Becoming One of the Most Valuable New Venture in the World

Becoming one of the most valuable new venture in the world

A study on how such ventures arise

Final thesis, June 22nd, 2016

Name: Lisa Boschma Student number: 11092963 Qualification: MSc in Business Administration – Entrepreneurship & Innovation Institution: University of Amsterdam Supervisor: dr. Ileana Maris – de Bresser Second reader: dr. Wietze van der Aa

Statement of originality

This document is written by Student Lisa Boschma who declares to take full responsibility for the contents of this document.

I declare that the text and the work presented in this document is original and that no sources other than those mentioned in the text and its references have been used in creating it.

The Faculty of Economics and Business is responsible solely for the supervision of completion of the work, not for the contents. Table of contents

Abstract ...... 5

1. Introduction ...... 6

2. Literature review ...... 9

2.1 Nature of opportunities ...... 9

2.2 Entrepreneurial approaches ...... 14

2.3 Theoretical conclusion ...... 19

3. Research method ...... 22

3.1 Research approach, type, strategy and time dimension ...... 22

3.2 Sampling ...... 23

3.3 Data collection ...... 24

3.4 Data analysis ...... 25

3.5 Validity and reliability ...... 26

4. Research results ...... 29

4.1 Snapchat case ...... 29

4.2 Uber case ...... 32

4.3 Pinterest case ...... 35

4.4 Airbnb case ...... 39

4.5 Comparative analysis ...... 42

4.5.1 Opportunity nature ...... 42

4.5.2 Entrepreneurial ability...... 42

4.5.3 Venture development ...... 43

4.5.4 Prior knowledge ...... 45

4.5.5 Social (network) ...... 46

4.5.6 Personality ...... 47

5. Discussion...... 48

6. Conclusion ...... 54

References ...... 55

Appendices ...... 59 Appendix A – Overview sources used ...... 60

Appendix B – Codebook ...... 62

Appendix C – Sources Uber ...... 69

Appendix D – Sources Pinterest ...... 86

Appendix E – Sources Airbnb ...... 101

Appendix F – Sources Snapchat ...... 125

Table of figures

Table 2.1 Aspects exploitation versus exploration ...... 14 Table 2.2 Aspects causation versus effectuation ...... 18 Table 2.3 Aspects exploitation – causation versus exploration - effectuation ...... 19 Table 2.4 Conceptual model ...... 20 Table 3.1 Overview of cases selected ...... 24 Table 3.2 Overview searched sources ...... 25 Figure 5.1 Theoretical contribution ...... 51 Table 3.3 Overview sources used ...... 60 Table 3.4 Codebook data analysis...... 62 Abstract

How the most valuable new ventures in the world came to existence, is academically limited supported. It is described that opportunities either are recognized or created, in that regard the entrepreneurial approaches such as causation and effectuation explain how ventures are developed.

Scholars have established an unelaborated and empirically not well supported link between causation and opportunity recognition (exploitation), and between effectuation and opportunity creation

(exploration). Secondary data is collected on four most valuable new ventures of the world to examine the link between the theories and to understand how such ventures came to being. The results reveal that regardless of the opportunity nature the ventures are explored-effectuated: the entrepreneur uses its vision and personal interest and the ventures are developed in a flexible way. It is also found that founders start to use causation over time if they do not know how to create a viable business. Still, the findings reveal that at first general prior knowledge is enough to recognize or create an opportunity.

Furthermore, this study shows that the network is used to acquire more resources to develop the venture. Lastly, the personality traits found match with exploration-effectuation which could explain why the ventures are developed in such a way.

1. Introduction

The idea of Airbnb, founded in 2008, was to provide a sleeping place for people joining a conference whilst hotels where fully booked. Their initial idea translated into building a platform for people that can rent the available space in their homes to others. This developed further into a venture that is today valued at approximately 24 billion dollars (Gallagher, 2015). Another example is Uber, founded in 2008, with the initial idea to serve people with a taxi on demand and now valued at 62.5 billion dollars (Effron, 2016; Feloni, 2014). Both Uber and Airbnb are considered as among the most valuable startups in the world (Austin, Canipe & Slobin, 2015; Kim & Kosoff, 2015; Picchi, 2015). A quick search reveals that there are many interviews, blogs and news articles which reveal how such ventures are founded and developed. Yet, it could be interesting to examine the founding and development of such valuable new ventures academically.

In the academic literature concerning entrepreneurship there is an ongoing debate on how opportunities originate; they exist already versus they are created (Alvarez, Barney & Anderson,

2013; Shane, 2012). Creating opportunities could be more advantageous (Alvarez et al., 2013). It is also stated that new ventures are based on an existing opportunity which is further created into a venture, thus both exploitation and exploration (Shane, 2012; Ardichvili, Cardozo & Ray, 2003).

Therefore, the question remains whether the most valuable new ventures in the world are founded as existing opportunities that are exploited or created opportunities that are explored. Besides, high- potential opportunities are in need of further research: “we have not explained much about the process of identifying and exploiting high-potential opportunities, given their rarity and the emphasis of researchers on collecting representative data” (Shane, 2012, p. 14). It is unclear if Airbnb or Uber are based on what is regarded as a ‘high-potential opportunity’, but at least the opportunity translated in one of the most valuable new ventures in the world. Thus, examining such ventures can reveal the underlying nature of an opportunity that turned out to have high potential.

In addition, Alvarez et al. (2013) argue that it is necessary to link the nature of opportunities with the theory on new ventures. This is supported by Shane (2012), who argues that the theory of opportunity natures is not limited to new venture creation and incorporates various opportunities. The theory of

‘entrepreneurial approaches’ does focus on how new ventures come to existence. In that regard

Sarasvathy (2001) does argue that there is a clear link between exploration-effectuation and exploitation-causation, but it is not discussed or elaborated why this is the case. Also Fisher (2012) describes in a literature review that opportunity recognition is the starting point of causation without using any arguments. This indicates that certain entrepreneurial approaches link with certain opportunity natures, but further academic and empirical support is needed to ground this link.

To conclude, the aim of this study is to examine how the most valuable new ventures of the world are founded and developed. Therefore, the link between the theory of opportunity natures and theory of entrepreneurial approaches is theoretically examined and empirically tested in this study. Establishing a clear link is useful for theory development. Firstly, based on that it can be examined how new ventures come to existence (opportunity nature) by means of exploitation or exploration, and are developed into a venture (entrepreneurial approaches) by means of effectuation or causation. Thus, this link integrates the theory of opportunity natures specifically with new venture creation. Secondly, the assumptions of other scholars can be tested: that exploitation links with causation and that exploration links with effectuation. Additionally, this link reveals how high potential ventures come to existence. Thus, the objectives of this study are as follows:

 To examine academically and empirically how the most valuable new ventures of the world arose.

 To develop the theory on new ventures by linking the theory of entrepreneurial approaches with

the theory of opportunity natures.

These objectives are translated into the following research question and sub-questions:

How did the most valuable new ventures in the world arise?

1. What are the aspects of opportunity exploration and exploitation?

2. What are the aspects of entrepreneurial approaches?

3. How do the entrepreneurial approaches link with the opportunity natures?

4. What aspects of opportunity natures and entrepreneurial approaches are found in the most

valuable new ventures of the world?

5. What does a case comparison reveal about the opportunity natures and entrepreneurial

approaches of the most valuable new ventures of the world?

Conducting this study is valuable, because other scholars have combined theories before without explanation or empirical support. Therefore, in this study the aspects of each theory are first elaborated separately which is used to discuss the possible links. In addition, empirical evidence is used to examine which theories hold in each most valuable new venture of the world. Thus, this study develops the link between theories from the literature and empirical evidence. The outcome of this study therefore contributes to the theory of founding and developing new ventures. This could serve as a guide for entrepreneurs to start and develop their own ventures. Moreover, schools may use this to teach their students on entrepreneurship.

The following chapter is the literature review in which the aspects of opportunity exploitation versus exploration and causation versus effectuation are discussed. The literature review concludes with a discussion on the link between opportunity natures and entrepreneurial approaches. The next chapter is about the research methodology: the approach, sampling, data collection, data analysis and the validity and reliability. Due to several reasons it is difficult to interview the founders of the most valuable new ventures of the world (e.g. location, access to venture, agenda of founders et cetera).

Therefore, it is chosen to use secondary data which is further explained in the research methodology chapter. In chapter four the results of the study are described with an emphasis on opportunity natures and entrepreneurial approaches that became apparent in each case. Furthermore, the cases are also compared based on the aspects of the opportunity natures and entrepreneurial approaches. The last chapters of this thesis are the discussion which is about the research results and implications, and the conclusion in which the main research insights are summarized.

2. Literature review

In the first two sections of this review the aspects of opportunity natures and those of entrepreneurial approaches are discussed. Based on that, in the conclusion it is argued how the opportunity natures link with the entrepreneurial approaches by comparing the aspects of both.

2.1 Nature of opportunities

Scholars such as Alvarez et al. (2013) and Shane (2012), distinguish between different types of opportunities. In this study the focus is on an opportunity that ultimately becomes a new venture.

Alvarez et al. (2013) wrote a literature review on the distinct processes of general opportunities, namely the opportunity discovery - about recognizing opportunities and the creation process - about created opportunities. They concluded that such a process view on entrepreneurship makes it clear how opportunities are really formed, instead of relying on a “superman-like entrepreneur with extraordinary vision” (Alvarez et al., 2013, p. 313). The study of Alvarez et al. (2013) is used as a starting point for this section, because various aspects are discussed and it is one of the more recent articles on opportunity exploitation and exploration.

Before discussing various aspects that belong to exploitation and exploration, first a general description of both natures would be helpful. Generally, exploitation is explained by Alvarez et al.

(2013) as opportunities created by the market, recognized by entrepreneurs and exploited.

Opportunities in that case come from existing markets or industries, thus opportunities are recognized and exploited (Alvarez et al., 2013). Vaghely and Julien (2010) in their literature review call this phenomenon endogenous: existing within a certain framework. Exploration is generally explained by

Alvarez et al. (2013) as entrepreneurs creating opportunities by action, thus exploring. This is more regarded as: “iterative, inductive, and intuitive decision making” (Alvarez et al., 2013, p. 311). In that case it is argued that opportunities do not exist beforehand, thus an opportunity exists because an entrepreneur creates (explores) it (Alvarez et al., 2013). Opportunity exploration is about creating new knowledge and eventually new markets (Alvarez et al., 2013). This is supported by Vaghely and

Julien (2010), who describe exploration as exogenous: the opportunity does not exist within a certain framework.

Exploitation of opportunities

Opportunity exploitation depends on the entrepreneur: is he able to spot it? In this case both existing market and industry knowledge, and experience make it possible to anticipate on the outcome of the opportunity and to reduce the risk (Alvarez et al., 2013; Vaghely & Julien, 2010). Since the market exists, data can be collected on customers or competitors in order to find shortcomings (Alvarez et al.,

2013). Ardichvili et al. (2003) also propose with their literature review that prior knowledge on markets, customers and unfulfilled needs contributes to the chance of successfully recognizing an opportunity. This is supported by the literature review of Baron (2006) too: prior knowledge on markets and industries helps to recognize opportunities. Baron (2006) further argues that opportunities may not be recognized in an instance, instead this depends on the entrepreneur’s ability to establish links between information found on trends, industries and customers et cetera. Therefore, prior knowledge is needed to spot opportunities and the ability to spot opportunities depends on linking the right knowledge (Baron, 2006).

Moreover, Shane (2000) found empirical evidence that entrepreneurs in the 3D printing industry all had relevant work experience or an educational background and knew something about either the market, industry or customer problems. However, it remains unclear why some entrepreneurs are able to recognize the opportunity by using their relevant prior knowledge, while others are not. Moreover, results from the 3D printing industry may not apply to other industries (Shane, 2000). Still, as described support is found that the ability to spot opportunities and prior knowledge are important for exploitation. Furthermore, it is supported by various scholars that the required prior knowledge is extracted from existing markets, industries or customer problems.

In addition, it is proposed that social aspects also play a role in opportunity exploitation. Some years ago it was proposed in the literature study of Ardichvili et al. (2003) that many social contacts contribute to the chance of successfully recognizing opportunities. In another literature study it is concluded that collaboration and a social network are essential in opportunity exploitation by means of financial and human resources (Klein, 2008). Therefore, it can be argued that social interaction does play a role in exploitation too by means of getting more resources.

Exploration of opportunities

In contrast, the process of exploring opportunities starts with the individual entrepreneur and his viewpoints, resources and competences (Alvarez, et al., 2013; Vaghely & Julien, 2010). As Klein

(2008) in his literature study argues: the actions of entrepreneurs are biased by their perceptions.

Furthermore, Cornelissen (2013) puts a real emphasis on the vision of entrepreneurs based on studying the autobiographies of Van Gogh and Steve Jobs: vision influences what is created. Another example highlights the influence of Steve Jobs his personal interests for developing the iPod: “it also came about because of Steve Job’s fanatic love for music” (Cornelissen, 2013, p. 706). In addition to the individual entrepreneur it is also important to learn from mistakes made by means of ‘trial-and- error’ in opportunity exploration (Alvarez et al., 2013). The importance of trial-and-error is also supported by the empirical research of Vaghely & Julien (2010) in small and medium sized ventures in various sectors and with the empirical study of Sanz-Velasco (2006) in 20 Swedish mobile internet ventures. Moreover, the research of Cornelissen (2013) reveals that Van Gogh and Steve Jobs also failed a few times before becoming successful. This indicates that learning by doing does exist in practice and is not limited to literature reviews or specific sectors. It is further regarded that there is an offer focus at first which switches later to the customer (Sanz-Velasco, 2006). Alvarez et al. (2013) elaborate on this point by stating that in a later stage customer feedback may be helpful for product improvements. It can be concluded that the entrepreneur is able to explore an opportunity based on: a vision, personal interests, learning by doing and being more product focused at first.

To reduce risk in exploration Alvarez et al. (2013) propose by referring to Sarasvathy (2001) that the focus is on acceptable loss instead of the total cost. However, in doing so Alvarez et al. (2013) directly links exploration with effectuation without further argumentation and references. The links between the nature of opportunities and entrepreneurial approaches are argued in section 2.3 of this thesis. Therefore, the aspect of acceptable loss is not considered as an aspect of exploration yet.

Exploration and exploitation of opportunities: common factors

As elaborated earlier in this section, it can be argued that prior knowledge plays a role in opportunity exploitation (Alvarez et al., 2013). For opportunity exploration, prior knowledge is seen as important

11 as well. It is good to have a mix of divers and specific knowledge in one team: too much of specific knowledge could blind sight entrepreneurs, whilst the use of diverse knowledge can be helpful to innovate (Alvarez et al., 2013).

Based on an empirical study on the founders and managing directors of 20 Swedish customer internet ventures it was found that even though prior knowledge does play a role in both processes, also opportunism has a role in exploration and exploitation. Individuals were able to find or create an opportunity without having much relevant experience (Sanz-Velasco, 2006). However, this conclusion is derived from an industry in which many changes occurred at the time of the study

(Sanz-Velasco, 2006). Opportunism could be only in affect when major changes happen in an industry, but this is rejected by Shane (2000) based on a case study of firms in 3D printing. Shane

(2000) proposed that it is not easy to spot opportunities in time of technological change, and that opportunity recognition is enhanced by prior knowledge. Another study revealed also that prior experience has the advantage of identifying innovative opportunities, but that opportunities can be identified also with little prior knowledge (Shepherd & DeTienne, 2005). This study was held under

MBA students whom were told to find a problem and to propose solutions for that (Shepherd &

DeTienne, 2005), thus maybe these students could not identify opportunities without having the task to do so. Still, it can be concluded that opportunities can be identified or created with little prior knowledge (Sanz-Velasco, 2006; Shepherd & DeTienne, 2005).

Some years earlier it was proposed, based on a literature study, that the ability of entrepreneurs to spot an opportunity is equally important for opportunity recognition and development (Ardichvili et al.,

2003). The assumption of these scholars is based on the perspective that new ventures are mainly developed and partly recognized: “some development activity may occur before an opportunity is perceived (recognized) by others not involved in the initial development” (Ardichvili et al., 2003, p.

113). This proposition is supported by the literature review of Shane (2012): new ventures may be based on opportunities that exist already, but these are explored. According to Alvarez et al. (2013) the citation of Ardichvili et al. (2003) still implies exploitation, because it is actually about an

12 individual recognizing someone’s opportunity and constituting a venture. Therefore, the whole opportunity is available in the market or industry apart from the venture.

Even though Alvarez et al. (2013) did not focus their study specifically on new ventures, their viewpoint is supported by others. For example the literature review of Davidsson (2015) reveals that: the opportunity could either be developed by the creation of a venture (exploration) or the opportunity is the starting point of creating the venture (exploitation). Furthermore, Ramoglou and Zyglidopoulus

(2015) also argue that new ventures could be the result of an entrepreneur capable of exploiting an existing opportunity. Therefore, it is not necessarily true that ventures are created by only exploration or both exploration and exploitation as proposed by Ardichvili et al. (2003) and Shane (2012). Thus, spotting an opportunity does not necessarily apply to the founding of all ventures.

Furthermore, Vaghely and Julien (2010) found in small and medium sized enterprises that social interaction is important for information processing in both exploitation and exploration. It is regarded that for decision making it is important to socially interact with providers of information and those that have information on the organization and environment. This also indicates that extra resources are helpful in opportunity exploration and exploitation. However, the findings of Vaghely and Julien

(2010) are based on a mix of various indicators such as ‘success stories’ and ‘handling market complaints’ to identify if individuals processed information more exploitative or explorative. Thus, social interaction could be also an outcome over all five indicators whilst it only applies to either exploitation or exploration. Still, as argued in this paragraph support is found that the social aspect applies to both exploitation (Ardichvili et al., 2003; Klein, 2008) and exploration (Alvarez et al.,

2013) by means of getting the right resources.

Theoretical insights obtained

Different aspects are discussed for exploitation and exploration. To conclude the theoretical insights on exploitation and exploration are summarized in Table 2.1. The aspects highlighted in the table indicate the differences between the aspects of exploitation and those of exploration.

Furthermore, one of the aims of this research is to examine if the most valuable new ventures in the

world are a case of exploitation or exploration, because empirical evidence is limited as revealed in

this paragraph too. It is possible that the empirical research of this study shows that the most valuable

new ventures are founded on both exploitation and exploration, but it could also be just exploration.

Therefore, exploration and exploitation are regarded as distinct until empirical research proves

otherwise. The aspects listed in Table 2.1 are used to empirically examine whether the aspects of

exploitation and exploration played a role in starting the most valuable new ventures of the world. In

the empirical research the focus is first on the nature of opportunities: is it a recognized or a created

opportunity? Furthermore, empirical evidence is sought on the ability to spot and to create

opportunities. Lastly, the social network and prior knowledge of entrepreneurs are examined.

Table 2.1 Aspects exploitation versus exploration

Exploitation aspects Exploration aspects *Opportunities exist already and can be recognized from *Opportunities do not exist and are created (taking action and an existing market. creating new knowledge and markets). *Ability to spot opportunities (based on prior knowledge *Ability to create opportunities: vision, personal interests, generated from existing markets or industries and learning by doing, offer focused (incorporate customer feedback customer problems). in later stage). *Prior knowledge *Prior knowledge *Social networks (getting more resources). *Social networks (getting more resources).

Even though there are clear differences between exploitation and exploration, it is unclear how these

aspects are used in new ventures. For example: how can the development of created opportunities into

new ventures be examined? Also the social aspect and prior knowledge seem similar for both natures.

Thus, it is important to further extent or elaborate on the aspects listed in Table 2.1. A more detailed

framework can be established based on the entrepreneurial approaches which specifically look at new

venture development and are discussed in the next paragraph.

2.2 Entrepreneurial approaches

Support for opportunity recognition can be found in the theory of causation. Sarasvathy (2001) and

Fisher (2012) both argue that causation links with exploitation without discussing why this is the case.

The same holds for Sarasvathy (2001) arguing that effectuation shows a link with exploration. Thus, in this section the aspects of effectuation and causation are discussed which in the next paragraph can be compared with the aspects of opportunity natures.

Causation

Sarasvathy (2001) used thought experiments to establish that causation is starting from the existing market: a restaurant could be started by analyzing the market and customers to find a valuable opportunity. Therefore, it is argued that causation relies on planning and analysis: competitive analysis, market research and planning ahead for the future (Sarasvathy, 2001; Fisher, 2012).

Chandler, DeTienne, McKelvie and Mumford (2011) support that causation is about marketing planning: the market is segmented and targeted; and marketing strategies are created. This is further detailed by the thought experiment of Sarasvathy (2001): the end goal to open a restaurant is further shaped in terms of a menu or the decoration that does appeal to the market segment and the customer needs. In addition, Fisher (2012) for example found that ventures in case of causation use business planning: write business plans, do scenario mapping and estimate the financials for the future.

Chandler et al. (2011) support this by mentioning production plans, objectives and competition analysis. Furthermore, financial planning is supported by means of projecting the expected return

(Sarasvathy, 2001; Fisher, 2012). Therefore, it is about pursuing an idea by making use of analysis and by selecting the means to achieve the end goal (Sarasvathy, 2001; Fisher, 2012). This also indicates the aspect ‘prediction’ as argued by Sarasvathy (2001), because planning and analysis are used to project the future.

Lastly, the knowledge of an entrepreneur is considered as essential (Sarasvathy, 2001). However, this aspect is not discussed in the literature review nor incorporated in the empirical research of Fisher

(2012) and Chandler et al. (2011). Overall, it can be concluded that causation is about using business planning, marketing planning and selecting the means to pursue the end goal. Therefore, the future can be predicted by making use of planning and analysis.

Effectuation

The main starting point of effectuation is the entrepreneur and its resources: “who they are, what they know” (Sarasvathy, 2001, p. 249). Even though it is about what the entrepreneurs know, effectuation is also described as not being about the use of: “preexisting knowledge, such as expertise in a particular new technology” (Sarasvathy, 2001, p. 252). This makes it questionable what role prior knowledge plays in effectuation. Also personal characteristics are described as influencing the creation process. However, it is not described what personality traits make a difference in effectuation. Lastly, the vision of an entrepreneur is considered as important to create an opportunity by means of imagination and aspiration (Sarasvathy, 2001). Chandler et al. (2011) support that a vision is important, still this vision should not be treated as one definite end goal to pursue.

Effectuation is further explained as experimenting and learning by doing: to deal with failures and learn to improve are more important than trying not to fail at all (Sarasvathy, 2001). Chandler et al.

(2011) conducted interviews and surveys to identify what entrepreneurs indicated as important for effectuation and found that experimentation is a valid construct. The result of their research is that experimentation can be measured by asking if various products and business models where used, if multiple approaches for business models were tried, and if the outcome was imagined or totally different than expected (Chandler et al., 2011). In addition, the measurement ‘flexibility’ validated by

Chandler et al. (2011) also indicates that it is not a planned process: stay flexible, grow the business through arising opportunities and use the resources available. This fits with effectuation as explained by Sarasvathy (2001): there is no clear end goal, but instead the focus is on the available resources and experimentation. Therefore, effectuation can be regarded as a flexible process.

Moreover, support is found in the results of Fisher (2012): long term plans, market segmentation and marketing plans are not made in ventures that mainly apply effectuation and not causation. In accordance with that is the thought experiment of Sarasvathy (2001): a restaurant is opened and after that the first users set the target market from which insights are used to develop the product.

Therefore, effectuation is about being product focused at first. It is also found that project planning occurs in the case of effectuation which is used as an argument that effectuation and causation happen

16 intermixed (Fisher, 2012). However, Fisher (2012) did not consider that maybe project planning does happen in effectuation and is a new insight for theory building. Project planning would fit with the other aspects of effectuation, because trying another approach could be planned for example or maybe deadlines are set to evaluate an experiment. It is at least not about long term future plans, because these would not fit with having a flexibility approach.

In addition, it is argued that the principle “affordable loss or acceptable risk” (Sarasvathy, 2001, p.

251) applies in the case of effectuation. The empirical results of Fisher (2012) show that there is a weaker link with this principle for ventures that apply causation. Chandler et al. (2011) also found empirical support that effectuation is about using the resources available and not taking such a financial risk that damages the venture or that someone wants to take. In accordance with effectuation as being about experimentation and not having a clear end goal, it can be concluded that effectuation is not focused on future planning. This is in accordance with the initial product focus, because the market, marketing and future planning are initially not paid attention to. Still, project planning may apply to effectuation as argued before.

Causation and effectuation: common aspects

A similarity between effectuation and causation is found by Chandler et al. (2011), who argue that the social aspect in general applies to both causation and effectuation. This argument is based on explorative interviews with entrepreneurs to identify constructs which later on where tested in a survey conducted under entrepreneurs. According to Sarasvathy (2001) the social aspect of effectuation is about establishing partnerships and arranging pre-commitments, but Chandler et al.

(2011) found that the same yields for causation. Therefore, Chandler et al. (2011) think that for causation the social aspect is used to get the necessary resources for implementation. Also Fisher

(2012) asserts that in causation the resources are gathered to achieve the end goal. Yet, these specific statements about the use of the social aspect are not empirically supported or based on academic literature. Fisher (2012) also concludes that partners can give valuable feedback and spread a good word for the business, but that limited resources do enhance creativity better. These statements are based on the proposition that effectuation and causation happen both in new venture creation which is

derived from the empirical evidence (Fisher, 2012). Even though there is an indication that both

effectuation and causation incorporate partnerships and arrange pre-commitments, it remains unclear

what the difference is for effectuation and causation in regard to this social aspect. At least, the social

aspect is important for both causation and effectuation. The aim of this research is to link the theory of

opportunity natures and entrepreneurial approaches, and therefore both effectuation and causation are

regarded as distinct. Finally, Sarasvathy (2001) discussed prior knowledge as important for both

causation and effectuation as mentioned earlier. However, this is not elaborated nor supported by

other scholars.

Theoretical insights obtained

The various aspects for effectuation and causation that are discussed and supported throughout this

section are summarized in Table 2.2. In this study, empirical evidence is sought to find out what

entrepreneurial approach is applied in developing the world’s most valuable new ventures. The data

analysis is focused on planned venture development and its aspects for causation. For effectuation the

data analysis is focused on: the ability of the entrepreneur and on flexible venture development by

means of the aspects indicated in Table 2.2. Lastly, the social aspect and prior knowledge are lacking

a clear definition or are limited supported by other scholars. These aspects are still used to examine

what role they played in the venture development. It is also unclear why personality matters in

effectuation, thus it is examined which traits appear in each case.

Table 2.2 Aspects causation versus effectuation

Causation Effectuation *Planned venture development: business planning (business *Ability individual entrepreneur (personality, vision). plan, scenario mapping, financials – project returns, analyze *Flexible venture development: experimenting & learning by competition), market planning (market segmentation & doing, no clear end goal, use available resources, use arising market research), select means (pursue the initial opportunity opportunities, balancing risk, product focus first (initially no long by selecting the means that will fulfill the end goal). term, market segmentation, market research and marketing *Social (partnerships arranging pre-commitments). planning). *Prior knowledge *Social (partnerships arranging pre-commitments). *Prior knowledge

2.3 Theoretical conclusion

The findings of section 2.1 on opportunity natures and section 2.2 are merged together into Table 2.3.

Taken together it can be theoretically concluded that exploitation links with causation and that

exploration shows a connection with effectuation. Therefore, the aspects of both theories can be used

as constructs to examine empirically how the most valuable new ventures of the world arose. The link

between the theories is further elaborated in this theoretical conclusion.

Table 2.3 Aspects exploitation – causation versus exploration - effectuation

Exploitation aspects Exploration aspects *Opportunities exist already and can be recognized from an *Opportunities do not exist and are created (taking action and existing market. creating new knowledge and markets). *Ability to spot opportunities (based on prior knowledge *Ability to create opportunities: vision, personal interests, learning generated from existing markets or industries and customer by doing, offer focused (incorporate customer feedback in later problems). stage). *Prior knowledge *Prior knowledge *Social networks (getting more resources). *Social networks (getting more resources). Causation Effectuation *Planned venture development: business planning (business *Ability individual entrepreneur (personality, vision). plan, scenario mapping, financials - project returns, analyze *Flexible venture development: experimenting & learning by competition), market planning (market segmentation & doing, no clear end goal, use available resources, use arising market research), select means (pursue the initial opportunity opportunities, balancing risk, product focus first (initially no long by selecting the means that will fulfill the end goal). term, market segmentation, market research and marketing *Social (partnerships arranging pre-commitments). planning). *Prior knowledge *Social (partnerships arranging pre-commitments). *Prior knowledge

Exploitation and causation link on various points. For example planned venture development fits with

exploitation as in ‘prior knowledge generated from existing markets or industries and customer

problems’. Furthermore, the ‘opportunities exist’ of exploitation could link with causation as in

‘pursue the initial opportunity’. There are also clear links between exploration and effectuation. For

example the abilities of the individual entrepreneur are important in both theories: vision even

overlaps. Also ‘learning by doing’ is similar, and ‘opportunities are created’ is in line with a flexible

venture development approach. Moreover, the ‘offer focus first’ seems to fit with the ‘product focus

19 first’. This indicates that both effectuation and exploration are not concerned about the customer initially, but focus more on the product as argued. Table 2.4 contains the conceptual model which integrates the theories and is used in this study to examine the empirical evidence.

Table 2.4 Conceptual model

Aspects Exploitation - Causation Exploration - Effectuation Nature of opportunity Opportunities exist already and can be Opportunities are created (taking action and recognized from an existing market. creating new knowledge and markets). Entrepreneurial ability Prior knowledge generated from existing markets Vision, personal interests and personality. or industries and customer problems. Venture development Planned: business planning (business plan, Flexible: experimenting & learning by scenario mapping, financials - project returns, doing, no clear end goal, use available analyze competition), market planning (market resources, use arising opportunities, segmentation, market research), select means balancing risk, product focus first (initially (pursue the initial opportunity by selecting the no long term, market segmentation, market means that will fulfill the end goal). research and marketing planning). Prior knowledge Unspecified Unspecified Social (network) Getting more resources, partnerships arranging Getting more resources, partnerships pre-commitments. arranging pre-commitments.

In this study the first aim is to find out which entrepreneurial approaches and opportunity natures the entrepreneurs used to start and develop the most valuable new ventures of the world. Secondly, empirical evidence is sought for the link between the entrepreneurial approaches and opportunity natures as displayed in Table 2.4. Thus, the focus is on the way the entrepreneur(s) got about the opportunity and used entrepreneurial approaches to start and develop such a valuable venture.

In addition to Table 2.4, it is found that prior knowledge may not apply in the case of effectuation

(Sarasvathy, 2001), whilst it is also highlighted that “what they know” Sarasvathy (2001, p. 249) as entrepreneurs is important. As argued in section 2.1, prior knowledge does apply in the case of opportunity exploration which is however not elaborated in the literature. Alvarez et al. (2013) argued that diverse knowledge is more important than specific knowledge, because specific knowledge blind sights entrepreneurs for opportunities (Alvarez et al., 2013). Therefore, this could imply that knowledge in a technology could be too specific, whilst what entrepreneurs know in general is more important for opportunity exploration and effectuation. This also indicates a difference between

20 exploration and exploitation which was hard to find in section 2.1: exploitation and causation could rely more on market and industry specific knowledge (Sarasvathy, 2001) and diverse knowledge may fit better with effectuation and exploration. It can be at least theoretically concluded that prior knowledge does play a role in both opportunity natures and entrepreneurial approaches. In this study, it is empirically examined what kind of prior knowledge applies in starting and developing the most valuable new ventures of the world.

The social aspect mentioned in Table 2.3 and 2.4 applies to both exploitation-causation and exploration-effectuation. Still, there is no clear difference. For exploitation and exploration it is already argued that the social aspect is used to get the necessary resources. For causation and effectuation the main purpose of the social aspect is argued as establishing partnerships and arranging pre-commitments. As argued in section 2.2 there is an indication that the social aspect is used in another way: causation using partnerships to get necessary resources for implementation plans

(Fisher, 2012); and effectuation using partnerships that contribute to the establishment of the venture

(Sarasvathy, 2001). However, it cannot be asserted that this it true due to a lack of empirical evidence.

It is at least theoretically supported that the social aspect is relevant for both opportunity natures and entrepreneurial approaches. Therefore, the kind of social networks that were apparent in the most valuable new ventures in the world are empirically examined in this study.

Lastly, as indicated before the personality aspect under the entrepreneurial ability of effectuation and exploration is not elaborated in the current literature. Thus, in this study, data is collected to examine what role personality traits played in starting and developing the most valuable new ventures of the world.

3. Research method

In this chapter the research method is described. First, the approach, type, strategy and time dimension are discussed. Furthermore, the data collection method is elaborated in section 3.3 and in section 3.4 it is described how the data is analyzed. Lastly, the validity and reliability of this research are discussed.

3.1 Research approach, type, strategy and time dimension

The aims of this study are to academically and empirically find support on how the most valuable new ventures came to existence and to develop the theory on new ventures by linking opportunity natures with entrepreneurial approaches. Empirical evidence on the link between the theories of opportunity natures and entrepreneurial approaches is limited. Also assumptions are made on how new ventures arise in the opportunity nature theory as explained in the introduction, whilst the opportunity natures are generally applicable to any opportunity and not specifically to venture opportunities. Thus, there is a need to further develop the theory on how new ventures come to existence. The aspects highlighted in Table 2.4 (literature review) are used as constructs to examine this and therefore this study is deductive (Saunders, Lewis, Thornhill, Booij & Verckens, 2011). However, the following constructs appeared to overlap across the theories and - or were not well elaborated: prior knowledge, personality and social (network). Thus, these constructs are further developed based on the data collected which also makes this study inductive. Besides, an exploratory type of study is chosen, because the focus is on getting new insights and to get a better understanding on how the most valuable new ventures of the world came to existence (Saunders et al., 2011).

In this case it is studied how ventures arose, thus the ventures do exist already and it is about examining what happened in the past instead of following the ventures from the initial start.

Therefore, activities or events that made a difference may not be reported or paid attention to in secondary data. Still, it is possible to find out how the ventures were founded and developed. The development over time indicates that this study is longitudinal (Saunders et al., 2011).

Furthermore, case study research is used which is suitable to build theories (Eisenhardt, 1989) and for exploratory research (Saunders et al., 2011; Yin, 2014). Thus, a case study also fits with the aims and

22 exploratory type of this study. Case study research is also focused on events in a real-life context that happen uncontrolled (Yin, 2014; Saunders et al., 2011) which fits with examining how new ventures come to existence. This case study is holistic, because the focus is on the venture as unit of analysis

(Yin, 2014; Saunders et al., 2011). Furthermore, a multiple case study is used by means of focusing on different ventures that are considered as the most valuable in the world (Yin, 2014; Saunders et al.,

2011). A multiple case study makes it possible to generalize over theory, because one venture can indicate a finding which might be different for another venture (Yin, 2014). Thus, theory can be developed by examining multiple cases which are further detailed in the next section.

3.2 Sampling

In order to study the cases thoroughly it is important to use a small sample of approximately five cases (Gerring, 2007: Yin, 2014). For theory building cases should be selected that contribute to extending or challenging the theory (Eisenhardt, 1989), thus cases are often selected because of a specific purpose (Saunders et al., 2011). Therefore, purposive sampling is also used in this study.

The unit of analysis under study is a new venture which is considered as the most valuable in the world. These new ventures are ranked by their value by Austin et al. (2015) and Kim and Kosoff

(2015). The valuation of these ventures is used to select those with the highest value. Also ventures older than ten years are not selected, because this would create a gap of a few years with other new ventures. Of the first highest valued new ventures of the world, three cases appeared to have things in common which were not shared by the fourth one. For example the three cases where all founded in the United States and did not have a tangible product. It could be of influence that one venture was founded outside of the United States: other culture, government regulations et cetera. Furthermore, the outlier also has a phone as a product which is tangible. Therefore, it is decided to focus on a more homogenous sample which can be studied in depth and makes it possible to identify even small variations (Saunders et al., 2011). Based on the criteria discussed, four cases could be selected from

Austin et al. (2015) and Kim and Kosoff (2015). Table 3.1 contains an overview of the cases that are selected for this research.

Table 3.1 Overview of cases selected

Venture Uber Airbnb Snapchat Pinterest Value1 $51 billion $25.5 billion $16 billion $11 billion Equity funding2 $7.4 billion $2.3 billion $1.3 billion $1.3 billion Founded3 2008 2008 2011 2008 Founders3 Travis Kalanick Joe Gebbia Evan Spiegel Ben Silbermann Garrett Camp Brian Chesky Bobby Murphy Evan Sharp Nathan Blecharzyk Paul Sciarra Business3 Platform for Platform to rent Photo sharing Photo sharing taxi services sleeping places app network Sector3 Transport Travel Mobile Social Media Founded in3 US, New York US, California US, California US, California 1(Kim & Kosoff, 2015; Austin et al., 2015) 2(Austin et al., 2015) 3(Uber–www.uber.com, Airbnb–www.airbnb.nl, Snapchat–www.snapchat.com, Pinterest–www.pinterest.com)

3.3 Data collection

In order to get information on the most valuable new ventures of the world, secondary data is used.

Firstly, it is difficult to get in contact with the founders of such ventures. Secondly, there are already a number of interviews and articles available that are about the founding and development of these ventures. This makes it suitable to use secondary data (Saunders et al., 2011). The data obtained is also available publicly which limits ethical issues and accessibility problems (Saunders et al., 2011).

Firstly, specific sources were chosen to search for data as indicated in Table 3.2 on the next page.

Data was found by using the following search words: ‘specific venture name’ history, ‘specific venture name’ founding, ‘specific name of an entrepreneur’. For each venture the LinkedIn profiles of the two or three cofounders were used, except for the LinkedIn of Bobby Murphy, cofounder of

Snapchat, which was inaccessible. Additionally, four to five other sources were collected for each venture. Two sources for each venture were chosen for analysis, because most constructs of the theoretical framework were apparent in these sources. The omitted sources discussed the same founding and developing story, but were less elaborated as the selected ones. Furthermore, for each venture one source is chosen that describes the first years of starting the venture and one that is from a few years after the launch describing specific venture developments. The sources used per case are listed in Table 3.3, Appendix A. In accordance with Yin (2014) and Saunders et al. (2011) the following aspects are also detailed in Table 3.3: the relevance, source, purpose, research method and reference to the appendix containing the data source.

Table 3.2 Overview searched sources Sources Business magazines Youtube.com LinkedIn Venture website Type Articles Fortune Interviews with Resume founders Blog Articles Forbes or presentation Text Articles Business Insider of founders Articles Bloomberg Owner Time.inc (Fortune) Depends Founders Ventures Forbes Media LLC (Forbes) Axel Springer SE (Business Insider) Bloomberg (Bloomberg)

There are articles of business magazines and presentations of founders used that address the founding and development of the ventures under study, thus touch upon the constructs established. LinkedIn profiles are used to examine the prior knowledge of the entrepreneurs. Therefore, these sources are regarded as relevant. The interviews conducted by business magazines are summarized in articles, thus the method used and questions asked are not always transparent. In addition, the articles can be influenced by the perspectives or objectives of the owners or writers. For example most magazines are owned by another party which may have certain interests that bias the information. In addition, a

LinkedIn profile may not contain all experience and knowledge of a founder and the founding story on the venture website may be more of a selling story. The interviews and presentations on YouTube can be conducted or held for a specific purpose. For example a presentation could be given to increase sales or to educate students. At least, these are not summarized or processed yet which leaves less room for biased objectives or perspectives (Saunders et al., 2011). In order to ensure the objectivity and validity of the data, multiple evidence and sources are used to triangulate a finding (Saunders et al., 2011; Yin, 2014), as evidenced in Table 3.3, Appendix A.

3.4 Data analysis

In order to build theories it is important to start with collecting and analyzing data at the same time

(Eisenhardt, 1989). The researcher should not be limited by things that seem important, because new insights can be used as aspects for data analysis (Eisenhardt, 1989). Furthermore, this also reveals if enough secondary data is gathered to answer the research questions. Therefore, open data coding is already started in the data collection phase. The data collected is first open coded; this means that text fragments are labeled based on their main message (Boeije, 2010). Examples of open codes are:

25 market demand, business planning, vision, product focus first and education. The next step is to axial code the data which is used to cluster and structure the open codes (Boeije, 2010). Examples of axial codes are: existing opportunity nature, entrepreneurial ability and prior knowledge. Finally, selective coding is applied to develop theories and assumptions (Boeije, 2010). The selective codes are used to indicate if the data is about exploitation-causation or exploration-effectuation, or if it was about a construct that was common across the theories. In order to keep the coding process transparent a codebook is used which is displayed in Table 3.4, Appendix B.

Firstly, a within-case analysis was conducted which is focused on describing the cases separately.

This further enhances the process of comparing the cases eventually and makes it possible to generate more case specific insights (Eisenhardt, 1989). Each case is summarized separately by describing what constructs where found in relation to the data (Yin, 2014; Eisenhardt, 1989). In this study for example ‘product focus first’ and ‘vision’ are constructs that can be used to examine the cases on.

Secondly, the findings of the cases are compared in a cross-case analysis with a focus on differences and similarities regarding the concepts which can reveal new unanticipated insights. A case comparison also makes it possible to examine the insights found further (Eisenhardt, 1989; Yin,

2014). These within-case and cross-case analysis are used to examine how the ventures arose. From this analysis it is argued how the most valuable new ventures came to existence which could be linked with either exploitation-causation or exploration-effectuation or a mixture thereof.

3.5 Validity and reliability

It is important that similar conclusions can be reached if the same study is repeated, because this contributes to the reliability of the research (Yin, 2014). The reliability is enhanced by providing a clear link between the theory and the findings, and to provide an oversight on the data analysis process (Yin, 2014: Saunders et al., 2011). Firstly, the main constructs used to examine the data are derived from the literature review. This makes it possible to link the eventual findings and conclusion with the theory. Secondly, a database and codebook are used to keep an oversight and also make the data analysis transparent. The codebook explains the coding process and thus it is clarified how the data analysis is performed. Finally, there is a clear data analysis structure that runs from coding the

26 cases, to analyzing individual cases and eventually comparing cases. The within-case and cross-case analyses are used to make transparent how theory is developed from empirical research, which enhances the reliability of this research (Eisenhardt, 1989). A limitation of this study is that observer error cannot be avoided, because with the use of secondary data the data collection method cannot be controlled (Saunders et al., 2011). Furthermore, the findings cannot be verified with the ventures due to the reliance on secondary data which results in observer bias (Saunders et al., 2011).

Furthermore, it is important to clearly show how constructs are built for construct validity (Yin,

2014). Construct validity is important by means of setting up the right measurements for data collection (Yin, 2014; Eisenhardt, 1989). In the literature review the aspects of opportunity natures and entrepreneurial approaches are based on a triangulation of academic articles which reduces biased perceptions and contributes to the construct validity (Eisenhardt, 1989). The cases of this study are also built upon different data sources: business magazines, videos and LinkedIn profiles. Therefore, the constructs are measured multiple times and can also be triangulated. This strengthens the construct validity too (Yin, 2014) Moreover, the aspects of opportunity natures and entrepreneurial approaches were first elaborated separately before examining any links. The aspects found under each section are summarized in tables and then transformed into the theoretical framework. Thus, it can be traced back how the constructs are built from the literature review which is important for the construct validity

(Eisenhardt, 1989; Yin, 2014).

The internal validity is weakened when there are unrepresentative cases under study that not fit the sample (Saunders et al., 2011). For this study the cases where selected based on certain criteria, therefore this enhances the internal validity. Moreover, the data used is secondary and is thus already available. Therefore, it is possible to conduct a longitudinal study which strengthens the internal validity (Saunders et al., 2011). However, the data collection method cannot be controlled in this case which is a limitation (Saunders et al., 2011). For example it could be that the there is a personal relation between an interviewer and the respondent. In addition, maybe the writer of the article was not in favor of a particular company. Even though these things cannot be controlled directly, the data

27 supporting each construct is triangulated to avoid such biases and to strengthen the internal validity

(Saunders et al., 2011).

In order to generalize over the theory, attention should be paid to the external validity (Yin, 2014).

Single cases should be studied based on the theory and it is important to compare and contrast the multiple cases (Yin, 2014). In this study the constructs are built upon the literature review in which the theories of opportunity natures and entrepreneurial approaches are discussed. These constructs are used to examine the founding and development of the cases separately. Furthermore, the cases are also compared and contrasted as described in section 3.4. Based on that, a theory can be generalized about the founding and development of the most valuable new ventures in the world by means of opportunity natures and entrepreneurial approaches.

4. Research results

In this chapter the first section contains the results of the within-case analysis. In section 4.5 the results of the cross-case analysis are described by comparing each construct that appeared to be relevant for the cases.

4.1 Snapchat case

In this paragraph the empirical evidence found in the Snapchat case is described. The cofounders of

Snapchat are Evan Spiegel and Bobby Murphy which are further mentioned by using their first name.

Nature of opportunity: existing or created

Initially investors were not interested (Colao, 2014, p. 2): “many wondered why anyone would want to send a disappearing photo”. Others also did not expect that Snapchat would be big (Stone & Frier,

2015). After the launch in July 2011 it also appeared that nobody wanted the product, therefore both cofounders started to focus on other things than Snapchat. In the fall of 2011 the user base of

Snapchat suddenly increased, because students found out that the app was not banned by schools yet and there were some privacy issues such as unwanted disposal of personal content (Colao, 2014).

Thus, Snapchat created its own market over time. Furthermore, the industry is also created in which competitors entered later on (Colao, 2014, p. 3): “an entire sub-industry … temporary, social media has emerged behind it”. There was no evidence found for Snapchat being an existing opportunity.

Even though also no evidence was found for creating new knowledge, Snapchat can be regarded as a created opportunity, supporting exploration-effectuation, by creating its market and industry.

Entrepreneurial ability: vision & personal interest

Evan continues to have a vision on Snapchat and the industry. For example Evan mentions (Stone &

Frier, 2015, p. 1): “young users are not well served by other for-profit social networks”. Later on the founder also had a perspective on advertising (Stone & Frier, 2015, p. 1): “Evan views advertising as a product, while most Internet Founders view advertising as the necessary evil”. This view has been confirmed by Evan during the interviews he gave. In addition, the initial Snapchat idea is based on a personal interest: Reggie, a former cofounder, had a problem with a private photo that was exposed.

Reggie shared this problem with Evan, and together with Bobby they started Snapchat (Colao, 2014).

It was also argued as important to: “find something important to you … that you love” (Stone & Frier,

2015, p. 1). Furthermore, in his youth Evan build a computer and did photoshop experiments which indicate an interest in technology. Thus, it mainly started out with the personal interest and a vision that was more based on an opinion than knowledge about the industry or market. Therefore, support is found for exploration and effectuation.

Venture development: planned or flexible

After the launch in 2011 Snapchat was (Colao, 2014, p. 2): “a technically competent product that virtually no one wanted”. Snapchat was about meaningful features, instead of focusing on popular things like competitors did. Furthermore, the market created itself after some time as mentioned earlier in the paragraph above (Colao, 2014). The advertisers were also required to adjust their advertisements to make them workable on Snapchat (Stone & Frier, 2015). Finally, Evan responded to people who criticized Snapchat as difficult to use (Stone & Frier, 2015, p. 1): “I get that it looks different, it looks different because it’s something new”. It further appeared that most engineers worked on product innovation. Thus, over the years the focus remained on the product and not on market planning which indicates that Snapchat is explored and effectuated.

Even though there are some hints of business planning in the Snapchat case, it appears that these plans are not definite and therefore Snapchat remains flexible. According to Colao (2014) Snapchat would focus on a buy-in option, but it appeared in the interview of Stone and Frier (2015) that the focus switched to advertising. Furthermore, when Snapchat became more popular the founders invested family money and savings to keep the network up and running. Besides, Snapchat did not generate or plan for any revenue and others were skeptical about the revenue prospect (Colao, 2014). Thus,

Snapchat remains flexible, supporting effectuation and exploration, by not sticking to business plans, using resources available instead of selecting them and having no long term end goal.

It is further revealed that the founders learned from previous experiences: they learned that it is essential to adapt to emerging platforms. Moreover, a prototype was built before launching Snapchat

(Colao, 2014) and there were also experiments with brand pages and advertisements before integrating these completely into the product (Stone and Frier, 2015). Thus, support is found for learning by doing and experimentation which are part of exploration and effectuation.

Still, there do appear some hints of causation over the years. It appears that Snapchat analyzes competition and uses this to differentiate the products (Colao, 2014, p. 3): “It’ll make sense in a

Snapchat way”. This is further supported by the evidence that Snapchat has a differentiated offering from that of Facebook. Furthermore, three years after launching Snapchat, Evan looked at various

Chinese competitor apps that have a buy-in option. He used this as inspiration for a Snapchat buy-in option (Colao, 2014). Thus, over the years the founders started to use business planning.

Prior knowledge

Bobby did a major in mathematics and computational science (Colao, 2014), and Evan studied product design (Spiegel, n.d.; Colao, 2014). Furthermore, Evan has work experience related to technology and software development (Spiegel, n.d.), and Bobby worked as a coder (Colao, 2014). In addition, in his youth Evan already failed with launching a social network and together the founders were unsuccessful with a former online software website (Coloa, 2014). Skills are not well elaborated in the Snapchat case: it is only mentioned that in his youth Evan did technology related activities and photoshopping which do related to the Snapchat app (Colao, 2014; Spiegel, n.d.). In regard to awards and recognition, Evan was recognized by professionals as an undergrad (Colao, 2014) and won a design related award (Spiegel, n.d.).

Social (networks)

Reggie, who came up with the Snapchat idea, knew Evan already before. Moreover, Bobby and Evan are former housemates and already tried to create things together (Colao, 2014). Evan also used his network to recruit the first employees (Colao, 2014). In regard to investors, there are at least two investor mentioned. Additionally, little evidence is found on advice givers. At least it is revealed that the Snapchat founders had a Sony CEO as board member who gave them advice, and Evan read multiple books to guide his business decisions (Stone & Frier, 2015).

Personality

Colao (2014, p. 1) describes Evan as an opinionated non-conformist. Evan is a direct, serious and modest person that thinks independently and follows his own beliefs, but who is also open for discussions and thoughts of others (Stone and Frier, 2015). Moreover, he can also be regarded as an idea generator: “I literally just invented this in my head” (Stone & Frier, 2015, p. 1). There are also a few phrases that reveal that Evan is an inconsistent boss (Stone & Frier, 2015). Lastly, the only personality trait described of Bobby, is that he is never upset (Colao, 2014).

4.2 Uber case

In this paragraph it is described what empirical evidence is found in the Uber case. The cofounders of

Uber are Travis Kalanick and Garrett Camp which are further referred to by their first name.

Nature of opportunity: existing or created

Uber can be regarded as a created opportunity. The following citation reveals that there was not a market demand at the launch yet (Y Combinator, 2012a, min 8:38): “people thought we were crazy: limos in San Francisco what?”. Others also did not expect Uber to be a success (Lashinsky, 2015).

Furthermore, Uber transformed the taxi industry which caused resistance on one hand and on the other hand made new competitors enter that wanted to defeat Uber (Y Combinator, 2012a). Lastly, it is not found that any new knowledge was created. Still, it is supported that Uber created its demand and industry after launching which supports effectuation and exploration.

Entrepreneurial ability: vision & personal interest

Additionally, Uber is created based on a vision which is repeatedly mentioned (Y Combinator, 2012a, min 4:28): “I wanna push a button and get a ride … and let’s make it a classy ride”. The founders initially saw Uber as enhancing their personal lifestyle which expanded to providing a better transportation experience: the traditional taxi industry was odd and boring according to Travis (Y

Combinator, 2012a). Furthermore, at the fifth year anniversary Travis envisioned Uber to help cities have safer roads, less congestion and being economically valuable for them (Lashinsky, 2015). Thus, five years after the launch a vision continued to play a role. Additionally, there was a personal

32 interest, the founders wanted to have Uber themselves to enhance their personal lifestyle at first (Y

Combinator, 2012a). The founders maybe envisioned to change the taxi industry, because they were taxi users themselves which could imply exploitation-causation. Still, their vision and personal interest shaped more what Uber came to be which could not have been read from the existing industry or market. Therefore, the entrepreneurial ability is about effectuation and exploration.

Venture development: planned or flexible

The first tasks were focused on building the website and making the processes work. It is mentioned that the founders did meet one driver to verify some ideas. However, the market was not analyzed or segmented before launching (Lashinksy, 2015). Furthermore, people were wowed by the launch of

Uber, as mentioned before, and did not understand some product developments like Uber Taxi. This shows that the founders paid less attention to the market demand. Uber also has no marketing spend, but focuses on special occasions like giving roses to riders at Valentine’s Day and surprising riders with a presidential alike escort on Presidents Day. Uber changes the product and services on these occasions for their riders to “give them an excuses to tell the Uber story” (Y Combinator, 2012a, min

19:25). Thus, the focus is mostly on the product which is differentiated to spark word-of-mouth marketing. Even though there were marketing activities reported by an Uber employee, these happened incidentally after the launch (Lashinksy, 2015). Besides, support is found for limited future planning: employees switched to tasks that required the most attention and they also faced unexpected issues (Lashinsky, 2015). Thus, the initial focus was on the product and less on marketing or business planning which is in support of exploration and effectuation.

The special occasion product and service changes, as mentioned before, can also be regarded as using arising opportunities. In addition, Uber does not own the cars and drivers are responsible for making their own money (Y Combinator, 2012a). In doing so Uber balances it risk, because no investments are made in owning such resources. Besides, success could not be predicted (Y Combinator, 2012a, min 9:15): “Is this a one hit wonder or not … is this only gonna work in San Francisco because it’s so screwed up?”. Also in 2012 when Uber launched Taxi it appeared to be unsuccessful in New York.

This indicates that the future remained uncertain and thus that the end goal was unclear. Therefore, the venture is developed in a flexible way, supporting exploration and effectuation.

Because the founders were uncertain if Uber would work in other cities, they just tried to do so. In the beginning Uber was launched city after city which made it possible to learn from each launch and to improve further (Y Combinator, 2012a; Lashinksy, 2015). In addition, it is mentioned that the Uber employees learned the importance of checking the drivers’ cars after figuring out that not all cars were up to the Uber standard (Lashinksy, 2015). Besides, experiments are mentioned such as trying a hybrid fleet to have enough cars available (Y Combinator, 2012a) and phone support which turned out to be unsuccessful (Lashinksy, 2015). The evidence mentioned indicates that experimentation and learning by doing are part of Uber which is in support of exploration and effectuation.

There were no hints of causation found in the Uber case by means of business planning or marketing planning, thus Uber was mainly flexibly developed by means of exploration and effectuation.

Prior knowledge

Travis and Garrett both completed an engineering study and founded or worked at various technology related ventures before founding Uber. The founders continued to direct their previous founded ventures over six years and in one case up to ten years. Both founders are also recommended as having entrepreneurial expertise (Kalanick, n.d.; Camp, n.d.). In that regard Travis has skills in acquiring funds, project management and strategy execution (Kalanick, n.d.). Garrett is recommended and recognized for his skill in product design, strategy development, user behavior, engineering and appears also to have the ability to integrate various skills in his product ideas (Camp, n.d.). Both founders of Uber also received technology related awards before launching Uber (Camp, n.d.;

Kalanick, n.d.). In addition, Travis is also respected as advisor and received recognition for his job as a founder (Kalanick, n.d.).

Social (network)

Travis and Garrett knew each other already before, because they were in Paris attending a conference together which is the same conference at which they came up with the idea (Y Combinator, 2012a). In

34 addition, some first employees were familiar with Garrett too (Lashinksy, 2012). Any investors or advisors could not be uncovered in this case unfortunately.

Personality

A former intern describes the founders as being casual and passionate (Lashinksy, 2012). Travis is recommended as listening to others, but also has his own beliefs. Furthermore, Travis seems good at balancing his work: “balance between strategy and execution” and “know when to work hard, when to play hard” (Kalanick, n.d., p. 1). Garrett is argued by several people as: passionate, visionary, idea generator, collaborator, open to discussion, analytical, positive, people oriented and strategical (Camp, n.d.). That Garrett is people oriented is derived from the following (Camp, n.d., p. 1): “motivates others … put’s people first … makes employees happy”. Being an idea generator is based on:

“constant idea stream … full of ideas” (Camp, n.d., p. 1). Furthermore, strategical is derived from:

“aware of business challenges … sets targets …eye for business strategy” (Camp, n.d., p. 1). Lastly, analytical refers to (Camp, n.d., p. 1): “strong analytical thinker … detail oriented … seeing patterns”.

4.3 Pinterest case

In this paragraph the empirical evidence found in the Pinterest case is described. The founders of

Pinterest are further mentioned in the text as Ben (Silbermann), Evan (Sharp) and Paul (Sciarra).

Nature of opportunity: existing or created

From day one Pinterest opposed the social network trends which competitors already adapted to (Y

Combinator, 2012b, min 17:49): “we were like the polar opposite of what people wanted to see”.

Pinterest contrasted competitor social networks by not focusing on mobile, being all visual instead of text-based, and not available in real-time. Therefore, investors did not expect Pinterest to be a great opportunity and were not interested (Y Combinator, 2012b). It is further stressed that going beyond user expectations was important (Bercovici, 2014) and that the offering of Pinterest was totally different than that of competitors (Y Combinator, 2012b). It was not found that any new knowledge was created. Still, Pinterest is a created opportunity and thus explored and effectuated, because the founders created a market and changed a current industry.

Entrepreneurial ability: personal interest & perspectives

The founders of Pinterest did have a personal interest in the idea. The aim was to build something useful for others and something the founders would love themselves (Y Combinator, 2012b, min

13:23): “we came up with this idea for something … that we would use personally”. Besides, Ben had an interest in technology and together with Paul he shared an interest in mobile (Y Combinator,

2012b). Both Ben and Evan also had personal collections before: Evan struggled to organize his architectural photo collection and Ben had created an unsuccessful collection website when he was younger (Bercovici, 2014). These personal interests support effectuation and exploration. In addition, the founders disliked the add integration of other social networks and aspired to do it different

(Bercovici, 2014). This could indicate prior knowledge which is part of exploitation-causation.

However, it is the personal interest that drove the idea in the first years and their vision is also based on their opinion which still implies effectuation and exploration.

Venture development: planned or flexible

The cofounders first focused merely on the design of Pinterest. The focus was not on involving the user or incorporating user feedback: the founders decided how the improved website should look like and when the website was cool enough to launch. Moreover, the founders wanted to create something that everybody around the world would use (Y Combinator, 2012b). Thus, less attention was paid to the market needs and segments. After the second launch it appeared that Pinterest was not an immediate success, that is when the focus shifted to gathering feedback from users, arranging user meetups, showing the value of Pinterest to users and focusing on (word-by-mouth) marketing (Y

Combinator, 2012b; Bercovici, 2014). Thus, the focus was initially on the product and shifted eventually to the market which is in support of exploration and effectuation.

Additional support for effectuation and exploration is also found, because the founders did not expect

Pinterest to be used as an inspiration tool. It is also mentioned that the founders needed to adapt to changes several times and that they followed their instincts (Y Combinator, 2012b). Thus, the end goal was unanticipated and could not be defined which also supports exploration and effectuation.

Learning by doing and experimenting, part of effectuation and exploration, also apply in this case.

The two initial founders, Ben and Paul, learned from their previous created app that it is important to choose a focus, rather than investing everything in many various features. The founders also tried several strategies prescribed as suitable for social networks, but eventually learned to create a different strategy which made Pinterest successful (Y Combinator, 2012b, min 16:22): “We needed a different strategy for going at it and all the strategies we were reading about in terms of general social sites”. Five years after the launch the founders also experimented with the integrated advertisements

(Bercovici, 2014). Thus, effectuation and exploration still apply some years after the launch.

Five years after the launch there do appear some hints of causation. The founders could have based their perspective on competitors and learned from them how to improve or differentiate. Before

Pinterest choose to do integrated advertisements, the competitors already proved that it was possible to generate revenue in that way. Thus, the market for advertising on social networks did exist already.

Moreover, this indicates that business planning has been done by analyzing the competition. Also the market is analyzed and the results of advertising could be predicted, because the cofounders knew from research that Pinterest users are likely to spend more money than other network users for example. In addition, the founders were not bothered if Pinterest would be the last social network with a buy-in option. The focus at that moment was on predicting user searches and adapt to those like

Google does. Thus, for product development the founders did pay attention to and sometimes appeared to follow competitors. Moreover, building a culture and communicated a business direction are also stressed which are in support of business planning and thus causation (Bercovici, 2014).

Prior knowledge

The studies of two founders appeared not to be business related: Ben studied to become a doctor (Y

Combinator, 2012b), and Evan completed a history and architecture study (Sharp, n.d). According to work experience, Ben and Evan both have worked at a competitor of Pinterest (Silbermann, n.d.;

Sharp, n.d.). Ben further has experience as IT-consultant and he had worked also on other websites and online programs (Silbermann, n.d.; Y Combinator, 2012b). Paul had some financial jobs related to investments and venture capital (Sciarra, n.d.). Together the founders also worked on an unsuccessful

37 app before launching Pinterest (Y Combinator, 2012b; Bercovici, 2014). It was further revealed that the founders were non-technological at the start. The founders say that this made Pinterest unsuccessful at first, and therefore they decided to focus on marketing eventually (Y Combinator,

2012b). At least Ben did possess prior entrepreneurial skills, because he is recommended for his business development and product ideation skills (Silbermann, n.d.). Evan is recognized for his user experience skill, but it is unclear when this skill was obtained. Lastly, Ben was recognized as best employee and also won a business plan competition at university (Silbermann, n.d.).

Social (network)

Ben invited his college friend Paul to join him in starting a company (Y Combinator, 2012b), and

Evan was met through a mutual friend (Bercovici, 2014). The founders used their University’s alumni directory to find investors (Y Combinator, 2012b) and they used their network to attract users

(Bercovici, 2014). Thus, the founders did utilize their network in some way to enhance venture development. In the case of Pinterest it is also described that there were advisors, but only an Expedia global marketing president is mentioned to be one of those (Bercovici, 2014). Lastly, it is only generally mentioned that there were investors and that Pinterest received funds (Bercovici, 2014)

Personality

Currently Pinterest is managed by Ben who is described as strategical and analytical (Bercovici,

2014). Recommendations from others support that Ben is analytical (Silbermann, n.d., p. 1):

“generating insights on difficult problems … analytical brilliance”. Ben can be further regarded as a collaborator (Silbermann, n.d., p. 1): “social … team player … helps out colleagues”. Additionally, evidence is found that Ben is an idea generator (Silbermann, n.d., p. 1): “many innovative ideas … creative”. Also Ben is seen as a humble person (Silbermann, n.d.). On the other hand, Evan is argued to be more creative (Bercovici, 2014): he is “constantly thinking how to improve the product and the brand” (Sharp, n.d., p. 1). Furthermore, Evan is argued as open to ideas of others, humble and empathetic (Sharp, n.d.). Unfortunately, no personality traits for Paul could be uncovered.

4.4 Airbnb case

This paragraph is about Airbnb and reveals the empirical evidence found on opportunity natures and entrepreneurial approaches. The founders are further referred to by their first name: Joe (Gebbia),

Nathan (Blecharzyk) and Brian (Chesky).

Nature of opportunity: existing or created

Thanks to a rent paying problem and their problem solving skills, the founders noticed that there was a design conference and that there were no sleeping places available anymore (Y Combinator, 2012c;

McCann, 2015). Therefore, the founders decided to provide airbeds at their apartment that conference guests could rent (Y Combinator, 2012c). The focus also remained on conferences for a while and the founders even calculated the conference opportunities (Y Combinator, 2012c, min 7:15): “Obama announced he was gonna speak in this 80,000 seat football area … and there were 27,000 hotel rooms

… we realized there’s an opportunity here”. Furthermore, the founders used the housing pricing commotion as an opportunity to attract users to list their available sleeping places (Y Combinator,

2012c). This indicates that the market demand existed already and that Airbnb recognized this opportunity, evidencing exploitation-causation.

Entrepreneurial ability: vision & personal interest

The founders appeared to have a perspective on Airbnb which supports effectuation and exploration: being international from the start and integrating the on-offline experience (McCann, 2015). Airbnb is also envisioned by the founders as: “creating a whole new world” (McCann, 2015, p. 1). Furthermore, the founders believed in general that anything could be changed. In addition, the founders searched for an opportunity to earn money because they needed to pay their rent which is an indirect personal interest (Y Combinator, 2012c). It is not found that the entrepreneurs possessed any prior knowledge about the industry and market. Thus, support is found for exploration and effectuation.

Venture development: planned or flexible

Even though the founders do tell that at first the product-market fit is crucial, the founders first mainly focused on the product. For example airbeds were not what the user demanded, but sleeping places. In

39 addition, the breakfast idea was also not based on any user need or feedback (Y Combinator, 2012c;

McCann, 2015). Later on at the end of 2008, user feedback was stressed more and the founders started to meetup with their users (Y Combinator, 2012c; McCann, 2015). The feedback gathered was used to develop the product: providing real beds, not merely for conferences and not requiring a guest host

(McCann, 2015). This focus on user feedback became important, because it was advised that the small user base should really love Airbnb (McCann, 2015). Therefore, the product-market fit eventually appeared to be important for success, but that is not what happened right from the start. This is further supported by not targeting any market in the beginning and relying on users to spread the word (Y

Combinator, 2012c; McCann, 2015). Thus, market(ing) planning did not receive much attention in the beginning. Therefore, the focus was mainly on the product at first which is an indicator of exploration and effectuation.

On one hand the founders choose to pursue an opportunity by means of providing sleeping places. On the other hand the founders choose to provide airbeds, because this was the only thing they had available and could afford (Y Combinator, 2012c). Therefore, the emphasis seems to be on causation, because it was first chosen to pursue an opportunity and later the available means were selected.

However, it is indicated that (Y Combinator, 2012c, min 22:33): “if we back in 2007 said we’re gonna create that … it would have been impossible”. This indicates that the end goal was flexible and not anticipated, thus supporting effectuation and exploration.

Also experimentation, part of exploration and effectuation, is supported: trying several payment processing strategies and doing a Google advertising experiment (Y Combinator, 2012c). Besides, the regulatory challenges taught Brian how to deal with and anticipate on challenges. For example the founders learned how to persuade the regulatory people. Moreover, the founders also learned how to use bloggers and the local news to get national press awareness (McCann, 2015).

Still, the design of the third website was not only a matter of effectuation or exploration. The third website was launched in the summer of 2008 and mainly based on Craiglist which offers a similar product (Y Combinator, 2012c). Furthermore, the founders examined the payments processes of

40 competitors (McCann, 2015). Airbnb also quickly expanded to Europe after they defeated their clone over there (McCann, 2015). This indicates that competitive analysis and market planning has been done. Besides, also after seven years business planning is emphasized (McCann, 2015, p. 1): “you can afford think long term … you need a plan, a roadmap, a strategy”. Brian further mentions that the focus is also on building a culture and scaling it (McCann, 2015). This shows that causation was part of Airbnb from early on and continues to be important by means of business and market planning.

Because causation already played a role from 2008 (the launch), it appears to be mixed with the other theories supported in this case.

Prior knowledge

In the case of Airbnb, Nathan has studied computer science (Blecharzyk, n.d.) and the two others studied industrial design with product design courses (Chesky, n.d.; Gebbia, n.d.). In also appears that

Nathan had various engineering jobs, was a programmer and owned a company before (Blecharzyk, n.d.). Joe founded three other companies in which he worked for approximately four years, and he further has experience as designer and product developer (Gebbia, n.d.). Furthermore, Brian has worked as a designer and has started his own ventures before (Chesky, n.d.). Together the founders also designed a platform before to find roommates (McCann, 2015). The problem solving skills of the founders are regarded as the reason that they came up with the Airbnb idea (Y Combinator, 2012c).

Furthermore, the founders also possess the skills to convince people (McCann, 2015). In accordance with their work experience and education, Nathan describes his technology skills (Blecharzyk, n.d.), and the other founders are recommended for their design skills (Gebbia, n.d.; Chesky, n.d.). Lastly,

Joe also received awards related to technology and innovation, and was further recognized for his performance at university (Gebbia, n.d.).

Social (network)

Joe and Brian knew each other already before, because they were former classmates. Moreover,

Nathan was an old roommate of Joe who was asked to join as a founder because of his engineering skills (Y Combinator, 2012c). The founders also used their network to get cereal boxes printed, because they had run out of money to do so (Y Combinator, 2012c). Furthermore, evidence is found

41 for having advisors: Airbnb joined a startup program that included an advisor which also guided the founders to achieve success with Airbnb (Y Combinator, 2012c). It is further revealed that the founders asked several CEOs advice on beating a clone. The founders of Airbnb also describe that enough help was available in initial years of the venture (McCann, 2015). Lastly, it is only generally described that there were investors (Combinator, 2012c; McCann, 2015).

Personality

The advisor of Airbnb saw their potential (Y Combinator, 2012c, min 17:20): “you guys won’t die … you are like cockroaches”. This implies that the founders were really putting an effort to make Airbnb work. Furthermore, Brain tells he is open to feedback from others and that he also takes the feedback into account (McCann, 2015). In addition, Brian is argued as being focused, driven and passionate about design (Chesky, n.d.). Joe is only describing that he is passionate about the things he does

(Gebbia, n.d.). Unfortunately, no personal traits of Nathan were found.

4.5 Comparative analysis

In this section the cases are compared. Each section contains a case comparison on one of the following constructs: opportunity nature, entrepreneurial ability, development of the venture, prior knowledge, social (network) and personality.

4.5.1 Opportunity nature

All cases started out as a created opportunity, except for Airbnb. The main similarity of the created opportunities is that these ventures all changed how things were done at that moment in the particular industry: Uber and Snapchat created their own market and industry, and Pinterest totally opposed trends and competitors. In contrast, the founders of Airbnb recognized the market demand as the opportunity to start a venture. This reveals that it is either possible to become a most valuable new venture in the world by recognizing or creating an opportunity.

4.5.2 Entrepreneurial ability

The founders of Snapchat, Uber and Pinterest all had a certain vision on how things were done currently and choose to transform that. Users could be served better according to Uber and Snapchat,

42 and the social network products needed to be changed as argued by Pinterest and Snapchat. Even though this seems to indicate prior knowledge about the industry or market, the founders themselves saw a way to create the opportunity which was not specified yet. Contrastingly, the founders of

Airbnb had a perspective on the idea itself which was not based on any industry. In addition, in all cases the personal interest played a role. The idea of Snapchat, Pinterest and Uber was personally appealing to the founders, because they loved or personally wanted the idea. Contrastingly, the interest in Airbnb was indirect: earning money to pay the rent. Linked to the opportunity nature, this shows that the founders of the created opportunities found the idea personally appealing and had a vision on the current industry. The founders of the recognized opportunity used the idea more for a personal need and the vision on the idea itself was unrelated to the industry which does not match with exploitation-causation.

In short, all founders had a perspective on their idea and - or how to serve their users. The entrepreneurs mainly used their opinion to envision what their idea should be like which was either based on the current industry or not. In addition, all founders did have a personal interest in the idea which was even a personal appeal for created opportunities. Thus, the entrepreneurial ability is in all cases in line with exploration-effectuation.

4.5.3 Venture development

All founders initially focused on the product itself by not paying attention to the market needs and segments. The founders of Uber and Snapchat also continued to be more product focused. For example the founders of Snapchat required users to adapt to their network instead of them adapting to user needs. Furthermore, the founders of Uber choose themselves how to differentiate their product for special occasions to spark work-by-mouth marketing. This shows that these founders do not choose to adapt as much to user needs. Contrastingly, Pinterest and Airbnb were eventually more users focused by arranging user meetups to gather customer feedback for example.

Flexibility was apparent in each case. All founders could not predict what their venture would be like after some years. There is also resource flexibility by means of using existing or not investing

43 themselves in new resources. Still, the founders of Airbnb had the goal to provide sleeping places which is in line with the opportunity they recognized. However, the founders of Airbnb did also not expect what goal Airbnb eventually would serve. In comparison with the other cases this could mean that there are short term and initial goals that contribute to the unexpected end goal. For example for

Uber the goal was to provide transportation, but the founders choose to remain flexible by not owning taxi related resources themselves. Moreover, the literature review also revealed that short term planning could happen in case of exploration and effectuation.

In addition, all founders learned how to improve their product by trying out various possibilities and by experimentation. On top of that the founders of Uber and Pinterest also learned to improve on a business development level: strategies and expansion. Besides, the founders of Uber and Airbnb faced problems or challenges and learned how to overcome those. Another similarity is the advertising experiments which were apparent in the Pinterest, Airbnb and Snapchat cases. Moreover, the founders of Uber used experiments to find out how to support their product by for example phone support and a hybrid fleet.

Causation was playing a role in Airbnb early on, because competition was already examined in the initial stage and this analysis was used to learn how to develop the product. Over time in almost all cases causation became more apparent, only in the Uber case causation aspects could not be uncovered. In the Pinterest, Airbnb and Snapchat cases, causation mainly played a role in regards to analyzing and – or following competition. Besides, in the case of Pinterest the market was analyzed too. Both the founders of Pinterest and Snapchat focused on product developments that were proven by competitors as generating revenue. In that regard the founders of Airbnb used the analysis more to survive competition. In addition, Airbnb and Pinterest focused on establishing a culture and having a strategy or business direction.

To conclude, exploration-effectuation plays a role in the development phase of all the most valuable new ventures in the world: being initially product focused; being focused at resource flexibility or availability; applying learning by doing and experimentation to enhance the product and sometimes

44 for strategical matters; and not pursuing long term, definite goals. Over time causation does become more apparent in most cases except for Uber. Causation in the Pinterest, Airbnb and Snapchat cases comes in play when there is a need to secure the business by means of generating revenue or surviving competition. The founders of Airbnb, a recognized opportunity, also use causational practices in the initial stage to learn from others how the product should be developed.

4.5.4 Prior knowledge

Airbnb, Snapchat and Uber have in common that their founders have an education related to technology or product design. Only the Pinterest founders followed studies that are not related to starting a business or developing the idea. Furthermore, the education is not directly related to the industry of the ventures, because the Airbnb founders did not study hotel management and the studies of the Uber founders were not related to the taxi industry for example. In regard to work experience it is found that the founders of all ventures already had some venture related projects. In comparison to the other founders, those of Uber and one cofounder of Airbnb founded the most ventures and also continued to direct these for a longer period of time. The founders of Uber directed their founded ventures for over six years and up to ten years, while the cofounder of Airbnb did this for four years.

In addition, at least one founder of each venture has technology related work experience. Even though the Snapchat founders had tried a similar venture before, the other founders did not have any industry related experience. Concerning the skills, it is found that the founders of each venture possess product, business and - or technology related skills. Even though the skills may vary between the founders, the skills do match with the education and work experience of each founder. It further appears that at least one founder of each venture won an award that is related to technology or entrepreneurship. Additionally, one founder of each venture was also recognized for his performance.

It can be concluded that the founders of all ventures at least have some skills, education, work experience or awards that support their prior technology, business and – or product design related knowledge. Additionally, the founders of Uber and one cofounder of Airbnb had previously founded ventures which the founders of Uber directed for over six years, more than any other founder did. At least, any pre-existing knowledge on the industry and market was not found. This shows that any

45 specific knowledge was not required in all cases to start one of the most valuable new ventures in the world. Thus, general knowledge related to creating the product or starting a business is important regardless of the opportunity being recognized or created. That also implies that all cases are in line with exploration-effectuation, because that is about general prior knowledge as discussed in the literature review.

4.5.5 Social (network)

The analysis revealed that the founders of each venture knew each other already before, usually from work or university. In the Pinterest case the third founder was met through a mutual friend, thus also indicating the use of a network. The first employees of Snapchat and Uber were also familiar with one of the founders. In addition, financial resources were acquired through the network as in the case of

Pinterest and Airbnb. Moreover, the founders of Pinterest attracted more users through their network.

In addition, it appears that the Snapchat, Pinterest and Airbnb founders all had experienced advisors that had high managerial positions at other companies. The founders of Airbnb also joined a startup program which helped them to develop their venture. In the case of Uber there could be no advisors uncovered. Lastly, it is only generally mentioned that there were investors in the Snapchat, Airbnb and Pinterest case.

It can be concluded that the ventures came to existence because the founders knew each other already, and because the founders used their network to find employees and financial resources. The advisors used were also all experienced and managerial ones from other companies, thus adding experience related resources. Therefore, in all cases the financial and – or human resources were enhanced through the network. In that regard there is no difference between Airbnb as recognized and the other ventures as created opportunities. This is in accordance with the literature review: using social networks to get the right resources and the use of informants as in advisors apply to both exploration and exploitation. Still, the resources acquired by the founders are mainly used to develop the ventures in general and not for implementation plans. Thus, as argued in the literature review this shows that the social aspect is in line with effectuation as entrepreneurial approach.

4.5.6 Personality

According to the analysis it appears that all ventures have at least one founder that searches for feedback and is also open to that, but that founders also hold on to their own beliefs. In the Pinterest,

Uber and Snapchat cases the personally traits of being passionate and an idea generator surfaced.

Other similar traits across the Uber, Pinterest and Airbnb cases were: visionary, focused and strategical. While, for example Evan the cofounder of Snapchat was more inconsistent. In the cases of

Pinterest and Uber evidence is found for traits as being a team worker, collaborator and in each venture one founder appeared to be more analytical while the other was more creative. The Pinterest founder, Evan, seems to oppose collaboration a bit by being a non-conformist and independent thinker. The personality traits of the other Pinterest cofounders are unclear, thus it is unsure if the combined traits of both cofounders are similar to the other cases.

Therefore, it can be concluded that the personality traits contribute to the aspects of exploration- effectuation. For example most founders have own beliefs, think independently and are visionary which all indicate the entrepreneurial ability of exploration-effectuation by means of having a vision.

In that regard the founders do value the input of others, because they are all open to feedback and some are found to be collaborative. Most founders were also passionate about their work which could indicate a personal interest in it, also evidencing the entrepreneurial ability of exploration- effectuation. Moreover, most founders were idea generators which could be essential to create opportunities. For example being an idea generator could help to generate and act on new opportunities quickly without relying on planning an analysis, thus supporting exploration- effectuation. However, in two cases one of the founders also appeared to be strategical and focused which seem to link with exploitation-causation by means of planned venture development. Still, these traits are combined with the more creative traits of the other cofounder. In that regard being strategical and focused could imply that there is a clear, temporal direction to develop the venture which is adjusted over time. Thus, the development of the venture is still flexible in that regard which supports exploration-effectuation.

5. Discussion

In this chapter the findings of this study are discussed. First, the research question is answered. This is followed by a description of the theoretical and practical implications of these findings. Lastly, the recommendations for further research are discussed.

Research findings

The main question to answer is: how did the most valuable new ventures in the world arise? Based on the results it can be concluded that the most valuable new ventures were mainly created opportunities, but could also be as in the Airbnb case a recognized opportunity.

Regardless of the opportunity being recognized or created, it is found that ventures are explored- effectuated. For example in both cases the entrepreneurs had envisioned the idea and were personally interested in the idea which was used to pursue the opportunity. Even though knowledge about the existing industry and market seemed to be of an influence, it was more about the entrepreneurs’ opinion about how things were done currently which sparked a certain vision. In addition, the recognized and created opportunities were developed in a flexible way: being product focused at first; learning by doing and experimentation; only using short term planning; and not having a clear end goal. Thus, the findings of this study show that recognized and create venture opportunities are both developed in an explored-effectuated way. This is in line with Shane (2012) arguing that recognized venture opportunities are explored too. Therefore, recognized opportunities are not only part of causation and effectuation is not limited to created opportunities as asserted by Sarasvathy (2001) and

Fisher (2012).

In addition, in case of the recognized and two created opportunities the causation practices became more apparent after some years. That effectuation might change into causation was also not discussed by Sarasvathy (2001) and Fisher (2012). It appeared that business planning, as aspect of causation, was mainly used to deal with competition or to find product developments that would generate revenue. However, business planning also played a role in Airbnb as recognized opportunity from

48 early on. Besides, for Uber causation seems not to play a role at all. The use of causation, by means of business planning, could be possibly explained by the prior knowledge of the founders.

In all cases the founders possessed prior technology, business and – or product design related knowledge. Therefore, this shows that any specific industry or market knowledge is not needed to recognize or to create an opportunity as argued by Shepherd and DeTienne (2005) and Sanz-Velasco

(2006). That contrasts the beliefs of Ardichvili et al. (2003) and Baron (2006), who stated that specific prior knowledge about markets and industries is needed to spot an opportunity. Still, Airbnb is a recognized opportunity and based on an existing market demand. This could explain why causation happened in this case from early on, because the founders needed to know how to act on the user demand by using business planning for example. That implies that more specific knowledge was needed to pursue a recognized opportunity, thus exploitation-causation Sarasvathy (2001).

Furthermore, the created opportunities changed from exploration-effectuation into causation when it became important to generate revenue or to deal with competitors. Thus, these founders needed knowledge to develop their ventures into viable ones and therefore started to use business planning.

That also explains why the Uber founders did not use causation, because they directed the development of their previously founded ventures for at least six years and up to ten years. Thus, the

Uber founders were experienced in developing a viable business in contrast to the other founders.

This would also explain why in all cases, regardless of the opportunity nature, advisors were consulted expect for the Uber case. The advisors were all experienced and managerial advisors which could have been consulted to guide venture development as supported by Vaghely and Julien (2010).

As argued the Uber founders already possessed experience on how to direct a founded venture themselves, thus that would explain why advisors were not consulted. Still, in all cases the network was used to get resources: start the venture with someone familiar and use own contacts to get additional human or financial resources. Thus, the network is also used to acquire more resources regardless of the opportunity nature (Ardichvili et al., 2003; Klein, 2008; Alvarez et al., 2013). These

49 resources are used for venture development matching with all ventures mainly being explored and effectuated (Sarasvathy, 2001).

Lastly, the results reveal that the personality traits of all founders were in coherence with the aspects of exploration-effectuation. For example, as argued in the results section, in each venture one founder appeared to be more creative and the other was more strategical and focused. Thus, together the founders were able to quickly generate new possibilities and thus remain flexible, while they were also able to plan for the short term. In addition, the founders leveled the feedback of others with their own beliefs. Therefore, the perception and vision of the founders were of importance. This shows that personality can contribute to effectuation as argued by Sarasvathy (2001). Furthermore, that could explain why all ventures, regardless of the opportunity nature, were explored-effectuated.

Theoretical contributions

This study contributes to the theories of entrepreneurial approaches, because it is found that effectuation is not limited to created opportunities in contrast to what Fisher (2012) and Sarasvathy

(2001) proposed. This also contributes to the theory of venture opportunities in specific: recognized and created venture opportunities are both explored-effectuated (Shane, 2012).

Second, the results of this study contribute to the relation between the personality traits and the way the venture came to existence and is developed. All founders appeared to possess personality traits that are in accordance with the aspects of exploration-effectuation. Thus, that could explain why both recognized and created opportunities were mainly explored-effectuated.

Third, this study contributes to the prior knowledge aspect and explains its role in the opportunity natures and entrepreneurial approaches. It is found that general knowledge is enough to recognize and create an opportunity (Shepherd & DeTienne, 2005; Sanz-Velasco, 2006). Even though the recognized opportunity is mainly explored-effectuated, the results show that the founders of such opportunities do use causation practices right from the start. For example the founders use business planning to act on the existing demand. That explains why recognized opportunities are in need of specific market or industry related knowledge (Sarasvathy, 2001). In addition, the change of

50 exploration-effectuation into causation can be explained with the aspect of prior knowledge. The results show that prior knowledge on how to create a viable business makes it possible to continue with exploration-effectuation. Thus, that would explain why the founders without such knowledge use business planning to develop a viable venture.

Lastly, this study reveals the role of the social aspect in the opportunity natures and entrepreneurial approaches. It is found that advisors are consulted when there is limited knowledge available on how to create a viable business. In addition, it appeared that the network is used to acquire financial and human resources for venture development which is in line with all ventures being explored- effectuated (Sarasvathy, 2001).

The theoretical contributions of this study are visualized in Figure 5.1. This figure shows that the founders mainly used exploration-effectuation which is in accordance with the general knowledge and personality traits of the founders. This approach is only blurred with exploitation-causation in case of a recognized opportunity, because in that case knowledge is needed to act on the existing market demand. Financial and human resources are used to develop all ventures in an explored-effectuated way, regardless of the opportunity being recognized or created. After some years exploration- effectuation may change into causation when there is limited knowledge available on how to create a viable business. In that case also managerial and experienced advisors are consulted.

Figure 5.1 Theoretical contribution

Practical implications

In practice the results mean that no matter if the opportunity is recognized or created, it is important to have a vision on the idea and – or a personal interest in it. This study also shows that a flexible

51 approach is used in both opportunity recognition and creation: product focus at first; experimentation and learning by doing; using available resources; and not pursuing a well-defined end goal. Therefore, schools are advised to teach students how to flexibly develop ventures with their vision and personal interest instead of using a planned approach by relying on analysis. Likewise, entrepreneurs are advised to focus on their vision and personal interest, and to flexibly develop the venture.

Furthermore, recognized and created opportunities can be pursued with general relevant knowledge.

Thus, entrepreneurs are not limited by their education or work experience in a particular industry or market to start a venture. An advice for schools would be that students get the chance to work on opportunities that are not bound to a particular industry or market. Still, the results show that knowledge to act on the market demand in case of a recognized opportunity and knowledge to create a viable business is important. Therefore, it is recommended that entrepreneurs and students aim to possess such knowledge or know how to acquire such knowledge through business planning.

Entrepreneurs are further advised to look into their network to acquire financial and human resources that are useful for developing their venture. For schools it is recommended to teach students networking skills and how financial and human resources can be acquired from their network. In addition, the results suggest that it is important for an entrepreneur to: find a cofounder he/she is already familiar with; balance own beliefs with feedback of others; and to achieve a balanced set of personality traits with the other cofounder. For schools it could be important to form groups of students that are familiar with each other and together have a balanced personality trait set.

Furthermore, it is advised that students are supported in having own beliefs and perceptions, and are taught how to level that with feedback of others.

Further research

Firstly, further research is required to test the link between the opportunity natures and entrepreneurial approaches. For example this study did reveal that regardless of the opportunity nature, an opportunity could still be explored-effectuated. However, that result was only found in one case and therefore it could be just one unique case. The result could also only apply to the most valuable new ventures in

52 the world. Thus, it is necessary to further test this finding. Statistical analysis would be helpful, because that would indicate if these results are generalizable over a population of new ventures in general and therefore not mere a unique occasion.

Furthermore, it could be that exploitation-causation aspects did play a bigger role during flexibly developing the venture. Because of the reliance on secondary data this evidence may not have been found. This does not limit the findings that flexible venture development is used regardless of the opportunity nature. Still, it is advised to further analyze the degree of exploitation-causation practices being used while also applying exploration-effectuation. Also other (indirect) factors could have influenced the success of Airbnb as recognized opportunity. Thus, in depth interviews would be useful to examine the aspects of the opportunity natures and entrepreneurial approaches into detail.

Lastly, the influence of prior knowledge, social networks and personality traits is in need of further examination. This study for example reveals that the personality traits of all founders match with exploration-effectuation. That could explain why the founders choose to pursue the opportunity in a more explored-effectuated way. Thus, further research is needed to examine if the founders also use exploration-effectuation if this approach does not match with their personality. In addition, it was found that general prior knowledge is also enough to recognize an opportunity. The question remains whether specific prior knowledge would make a difference in that case. Therefore, further research is required to compare recognized venture opportunities that are based on general prior knowledge to those based on specific prior knowledge. Furthermore, limited prior knowledge on creating a viable business is argued to trigger the use of causational practices. It is also found that advisors were only consulted if the founders had little experience in developing a viable venture. These assumptions are in need of further exploration, because this study relied on secondary data. For example there could be other factors that triggered the use of causation practices, or the Uber founders did eventually use causation which was not uncovered in this study.

6. Conclusion

Studying the most valuable new ventures of the world by means of secondary data revealed that: both recognized and created opportunities were shaped by an entrepreneurial ability by means of a vision and personal interest, and developed in a flexible way. This study contributes to theory development, because scholars thus far often linked exploitation with causation, and exploration with effectuation.

Thus, it is advised that entrepreneurs and students are able to create ventures in a flexible way based on their vision and personal interest, rather than relying on a planned approach and data analysis.

Furthermore, opportunities can be recognized or created with general prior knowledge. This implies that entrepreneurs are not limited to for example industries that match with their education and work experience. Therefore, schools are advised to give students assignments which are not focused on a particular industry. Still, if knowledge to create a viable business is unavailable than the founders start to use business planning (causation) over time. In order to act on the existing market demand, business planning is used in recognized opportunities from early on. Thus, it is recommended that entrepreneurs and students at least know how to use business planning to acquire such knowledge.

Additionally, it was found that regardless of the opportunity being recognized or created, advisors are used when the founders lack the experience to create a viable business. The social network was also used to find a cofounder and to acquire resources for venture development. Both findings are in line with the assertions of other scholars. Thus, entrepreneurs can look into their network to find additional resources and students could be taught networking skills for example.

Lastly, the personality traits of all founders were in line with the aspects of exploration-effectuation.

That could explain why the founders also choose that approach to develop the ventures. In that regard the results reveal that it is important to follow own beliefs, while also being open to feedback.

Furthermore, personality traits should be balanced: for example one founder is more creative and the other more strategical. Therefore, it is recommended that entrepreneurs and students team up with someone to balance their own personality traits. Furthermore, it is advised that entrepreneurs level feedback of others with their own beliefs and that students are taught how to do that.

References

Alvarez, S.A., Barney, J.B., & Anderson, P. (2013). Forming and exploiting opportunities: The implications of discovery and creation process for entrepreneurial and organizational research. Organizational Science, 24(1), 301-317.

Ardichvili, A., Cardozo, R., & Ray, S. (2003). A theory of entrepreneurial opportunity identification and development. Journal of Business Venturing, 18(1), 105-123.

Austin, S., Canipe, C., & Slobin, S. (2015). The billion dollar startup club. Retrieved on February 17th from: http://graphics.wsj.com/billion-dollar-club/.

Baron, R.A. (2006). Opportunity recognition as pattern recognition: How entrepreneurs “connect the dots” to find new business opportunities. Academy of Management Perspectives, 20(1), 104-119.

Bercovici, J. (2014, October 15). Inside Pinterest: The coming add colossus that could dwarf Twitter and Facebook. Forbes. Retrieved from: http://www.forbes.com/sites/jeffbercovici/2014/10/15/inside- pinterest-the-coming-ad-colossus-that-could-dwarf-twitter-and-facebook/#da24471d2d99

Blecharzyk, N. (n.d.). Nathan Blecharzyk. [LinkedIn page]. Retrieved April 1, 2016, from: https://www.linkedin.com/in/blecharczyk?authType=NAME_SEARCH&authToken=ZA9s&locale=e n_US&trk=tyah&trkInfo=clickedVertical%3Amynetwork%2CclickedEntityId%3A8108196%2Cauth Type%3ANAME_SEARCH%2Cidx%3A1-1- 1%2CtarId%3A1463595462564%2Ctas%3Anathan%20blec

Boeije, H. (2010). Analysis in qualitative research. London: Sage Publications.

Camp, G. (n.d.). Garrett Camp. [LinkedIn page]. Retrieved April 1, 2016, from: https://www.linkedin.com/in/garrettcamp?authType=NAME_SEARCH&authToken=JGGN&locale= en_US&srchid=1877288981463595586625&srchindex=1&srchtotal=10&trk=vsrp_people_res_name &trkInfo=VSRPsearchId%3A1877288981463595586625%2CVSRPtargetId%3A1637353%2CVSRP cmpt%3Aprimary%2CVSRPnm%3Atrue%2CauthType%3ANAME_SEARCH

Chandler, G.N., DeTienne, D.R., McKelvie, A., & Mumford, T.V. (2011). Causation and effectuation processes: A validation study. Journal of Business Venturing, 26(3), 375-390.

Chesky, B. (n.d.). Brian Chesky. [LinkedIn page]. Retrieved April 1, 2016, from: https://www.linkedin.com/vsearch/f?type=all&keywords=brian+chesky&orig=GLHD&rsid=&pageK ey=nprofile_view_nonself&trkInfo=tarId%3A1463595227658&search=Search

Colao, J.J. (2014, January 6). The inside story of Snapchat: The world’s hottest app or a $3 billion disappearing act? Forbes. Retrieved from: http://www.forbes.com/sites/jjcolao/2014/01/06/the-inside- story-of-snapchat-the-worlds-hottest-app-or-a-3-billion-disappearing-act/#2e7fd4ac55ec

Cornelissen, J.P. (2013). Portrait of an entrepreneur: Vincent van Gogh, Steve Jobs, and the entrepreneurial imagination. Academy of Management Review, 38(4), 700-709.

Davidsson, P. (2015). Entrepreneurial opportunities and the entrepreneurial nexus: a re- conceptualization. Journal of Business Venturing, 30(5), 674-695.

Effron, J. (2016). Puppies! And other secrets to Uber’s success. Retrieved on February 17th from: http://www.cnbc.com/2016/02/04/puppies-and-other-secrets-to-ubers-success-commentary.html

Eisenhardt, K.M. (1989). Building theories form case study research. The Academy of Research Review, 14(4), 532-550.

Feloni, R. (2014). How Uber CEO Travis Kalanick went from a startup failure to one of the hottest names in Silicon Valley. Retrieved on February 17th from: http://www.businessinsider.com/uber-ceo- travis-kalanicks-success-story-2014-9?IR=T

Fisher, G. (2012). Effectuation, causation and bricolage: A behavioral comparison of emerging theories in entrepreneurship research. Entrepreneurship Theory and Practice, 36(5), 1042-2587.

Gallagher, L. (2015). The education of Airbnb’s Brian Chesky. Retrieved on February 16th from: http://fortune.com/brian-chesky-airbnb/

Gebbia, J. (n.d.). Joe Gebbia. [LinkedIn page]. Retrieved April 1, 2016, from: https://www.linkedin.com/in/jgebbia?authType=NAME_SEARCH&authToken=4SRn&locale=en_U S&srchid=1877288981463595413252&srchindex=1&srchtotal=18&trk=vsrp_people_res_name&trkI nfo=VSRPsearchId%3A1877288981463595413252%2CVSRPtargetId%3A3227180%2CVSRPcmpt %3Aprimary%2CVSRPnm%3Atrue%2CauthType%3ANAME_SEARCH

Gerring, J. (2007). Case study research: Principles and practices. New York, NY: Cambridge University Press

Kalanick, T. (n.d.). Travis Kalanick. [LinkedIn page]. Retrieved April 1, 2016, from: https://www.linkedin.com/in/traviskalanick?authType=NAME_SEARCH&authToken=xqK3&locale =en_US&srchid=1877288981463595363213&srchindex=1&srchtotal=1&trk=vsrp_people_res_name &trkInfo=VSRPsearchId%3A1877288981463595363213%2CVSRPtargetId%3A10371%2CVSRPcm pt%3Aprimary%2CVSRPnm%3Atrue%2CauthType%3ANAME_SEARCH

Kim, E., & Kosoff, M. (2015). The $10 billion dollar club: Meet the 11 most valuable startups in the world. Retrieved on February 17th from: http://uk.businessinsider.com/startups-valued-at-more-than- 10-billion-2015-11?r=US&IR=T

Klein, P.G. (2008). Opportunity discovery, entrepreneurial action and economic organization. Strategic Entrepreneurship Journal, 2(3), 175-190.

Lashinsky, A. (2015, June 3). Uber an oral history. Fortune. Retrieved from: http://fortune.com/2015/06/03/uber-an-oral-history/

McCann, C. (2015, November 20). Two tech billionaires just interviewed each other in my Stanford class – here’s what they said. Business Insider UK. Retrieved from: http://uk.businessinsider.com/linkedin-cofounder-reid-hoffman-interviews-airbnb-founder-brian- chesky-at-stanford-class-2015-11?r=US&IR=T.

Picchi, A. (2015). The 13 most valuable startups and spinoffs. Retrieved on February 17th from: http://www.cbsnews.com/media/the-13-most-valuable-private-companies/14/

Ramoglou, S., & Zyglidopoulus, S.C. (2015). The constructivist view of entrepreneurial approaches: A critical analysis. Small Business Economics, 44(1), 71-78.

Sanz-Velasco, S.A. (2006). Opportunity development as a learning process for entrepreneurs. International Journal of Entrepreneurial Behavior and Research, 12(5), 251-271.

Sarasvathy, S.D. (2001). Causation and effectuation: Toward a theoretical shift from economic inevitability to entrepreneurial contingency. Academy of Management Review, 26(2), 243-263.

Saunders, M., Lewis, P., Thornhill, A., Booij, M., & Verckens, J.P. (2011). Methoden en technieken van onderzoek. Amsterdam: Pearson Education.

Sciarra, P. (n.d.). Paul Sciarra. [LinkedIn page]. Retrieved April 1, 2016, from: https://www.linkedin.com/in/paulsciarra?authType=NAME_SEARCH&authToken=ut4W&locale=en _US&trk=tyah&trkInfo=clickedVertical%3Amynetwork%2CclickedEntityId%3A6588090%2CauthT ype%3ANAME_SEARCH%2Cidx%3A1-1- 1%2CtarId%3A1463595281986%2Ctas%3Apaul%20sciarra

Shane, S. (2000). Prior knowledge and the discovery of entrepreneurial opportunities. Organization Science, 11(4), 448-469.

Shane, S. (2012). Reflections on the 2010 AMR decade award: Delivering on the promise of entrepreneurship as a field of research. Academy of Management Review, 37(1), 10-20.

Sharp, E. (n.d.). Evan Sharp. [LinkedIn page]. Retrieved April 1, 2016, from: https://www.linkedin.com/in/evsharp?authType=NAME_SEARCH&authToken=mWkP&locale=en_ US&srchid=1877288981462180275575&srchindex=2&srchtotal=29&trk=vsrp_people_res_name&tr kInfo=VSRPsearchId%3A1877288981462180275575%2CVSRPtargetId%3A27742905%2CVSRPc mpt%3Aprimary%2CVSRPnm%3Atrue%2CauthType%3ANAME_SEARCH

Shepherd, D.A. & DeTienne, D.R. (2005). Prior knowledge, potential financial reward, and opportunity identification. Entrepreneurship Theory and Practice, 29(1), 91-112.

Silbermann, B. (n.d.). Ben Silbermann. [LinkedIn page]. Retrieved April 1, 2016, from: https://www.linkedin.com/in/silbermann?authType=NAME_SEARCH&authToken=UYu2&locale=e n_US&srchid=1877288981463595168435&srchindex=1&srchtotal=3&trk=vsrp_people_res_name&t rkInfo=VSRPsearchId%3A1877288981463595168435%2CVSRPtargetId%3A2740677%2CVSRPcm pt%3Aprimary%2CVSRPnm%3Atrue%2CauthType%3ANAME_SEARCH

Spiegel, E. (n.d.). Evan Spiegel. [LinkedIn page]. Retrieved April 1, 2016, from: https://www.linkedin.com/in/evanspiegel?authType=NAME_SEARCH&authToken=FI78&locale=en _US&trk=tyah&trkInfo=clickedVertical%3Amynetwork%2CclickedEntityId%3A82834557%2Cauth Type%3ANAME_SEARCH%2Cidx%3A1-1- 1%2CtarId%3A1463595091948%2Ctas%3Aevan%20spiegel

Stone, B., & Frier, S. (2015, May 26). Evan Spiegel reveals plan to turn Snapchat into a real business. Bloomberg. Retrieved from: http://www.bloomberg.com/news/features/2015-05-26/evan-spiegel- reveals-plan-to-turn-snapchat-into-a-real-business

Vaghley, I.P., & Julien, P.A. (2010). Are opportunities recognized or constructed? An information perspective on entrepreneurial opportunity identification. Journal of Business Venturing, 25(1), 73-86.

Y Combinator. [Y Combinator]. (2012a,October 20). Travis Kalanick at startup school 2012. [video file]. Retrieved from: https://www.youtube.com/watch?v=rQ6GoY2_Ujw

Y Combinator. [Y Combinator]. (2012b, October 20). Ben Silbermann at startup school 2012. [video file]. Retrieved from: https://www.youtube.com/watch?v=KYQHPHYs2Os

Y Combinator. [emilindricau]. (2012c,October 20). “1000 days of Airbnb”, Airbnb founder – Brian Chesky – startup school 2012. Retrieved from: https://www.youtube.com/watch?v=L03vBkOKTrc

Yin, R. (2014). Case study research: Design and methods. Thousand Oaks, CA: Sage Publications.

Appendices

Appendix A – Overview sources used

Table 3.3 Overview sources used

Case Source Purpose Relevance Research method Appendix Uber LinkedIn Travis Kalanick Personal profile of founder to Indicating prior knowledge, personality and Social network C (Kalanick, n.d.) show others his resume. entrepreneurial ability. profile of founder LinkedIn Garrett Camp Personal profile of founder to Indicating prior knowledge, personality and Social network C (Camp, n.d.) show others his resume. entrepreneurial ability. profile of founder Presentation startup school Educating students on starting Explains how Uber came to existence in the first Presentation C (Y Combinator, 2012a) and developing a business. years covering the opportunity nature, venture development approach and social (network). Business article Fortune Asking first employees of Explains more detailed how Uber is developed as Summarized C (Lashinksy, 2015) Uber how they reflect on their venture and shows developments over some years interview work and growth of Uber. covering the opportunity nature, venture development approach and social (network). Pinterest LinkedIn Ben Silbermann Personal profile of founder to Indicating prior knowledge, personality and Social network D (Silbermann, n.d.) show others his resume. entrepreneurial ability. profile of founder LinkedIn Evan Sharp Personal profile of founder to Indicating prior knowledge, personality and Social network D (Sharp, n.d.) show others his resume. entrepreneurial ability. profile of founder LinkedIn Paul Sciarra Personal profile of founder to Indicating prior knowledge and entrepreneurial Social network D (Sciarra, n.d.) show others his resume. ability. profile of founder Presentation startup school Educating students on starting Explains how Pinterest came to existence in the Presentation D (Y Combinator, 2012b) and developing a business. first years covering the opportunity nature, venture development approach, prior knowledge and social (network). Business article Forbes About how Pinterest with its Explains how Pinterest came to existence in the Summarized D (Bercovici, 2014) ad integration can defeat first years and is developed, covering the interview Facebook and Twitter opportunity nature, venture development approach, prior knowledge, personality and social (network). Airbnb LinkedIn Brian Chesky Personal profile of founder to Indicating prior knowledge, personality and Social network E (Chesky, n.d.) show others his resume. entrepreneurial ability. profile of founder LinkedIn Joe Gebbia Personal profile of founder to Indicating prior knowledge, personality and Social network E (Gebbia, n.d.) show others his resume. entrepreneurial ability. profile of founder

LinkedIn Nathan Blecharzyk Personal profile of founder to Indicating prior knowledge. Social network E (Blecharzyk, n.d.) show others his resume. profile of founder Presentation startup school Educating students on starting Explains how Airbnb came to existence in the first Presentation E (Y Combinator, 2012c) and developing a business. years covering the opportunity nature, venture development approach, personality and social (network). Business article Business Two billionaires that Explains how Airbnb came to existence and Summarized E Insider (McCann, 2015) interview each other about includes new developments from over the years interview starting and developing the covering the opportunity nature, venture venture development approach, prior knowledge personality and social (network). Snapchat LinkedIn Evan Spiegel Personal profile of founder to Indicating prior knowledge. Social network F (Spiegel, n.d.) show others his resume. profile of founder LinkedIn Bobby Murphy Unavailable - - - Business article Forbes Critical article about the Explains how Snapchat came to existence and Summarized F (Colao, 2014) future of Snapchat includes new developments from over the years interview covering the opportunity nature, venture development approach, prior knowledge personality and social (network). Business article Bloomberg About how the CEO of Explains how Snapchat came to existence and Summarized F (Stone & Frier, 2015) Pinterest approaches venture includes new developments from over the years interview and product development covering the opportunity nature, venture development approach, personality and social (network).

Appendix B – Codebook

Table 3.4 Codebook data analysis

Explanation of when the Quote from the data illustrating Selective code Axial code Open code Definition of code code or sub-code is used the code or the sub-code Exploitation - Causation Existing "Opportunities that are formed Used if opportunity is opportunity by exogenous shocks to recognized from the nature preexisting markets and then market or industry discovered and exploited by entrepreneurs—what we call the “discovery process" " (Alvarez et al., 2013, p. 303)

Market demand "Knowledge about the Used if there is a specific "When we came up the idea. It willingness and ability of market need or problem would be an air bed and breakfast, customers to pay, as well as mentioned because you know all the hotels are knowledge about demand" sold out" (Y Combinator, 2012c, (Alvarez, 2013, p. 306) min 3:56) Entrepreneurial "Everyone associated ability with that industry or market should be aware of the objective opportunities" (Alvarez et al., 2013, p. 306)

Knowledge Prior knowledge about the Used if there is prior No evidence found existing market market before recognizing the knowledge about the opportunity market

Knowledge Prior knowledge about the Used if there is prior No evidence found existing industry industry before recognizing the knowledge about the opportunity industry

Planned "Envisioning the end from the venture beginning, maximizing expected development returns, business planning and competitive analyses to predict an uncertain future, and exploiting pre-existing knowledge" (Chandler et al., 2011, p. 379) Business planning "Maps out (writes up and Used if any business plan, "Asia offers a possible blueprint. discusses) scenarios for the firm’s scenario planning, There, a handful of wildly popular future … develops a business financial projection or mobile messaging services that plan … creates and compares competitive analysis is upsell users with “in-app” financial projections for firm mentioned purchases. Spiegel’s party line, growth … gathers information when discussing revenue, feels as if about competitors and analyzes it’s read from a script: “In-app their offerings" (Fisher, 2012, p. transactions followed by 1030). advertising, that’s the plan we’re sticking to.” " (Colao, 2014, p. 3)

Market planning "We researched and selected Used if there is an "While one analysis of data from target markets" (Chandler et al., indication that the market 25,000 retailers showed that users 2011, p. 379) is researched or if the driven to commerce sites from market is targeted Pinterest are 10% likelier to buy something than those coming from other social sites" (Bercovici, 2014, p. 3)

Means to fulfill "Entrepreneur seeks to raise Used if resources are No evidence found goal resources to pursue the selected that fit with opportunity" (Fisher, 2012, p. pursuing the opportunity 1024)

Explanation of when the Quote from the data illustrating Selective code Axial code Open code Definition of code code or sub-code is used the code or the sub-code Exploration - Effectuation Creating "Indeed, the enactment process opportunity may lead to the formation of nature opportunities that are largely unrelated to current markets and industries, and whose existence and exploitation may require the use of broad disparate knowledge from unrelated industries and the development of fundamentally new knowledge" (Alvarez et al., 2013, p. 309) Create new market "Opportunities that are largely Used if it is indicated that "When we first launched guys, it unrelated to current markets" there was limited interest wasn’t easy getting our range around. (Alvarez et al., 2013, p. 309) in the new idea initially or People thought we were crazy: when a new market came “limos in San Francisco.. what?" " (Y to existence based on the Combinator, 2012a, min 8:35) idea Create new "Opportunities that are largely Used if it is indicated that "An entire subindustry–so-called industry unrelated to current ... industries" a new industry was ephemeral, or temporary, social (Alvarez et al., 2013, p. 309) created or if the current media–has emerged behind it. industry is transformed Besides Poke (which has largely faded), there’s Clipchat (a Snapchat- Twitter hybrid), Wickr (disappearing texts) and dozens of other apps" (Colao, 2014, p. 3)

Create new "Opportunities whose existence Used if it is indicated that No evidence found knowledge and exploitation may require the the entrepreneurs development of fundamentally acquired new knowledge new knowledge" (Alvarez et al., by pursuing the idea 2013, p. 309) Entrepreneurial "Choice of effect is driven by ability characteristics of the actor and his or her ability to discover and use contingencies" (Sarasvathy, 2001, p. 251) Vision "The effectuator merely pursues Used if a certain “Young users are not well served by an aspiration ... for transforming perspective or viewpoint other for-profit social networks” the original idea into a firm" related to the idea is (Stone & Frier, 2015, p. 1) (Sarasvathy, 2001, p. 249) described Personal interest “It also came about because of Used if interest in idea is "Silbermann … as a child in Iowa Steve Jobs’ fanatic love for described or if certain had multiple collections" (Bercovici, music” (Cornelissen, 2013, p. hobbies fit with the idea 2014, p. 1) 706).

Personality Personality traits that individual Used if personality of an "Garrett is the ideal entrepreneur. entrepreneurs possess entrepreneur is described Stubbornly optimistic, visionary, brilliant, thinks big, persistent ..." (Camp, n.d., p. 1)

Flexible venture "The effectuator more often than development not proceeds without any certainties about the existence of a market or a demand curve, let alone a market for his or her product, or a potential revenue curve" (Sarasvathy, 2001, p. 249)

Learning by doing “If they believe they are dealing Used if it is described “A few weeks earlier his social media & Experimenting with relatively unpredictable that experiments are service, especially popular with phenomena, they will try to conducted when it is women and hobbyists, began gather information through indicated that the experimenting with selling ads to experimental and iterative founders learned to show to its 70 million users. With learning techniques” (Sarasvathy, improve more demand than it could satisfy, 2001, p. 252) Pinterest had limited its test to a mere dozen sponsors, wringing commitments of more than $1 million from each" (Bercovici, 2014, p. 1)

Product focus first “Effectuation dictates that in Used if it is indicated that “A technically competent product highly uncertain and dynamic the entrepreneur first that virtually no one wanted” (Colao, environments, target customers mainly focuses on the 2014, p. 2) can only be defined ex post product and idea without through whoever buys a product considering the market or service” (Fisher, 2012 , p. 1024) No clear end goal "Neither possible outcome or Used if the outcome was “So basically what we are today is a their probability known" unanticipated and community market place for space. (Alvarez, 2013, p. 305) surprised the It's a really big idea, but if we back in entrepreneurs 2007 said we're gonna create that... it would have been impossible” (Y Combinator, 2012c, min 22:33) Use available "We adapted what we were doing Used if the idea was "We wanted originally do a design resources to the resources we had" adapted to resources bed and breakfast. But actually we (Chandler et al., 2011, p. 382) available did not have any furniture. Remember I'd moved up there. But Joe said he had some airbeds and that's where the name came to" (Y Combinator, 2012c, min 3.56)

Use arising "We were ﬂexible and took Used if the idea was "Valentine's Day we distributed tens opportunities advantage of opportunities as adapted to opportunities of thousands of rose to thousands of they arose" (Chandler et al., that came across drivers, every girl who got in a car 2011, p. 382) after 4 p.m. was handed a rose by the driver. That's a strong move.. fellows" (Y Combinator, 2012a, min 19:50) Balance risk "Affordable loss entails making Used if it is indicated that "And the only way to do it.. the decisions based on what one is the entrepreneurs tries to original idea was let's go by 10s willing to lose, and committing a reduce the risk to lose classes. Let's hire 20 drivers in and specific amount of resources to let's get a parking garage. And I am an endeavor with the like Garrett we are not buying any understanding and acceptance cars dude. And we are not finding that such resources may be lost" any leas on a parking garage" (Y (Fisher, 2012, p. 1025) Combinator, 2012a, min 5:02) Explanation of when the Quote from the data illustrating Selective code Axial code Open code Definition of code code or sub-code is used the code or the sub-code All theories in common Prior The knowledge entrepreneurs knowledge possess before starting the venture

Work experience Work experience prior to starting Used if any jobs are “Software Developer at Intuit,

the venture mentioned prior to February 2010 - August 2010 (7 starting the venture months), worked on stealth project involving SMS technology” (Spiegel, n.d., p. 1) Education Education followed before Used if any education is "Master of Science (M.Sc.), Software starting the venture mentioned prior to Engineering, 2001 - 2005" (Camp, starting the venture n.d., p. 1) Skills Obtained skills before starting the Used if any skills are "Demonstrated his skills in areas venture mentioned prior to ranging from ideation to product starting the venture creation to business development" (Silbermann, n.d., p. 1)

Awards/recognition Received awards and Used if awards are "Winner of Yale 50K Business Plan performance recognition related specified or if someone Competition" (Silbermann, n.d., p. 1) to the idea and received before else recognizes the the venture came to existence performance of a founder prior to starting the venture Social Who contributed to starting and (network) developing the venture Network Contacts that contributed to Used if it was mentioned "And I went with my co-founder and starting or developing the venture that any contacts were my best friend or isn’t he… Joe used in starting and Gebbia. And the day of developing the venture graduation Joe looked to me and says: Brian I think we're gonna start a company together" (Y Combinator, 2012c, min 1:26) Advisors Advisory help that contributed to Used if it was mentioned "I went out and asked advice from starting or developing the venture that any advisory help some of the smartest people I knew was used that helped the including Mark Zuckerberg, Andrew venture start and develop Mason, Paul Graham, and you (Reid)" (McCann, 2014, p. 1) Investors Funds and investments that Used if it is described that "To date, Pinterest has raised $764 contributed to starting and money is raised from million in seven rounds from a group developing the venture others of investors" (Bercovici, 2014, p. 2)

Appendix C – Sources Uber

Source 1: LinkedIn Travis Kalanick (Kalanick, n.d.)

Travis Kalanick CEO, co-founder at Uber

Summary DO NOT CONTACT ME ON LINKEDIN - Email me: [email protected] Experienced, successful Serial Entrepreneur Specialties: Fund-raising, start-up adviser/board member, project management, consumer marketing, consumer Internet, computer engineering background (UCLA),

Experience CEO, co-founder at Uber June 2009 - Present (6 years 10 months)

Head of P2P Initiatives at Akamai Technologies 2007 - 2008 (1 year)

Founder, CEO at Red Swoosh (acquired by AKAMAI) January 2001 - April 2007 (6 years 4 months) Red Swoosh: Akamai meets Cisco meets P2P Update: Red Swoosh acquired by Akamai in April, 2007 http://gigaom.com/2007/04/12/akamai-goes-p2p-buys-red-swoosh/ Red Swoosh's products and services make broadband entertainment a viable business. Our technology massively reduces the cost of video delivery while moving the content at several times the speed to end-users. OUR TECHNOLOGY Red Swoosh is running the world's largest Data Grid in the world with over 200,000 machines simultaneously connected, and 3M machines worldwide participating. We deliver data at speeds equal to premium CDNs and do so without having to ever pay for bandwidth again.

Co-founder at Scour.net 1998 - 2000 (2 years) Internet's first multimedia search engine, and 1st generation of P2P filesharing,

Skills & Expertise Do not contact me on linkedin - email me at [email protected]

Education UCLA Computer Engineering, Business Economics, 1994 - 1998

Honors and Awards MIT Technology Review TR35 - 2002 - Top technology innovators under 35 World Economic Forum - Technology Pioneer, 2005

Interests Written Op-eds/Columns for a number of outlets including: - Financial Times - CNET Featured in stories in the following publications: WSJ, Forbes, Wired, Technology Review, Techcrunch, GigaOm, AP, Reuters, San Jose Mercury News, LA Times, and many others

Additional organizations Advising and/or investments: - DeviantArt - Expensify - Dolores Labs - Kareo - Blippy - Formspring.me - Sociable

Recommendations Head of P2P Initiatives- Akamai Technologies

David Barrett Founder and CEO of Expensify Travis is *the* reason Red Swoosh was fun, fast paced, and made money for its investors and employees alike. He has an uncanny knack for knowing when to work hard, when to play hard, and when to put everything on the line to pay off big. I have incredible respect for Travis's advice, and I'd strongly recommend anybody who has a chance to pay attention when he gives it. September 20, 2008, David reported to Travis at Akamai Technologies

Founder, CEO - Red Swoosh (acquired by AKAMAI) Nisan Gabbay CEO, Sociable Labs Travis is the consummate entrepreneur. He has great balance between strategy and execution. He listens well, but also has strong conviction. Greatness is only a matter of time! October 1, 2006, Nisan was with another company when working with Travis at Red Swoosh (acquired by AKAMAI)

Ken keller Principal at KellerApps IGN used Red Swoosh for its downloads.ign.com game file download service before purchasing www.fileplanet.com. As an investor, former client, and Technical Advisory Board member of Red Swoosh, I can state that Red Swoosh does what it says it will do and has an excellent P2P CDN product. Travis is a pleasure to work with. July 23, 2005, ken was Travis's client

Source 2: LinkedIn Garrett Camp (Camp, n.d.)

Garrett Camp founder @ Expa

Summary Garrett is the founder of Expa, a startup studio that works with founders to develop and launch new products. Expa focuses on product strategy, system design, and user experience. Garrett founded Uber in 2009, to help people easily request car service via a mobile app. Uber now provides on-demand car service in 330 cities worldwide. Garrett is chairman & advisor to Uber. Garrett previously co-founded StumbleUpon in 2002, growing the company to over 25M registered users and profitability as founding CEO. Garrett completed his Masters in Software Engineering at the University of Calgary, where he researched collaborative systems, evolutionary algorithms and information retrieval. He is also a 2007 recipient of MIT Technology Review’s TR35 award. Specialties: startups, product strategy, systems design, user experience

Experience Founder at Expa May 2013 - Present (2 years 11 months)

Founder & Chairman at Uber 2009 - Present (7 years)

Chairman, co-founder at StumbleUpon May 2012 - October 2014 (2 years 6 months)

CEO, co-founder at StumbleUpon November 2001 - May 2012 (10 years 7 months)

Skills & Expertise Product Strategy (4+)

Social Media (24+) Recommender Systems (7+) Social Networking (29+) System Design (4+) Usability Testing (4+) Idea Generation (15+) Mobile Technology (17+) Start-ups (80+) Product Management (33+) Personalization (9+) Strategic Negotiations (3+) Monetization (3+) Web Development (5+) E-commerce (7+) Analytics (4+) User Experience (22+) Entrepreneurship (50+) Mobile Devices (5+) Venture Capital (12+) Business Strategy (9+) Leadership (8+) Creative Direction (13+) User Interface Design (13+) Strategic Partnerships (14+) Web Analytics (3+) Management (8+) Digital Strategy (6+) Mobile Marketing (3+) Digital Media (4+) Online Advertising (6+) Online Marketing (4+) Information Architecture (3+)

Education The University of Calgary Master of Science (M.Sc.), Software Engineering, 2001 - 2005

The University of Calgary Bachelor of Science (BSc), Electrical Engineering, 1996 - 2001

Interests social media, interface design, community dynamics, collaborative software.

Recommendations CEO, co-founder - StumbleUpon

Joe Walp Software Engineer at PayPal Garrett is an honorable man and a strong analytical thinker. This is high praise. October 10, 2012, Joe reported to Garrett at StumbleUpon

Arvind Kalyan Engineering at LinkedIn

Full of energy and ideas! Out of the all times I interacted with him there's *never* been a time when he ran out of ideas on how to improve some aspect of what I was working on. He was always enthusiastic and used to welcome others feedback. He was very clear in laying out the path so we had a clear sense of direction of where we were headed. I truly enjoy using his product (StumbleUpon) just as much as I enjoy working on it. A great entrepreneur and I cant wait to see his next invention positively influence millions of lives! July 26, 2012, Arvind worked indirectly for Garrett at StumbleUpon

Rob Hayes Venture Investor Garrett is a product visionary in the true sense of the word. "Visionary" gets thrown around too much, but a true visionary is someone who has an accurate view of what the future should look like and then makes that future happen. Garrett is that guy and someone who I hope to work with over and over again. July 14, 2012, Rob was with another company when working with Garrett at StumbleUpon

Vincent Roussilhon Product Management at Criteo Garrett is a charismatic and motivating serial entrepreneur. He does it for the pleasure to get to work in the morning and manages to distill that mood to the people who work with him.He also deeply cares for his team and always strives to make sure that people feel welcome and rewarded. As a direct result, StumbleUpon feels like a family. More importantly he has a tremendous energy that allows him to always keep pushing forward. He sets his sight on a target and pulls everybody with him, without ever being frustrated when things don't go as well or as fast as he would like. This always-positive attitude makes working for Garrett a great adventure. StumbleUpon wouldn't be where it is today without his drive. June 21, 2012, Vincent reported to Garrett at StumbleUpon

Iain Grant Partner at Riviera Partners Garrett is the quintessential Silicon Valley CEO. Unparalleled in his Product expertise and passion, a true visionary, and great executive/leader. I was retained by Garrett for a VP of Product search for StumbleUpon and I can honestly say Garrett was an absolute pleasure to work with, as well as someone I learned a great deal from. Garrett fully understands the challenges of building a great company from the ground up, and what it takes to achieve success building a product that delights hundreds of millions of users around the World. I sincerely hope I get to work with Garrett again many times in the future, as he'll continue to be a success in whatever he does. June 19, 2012, Iain was a consultant or contractor to Garrett at StumbleUpon

Mark Bartels CFO at Invoice2go I've worked with Garrett since 2008. Garrett is an "entrepreneur's entrepreneur" who transitioned from founder to CEO of StumbleUpon. He has the combination of product, operational, and engineering experience which enabled the company to grow very quickly over the past few years. Scaling experience is extremely important in a fast growing company and Garrett's guidance on building the organization, hiring an Executive team and rolling out the appropriate processes really helped streamline our rapid growth. June 19, 2012, Mark reported to Garrett at StumbleUpon

Ted Wang Business Lawyer Garrett is an absolute genius. Genius is a big, bold word but Garrett lives up to it. He sees the future in a way that few people in the world do. He understands how people use technology products and how subtle product changes can impact user behavior. He is passionate about product design and knows how to build a great business by putting users first. I am honored to have been his lawyer.

June 18, 2012, Ted was a consultant or contractor to Garrett at StumbleUpon

Ali Behnam Managing Partner at Riviera Partners We enjoyed working with Garrett on a number of searches. He had great insight and intuition about people. He understood the dynamics of hiring well and how all the people on e-staff needed to fit together. June 18, 2012, Ali was a consultant or contractor to Garrett at StumbleUpon

Josh Kopelman Partner, First Round Capital Garrett is the ideal entrepreneur. Stubbornly optimistic. Visionary. Brilliant. Thinks Big. Persistent. Confident. And thinks outside the box... June 15, 2012, Josh worked directly with Garrett at StumbleUpon

Erica Meade Director of User Experience at Minted In the close to 2 years that I worked with Garrett, I was continuously impressed by the constant stream of ideas that flowed from him. After a multi-hour brainstorm, Garrett would still be coming up with ideas for new features and product enhancements. He is enthusiastic, detail-oriented, positive and has a great sense of humor. I learned a lot working for him and can't wait to see what amazing things he does next. June 15, 2012, Erica reported to Garrett at StumbleUpon

Sumanth Kolar Head of Engineering at SlideShare Garrett is the epitome of innovation. He is a idea machine, coming up with amazing insights and product ideas all the time. Garrett is a great motivator and brings out the best out of people working with him. I would rate him as the most personable manager I've worked with and have always been comfortable bringing up controversial issues. He has been extremely supportive of the team. I have had great times hanging out with him personally and look forward to working with him again sometime in the future. June 14, 2012, Sumanth reported to Garrett at StumbleUpon

Stephen Russell CEO & Founder at Prism Skylabs, Entrepreneur, Investor, Dog Lover Garrett is a modest, thoughtful, and exceptional entrepreneur. I am very appreciative of having the opportunity of working with him over the last several years on both StumbleUpon and Uber and can't wait to see what he comes up with next. June 13, 2012, Stephen was with another company when working with Garrett at StumbleUpon

Scott Belsky General Partner at Benchmark Garrett is a rare breed, with an eye for product, UX, business strategy, and making life more meaningful by inventing cool stuff. Garrett is also among the most approachable entrepreneurs I have ever had the opportunity to work with. June 13, 2012, Scott was with another company when working with Garrett at StumbleUpon

Marc Leibowitz Doer If someone asked me, "Who's done more for Canada over the last 50 years?", well... it wouldn't be Garrett. But hey, Canada is a big state (it *is* a state, no?), so that's not really a slight. What Garrett *has* done is create a whole new way to explore the vastness and awesomeness of the Interwebs (which are almost as expansive as Canada), reinvent personal transportation and just be an all-around

73 terrific entrepreneur. If the opportunity to join something Garrett has created presents itself, one would be foolish not to jump at it. June 13, 2012, Marc reported to Garrett at StumbleUpon

Oscar Salazar Chief Product and Technology Officer at RIDE I've known Garrett for more than 10 years and I've always been amazed by his ability to identify opportunities in different domains. His attention to details and his sense of aesthetics made him an excellent product person and a leader. I'm looking forward to seeing what he is doing next. June 13, 2012, Oscar was with another company when working with Garrett at StumbleUpon

Jeff Eddings Director of Product Management at Yahoo Garrett is everything you want in an entrepreneur: incredibly bright, sees connections between things that no mortal person could see, bubbling over with ideas, and a great ambitious drive to see those ideas to fruition. The extra bonus is that he's quick with a joke and one of the nicest guys in Silicon Valley! June 13, 2012, Jeff reported to Garrett at StumbleUpon

Hashem Bajwa Brand Marketing and Experience Design Garrett is a rare entrepreneur that is both a craftsman and a visionary,. He can get deep into a product and built it well but also has a strategic sensibility and view that is necessary to lead teams and companies. His perspective on how to build products, lead teams and manage businesses is impressive to me since I first met him in 2006. Some startup founders are good at certain things and need help in many other areas, but Garrett is truly multifaceted.Garret also has a rare combination of engineering/technology skills and marketing/communications savvy. This combo is hard to find and I believe makes for more desirable and viable products and businesses. It is also a combination of two different worlds that is becoming increasingly important to the success of technology products. June 13, 2012, Hashem was with another company when working with Garrett at StumbleUpon

Dane Santos Sr. Recruiter, Talent Scout at Talent4Now It was my privilege and pleasure to work with Garrett and and his crew to add other "A players" to an already tremendous team at StumbleUpon! I can truthfully say Garrett meant it when he said "they will do what it takes to hire the best". Garrett is a man of action and integrity. I would certainly put him and anyone from SU at the top of the list of those I would work with again November 11, 2009, Dane was a consultant or contractor to Garrett at StumbleUpon

Ken MacInnis Enginerd GMC is the epitome of product design and architecture. My recommendation for Garrett stems directly from experiencing his grasp of many interconnected design decisions, product ideas, and engineering tasks. His skill in juggling all these aspects of running a company ensures he stands out from the crowd. April 24, 2008, Ken reported to Garrett at StumbleUpon

Source 3: Video Startup School (Y Combinator, 2012a)

0:00 Wow this is awesome. Okay this place is full.

0:04 Ehm.. alright so good to meet all of you my name is Travis Kalanick cofounder CEO of Uber.

0:11 Ehm.. let’s see. I do a lot of speaking because we are.. we’re a technology company that is.. we are in the trenches we’re in the city's you know.

0:21 More than half of our employees are not in San Francisco.

0:25 Almost.. I don't even remember the last time I spoke in San Francisco in front of an audience. Ehm.. every time I go to speak somewhere.. right. I look and go on Google and I look at the road. I look at architecture. I look at cool pictures I can put, that are iconic. I am going to speak in Silicon Valley. I am searching Google Images and I can’t find anything. And so yeah.. ah there you go. It's going to be here.

*Audience is laughing*

0:59 Alright Alright.

1:01 As I found a little something.

1:02 Ehm.. alright so guys I am guessing most people here at least know what Uber is, but for those of you who don't.. I am gonna do a sort of a basic tour just really quick. Ehm.. It is an app on your iPhone. Ehm.. that helps you get a car. Our motto is everyone's private driver and so you.. you open up the app and you see a bunch of cars that are near you. This is one of San Francisco. Car is three minutes away. And.. Jim will arrive in two minutes. He's ready to 4.8 and this is of course all screenshots from your app. When he arrives you're told you're notified. You can call the driver of course and if you are lucky he will open the door for you. Ehm.. when you're done. This is a short trip fifteen dollars that is our minimum in San Francisco. Of course you have lower cost options now we have something called UberX.

1:58 A couple days ago we launched Taxi in San Francisco. For a lot of folks it was like “what are you doing.. taxis? You are the anti-taxi. What are you doing?”. We know what we are doing. But eh.. We'll get to that in just a second.

2:10 Alright so some basics. Eh.. launched in June 2010 so we're for just over two years old. Eh.. we don't own cars, we don't employ drivers. A lot of people don't know that about us. They think we have all these assets they think that we employ lots of drivers.. we don't. We have a 120 employees most of which are not in San Francisco. Eh.. we don't have a marketing spend. Are deployed in 17 cities for some reason there is 16 here. Eh.. we actually just soft launched in Sydney a couple days ago. Actually yesterday. Eh.. Amsterdam is comming very very shortly. And I think Minneapolis is not on here we did that a couple weeks ago.

2:55 So quick numbers. Ehm.. hundreds of thousands hours driven per week. Eh.. a very interesting engagement figure 50 percent of all the people who have ever ridden with Uber, have ridden in the last 30 days. And remember when you ride you are paying. So think about commerce. Think about a commerce site or commerce app were fifty percent of the people ever paid, paid in last 30 days. Ehm.. average person is paying about 105 dollars a month. In San Francisco it is a bit higher than that. Prices are probably a bit too high, some of you may felt that sting. Ehm.. we are doing 26 percent month- over-month growth that is an average over the last now sixteen.. seventeen months. You all will be like.. well if you start really low and you can grow a really big. But we were pretty big 12 months ago. And if you do 26 percent month-over-month growth that means in 12 months you're sixteen times bigger than you were twelve months ago. So we're growing fast. In fact September over August was 29 percent month-over-month.

3:56 So I gonna to tell a little bit about our background

3:58 Ehm.. and hopefully If I have enough time getting to some of the regulatory stuff which I know none if you guys want to hear about

4:04 Alright. So this you can’t see very well because of all the lights. It is a romantic shot from the Eiffel Tower between a.. with me and my co-founder Garrett Camps. Some of you guys may know him. He is the founder of StumbleUpon. It was in Paris at the web where we came up with this idea. Essentially you know he just said: “I wanna push a button and get a ride”. You know.. and let’s make it a classy ride. And that's kind of how we started. Paris in many ways is a sister city of San Francisco.. impossible to get a cab there.

4:35 Ehm.. so this is something from the past. This is what we call Haley. I am not sure if you guys have ever done that but..

*Audience is laughing*

4:44 Some people actually put their arm out to get a cab.. I don't.. I don't know what's going on. It is a weird thing, but this is what we used to see in San Francisco. I went through that.

4:52 When we first started actually it wasn't about taken over the world. It wasn't about taking on corruption in every city around the world. Ehm.. it was actually just about being baller in San Francisco.

*Audience is laughing*

5:02 And the only way to do it.. the original idea was let's go by 10s classes. Let's hire 20 drivers in and let's get a parking garage. And I am like Garrett we are not buying any cars dude. And we are not finding any leas on a parking garage. Ehm.. but the idea of pushing a button and getting a ride in within minutes was a magical one and in the beginning it was a lifestyle thing. It was S classes for us and our 100 friends and so that's where it started. In order to use the app anybody could download, but in order to use it you need to have a special code that I gave you. Ehm.. and pretty soon the inbox was just full of people who wanted the code, because our friends were telling their friends. And then you know I searched on Google Images.. it is my favorite thing. Explosive viral growth on the internet... there you go.

*Audience is laughing*

5:56 That was the best one I could find

5:57 Ehm.. we had this thing called Godview and this is an older version of Godview. You can see much more what's going on today, but I can’t show you the new version of Godview it is too intense. Ehm.. but eh.. this is a screenshot of a Friday night very soon after we launched, maybe a few weeks or something like that. We had four trips going on at the same time.. we were going nuts. *loudening voice* There's four trips there's like we got trips going on, we got a dispatch the green line at the top there that's a dispatch.. he should not have his arm up, but he does. He’s got a little briefcase which is cool. Ehm.. that is Friday night early on and now this is 5 a.m *showing figures on slides* on a Monday.

*Audience is impressed*

6:46 Eyeballs by the way, you see some eyeballs every once in a while in there. That is somebody opening an app. So we see when people open apps. That helps us in demand prediction. Remember we're logistics company, we were building an urban logistics fabric.

7:02 So when you do something successful..

*Audience is laughing*

7:06 Not everybody is happy. Ehm.. and the older the industry you're tackling. Ehm.. the more protected it is by government or by corruption or by both. The more they're going to be upset about what you do. Eh.. we are making drives lives a hell of lot better. They're making a lot more money they're making ends meet, their living the American dream. And Uber is helping them do that. Riders

76 are getting around town much more efficiently. I'm not sure who hurts from this, other than in particular uncommon industry which I won’t mention.

*Audience is laughing*

7:39 So a few metrics. Look when I'm having a bad day I just go to our overall revenue graph

*Audience is laughing and applauding*

7:55 Eh.. this is a cool trick in Photoshop if you take that image and you flip it.. it's like a smile

*Audience is laughing*

8:02 Okay.. alright just get through with this

8:06 Okay.. look we launched in San Francisco..

8:10 Oh by the way so this.. this is what 26 percent month-over-month growth looks like and man a lot of times when I show this when I do presentations for cities.. Eh.. every time we launch in a city, we do this big launch event sort of have some high rollers. And people who really make the city move we sort of pay our respects that city and do a really nice dinner. And these folks are always leaning to the left looking for the axis

*Audience is laughing*

8:35 Ehm.. when we first launched. First of all a lot of people go like “wow it is successful” it's so obvious. I call it the hand.. the palm to the forehead moment when they learn about Uber. They are like I had this idea or I should have had this idea. Ehm.. when we first launched guys, it wasn’t easy getting our range around. People thought we were crazy: “limos in San Francisco.. what?” *sarcastic tone*. Ehm.. but it took off like I said and so one of the interesting things before we went to our Series A. Oh sorry this is actually before our series B here which we did in November of last year. Was.. is this the one hit wonder or not? Is this only gonna work in San Francisco, because it's so screwed up? And so we started launching in other cities. And this is a revenue chart on a weekly.. on a weekly is a weekly window which you could think of as it is almost like a moving average.

*Showing figure on slide*

9:30 Ehm.. Bleu is San Francisco, yellow is New York.. this is early on. Eh.. the brown is Seattle and the green there is Chicago. Now see we're way past that now. Ehm.. this is like sort of the first 100 days. But what we found is that every city we're rolling out.. hey we did not know if that was gonna work. Every city we're rolling out got progressively better. Our operations side of the house got very efficient. And then the technology and the number people who knew about us. So when we did go into New York we had a thousand people with credit cards on file without a car on the ground. So this was not a one hit wonder and so we just started launching it a ton of cities. We had this double rainbow of metrics.

*Audience is laughing*

10:14 What does it mean.. Ehm.. Remember as liquidity goes. This is.. you know people in the marketplace who are in a billion marketplace know what liquidity means, demand and supply go up together. If they don't, you are not in the marketplace. Eh.. in our world as liquidity goes up, the quality, the experience goes up.. and dramatically right. So our average pick up times in San Francisco is two minutes and 45 seconds. When we first started in New Yorker we were like 12 min average pick up times. And let me tell you.. you don't want to be delivering twelve-minute pickup times to New-Yorkers. They will kick your ass.

*Audience is laughing*

10:53 So as it gets better.. now we are around five minutes in New York and that is when they kind of lose their minds. Ehm.. as more people use it, you go from the core user base to bigger.. the engagement actually gets deeper. The number of rides per rider per month actually go up as we expand. Eh.. that is a cool cohort graph, but who cares.. right? The bottom line is that fifty percent of people who ever use, still use and we've seen that from the beginning.

*Audience is laughing*

11:23 This is an interesting one. This is San Francisco indexed revenue.. so we're getting.. there's lots of town cars in San Francisco. Right? The number of town cars that they were in San Francisco before we got there.. ehm.. was 600. There are now more cars dedicated to Uber then there were town cars in San Francisco when we got there.

11:46 And so you all will be like this thing is going to slow down.. the train is gonna slow down at some point. We indexed San Francisco revenue from last year's July 1st through the end of the year and look at this year July 1st to where we are now. And it’s tracking almost identical so it's not slowing down anytime soon and we are just talking about for a particular city 20 percent month-over- month. It grows, that’s.. that's really big growth especially when you're.. when the numbers are getting big

12:15 So on the operations side I think a lot of us are techies. You know I'm an engineer by training. Ehm.. we know what product managers are we know what that means. But when you're on the ground, when your technology touches people and touches city's. Ehm.. what you have to do is to have process managers. Process managers are similar to product managers they manage the process that people do versus machines and the road map for product has to dovetail with the road map for process. Because any time we change anything that happens in a car, that’s gonna change the tag and vice versa. So it is a really interesting road mapping processes that we go through.

12:56 Come on.. Ehm.. so this is supposed to be a picture of Europe. Ehm.. we're rolling out very big in Europe right now, so getting the operational expertise.. And I think it this is just not talked a lot about on startups, is the operation side of the business. I think a lot of e-commerce companies see that. We see it on a very deep level.. because you know the rubbers actually meeting the road. But getting teams ready to roll out in Europe is something we've been spending time on in Paris and London right now. Like I said we are going to be in Amsterdam very soon. And there's a whole host of other cities that were .. that are lined up in Europe. And that is gonna be a big push end of this year or in the first half of next year

13:34 Ehm.. we have somebody in Asia ready to go. And setting sort of our first city in Aisa Pac. Ehm.. and I can't wait to go to launch party.

13:47 Okay, alright. So quality and choice.. It is really interesting right we, we had this high-end thing and it costs about 50 percent more than a cab. And everybody said: “oh this is high-end”. And everybody said: “wow I'm gonna do a low-cost Uber”. There's like a few companies out there. I can't remember their names

*Audience is laughing*

14:08 Eh.. That decide that they're going to be a low-cost Uber and they clone our app. You know they flatter us by basically stealing all the pixels and copying them over to their app. Ehm.. Uber f.y.i. Uber is gonna be a low-cost Uber. Ehm.. but it's about quality and choice. And what we see when we low.. When we roll out a low cost option. What we see is that.. actually engagement gets deeper, because people have choice they don't have to always get the expensive thing. So they start using it more often. People who maybe would not start with our black car products, start with taxi or what we call UberX. Ehm.. and then it's date night.. And they wanna improve.. You know they wanna impress their lady or are they just need a comfortable ride. Ehm.. And then it goes from there. So this was eh.. Well choice is a beautiful thing let's keep moving.

14:58 Ehm.. Taxi we did in Chicago in April. Ehm.. we now have a few cities, we are in Boston, Toronto, Chicago, San Francisco, we were in New York, but we are not anymore. Eh.. don't get me started.

*Audience responses*

15:16 Fair enough we will get to that in the end. We did UberX which is sort of like a low-end Uber. Ehm.. where and we did this in July in San Francisco and New York and that's where it's basically 30 percent cheaper. All hybrid fleet, at least in SF we were trying to diversify a little bit at hybrids. Because we can't get partners to buy cars fast enough. Ehm.. but the thing is as you push a button and a car appears in five minutes, that feels magical. Ehm.. but how you make that happen is actually very complex. Ehm.. so we have a math department here, there. I like to tell them: “I said look guys you're in charge of our margins”. Right? Because they need to get the pickup times really low, but the utilization really high. How do you do that? Right?

16:00 Well you do that through a lot a math, but let's start with our math department. Okay that is not my math department, but we have to nuclear physicists on staff, a computational neuroscientist, eh.. a machine learning expert and a few other guys there. They're killing it. And some of the things they do. Eh.. They do demand prediction, congestion prediction, supply matching, supply positioning.. ehm.. smart dispatch algorithms, dynamic pricing. Friday and Saturday night are special nights. Eh.. we sometimes get really big waves of demand that you can't really get enough cars to do anything about, so you have a marketplace oriented sort of dynamic pricing element. Eh... that clears the market, it gets more cars on the road. Ehm… and sort of lashes in sort of controllable demand. You can't see these pictures really well because of the lights, but these are pretty, these are some heat maps of cities… this is DC right here but you guys probably can't see it. This is Manhattan, can't you tell.

17:07 Ehm.. Anyways these are useless I'll just keep going

17:11 Okay, alright. This right here's what driver see, this is our supply positioning. So in our company when math goes operational, than it becomes... How am I doing on time by the way? I have no timing here.

*Audience responds "8 minutes left"*

17:27 Eight minutes left? Alright eight minutes left, alright. This is gonna suck, alright.

*Audience is laughing*

17:31 Ehm.. Alrights, so supply position right. We have a heat map of demand, but I can... Basically we are predicting demand 20 minutes ahead of time. The problem is... is that if I gave the heat map to drivers... right? They all go to the same spot and then that will be bad for a lot of people who are in that hot spot. So what we do is we say: “here's the heat map of demand a prediction for 20 minutes ahead time, but where is the supply right now...”. That is anti-heat; it sucks the heat out of the map. What's left over is residual heat underserved demand. And we do that neighborhood by neighborhood base and will ultimately go continuous on it. The math is very tricky and complex and computationally intensive. Ehm.. But that gives you a sense of some of the things we do. That's in a car, you don't see it because once you get in the car he's on trip and he does not see that map anymore.

18:17 Dynamic pricing… Ehm.. I talked a little bit about that already. We have... One of our nuclear physicist guys is a big San Francisco Giants fan. Clearly we have to look at events in the city, because that’s demand in a big way. Ehm.. When the giants play of course demand is huge. When the Giants win it’s much huger than when they lose.

*Audience is talking*

18:38 Because people want to go out in style, you know. Ehm.. The wanna go to bars they're just feeling good. Actually what is interesting is that in Boston when they lose, when the Red Sox lose, we actually have bigger demand.

*Audience is laughing*

18:50 No joke. Here's what's really interesting. Eh... it's not enough to make money yet… Oh I just gave away the punch line. But basically that huge uptick in demand when Giants… when the San Francisco Giants win… It starts about three hours before the game begins. Uber Vegas is gonna take a whole new meaning.

*Audience is laughing*

19:15 Okay so I am gonna really speed through here and I've… This sucks because there is so many cool regulatory stuff I could've talked about.

*Audience is laughing*

19:20 But giving writers high-fives. Look transportation is thought of as a boring space.. it's boring. Well until you push button and a car magically appears. But we basically have lots of people love us and how do we get them to tell that story over and over again. Give them an excuse to tell the Uber story. Ehm.. so we do a lot of creative things. I think a lot of you guys have seen that. Ehm.. but eh.. look Valentine's Day we distributed tens of thousands of rose to thousands of drivers, every girl who got in a car after 4 p.m. was handed a rose by the driver. That's a strong move.. fellows.

*Audience is laughing*

20:01 I call it.. I call this scaling romance, okay

20:04 Eh.. On.. in President's Day. Ehm.. in DC we did what we call the Ubercade, okay? Escalade, town car, escalade, American flags all the way down. One out of every twenty people that pushed the button and Ubercade rolls up…

*Audience is laughing and applauding*

20:29 The driver, the driver has an earpiece that makes him look like secret service. And as you're driving through town kids are like waving, they are like knocking on the window.

*Audience is laughing*

20:46 We did something in eh.. We did something in South by Southwest's. We got Pedicabs, you don't do a town car in South by.. that's duchy.. Like you don't do that.

*Audience is laughing*

20:58 But a Pedicab let's do this, right? So we did that.. Let's call a 100 Pedicabs, you push a button and Pedicab takes you where you wanne go. But we took 10 of those Pedicabs and we outfitted them with these containers that could hold Texas barbecue. So we did on-demand Texas barbecue. You push the button and a cow would come to you on the map.

*Audience is laughing*

21:21 We did ice cream in July. And every time we roll out a city.. Ehm.. We do what is called rider zero. The first person to get in an Uber when soft launch, it was used to be an organic thing it just happened than my city team started to get excited by it. This is Edward Norton taking the first Uber in Los Angeles to go surfing.

21:42 So we give riders high-fives, but we give drivers hugs. And that's because... look the riders you know their date night goes well, they get to their business meeting on time in a certain part of town. But for a driver who is scrapping, maybe he has a few hours in the morning and one or two hours in the evening or in the afternoon booked, filling out that time with our consistent revenue stream helps them to make ends meet. And so you go from just barely making ends meet, to really making a living and then investing in your business. We have drivers who've gone from one car to fifteen. Each of those cars grossing more than a hundred grand a year. So these guys are living the American dream

22:25 This is Reod he actually was hustling one of our engineers early on. Our engineers were getting unlimited Uber, he's like I got it.. we are cool. But once you come join Uber, he did, he's the highest- performing driver on the system. He makes 20-30 percent more per hour. Most productive drive on the system than all the other drivers. Eh.. He also is the highest rated driver. We saw him figured out how he does what he does. Ehm.. he now has five cars on the system, he recently has firstborn son, named his son after our engineer

*Audience is laughing*

22:55 that's not funny like that's for real. Alright, this is Hani. Eh.. he's a comedian been in the city for about 25 years. He eh..or he thinks of himself as a comedian. Every time I get in the car, he tells me he used to be a Chippendales dancer.

*Audience is laughing*

23:13 This is Steve as he's.. And guys signal when I'm running out of time. I have no idea, I'll go over and spend an hour up here if you let me.

*Audience response*

23:17 Two minutes okay. Alright, Steve has 15 or sorry 20 cars on the system. He started with one, he's got five kids and a sixed going.. is on the way. Ehm.. that's funny

*Audience is laughing*

23:32 Eh.. I said Steve: six kids you are crazy, what are you doing to.. it is nuts. You got a business to run. He's like I got to keep the Uber.. Were need to keep growing. His son there doesn't look too happy to be part of the Uber fleet.

23:46 Eh.. Well I could talk about regulation. I'll spent a couple minutes. Eh.. The bottom line is.. Eh.. and I can’t go through a bunch of slides because I really don't have the time. Oh well let's go until somebody stops me.

24:00 This is a New York city medallion that's the license, basically to own and operate a single taxi in New York. Ehm.. the number of taxis and medallions in New York it's the blue bar there, the dark blue. It's basically been flat since 1946. The same number taxis were in the city in 1946, is the same number taxes that are out there today. That value of that medallion is worth about a million dollars a pop. There are thirteen thousand medallions in the City of New York. So you have thirteen billion dollars directed at keeping Uber from being successful.

24:46 Eh.. DC we had a really interesting situation. Eh..we went there, by the way we're as far as we could tell.. We are totally legal like love legal. Nicest laws in the country in terms of Sedans in DC. But DC Taxi Commissioner goes out there and says Uber is not legal. Ehm.. because they charge by time and distance. And let's just say that was real. Why is charging by distance evil? I don't understand, I don't get it. But he says look you're charged by time and distance you're not allowed. Well we looked at the law. Law says Sedans and a for hire vehicle designed to carry fewer than six passengers, which charges for a service on the basis of time and mileage. What I am telling you it is going public forms in Washington Post and et cetera. We go to the attorney general in the District of Columbia and that is what he tells us.

*Audience is laughing and applauding*

25:33 So when you read about the crazy stuff we're doing in cities... And I got to close this down, somebody is got the hawk, they are going to take me off here. But when you read about the crazy stuff that we're doing in the cities. Know that it is corrupt out there, know that we are highly.. highly disruptive. And what you read the papers isn't always true.

25:53 Ehm.. and the bottom line is that in order to be in this business.. eh.. in order to be this disruptive to what's going on. You have to have.. you have to be willing to fight. Eh.. and you have to not.. you can’t be shy.

26:10 Ehm.. so that’s give you a little bit about it. Basically they tried to put a floor up our prices. I'll leave it at this one, this last one here. They put a floor on our prices. Ehm... try to pass what they call the Uber amendment. Ehm… make our prices five times out of a taxi. Eh... they role the amendment out July 10th, those on Monday… sorry July 9th. The vote on the bill, the 10th... sorry, they put the bill out on a night that was a Monday at 4 p.m. to vote on at 11 a.m. the next day. 18 hours most of which you are going to be sleeping. I wrote an email to our consumers letting them know that they're about to do this. And... by the way the rationale is to ensure that basically we don't compete. If a CEO of a company told, said something like this they'd be in jail. But if you corrupt your politicians and then push those laws down it's totally legal.

26:58 Anyways we did something called life liberty and the pursuit of Uberness. Uber DC love as a hash tag. Eh... 18 hours later we had fifty thousand originally emails, these weren’t robo emails. Ehm… that went to city council people telling them not to vote for it, 37.000 tweets, 104 million social media impressions and we won. And it’s…

*Audience is applauding*

27:29 As you might imagine there was a lot of sleep during that time, but it was so short it maybe did not matter. Haha. So anyways guys. Eh.. I think that the bottom line.. I got so much stuff. Vegas by the way eh.. and prostitution are legal in Vegas, but Uber is not.

*Audience is laughing*

27:46 I got so much stuff, I probably go to end this. Ehm.. I just end with just a couple more slights here guys. And I am sorry about this. Ehm.. look technology is wiring up the core services in city life, right? Airbnb, as a bunch of other companies they are changing not just tag, not just your Twitter app. They're changing how you live. Ehm... but that change used to happen over decades, this is now happening over months.

28:07 Quality of life is not red it’s not blue, it’s just people. Right? Ehm.. cities that resist are going to feel backwards. And there cities that we’re not in, they feel backwards. Right? A lot of our customers who are used to this go to other cities, it doesn't work. Eh... so I asked the mayors what are you protecting, who are you protecting? Now I realize, they just don’t even realize that they're protecting... they think the taxi industry, they think drivers... no you’re actually screwing over drivers. Ehm… so cities need transportation alternatives but they need modern, accountable, convenient, stylish and efficient ones. Ehm… we’re out there in the city near you guys and look I appreciate being here. It is a lot of fun and eh... thank you.

Source 4: Uber an oral history (Lashinsky, 2015)

Five of the company’s earliest employees reflect on how they arrived at Uber, what their tasks were, and managing its sudden growth.

Uber turns five this week. For many users it’s hard to imagine a time when taxis or dial-a-number car services were the only way to be driven around. If Uber isn’t quite grown up yet, it certainly has grown. It is now in 311 cities in 58 countries, and it employs more than 3,000 people worldwide. To

82 celebrate its anniversary the company is running a series of promotions in its home town and first market, San Francisco. Travis Kalanick, the company’s chief executive, also plans to give a speech to Uber’s employees, drivers, and various dignitaries. He’ll focus on the challenges that cities face (including safer roads, congestion, and economic opportunity) and how he thinks Uber can help. As well, Uber’s San Francisco employees plan to fan out across San Francisco over the weekend, volunteering on a handful of public-works projects.

In celebration of its anniversary, Uber recently made five of its earliest employees available for interviews to talk about how they came to Uber and what some of their first tasks were. Their stories have some common themes, including the serendipity of joining something that didn’t look like much at first, scrapping to get something new going, and using Twitter to job hunt and stay abreast of critical developments. Their comments follow.

Ryan Graves was working for GE in 2009, and he decided he needed a change. I said, “I cannot be the GE guy.” I wanted to get into the startup world. I started following on Twitter a lot of guys in New York and angel investors around the country, figuring that angel investors know what’s coming next.

I wanted to know what was coming next in terms of starting something. I met the Foursquare guys when there were four or five them. They weren’t offering any kind of internships or business roles at the time, but I went out to Chicago and essentially started working for Foursquare. I did that for about three months. Then I saw a Tweet from Travis through some random angel investor who I was following who didn’t know him from Adam. He talked about big equity, big people involved. And I thought that sounded interesting.

So I tweeted at him and I shot him a couple of paragraphs about who I was. We spoke that night ’till one in the morning. It was a two-hour conversation. I woke up my wife in the middle of the night and said, “Hey, what do you think about moving to San Francisco?” We were in Chicago at the time. To her credit, she said, “If you think it’s a good idea, I’m up for it.

Graves moved to San Francisco in February 2010. There was a lot of work to do at the new company, including improving on the work of one of Uber’s co-founders, Garrett Camp.

Garrett had a prototype that didn’t work very well, so one of the first things we did was go out and get a firm to rebuild it before we pushed it to the App Store. They were called Mob.ly and were later acquired by Groupon. Then we designed the site for UberCab.com. We also worked on things like the sign-up flow and integrated credit card payment systems. All of the basics of commerce needed to be built out. We had one guy who was a driver that we would meet with at coffee shops, asking him questions so we could get an idea if the real world would accept this idea.

Conrad Whelan had been working in technology his native Calgary. He’d known Garrett Camp, a fellow Canadian, for years. An eye-opening trip and a phone call changed everything.

I did a crazy road trip across Europe, across Spain and Portugal in January of 2010 and realized: There’s a whole world out there. I’ve got to get my stuff together and get out of Calgary. I wasn’t actually really intending doing another startup at that point. I was actually planning on taking some time off, but I just happened to give Garrett a call to see how he’s doing. When he found out I was sort of free and ready to move, he basically told me I was hired and to move to San Francisco and help him get Uber Cab started.

Whelan was Uber’s first engineer. When I joined the company, you couldn’t actually sign up for the product. It was just a way to order the car. So I built the sign-up flows that would take a credit card and make user accounts. So as soon as we did that, we could officially launch, which was June 1st, 2010, two months after I started.

I think the next thing I did, which I really enjoyed, was optimize the dispatch algorithms to take into

83 account drivers that might miss a dispatch. That lasted like three years, or something like that, which is pretty cool.

Ryan McKillen was Uber’s second engineer. He learned about the company from Graves, a fellow alumnus of Miami University of Ohio whom he’d gotten to know in San Francisco. The company was using a small amount of office space from another startup called Zozi.

Somehow we ended up in a tiny conference room in their office, this glassed-in little conference room. The table was about as big as the room. On the morning of my first day I remember crossing the threshold of the door and noticing this stack of books on the table. All these computer science books, programming, databases, all this stuff. They’re pristine—the bindings on the books had never been broken. And there’s this one tattered book on the table that looks like it’s gotten all kinds of love, a lot of use. And so, first thing I say is, “Hey, Conrad, why is there a Spanish-to-English dictionary on the table?” And he looks back up at me and goes, “Well, Ryan, because the code is written in Spanish. Welcome to Uber.”

Austin Geidt started at Uber as an intern. Eventually she’d do so many jobs that she’d be the expert on Uber’s “playbook” for opening new markets.

I was out of school. I was looking for jobs. It was a bad economy. I was following a few random tech people on Twitter, and I think it was from Jason Calacanis, but I saw some tweets about Uber, and it looked interesting. I heard they were looking for an intern, and so I reached out to Ryan Graves, who was CEO at the time, and basically was like, “You’ve got to give me a shot.”

This was in August of 2010. And he called me pretty immediately. He said, “Answer a few questions for me.” I put together a little deck of some sort. I’d love to see today what it looks like. And then, pretty immediately, he was like, “Why don’t you come on in?” And then I met with them.

They were sharing Zozi’s office. They had very little space at the time. I met them. I don’t remember what we talked about but it was very casual. I liked that. I remember that I came very overdressed and they were just, like, these nerdy guys.

I remember thinking, “These guys are really cool, they’re really passionate about what they’re doing. Their products are really interesting.” And so I pleaded [to Graves] and he gave me a shot. I wasn’t super-qualified at the time, to be completely honest. It was a struggle for the first couple of months. I didn’t do super well, but they kind of hung on to me while I was green until I got the hang of it.

I was an intern, so the job wasn’t very defined. I remember handing out flyers at the Moscone Center that no one wanted. I remember cold-calling drivers off of Yelp. Then our first support ticket came in. I was like, “I got this.” And we experimented with phone support early, which just went to my phone. If I didn’t pick up, it went to Graves’s phone, and then to Travis down the line. But then I would get calls at 3 a.m. saying, “I can’t get a car.” So we shut that down. But in the beginning, it was just kind of making up value where I could find it.

I was so green out of school that I thought I didn’t know how to write a proper email. Then I quickly learned: “Oh, everyone’s kind of making this up.” In a start-up, no one knows what they’re doing. As soon as I got confident on that, I was pretty much off to a running start.

When we started getting support, I was like, “All right, I’m going to do all the support.” I took on the community-management side of blogging and whatnot. And then our driver operations guy left the company. They said, “Austin, can you take this along with what you’re doing?” And I said, “Sure.” And so then I was managing relations with partners.

Remember, we were just limos at the time, right? And so I remember onboarding someone. I happened to walk him out and see that he was in, like, a pink [Chrysler] Caravan, and I was like, “Oh,

84 we should probably do vehicle checks going forward.”

I took notes on everything that I was doing as I was launching a city. It kind of became a very sloppy version of our first playbook. And then each city I would go to thereafter, I would try and refine it, make it more efficient, just streamline this process. Then they said, “Okay, why don’t you hire a couple of launchers?” I ultimately hired about 50. My attitude was, “Ask for forgiveness.” I managed the expansion.

Rachel Holt moved to Washington, D.C., to be with her boyfriend, who is now her husband. She answered a job listing to start Uber’s operations in the nation’s capital. I got to D.C. on November 8th, 2011. We did our first ride on November 18th, 2011. So in 10 days, we sort of got everything fully spun off. In the beginning it was just me and another launcher team that started about two weeks after me. I think it was a little bit of the blind leading the blind. D.C. was the first market that we ever had any regulatory challenges. Ironically, when I went to D.C. I said I wanted to do nothing remotely political. Our official launch was December 15th, 2011.

I remember it was January 11th, 2012—less than a month after we launched. I actually had just come back from San Francisco. D.C. was really on fire. It was doing so well from a business perspective. In San Francisco I had met with Travis and with Bill Gurley, who was in the office at the time. I was so excited to share all this early success we had had. We were really working—really, really working hard. The team was working their tails off. I got back to D.C. and this tweet comes up saying that the taxi commissioner declares Uber D.C. illegal. Suddenly we were scrambling to figure out what to do. And of course, because it was D.C., everyone is interested in this regulatory story. So the Washington Post was writing about it and blogs in D.C. were writing about it. And then there is a taxi commissioner, not citing any rules, saying, you know, “This is illegal.” And that really sparked two incredibly crazy days. I got a call saying, “The taxi commissioner has requested a ride. What do we do?” And I was like, “Let him take the ride. We’re not doing anything wrong.” And he had called the press before he took this ride, and ended the ride at the Mayflower Hotel, which of course is where all fun things go down in D.C. And he had the press there, and he impounded the driver’s car and gave him $2,000 worth of tickets.

I spent the rest of the day calling every partner that we had, saying, “This is what happened. We’re 100% behind you. If anything like this happens again, we’re going to reimburse you for any tickets and any citations. We’re behind you.” We called every driver personally. We had more drivers on the road that evening than we had ever had before.

Appendix D – Sources Pinterest

Source 1: LinkedIn Ben Silbermann (Silbermann, n.d.)

Ben Silbermann Entrepreneur

Experience Founder at Pinterest December 2009 - Present (6 years 4 months) Founder at Pinterest. http://pinterest.com/about

Tinkering at Personal Projects January 2007 - December 2008 (2 years) Designed MightyQuiz, a Y-Combinator funded trivia site that powers trivia games for web communities like CyWorld and ArtistDirect.

Product Specialist at Google December 2006 - November 2008 (2 years) Helped design, test and launch new display advertising products. Products / Focus Areas: AdSense Display Ads, Google Ad Manager, Reservation Pricing and Network Yield Management.

Consultant at Corporate Executive Board December 2003 - December 2006 (3 years 1 month) Infrastructure and IT consulting for CIOs and Infrastructure Executives at Fortune 1000 companies. Worked on-site to develop infrastructure management plans for big companies like McDonald's, Hallmark, and Chevron.

Education Yale University B.A., 1999 – 2003

Roosevelt High School

Honors and Awards Winner of Yale 50K Business Plan Competition, Tenyck Award

Interests photography, bowling, startups, entrepreneurship, movies

Recommendations "Ben is a rare combination of analytical brilliance, creativity and likable humility. When Ben and I worked together he was universally recognized as one of the highest potential and highest performers in our company, advancing rapidly and given every chance to stretch his talents. He was remarkable for his ability to generate insight on difficult problems while still being able to communicate these difficult ideas in commercial situations to customers. Above all, Ben was sociable and universally liked and never made a fellow worker feel intimidated or inferior, despite his many talents. Ben is the very first person I would want to be working with me on any initiative."— Gregg Rosenberg, managed Ben indirectly at Corporate Executive Board

"Ben is incredibly bright and is always a source of innovative ideas, both large and small. His work was always of the highest quality and he went out of his way to help his colleagues in their work. He is also quite versatile and demonstrated his skills in areas ranging from ideation to product creation to

86 business development. Ben was also a solid team player and everyone enjoyed working with him." — Kavitha Venkita, managed Ben at Corporate Executive Board

Source 2: LinkedIn Evan Sharp (Sharp, n.d.)

Evan Sharp Founder at Pinterest

Experience Founder at Pinterest 2011 - Present (5 years)

Product Designer at Facebook March 2010 - May 2011 (1 year 3 months)

Skills & Expertise User Experience (24+) Information Architecture (11+) Web Design (5+) User-centered Design (4+) User Interface Design (13+) Adobe Creative Suite (3+) Graphic Design (5+) Interaction Design (19+) E-commerce (1+) Art Direction (1+) Concept Development (3+) Creative Strategy (1+) Design Thinking (7+) Design Strategy (2+)

Education The University of Chicago AB, History, 2001 – 2005

Columbia University - Graduate School of Architecture, Planning and Preservation MArch, Architecture, 2008

Recommendations To cut to the chase Evan's the best boss I've ever had. He was the reason I came to Pinterest in the first place and his passion behind the brand and the product was contagious from the first dinner we had about Pinterest until today. He's constantly thinking how to improve the product and the brand. It's a passion that comes through in the product and not something that can be manufactured. Users feel it but don't quite understand why, it's the secret sauce and Evan's the guy;-) Evan has a empathy in his design that I've never seen before. He is an incredibly humble person and I've learned a ton working with him. We bring different things to the table but what's really awesome is that he's always willing to be respectful and open minded to new ideas. I'm fired up to working with Evan for a long, long time! January 4, 2014, Jason Wilson reported to Evan at Pinter

Source 3: LinkedIn Paul Sciarra (Sciarra, n.d.)

Paul Sciarra Entrepreneur

Experience Founder at Pinterest 2009 - Present (7 years) Pinterest (www.pinterest.com) is a social catalog that lets you share the things you love & discover new things from friends and tastemakers.

Founder at Cold Brew Labs August 2008 - Present (7 years 8 months) Building social applications for the Internet.

Associate at Radius Ventures 2006 - 2008 (2 years) Sourcing, diligence and post-deal monitoring of early and mid-stage private and public investments. De facto observer on three companies' board of directors.

Analyst at VB, LLC 2004 - 2005 (1 year) Sourcing and diligence for private medical device-related investments.

Education Yale University 1999 – 2003

Source 4: Video Startup School (Y Combinator, 2012b)

0:00 Well first of all thanks for having me. Ehm.. it's really exciting for me to be here for like so many people that all wanna build cool things. Ehm.. I was.. I was getting ready for eh.. the talk last night and I was going back through all the emails, because sometimes my memory is a little bit hazy. And I found an e-mail from eh.. March 2010 which was eh.. roughly like three and a half.. four months after we launched Pinterest. And it is an email to our advisors and our investors at the time. And I thought I would read it to you, because it is kinda like a.. a cold blast from the past for me. Ehm.. the emails says: “hey everyone, I wanted to write a quick update from Cold Brew Labs which was the company name. Just to review, we launched a website called Pinterest. It's a tool for people to share and discover the things they love. People try Pinterest to create this collections or pinboards and to follow collections created by their friends. We're happy to say that we're making good progress. Today we have almost 3,000 register users and our daily pin count is steadily increasing. I'm also happy to say that we made big operational improvements. We’re relocating our offices to a new building just a few blocks away. The price will decrease as we're sharing it with another Y Combinator start-up, Shardio. And we've also gotten some free Amazon hosting credits”.

*Audience is laughing*

1:12 So a couple funny things about the email in general. Ehm.. the first is that the new location in question is a dilapidated two bedroom apartment on California Avenue. And in fact when I told Jessica Livingston that we were moving there she said: “oh my god I thought that place was awful”.

*Audience is laughing*

1:38 And the second is the exact setup of the place. So we had two bedrooms ehm.. one of which my cofounder Paul lived and one of which Dave the cofounder of Chardia lived in. Eh.. this is a picture of Dave. Ehm.. and we work at our living room as two companies altogether pretty much all day. And Dave was a late night guy who's hackers.. hackers are always up to 4 a.m. And so we're having meetings with investors or with users every once while, Dave would kind of be walking in his towel, because that was how you would get to the shower. And he just started to wave at everyone and that was really awkward.

*Audience is laughing*

2:11 Ehm.. and so a little bit later when we all gotta go watch The Social Network, we made a pact that if anyone ever made a movie about our company ehm.. Dave would get to be played by Ryan Gosling.

*Audience is laughing*

2:26 Because Ryan Gosling has awesome abs.

*Audience is laughing*

2:31 Ehm... so the other thing... all though that's like a little more seriously. If you think about it... four months and 3,000 accounts for a consumer startup is really not very good. And I think, the thing that surprised me the most ehm... in starting a company. After reading about you know Facebook hits Harvard ninety-five percent penetration in two weeks, like Instagram shoots two million people. Is that it can take a really really long time eh... to build things that are worthwhile. So March 2010 we launched Pinterest we had 3,000 accounts and that wouldn't be so bad if we hadn't started building Pinterest.. actually in November 2009. And that alone wouldn't have been so bad if I hadn’t left my job to start a company in May 2008.

3:12 Ehm.. a lot of people say things like: running a startup is like running a marathon. And I think that the part of that analogy that's right, is that it's long. But it is actually really different. I mean, I think when I.. I think about my experience it's more like going on a road trip. Like in a car that doesn’t have good headlights and you're not having very much gas. And you think you are going to Toledo, but you find out that you're supposed to be in Miami. And if you really run out of gas, you might have to buy gas from someone. They might just kick you out of your own driver seat. And that uncertainty, the fact that every single day you're dealing with a lot of choices you don't have a lot of perfect information, is for me the lesson that was hardest to learn and continues to be a real challenge in doing a startup today.

3:50 So I'm gonna talk a little bit about kind of our journey through this kind of weird process and a few things we learned along the way. Number one lesson: making things can take a long time. So 2008 I was working at Google ehm... I mean I was in Hudson. Not as an engineer, but working.. basically doing customer support, taking feedback from users and feeding it back into the advertising products. The reason I was there was because I'd come from Washington DC where I was working as a consultant. And growing up, even though I always looked up to anybody that made things whether it was an architect or an engineer or an artist, I'd always kinda thought I was gonna be a doctor. And so I pursued that path which is the same path my parents pursued, the same path that both of my sisters pursued. So when I graduated from college and decided I didn't want to be a doctor, I was a little bit lost. But even then.. like even at the time I thought I was gonna be a doctor, I had this real interest in technology. I thought it was really cool. So when I was an undergrad I made a program with some friends that let you try on glasses online. Ehm.. and it was appropriate, because both of my parents are ophthalmologists. Ehm.. when I was at my consulting job in DC, a good friend of mine named Holthy had me help him out whit his YC see start-up. Where he was trying to help market bands, he was a musician in a band. And even when I moved out to California and I was at Google, I was working on another web site which was a quiz website. That let anybody to play quiz questions about anything they wanted.

5:11 And the common theme through all these things was that.. for some reason I kept going back to the idea of building a product. I thought that was a really exciting thing to do, but it always stalled and I always had an excuse for why it stalled: it wasn't the right market; I need to learn more by working at Google; ehm.. it wasn't right timing. But actually the dependent variable was just me. Right? The dependent variable was that I never actually committed and put myself in a situation where had to make it work. And so I think from me.. I pay too much attention to talks where people basically build

89 something huge on a side and their where pulled out of their job, and everything was working. For me at least the active committing to going out and doing... doing it, turned out to be a really important thing. And so... I don't know if this applies to everyone, I've heard of a lot of people that have successfully built things on the side and then gently transition it to a full time gig. But at least in my situation... for a person that really like puts his heart into whatever job is at hand, it was a really important step. I actually remember the night that I made the call. Ehm.. I was sitting at dinner with my girlfriend and now my wife and I was talking about some cool idea, that I think would be great how we can build it and how we can market it. And she looks at me and said: “you know you should either do it or just, just stop talking about it”.

*Audience is laughing*

6:26 And.. it was a little bit harsh, but honestly it was the best thing someone could have told me. Because she was absolutely right. And I feel genuinely thankful that someone was honest enough in my life to just call me out and say make it happen or don't make it happen, but just make your call and be happy with that call. And so I am always really thankful for her.. eh.. giving me that advice.

6:48 So I left in 2008 and I hooked up with one of my friends. And Paul he was a great friend from college, super driven guy. And we decided the thing we were really interest in was mobile. So the iPhone had come out recently and a platform had come out, so people were really excited about it. And the product we wanted to build was called Tote, it was a shopping catalog on the phone. And the reason I thought this would be so cool, because I got always catalogs in my mail dumped at my doorstep. And I had this brand new, really cool phone and I just wanted to see something running on this phone. And so we got to work and we started prototyping it, we did it out our savings. Ehm.. but there were some problems. Ehm.. the first was that it took a really long time to get things built and approved by Apple, like a really long time back then. You had no idea when it was gonna get approved, you had no idea what was gonna happen. And second there were lot of unsolved problems back then. Ehm.. we started this grand ideas doing all sorts of offline caching and being able to use this thing in the subway, being able to eventually process payments. We put all those ideas into this prototype and made it really hard to shed. And not surprisingly sooner or later we're in a situation where we really needed to raise some money. And it was 2008 and you are two non-technical cofounders, and it was a really bleak time. There are lots of ways for investors to say no to you and I'm pretty sure that I've heard all of them. Like I've heard every single one.

*Audience is laughing*

8:06 Like these are the top three. Like number one is: call me back in a few months. This is kind of the most painful as you ask someone out on a date and they are like: not right now but maybe.. maybe in November. Right?

*Audience is laughing*

8:18 That one.. that one was like really really hard to hear, because you can have even less money and you can even have less leverage in negotiation. The second is: who else is in? Okay, this is one you hear all the time. It's like.. it's not good enough for me by myself, but if there are other people that put money I'd be willing to consider it. And then there were the occasional people that were really blunt.. they were like: “there is no way this is gonna happen, this is.. this is insane.. it's totally crazy”. I remember really vividly I went to a session where I was pitching actually a whole group of investors up in Silicon Valley. And it's really intimidating right? You're looking at these people that build great companies. And I'm about five minutes into explaining of what we are doing, everyone starts just heading for the door. And I was like: man.. like what.. what am I doing wrong. And I found out they.. they brought a tray of free cookies.

*Audience is laughing*

9:04 And..

*Audience is laughing*

9:07 What I was saying was interesting enough to keep them in their seats as long as there were like no cookies in the background.

*Audience is laughing*

9:12 Ehm.. you know we’ve done fundraising a few times and sometimes it's been easier. And sometimes it’s been really, really hard. Eh.. we’ve done it where we've flown off the coasts, we've had tracked down sort of everyone in our alumni directory whether they are tech investors are not investors. We’ve done it a bunch and I think I've learned like three important lessons that I think any entrepreneur should know if they're starting a kind of company that will need funding. The first is that: like even rich people are subject to free cookies right? Even though you're really rich, you're probably still the kind of person that is influenced by free. And in that lesson is actually something really important: it’s said investors are just people too, right? Investors are just regular people that happen to have other people's money, that own money or are willing to put forward. And even though they have a really good opinion on things.. they might be wrong. And that was something that was really hard for me to swallow, because I really looked up to all these people. And the second lesson is that: if you really need money and they have money, and they know that they are the only person that can give you the money.. you don't have any leverage or whatsoever. You have zero leverage. And that puts you in a really tough spot, right? You can’t really negotiate, it’s 2008 they know it’s 2008. They see your app, it’s kind of crap, nobody really uses it. There is nothing you can do.. unless you hack that system, right? Unless you somehow turn the tables and give them a reason that you should have the leverage. And those reasons generally are: fear of losing the deal.. right? Or the belief that this thing is just gonna be so big , that whether you give the money or not.. you’re just gonna be wildly successful. Number two was a hard case for us to sell. So we.. we solved for number one and that was a really important thing. And the very last thing I learned.. ehm.. and this was something especially true when you kind of driving up sand hill road, which I don’t know if you guys have been to you. I sort of looked like the Emerald City, but it kind of looks like a ski lodge with no mountain. *Audience is laughing*

11:06 It’s just very like normal buildings. The final thing I learned is that people are going to give you all kinds of advice. And.. I think it's really easy to take advice, because you walk into a room and there's like Google's for stock certificate. Ehm.. and there like invented Yahoo. These people are really, really, really smart. But if you look at the returns on venture capital, it's pretty shaky like we're in a pretty high volatility industry. And one thing that we always hold ourselves and one thing that I really, really believe is that: fundamentally.. like the future is unwritten. Like if they knew... they would be done.. right? And so people can tell you should be more technical, they can tell you that you're in the wrong market, they can tell you all these things. And those things might be true and you should assess them for yourself, but you shouldn't take it on face. Because they could be wrong. And in the back of your head you have to remember something: that for all the millions of dollars venture capital investors have made; for all the certificate there are on the wall they are these little trophies when things go IPO; for all those things there are things that they passed on. And those are the things that actually burn them up. Like if those are the ones, they are like haunt them at night. And I think that if you can convince somebody, that you just might be the one that's going to be to odds you can be successful. And it’s a general attitude, I think it is important whether you're recruiting, whether you're raising money, whether you just need to make a final push adjusting your product.

12:30 So eventually we put money together and we were working back on Tote. We’re still having the same fundamental problem that we couldn’t get the rate improved fast enough. And we’re fundraising on the east coast. And while I was out there I met this really great guy eh.. named Evan Sharp. Ehm.. Evan is a Columbia Graduate student at the time, he is studying architecture. We just hit it off. And

Evan he is reading about this whole dilemma. And we are just thinking: “what would be cool to build?”. Like what are we just wanna see... really what we wanted to see, what we wanted to see is something out there in the world. We just want to see somebody using something. Somebody asking once like what's my.. what’s my big plan, like what would make me really happy when we were starting pitches. I was like jeez.. I just wanna go somewhere and see somebody that I don’t know using something that I made and have it to be kind of useful. That’s what I thought was really exciting. And so we came up with this idea for something that was web-based, really simple, something that we would use personally.. and that was Pinterest.

13:24 We learned a lesson from doing this iPhone app. And that was that even though we had all these ideas of all these great features that were cramming and we weren't great at one thing.. right? There wasn't one thing that was special about it. People talk a lot about like a minimum viable product or when you should ship something. And my advice is: you should ship when you have one thing that you're proud of, like one thing that is worthy of someone's time. And that could take you a long time and it could take you not very long at all, but it's not worth their time to check out.. you're not getting any good feedback on whether it's good or not. They see it and they’re gonna be like this crap. Thank you for the feedback, start again. And we decided that the one thing we had to do really well, if we're gonna make a website about collections, we had to make it look really cool. Like if it didn't look cool than no one's gonna make a collection, because they don’t wanna show their friends. Because the thing we just made looks really lame.

14:08 So this is the first version of Pinterest. It didn’t look very cool. And in November 2009 we started building the basic infrastructure and started really iterating on what it could look like, how could we make it look really interesting. So we went through a lot of versions of this: vertical grid horizontal grid, both, left side nav, right side nav, top nav, different logos. And we waited until we felt, we had something that we thought was really cool. And we’d showed it to people along the way and we would show them something that we thought was a little bit of an improvement. And we finally felt ready to launch. And I emailed out to all my friends, like all my family, like look at this really cool thing. We really jazzed about it and basically no one responded.

*Audience is laughing*

14:48 Right. There's basically no response at all. 3,000 accounts, not active users accounts is pretty bad.. if you have three people actively pushing it out to every single person they know every day for four months. But there was something that was really positive. And it was that the few people that used it, myself amongst them, actually really loved it. And instead of immediately changing the product, I was like maybe I can just find more people like me. And that also fits with our current operating strategy since we don't have very good engineering resources. So we're just gonna market this thing.

15:23 And that’s what we started to do. Ehm.. we started to have meet-ups, the surfers meet-up in San Francisco it was at a store called Rare Device. Ehm.. we did another meet up later and Westtown just a little bit later. We all tried to make if fun to find pictures. And we also marketed online. So we had a campaign with a blogger that I met named Victoria, who was a wonderful woman. And we had something called pin it forward, where everyone would create a pinboard about what home meant to them and it was organized like a chain letter.. like one person would introduce the next person would introduce the next person. And everyone who participated would get invites to invite other people. And a thing about it that really worked was: we found this little group of people that were interested in the same things and we showed them how the service could be helpful to them. And fundamentally that's what Pinterest is about. It’s about finding people who share common interests and those people maybe your friends, they may not be your friends. But we needed a different strategy for going at it and all the strategies that we were reading about in terms of general social sites. This was a really, really exciting moment for us. And the best moment of all was when things started to grow.

16:24 When we went to that meet up, even though we had very, very few users, I distinctly remember that the people hadn't met each other before were having real conversations. Right? They weren’t bullshit conversations, they were asking about things in their life that they never would have known if they were just follow each other on Twitter or if they were just looking at each other’s Facebook projects. They found people there were saying he how is the gardening project that you are working on, how is your new living room, how’s all that stuff going. And it felt like that was the kernel is something really special: the idea that you can use our service online and that you found out about. You could go to a physical place and you could find that same person and you had a genuine connection.

17:05 A lot of people in Silicon Valley didn't get and I still don't know if they really get Pinterest. A lot of them kind of look at it and they said: well its visual, it's not organized in real time which is a big theme back then and it doesn't have a feed. Like it didn’t really make sense to them why anyone would use it, but the fact that it made sense to someone was what really matter to me. And I think it thighs back to what I told you guys about investors. A lot of people are reading tech press, investors read the same hacker news articles that everyone reads. There is not some sort secret special Hacker News that has the real companies you want to invest in.

*Audience is laughing*

17:33 Their reading the same Techcrunch articles, they’re getting the same data. It's incredibly democratic, you have access to all the information they have access to. And that also means that just like anyone else they may be subjected to the same biases and trends and bubbles and reports that happen in the general consumer media. At the time we were like, like the polar opposite of what people wanted to see. Twitter, FriendFeed, Facebook were the hot companies, right... because they were in real-time. Google was like needs the real-time search. Everything had to be a text base feed which could be accessed on your phone. Here we come and we’re saying it's not real time, it’s all visual. And so they're drawing their two matrix by two matrix, they’re like… this is a disaster. Right? This is like the worst thing that could happen.

*Audience is laughing*

18:18 And eventually what we compel them, eventually is we would show them real users and eventually those users where their wives or eventually those users were people they knew in their life and that's when it became a lot easier to get things done.

18:31 So where are we today? We are in San Francisco now. We just moved our office from Palo Alto, sadly I loved Palo Alto. And we're building out a team of people that are really diverse. I mean the thing we learned in building the service was that our problem in distribution wasn’t engineering problem, it was a community problem. The problem in building the first really cool thing, didn't happen to be anything but a design problem. And those three things just had to work together for our kind of business to succeed.

19:03 When I came out of Google I thought: “man the only way I can get this done is if I get the most brilliant graduate student out of Stanford, who doesn't know these invented page rank yet, getting him into a room and build all this really, really awesome stuff”. We called our company Cold Brew Labs, because all the cool companies called themselves labs.

*Audience is laughing*

19:20 We’re like.. we’re like: oh my god we got to be labs or no one is gonna want to work here. Because like labs companies are really cool.

19:23 And one of the most kind of satisfying realizations is that there are a lot of different ways to succeed. There a lot of different companies: there are companies that don't raise money, there are

93 companies that do raise money, there are companies that go b2b, there are companies that are consumer. And then within consumer there a lot of different things that are successful for the very simple reason, that there are a lot of different kinds of people in the world. And as much people want to give you advice about exactly how you should run your startup, exactly the strategy. I think you need to trust the data, you need to trust the users that you have and you need to trust your own instincts to do what you think is going to be right for your company.

19:57 Pinterest right now is a tool where we help people find their inspiration. And to some people that sounds really hokey. But to me the idea that we can show people things they want to do in their future, helping them get closer to actually doing those things. Whether it's redecorating their home, or going on a vacation, or buying a gift. And in that process inspire someone else, is a really cool thing to be working on. And it’s not what we thought this site was gonna do when we first launched it, but it’s what's come to be. And sometimes the product finds its purpose and sometimes it goes the other way around. And either way is okay as long as you get to something that people really love.

20:33 Pinterest is a network. Right, we have millions of people that are connected to billions of objects. It's the third-largest source of referral traffic on the Internet. And so in the early days some people like you don't need to be a technology company, now we have to right. All of the sudden now we need folks that can mine for data and those people have really interesting things to do. Like we're on that road trip, we're heading towards the Midwest and it turns out we had to bear the other way. And I think that adaptability to change is really fundamental.

21:00 And at the same time Pinterest is a tool where people can do these things. Right? You can plan a vacation, you can plan cooking and recipes, you plan holiday shopping, you can plan all these things in your life.

21:11 And the very last thing that's important to me, is that Pinterest is at team of talented people. Like I feel genuinely lucky, it’s like walking in office and work with people that are better than me, and pretty much everything I do. And I think that to me even though they're a lot of stories told about entrepreneurs that toil alone, the best things in the world are made by groups of people. I think when you're really early on the startup, you're really worried about like: oh my gosh I can’t get my equity from this person it’s gonna run out. But it’s that size of the total pie, right? It’s the size of with how many people can you actually build something that's bigger than who they are. And if you can find those people, if you can find people who want to work with you, that want something that's bigger than they are...I think that it's the best investment you can make, to give them ownership in what you're actually building. And to me it's just been a really gratifying experience to know that everyone that works with us actually owns part of the fate of the company.

22:06 So this is just people from around the office. We, we obviously value collaboration. It is kind of how the company was founded. And so if I had two pieces of advice.. they're.. they're really, really simple. Right, the first is that you should really just build something you believe. If you go on a five- year seven-year ten-year fifteen-year journey at least build something that you really, really love. Because otherwise you'd definitely gonna burn out. Or you have to be like to most mercenary person to give themselves fifteen years and take all this risk, if you didn’t have at least loved the idea of where you gonna end up.

22:38 And the second is just don't give up. Don't let somebody talk you out of your dream. And the reason that I think startup school is so cool, because if you look around in the room like you're surrounded by all these people that really want to do what you're doing. Silicon Valley is like a weird place like people always being talking about doing startups. The people are from all over the country, they're from all over the world. And those early party during a startup can actually be really lonely. It can just be a total bummer, because you are toiling on this thing and no one cares about. It’s not getting anywhere. And there's a tendency I think with a lot of people that I meet doing startup, they are like I just need to work harder. I need to go out into the world less, I need to turn on the lights less frequently, maybe I need to sit closer to the screen.

*Audience is laughing*

23:20 And I think that it's a really dangerous game to play. Like, there's a reason I started the presentation by showing a really good friend of mine, who wasn't working at the company I was. But we are still hanging out with us all the time. The fact that we could get a beer and talk about: “hey this is really tough, this is a hard time”, made it a lot easier. And wherever you live, the great thing now is that you can find those people. Like they are maybe in your neighborhood, they may be online, they may be on some meet-up. But you can find those people somewhere. I personally think it's good advice to take the time to invest in those people.

23:55 So part of the reason I was so excited to come... was to me it's just really exciting to be in a room full of so many people to basically want to do, what I wanne do. Right, I basically just want to build something bigger than myself that a lot of people in the world will find useful. And to be with lots of those people, just makes me happy, it gets me excited about doing what we do every day.

Source 5: Inside Pinterest (Bercovici, 2014)

The Cannes Lions advertising festival has become as big among the Madison Avenue crowd as the Riviera town’s iconic film event is for Hollywood. So as Steve Stoute nursed a drink with a friend at the Hôtel du Cap-Eden-Roc on the balmy June evening that opened this year’s boozing and schmoozing, the Cannes Lions veteran braced himself for an onslaught of media and technology executives. Stoute’s ad agency, Translation LLC, has clients like Anheuser-Busch, State Farm and McDonald’s – the kinds of whales that would have him fending off supplicants left and right.

But the roles of supplicant and master reversed when Stoute spotted Ben Silbermann walking into the bar. The soft-spoken Pinterest CEO was attending Cannes for the first time. Silbermann, 32, had just checked into his hotel and was planning to have a quick drink with his team before turning in to prep for his keynote speech the following morning. A few weeks earlier his social media service, especially popular with women and hobbyists, began experimenting with selling ads to show to its 70 million users. With more demand than it could satisfy, Pinterest had limited its test to a mere dozen sponsors, wringing commitments of more than $1 million from each.

Stoute was desperate to get his newest client, discount shoe store chain DSW, into the program (fashion is the third-most-popular type of content on Pinterest). “I didn’t want this thing to go by without us getting in front of it,” he says. Fortunately he had an in: Stoute’s drinking buddy that night was Ben Horowitz, whose venture capital firm, Andreessen Horowitz, had just participated in the $200 million funding round that had propelled Pinterest’s on-paper valuation to $5 billion. Horowitz called Silbermann over, and Stoute ordered rosé for everyone, raised his glass toward his new acquaintance and offered up a paean of praise and blessings: Rise above, be great, stay great.

After accepting Stoute’s flattery, Silbermann agreed to take his money, too. An hour into his Riviera debut, the new prince of Cannes had already bagged his first deal, just by showing up.

That’s pretty much how things have been going for Pinterest lately. A visual social network where people create and share image collections of recipes, hairstyles, baby furniture and just about anything else on their phones or computers, Pinterest isn’t yet five years old, but among women, who make up over 80% of its users, it’s already more popular than Twitter, which has a market capitalization of more than $30 billion. Pinterest’s U.S. user base is projected to top 40 million this year, putting it in a league with both Twitter and Instagram domestically, and it’s moving fast to catch up with them overseas, opening offices in London, Paris, Berlin and Tokyo over the past year. International users now make up nearly half of new sign-ups, according to the research firm Semiocast. Pinterest even doubled the number of active male users in the past year.

To date, Pinterest’s users have created more than 750 million boards made up of more than 30 billion individual pins, with 54 million new ones added each day. During the 2013 holiday season Pinterest

95 accounted for nearly a quarter of all social sharing activity. Among social networks, only Facebook, with its 1.3 billion users, drives more traffic to Web publishers.

All that activity sounds big, but it understates the moneymaking opportunity in front of Pinterest, which will ultimately be judged by how much revenue it can wrest from its users. While it’s the earliest of days still, many analysts and observers believe that, on the basis of average revenue per user, it’s only a matter of time before Pinterest blows past Facebook, Twitter and the rest of the social pack. “They’re going to bring in billions of dollars a year,” says Dave Weinberg, founder of the social marketing company Loop88.

To marketers, Pinterest represents a unique proposition, a new medium of a sort that’s never existed before. One difference is temporal. As Silbermann explains it, Facebook “is about your connections, your past events, your memories.” Users on Facebook volunteer a staggering amount of retrospective information such as birthplace, alma mater and vacations, data the company can use to power its highly targeted ad offerings. Twitter can’t offer that level of detail, which is why its revenue per user, at around $3.50, is only half that of Facebook’s. Twitter’s value remains stuck in the now, promising advertisers a presence in real-time conversations about the World Cup, a presidential election or Orange Is the New Black.

If Facebook is selling the past and Twitter the present, Pinterest is offering the future. “It’s about what you aspire to do, what you want to do down the line,” says Silbermann. And the future is where marketers want to live. When a user pins an image of a wedding dress or a coffee table to one of her boards, she’s sending up a signal flare to the merchandiser who might want to sell her that wedding dress or coffee table. “There’s intent around a pin,” says Joanne Bradford, Pinterest’s head of partnerships. “It says, ‘I’m organizing this into a place in my life,’ like when people tear out a page of a magazine.”

The idea of being able to locate consumers at that delicate moment when browsing becomes shopping has marketers intrigued. “One of the things we’re trying to figure out strategically is how to tap into consumers earlier in the inspiration or planning phase,” says David Doctorow, senior vice president of global marketing at Expedia, one of Pinterest’s charter advertisers. “We don’t have great ways to identify consumers in that part of the journey.”

For now advertising is Pinterest’s only revenue line. But it requires only the tiniest leap to conjure a scenario in which the company acts as middleman for the hundreds of thousands of retailers already showcasing their wares on its platform. “The next step will be how do we make it really easy for you to go out and buy that ring or take that trip,” says Silbermann. This is Amazon’s turf, but Facebook and Twitter have been making incursions, with both companies conducting tests of “Buy” buttons for frictionless shopping. Pinterest, though, has natural advantages in e-commerce, with independent research showing its users are more likely to share product links and make big purchases than users of other social platforms.

If Pinterest is going to lay claim to the future, it will have to knock off a pretty formidable incumbent, Google, which is also in the business of harvesting signals of intent and selling them to marketers. That’s the basis of its search advertising, the engine that drives roughly two-thirds of the company’s $55 billion in annual revenue.

Silbermann, who spent two years as a product specialist in Google’s advertising operation, knows what he’s up against. For all his midwestern diffidence (he was raised in Des Moines), he’s not shying away from the confrontation. In his Cannes keynote Silbermann dismissed Google as “the ultimate card catalog,” an outdated technology useful only if you already know what you’re looking for. Evan Sharp, Silbermann’s cofounder, puts a finer point on it. Pinterest, he says, “exposes people to possibilities they never would have known existed.”

Pinterest people talk of this open-ended form of search as discovery, and figuring out how to do it right “is the biggest business opportunity in the last 10 to 20 years for an online business,” says Tim Kendall, Pinterest’s product head. The choice of time frame is not accidental: As Facebook’s director of monetization from 2006 through 2010, he shaped the strategy that turned that company into the $200 billion force it has become. He says Pinterest will be bigger–bigger than Facebook and, yes, bigger than Google. “That’s why I joined.”

Silbermann didn’t always know what he was looking for. It’s tempting to assume otherwise: As a child in Iowa he had multiple collections, including one of dried insects pinned to cardboard; as an adult he started a pinning site for virtual collectors whose most avid early users were in the Midwest.

But the path was nowhere near as straight as that sounds. Silbermann grew up thinking he’d be a doctor like his parents, both of whom are ophthalmologists. An accomplished cellist and debater, he spent the summer before his senior year in high school at MIT’s elite Research Science Institute and then enrolled at Yale, where he took premed courses. Halfway through college, though, he caught the business bug. Instead of taking the MCAT upon graduation, he took a job as a management consultant at the Corporate Executive Board in Washington, D.C. “Like a lot of young people, I just wanted a job at the beginning,” he says of taking the road more traveled.

He quickly grew restless, growing increasingly fascinated by what was going on in the technology industry, which was bouncing back from the implosion of the Web 1.0 dot-com bubble. “I would read blogs on it in my free time and think, ‘What am I doing?’ The story of my time, this thing that I’m superexcited about, was happening in California, and I was like, ‘I’ve got to get out there,’ ” he recalls. After three years as a consultant he scored “ the only job I could get at Google,” as a product specialist, and moved out West in 2006. Silbermann spent his days translating customer feedback into product refinements, acquiring a skill he considers crucial to Pinterest’s success. But troubleshooting ad systems wasn’t what he’d come out West to do, and the loftier ambitions on display all around him were a goad to his own. Silbermann decided to quit and try to start his own company.

He hooked up with a Yale classmate, Paul Sciarra, and in 2008 the two started Cold Brew Labs. Its first product was a shopping app called Tote, which struggled to stir up interest. Silbermann was visiting New York when he met through a mutual friend a Columbia architecture student named Evan Sharp. “We both had the same hobby, which was the Internet,” Sharp says. “I grew up in rural Pennsylvania, and Ben grew up in Des Moines. For both of us, in a way, the Internet was this really precious window into worlds outside our day-to-day experience.”

Sharp told Silbermann about his collection of thousands of architectural drawings and photos, which had become increasingly hard to organize. That resonated with Silbermann, who’d noticed that Tote’s users seemed more interested in saving photos of products than in buying the products themselves. He invited Sharp to join Cold Brew Labs, and together the three launched the first desktop version of Pinterest in March 2010. Users could save images from anywhere on the Web to thematically organized boards–”Nail Art,” “Honeymoon Ideas,” “Viking Designs” and so on–as well as follow other users and their boards. Every section was a free-form grid that scrolled in a never-ending succession of pictures and words. As the work progressed, Sharp moved to the Bay Area and took a job at Facebook to support himself while the three worked from their makeshift offices, a “dirty apartment” in Palo Alto.

This is the point in the story where usually the founders hit on the novelty that makes their product go viral overnight. That wasn’t how it happened with Pinterest. Its early gains were the result of laborious word-of-mouth marketing, with Silbermann leaning on everyone in his network to spread the word and personally contacting several thousand users to quiz them about what they liked and disliked. “If he hadn’t done that, my guess is we would’ve given up in a few more months,” says Sharp, 31. “It’s kind of ridiculous how long we worked on it, given how little success we were seeing.”

Nor was it an overnight sensation with investors. “He had a hell of a time raising money in the beginning,” says Ron Conway, a perpetual member of the Forbes Midas List, whose firm, SV Angel, invested in April 2011 at the urging of fellow angel Shana Fisher. Yelp CEO Jeremy Stoppelman was one of those who failed to see the potential. “A friend sent it to me, and I didn’t even take the meeting,” he recalls. “I was like, ‘Ehhhh, this is interesting, but I don’t know what to do with it. It’s too conceptual for me.’ ” (Fortunately for Stoppelman, the opportunity came back around a year later courtesy of Eventbrite CEO Kevin Hartz, whose enthusiasm for Pinterest won him over.)

Those days are past. To date, Pinterest has raised $764 million in seven rounds from a group of investors that includes FirstMark Capital, Andreessen Horowitz and Bessemer Venture Partners. In May it closed that blockbuster $200 million round that provided fuel for its international expansion. At that valuation–and given the mania for fast-growth companies over the ensuing six months, a raise in the range of $8 billion to $10 billion is possible–Silbermann’s estimated 15% stake and Sharp’s estimated 10% would make them, on paper, candidates for the FORBES billionaires list.

Others are jumping on the gravy train. With more than 400 employees — up from fewer than 20 in early 2012 — Pinterest has just signed a lease on another building in the neighborhood (it moved into its current location just two years ago). “I spend a lot more of my time trying to clearly communicate where we’re going so everyone can march in the same direction,” Silbermann says. “Technology has made it easier for small teams to scale fast, but no one’s ever released something that makes it easy to build a culture proportionately as fast.”

The cornerstone of Pinterest’s culture is a principle they call Knit. Whereas other big tech companies in the Valley are led by people of one skill set–engineers at Google, designers at Apple – Pinterest solves problems by combining different kinds of expertise. “That way you can produce something that no one individual with one expertise could have produced on their own,” says product chief Kendall. As a visual reminder, a diagonal beam in the lobby is covered in a crocheted cozy. “We’re trying to build a culture of deep appreciation for different disciplines is how I’d put it,” Sharp says.

Despite their similarities, Silbermann and Sharp have slipped into complementary roles. (Sciarra, the third cofounder, left Pinterest in April 2012, finding a soft landing as an entrepreneur-in-residence at Andreessen Horowitz. “Ben was the guy to take the company into its next phase, and he’s doing an excellent job,” he says.) The linear-minded, strategic former management consultant was the natural choice for CEO. No rah-rah motivator, he spent a recent evening diagramming the company’s internal communications channels on a whiteboard to figure out which ones were working best. Sharp, a more lateral thinker, became chief creative officer. “I’d say I’m a little more crazy than Ben is and a little more — I don’t want to say artistic but a little more on the creative side,” Sharp says. “My mind is like a warren, whereas Ben’s is like a f–king database.”

Sharp sometimes feels bemused by the speed of all the change around him. “It’s something you don’t hear a lot about necessarily, but it’s a very weird process to grow up with the company but not to be the face of it as much,” he says. “It can make you feel insecure. I feel great, but I could see how a lot of cofounders end up spinning out or burning out of companies that they aren’t the CEO of, because you have to really be confident that you’re contributing.”

In a conference room in Bellevue, Wash., a crew of Pinterest ambassadors tutor executives from Expedia in the art of pinning. Larkin Brown, a chic, willowy user-experience researcher, explains how the different reasons users pin things–to plan a project, to compare different styles or just for inspiration–correspond to the phases of the so-called purchase funnel: awareness, consideration, preference and purchase. “The thing that’s important to understand is it’s the pin that triggers the mode,” says Brown. She hands off the PowerPoint clicker to Kevin Knight, head of agency and brand marketing, who stresses that every board a brand creates ought to correspond to an interest someone might have, since that’s how users orga nize their own boards. “Patio furniture isn’t an interest; outdoor living is an interest,” he says. Around the table heads nod and pens scribble. In 2013 Expedia

98 spent more than $1.7 billion on advertising and marketing across its brands, which include Expedia.com, Hotels.com and Trivago.

Pinterest conducts these five-hour workshops for the dozen or so partners in its Promoted Pins program — i.e., its advertising clients, each of which committed between $1 million and $2 million for a six-month run. After a workshop, participants typically see the interaction rate on their pins increase by 25%. Making sure advertisers know what they’re doing before they start spending money ensures they’ll be happy with the result, says Bradford, who oversees sales. They’d best be happy, since charter advertisers are reportedly paying $30 to $40 per thousand impressions–several times the rate Facebook commands.

Like Facebook’s Sponsored Posts and Twitter’s Promoted Tweets, Promoted Pins are a form of so- called native advertising, in which an ad takes the same form as the user-generated content around it. Native advertising evolved in response to what marketers call “banner blindness,” the tendency of Web users to tune out adjacent ads. It’s also turned out to be perfect for mobile phone screens, where ads must appear in the main feed or not at all. More than 90% of Pinterest usage is on mobile, higher than Facebook (68%) and Twitter (86%), according to comScore.

But there’s native and then there’s native. Facebook may know you’re a Cleveland Browns fan who takes a size XL, but when it shows you an ad for a Dawg Pound sweatshirt in your News Feed, it’s still an unwanted interruption, because who goes on Facebook looking to buy a sweatshirt? Pinterest users, on the other hand, are very much in the mode of planning how to spend their money. If you’re browsing for beach vacation ideas, an Expedia pin showing all-inclusives in Cancun isn’t an intrusion–it’s just more information. “Pinterest is a place people come to discover things they love,” says the firm’s head of operations, Don Faul, a veteran of both Facebook and Google. “Brands are at the center of that.” To make sure its ads never feel too much like ads, Pinterest has a few ground rules: Every Promoted Pin has to start out as an ordinary pin, living on the partner’s boards, and stunts like price promotions and contests are off-limits.

For high-end marketers in particular, context is everything. Yahoo’s Marissa Mayer calls it the “Vogue phenomenon,” alluding to the way glossy magazine ads seem like they’re part of the experience, while online ads are always a nuisance. Yahoo’s $1 billion acquisition of Tumblr, another visual social network, was Mayer’s attempt to re-create the phenomenon in pixels; Pinterest, with a bigger, more focused audience, has a better shot.

“With Pinterest, at least people have shown some intention to be served the content you’re providing them,” says Meghan Burns, marketing director for Vineyard Vines. “As a luxury brand it’s a huge step in the right direction. We can buy impressions all day long, but it’s all about maintaining a positive association with the brand.”

Pinterest provides a suite of tools to help brands quantify the return on their time and dollars and is collaborating with them to develop new ones tailored to their needs. Burns says her company’s Web traffic and new users numbers are up since it started paying to promote pins, and its nonpaid pins are also performing better on measures of audience reach and engagement. While one analysis of data from 25,000 retailers showed that users driven to commerce sites from Pinterest are 10% likelier to buy something than those coming from other social sites, Burns wants more convincing proof that the brand’s Pinterest fans are converting into sales. “I’m really waiting for that second tier of data to say, ‘Shoppers are ready to buy here,’” she says.

Once that happens, why not just sell to them directly? E-commerce is clearly part of Pinterest’s road map, but even with that war chest, it is still in ramp-up mode. Its workforce remains one-eighth the size of Twitter’s, much less Facebook’s or Google’s, which still means doing things one at a time, even if it means letting rivals get a head start.

That doesn’t bother Silbermann and Sharp. They’re not focused on selling stuff to their users any more than Silbermann was thinking about selling ads when he walked into the Hôtel du Cap.

The opportunity is much bigger. “How do we do for discovery what Google did for search?” Silbermann muses. “How do we show you the things you’re going to love even if you didn’t know what you were looking for? We think if we answer that question, all the other parts of the business will follow.”

100

Appendix E – Sources Airbnb

Source 1: LinkedIn Brian Chesky (Chesky, n.d.)

Brian Chesky Co-founder, CEO @ Airbnb

Summary I am one of the founders and CEO of Airbnb.

Experience Co-founder & CEO at Airbnb.com October 2007 - Present (8 years 6 months) www.airbnb.com

Principal at Brian Chesky, Inc. June 2007 - October 2007 (5 months)

Industrial Designer at 3DID June 2005 - June 2007 (2 years 1 month)

Skills & Expertise User Interface Design (11+) User Experience (22+) Entrepreneurship (38+) Leadership (18+) Interaction Design (5+) Start-ups (16+) Social Media (5+) Mobile Applications (4+) E-commerce (8+) User-centered Design (5+) Product Marketing (4+) Design Strategy (4+) Digital Marketing (4+)

Education Rhode Island School of Design Bachelor of Fine Arts (BFA), Industrial Design, 1999 – 2004

Recommendations Co-founder & CEO- Airbnb.com

Dan Andrews Programmer Analyst ♦ Running Evangelist ♦ Game Changer ♦ Coach and Mentor I have had the pleasure of spending a few days with Brian. I was literally inspired by his focus, his drive and his passion for all things well designed. Brian is accomplished and knowledgeable in the area of design. November 1, 2008, Dan was with another company when working with Brian at Airbnb.com

Source 2: LinkedIn Joe Gebbia (Gebbia, n.d.)

Joe Gebbia Co-founder & CPO, Airbnb

101

Summary I'm loving life, the things I'm working on, and the people I work with.

Experience Co-founder & Chief Product Officer at Airbnb February 2008 - Present (8 years 2 months) Airbnb is a place where what's inspiring about every person, and every home, in every country, can be shared. People share extra rooms, entire houses, castles, treehouses, boats, and even igloos. What began in my San Francisco apartment has spread to 40,000 cities in over 192 countries, creating a new economy for hundreds of thousands of people around the world.

Founder & Lead Designer at CritBuns June 2005 - April 2010 (4 years 11 months) Designed, developed, and patented a new invention for a portable seat cushion. Marketed to both niche and mass market sales channels, including the Museum of Modern Art (NYC & SF), Solutions Catalog (35MM viewer reach), and Gaiam wellness products. CritBuns has been exhibited in 3 countries, and is sold in over 30 stores worldwide.

Co-founder at Ecolect, Inc, February 2006 - March 2010 (4 years 2 months) Partner, lead interface designer, and strategist for an online sustainable materials community that connects designers with sources of eco-materials, and with other green-minded designers. Developed our GreenBox subscription into a profitable service that ships material samples quarterly to design firms/universities internationally.

Founder at Juice Studios September 2005 - November 2009 (4 years 3 months) Oversee freelance product, graphic, and web ventures.

Industrial Designer at Chronicle Books July 2006 - November 2007 (1 year 5 months) Design lead for new package design and format initiatives across marcom, book, and gift lines. Aided in retail store experience design, and trade show experience design. Responsible for ideation, material selection, graphic and industrial prototyping, and presentation quality images and models.

Industrial Design at Kaiju Studios June 2005 - August 2005 (3 months) Product design and ideation for LG Electronics.

Intern at Item New Product Development January 2005 - March 2005 (3 months) Product design and ideation for Staples, Inc.

Intern at Cornerstone Prototype + Development June 2003 - August 2003 (3 months) Involved in model making projects using range of materials from rapid-protoyping to rubber molds and urethane parts.

Intern at Critt Graham + Associates June 2000 - August 2000 (3 months) Worked with graphic design team on annual reports, web sites, and in-house marketing materials.

Skills & Expertise Brand Architecture (6+) Keynote (5+)

102

User Interface (22+) Storyboarding (3+) Start-ups (15+) Customer Experience (3+) User Experience (35+) Interaction Design (12+) User Interface Design (15+) Product Design (70+) Information Architecture (5+) Graphic Design (56+) Industrial Design (27+) Design Strategy (14+) User-centered Design (11+) Mobile Applications (7+)

Education Rhode Island School of Design BFA, Graphic + Industrial Design, 2000 - 2005 Activities and Societies: - Student body president (2002-2003) - Founder & Captain, RISD Basketball team (2000-2005)

Brown University Joint classes - Completed cross-registration liberal arts courses in public speaking, music, and environmental studies.

MIT Product Development - Joint product design class between RISD Industrial Design and the MIT Sloan School of Business.

Honors and Awards Business Week: Top 20 Best Young Tech Entrepreneurs (2009) Selected to Y-Combinator seed fund (2009) Selected to Designboom NYC Exhibit (2009) RISD Alumni Council Executive Committee (2005 - current) Selected to Designboom Sydney Exhibit (2008) Selected to Designboom Tokyo Exhibit (2007) Selected to Designboom NYC Exhibit (2007) CritBuns named "Best of 2006", ID Magazine (2006) Selected to Chronicle Books ID Fellowship (2006) Steven T. Mendelson Community Service Award, RISD (2005) Thomas A. Edison Award for Innovation, RISD Industrial Design Dept (2005) RISD Varisty Basketball Team, Founder & Co-captain (2000 - 2005) Student Leadership Scholarship, RISD (2003) Starred in MTV show "High School Stories" (2002) Student Body President, RISD (2002 - 2003) RISD Orientation Leader (2001 - 2005)

Interests Basketball, sustainability, travel, alternative fuels, typography.

Recommendations

Laura Baker Joe is a superb creative, always looking for new ways to better systems, never short of great ideas. September 17, 2011, Laura studied with Joe at Rhode Island School of Design

103

Source 3: LinkedIn Nathan Blecharzyk (Blecharzyk, n.d.)

Nathan Blecharzyk Entrepreneur & Software Engineer

Summary Specialties: Frontend: CSS, Javascript (Ext, Google Maps, Prototype, Scriptaculous) Backend: C, C++, PHP, MySQL, Ruby on Rails, Visual Basic .NET Software Stacks: Linux, Memcached, Mongrel, Nginx, Solaris Web Services: EC2, Facebook, Google Maps, S3, Yelp

Experience Co-Founder / CTO at Airbnb.com March 2008 - Present (8 years 1 month) Travel like a human.

Owner at Consult Mavens, LLC September 2006 - December 2008 (2 years 4 months)

Software Engineer at Batiq February 2007 - January 2008 (1 year)

Software Engineer at OPNET Technologies, Inc. September 2005 - May 2006 (9 months)

Teaching Fellow at Harvard University February 2005 - June 2005 (5 months) Moderated discussions of papers for a graduate course in peer-to-peer systems (instructed by Prof. Mema Roussopoulos).

Research Assistant at Harvard Kennedy School of Government June 2003 - June 2005 (2 years 1 month) Research Assistant for Prof. Asim Khwaja (part-time – 240 hours).

Intern Program Manager for Visual Basic .NET at Microsoft Corporation June 2004 - August 2004 (3 months)

Bioinformatics Programmer at Brigham and Women’s Hospital June 2003 - August 2003 (3 months) Bioinformatics Programmer for Dr. Guillermo García-Cardeña, Ph.D.

Education Harvard University Computer Science, 2001 – 2005

Source 4: Video Startup School (Y Combinator, 2012c)

*Someone announces Brian Chesky*

*Audience is applauding*

0:09 Hey guys, can you hear me?

*Audience is responding*

104

0:13 Alright well thank you for waiting it out. And eh today I am basically gonna talk about the first 1000 days of Airbnb. And eh.. when I got the email from Paul Graham, he ehm... asked me to speak. And I said alright, well what should I talk about? And Paul said you should talk about when you are powerless in obscure.

*Audience is laughing*

0:35 So I'm gonna talk about when I was powerless and obscure. And a lot of those 1000 days I was powerless and obscure. So let's start. Two years ago I when to start up school. And ehm... it was in Stanford it was at a different auditorium. And TechCrunch write a post here. Eh... Jason Kincaid did a story. And look at the photo you're probably… see if you can recognize somebody's. I will zoom this photo up. You probably keep still can't recognize somebody, because it is really pixelated. But now you can.

*Audience is laughing*

1:11 So that's me powerless and obscure in the audience two years ago. And I guess the central theme of my talked today is... if... if mean... I really think it's not impossible to be on stage two years from now. I mean… and you will see from my story it's not impossible.

1:26 So let's start. So the story starts back in ehm... 2004 I went to the Rhode Island School Design. And I went with my co-founder and my best friend or isn’t he… Joe Gebbia. And the day of graduation Joe looked to me and says: Brian I think we're gonna start a company together. So I said: why? I need a job I’ll see you. So I went to Los Angeles and...

*Audience is laughing*

1:49 And poor Joe is stuck back in provenance Rhode Island. But literally a thousand days ago when it.. it was weird when I was constructing a title. It was like a 1040 days so, October 2007 thousand days ago he calls me up and he says he's got this apartment, his roomie has moved out and he says Brian let's start a company. And I said: okay let’s start a company. So I literally quit my job, I left my house, I left all my possessions, I even broken up girlfriend... but I frightened that one anyways... *Audience is laughing*

2:26 And I drove up to San Francisco and Joe tells me the rent is 1150. And I have a thousand dollars in the bank account. And I said: I probably should have asked about that before I moved up.

*Audience is laughing*

2:45 So it turns out that weekend an international design conference was coming to San Francisco. And all the hotels were sold out. In RISD, even though it is an art school. They really teach you that creatively can solve problems. If you are creative and you identify an everyday problem that you deal with, you can actually solve that. And for us this is a problem and part of it was making rent, but part of it we just wanted to solve the problem with a creative solution.

3:12 And in literally 30 minutes we built this as we're talking. I know, I don't know... I am not here to give lessons. It’s up to state you have an idea just put something out there in 20-30 minutes. Don't matter... don't worry how bad it looks. And our first launch, our first of many what's this *showing slide*. And this is a site that two designers had built. Ehm... looks pretty modest today. We ended up hosting three people from around the world. Amol actually came from India. Catherine was a 35-year old woman from Boston. And Micheal... that’s not Micheal I just got a 45 year old guy from google news, I could not find... *Audience is laughing* I could actually not find a file photo of Michael. But anyways this guy... this 45-year-old father from Utah slept on an air bed in my living room.

105

3:56 When we came up the idea. It would be an air bed and breakfast, because you know all the hotels are sold out. It wasn’t giving me a designer... we wanted originally do a design bed and breakfast. But actually we did not have any furniture. Remember I'd moved up there. But Joe said he had some airbeds and that's where the name came to. So I decided that I chronicle our 1000 days to traffic. And so this was our first launch.

4:44 And a couple months later South by Southwest was coming up and we decided why don’t we built a site where you can basically provide airbeds for conferences all over the United States. We do, we did for that conference, for conferences all over the country. And it turned out that launching by South by Southwest.. we thought would be the best time to do it.. that is basically one of the preeminent tech events in the country.

4:48 I asked Joe, I said: “Joe who's the best engineer you know”. He said his old roommate Nate is. And so in March of 2008 we did our second launch and it looked like this. Airbeds for conferences. And that is our traffic.

*Audience is laughing*

5:00 So that was our second launch. You know a few months had gone by. And three things happened at that conference. The first thing is: I show up... and by the way we did not have payments at the that time, so I show up and I forgot to go to the ATM. So I showed up at this guy’s house, he lets me in, and we have dinner together and then he says alright... he was getting uncomfortable... alright eh... It is going to be 200 dollars. And I am like oh... can I get it to you tomorrow. And it was really awkward. And here I am a now guy's... some stranger sleeping in his living room. And he is like what the hell did I get myself into here.

*Audience is laughing*

5:39 The second thing happened is that I met a couple people. One of the people said: Brian I love to go use your product. I am going to London, but there is no conference. So he said that’s kinda limiting: why should it only be for conferences?

5:49 And the third thing: we met this guy guy right here Michael Seibel. Michael Seibel is the CEO of Justin TV. You know before we came up here I didn't know anything about Y Combinator, Tech Crunch, I was an industrial designer working in Los Angeles. And Michael basically, informally brought us in the YC community. I'm not sure if I should tell you to reach out to the YC alone without going to the program, but I actually did. It worked out really well. Michael basically channeled his inner Paul Graham. He was basically giving us advice, taught us the YC methodology. We called him the god founder.

*Audience is laughing*

6:23 And so in the summer of 2008 we did our third launch. And it’s kinda of similar what you see today. You type in a city, you find a listing, you find it on the map. In fact that was a room photo you know it's the same size as the person. Well Craigslist has photos of that size and we figured... well there's a reason they have them that big. I mean the people don't want big photos, we didn't know any better.

6:52 And the Democratic National Convention was coming up. We built this amazing product or what I thought at the time was a pretty innovative product. And it makes you able to book an average person space. The way you could book a hotel room. You get an authentic space. Well the problem is that no one wants to list their space, if no one's gonna book it. And I can’t.. I am like.. I can’t put mp3's on the site. It’s like..

*Audience is laughing*

106

7:13 Actually we should have done. Maybe we would have gotten more traffic. Ehm.. you know I can’t tell people go to this website where no one is listing. It's a chicken-and-egg problem. Well it turns out that making things suppress is a really good idea. Barack Obama announced he was gonna speak at this 80,000 seat football arena with the Denver Broncos speak. And there were 27,000 hotel rooms. So we're doing the math and we realize there's an opportunity here. And this was gonna be, this would gonna put us on the map. So we start noticing Fox News, CNN MSNBC, this entire eh... 24/7 news cycles… they are obsessed... they're looking for stories. People start writing about the DNC housing prices. So how we get press? We typed in DNC housing pricing... prices in Google News. And we emailed every single person that wrote about it. Well if you email CNN they're not gonna write you back, but if you email a blogger the probably write about you. And then you go to the local news. And then the local news will then Google you and they will see that bloggers are talking about you. So than they will do a story about you. Than the Denver Post and Rocky Mountain News are gonna Google you and see that all these people are talking about you. And eventually CNN is going to be following their own keywords, and will notice you, and then they'll cover you. And that's what happened. We got 800 people to list their rooms. And this event and this press tactic was really the thing that got over our initial hump. So we... *we’re gonna be huge is showed on the slide*.

*Audience is laughing and applauding*

8:50 It gets better *”Doctor, we’re losing them” is showed on the slide*.

*Audience is laughing*

8:54 Two months later we realize if only the put a few conventions every week. We be... we be huge. So we're sitting in our apartment and we realize well I don't wanna wait till 2012 to get more reservations. And this were the story kinda goes on a weird side track. So I want to warn you now. 9:15 Ehm... we had a lot of time in hands. When you build a product, a marketplace and no one uses your marketplace… you have a lot of time. So we had a lot of time on our hands. And we're sitting in the kitchen one day... and by the way we also had provide housing for the Republican National Convention. Eh… no one would do that.

*Audience is laughing*

9:38 We had like.. I think one booking.

*Audience is laughing*

9:41 Eh.. and so we have a lot of time on our hands, we are in the kitchen. We are like what if we made a ceri… eh.. a breakfast that we can sent to the people hosting. You know it is like a nice exchange. We were not gonna sent them eggs. It is not going to be perishable. And so obviously we thought let's send them a breakfast cereal. We're just having fun... by the way as I said we had a lot of time on our hands.And were thinking what would an Obama theme cereal will be called. And we just are like basically joking around and we decide… we come up with a name we think is hilarious. It's a hilarious name the... woops sorry.. It's a hilarious name and we launch, we create this product called Obama O's the breakfast of change.

*Audience is laughing*

10:30 We also had hope in every bowl, I liked that one too. So we designed this box mostly as I said: “we had a lot of time on our hands”. But then we started realizing this is a really cool design, we wanna sell this. But we needed a gimmick to people find out about this. So we made a video and we actually got a guy to make us a jingle. Ehm.. Should I play the jingle?

*Audience is positively responding*

107

10:49 Alright here is the jingle. *music is playing* so..

*Audience is applauding*

11:27 By the way I know you are thinking we are a web startup and now we're making cereal. Yeah.. well you know we had no traffic so.

*Audience is laughing*

11:36 So you know a company from San Francisco that wants to be an open platform, you gotta be very careful if you're only doing things for democrats right. We wanted people from all over the world to use that. So we said if we make a Barack Obama theme cereal we have to make a John McCain theme cereal. And we're thinking what would a John McCain theme cereal will be called. And we are reading about him on Wikipedia, we find out he was a captain in navy and that's how we came up with: Cap'n McCain's.

*Audience is laughing*

12:05 A maverick in every bite. And as you can predict we got a jingle made for that as well *music is playing*.

*Audience is laughing*

12:40 So we made this boxes serial. We think maybe this could be the solution to us not having any money or any traffic. We still believed in AirBnB, but we had no traffic. And we thought if we can make like a hundred thousand boxes of these and sell them for two dollars a box, that would be able to fund our company. We had this thing, we knew people wanted. They didn't want he website, but they did want the cereal.

*Audience is laughing*

13:03 Unfortunately we are... I think I was fifteen or twenty thousand dollars in credit card depth. I had eh… I had like maxed out five different... four different cards, five thousand dollars each. So I... we certainly couldn't pay for cereal. We meet this guy in Berkeley; he turns out to be an alumni of RISD. He says I am not gonna make you a hundred thousand boxes, but I am willing to print you… because I like you guys and I want to help... 500 boxes each of John McCain's cereal and Barack Obama theme cereal. So we realize well we're not gonna make a lot of money unless we charge a lot. So we said well if we call it limited addition we can charge a lot.

*Audience is laughing*

13:38 So we charge fourhund... forty dollars a box and we literally got 1000 boxes of cereals printed. ...they are just flat right, you've got assemble them yourself. I... Joe and I assembled them in our kitchen and I'm not joking. I mean we actually went to the grocery store and bought a 1000 boxes of cereal.

*Audience is laughing*

13:57 We would buy out...

*Audience is applauding*

14:09 We would buy out... And it wasn't just the look she would give us. It was the person behind me in line. And I was like well I just like honey and o's you know.

108

*Audience is laughing

14:28 So we put up this website, the jingles and CNN discovers it.. and CNN runs the story about Obama O's and Cap'n McCain's. And we end up selling out in like two days, twenty thousand dollars wort of Obama O's and not very many Cap'n Mccain's.

*Audience is laughing*

14:49 People started reselling the Obama O's.

*Audience is laughing*

14:52 In practice and Ebay... And then I realized... Joe we didn't charge enough... Dammit.

*Audience is laughing*

15:03 So some time passes, we pay off our debt. But our website still has no traffic. *Photo showed on the slide*

*Audience is laughing and applauding*

15:22 This is where people make epiphany and we are like: this is working but we don't want to make cereal the rest of our life. So we're gonna go back to the website. We're running out of money again and this is a low point for me. I'm just gonna make a confession, because I haven't really talked about this before. Ehm.. we are in our kitchen, we had no money, we have no food. And I wake up one morning and I go in the kitchen and I have no food, I have no money. And I'm like what am I gonna do.. I have to eat. Well luckily we didn't sell that many Cap'n McCain's.

*Audience is laughing*

15:59 So for two or three months we lived off Cap'n McCain's.

*Audience is laughing and applauding*

16:13 So this is actually from Paul Graham he's got this graph on eh... Y Combinator and he says: “basically after launch you think you're gonna make it and then you crash and you've got this long trop of sorrows”. And that's what happened with us. And it was a few months later, I'm sitting with Michael Seibel. And Michael Seibel of course is channeling his inner Paul Graham.. he's like: "oh you guys.. What are you doing? You should do Y Combinator". And I said Michael: "we've already launched.. You don't do Y Combinator if you've launched". And he says: "you guys are dying.. do Y Combinator". So we meet with.. *Picture is shown on slide*

*Audience is laughing*

16:52 Here is.. By the way I'm gonna give you some insight things on Paul Graham right now. So.. so we meet with Paul Graham and I don't know how much he liked the concept at first.

*Audience is laughing*

17:03 But he liked us and I don't know if he would like us.. he liked us because of a very specific reason. In November of 2008 you know Sequoia put of that thing on Tech Crunch r.i.p good times. It was basically an investment nuclear winter.. It wasn't clear that anybody would be funding people. So he was looking for people that wouldn't die. In fact Paul Graham says: "you guys won't die.. you are like cockroaches.

109

*Audience is laughing*

17:31 And so I think that's why he funded us. So we decided let's give it three more months. And by the way at the time our poor engineer... we're like really that cereal company... he moves back to Boston. He is like alright guys good luck with the whole cereal thing. So he is in Boston. Nate consulting, Nate comes back, we do Y Combinator. And you know Nate on foot is 6-foot-5 and he sleeps on this tiny airbed. I think they're bad for children actually.

*Audience is laughing*

17:59 And it was in our... in our bedroom.. And we would be up late into the night. Paul Graham says: "you need to be profitable by Demo Day". We didn’t even know if anybody was going to be at Demo Day... Investors... Because I mean it was a very different environment only two years ago. So what we did... and this is how we succeeded... we realize whatever you focus on, you get. We should focus only on one thing and that's being profitable. So we took... we printed out an imaginary revenue graph and we pasted it to the bathroom mirror. We said this is the first thing we're going to look at, when we wake up in the morning. And it is the last thing we are gonna look at before we go to bed, we're gonna be dreaming about revenue. And we really did... we put it up on the wall and the bathroom mirror. And we're literally up late at night... this is halfway through Y Combinator. We meet Paul Graham again and he gives us another major piece of advice. He says: "your users are meeting in person and your here and now and you... what are you still doing here?". And I was like: "what do you mean… what am I still doing here?". He says it again: "your users are in New York, there in DC, there in LA.. go to your users". But we said that doesn't scale... we can't do that. He says: "don't worry do things that don't scale, it will teach you". So that's exactly what we did. We started going to New York City, we went to Washington DC, we went to Denver, we went literally door-to-door... basically signing people up for our website. I would just knock... I mean we... we knocked on some doors and we said: "hey ehm... do you know how much bedroom is worth?".

*Audience is laughing*

19:34 Not really but ehm... we were basically saying things like that. We were in coffee shops, in conversations and I just wanna display out this listing over here. *Showing a picture on slide*. What is notable is... before this we were a marketplace for people to list their bedrooms on our website. And this guy David basically changed our business for ever. You know who David is? He does kind of look like a musician doesn’t he? So David is Barry Manilow's drummer. Barry Manilow's drummer forever changed our business. When he decided that he was gonna rent his entire apartment on his website while he was on tour with Barry. And before that we had this rule: you had to be in the place with them... you couldn't provide breakfast otherwise.

*Audience is laughing and applauding*

20:25 It seems so silly now I know. And this opened up a whole new market. But how do we know, because we met him. I had no idea until I find out... And by the way it was amazing when I get a call a couple weeks later, he's backstage on tour I hear "Barey Barey" and he is complaining to me that he can't log into his account. I just taught this was... amazing.

*Audience is laughing*

20:45 So this is our fifth launch on Demo Day. And we started getting what Paul Graham calls "the wiggles of hope". And we finally reach profitability... Graham profitable. And we looked at that graph *showing picture on slide* every day and we hit it a couple weeks early. And over the next couple months people started listing their places all over the world. And today we're actually in 8200 cities, in a 166 countries. Ehm.. And the revenue, the… the traffic I'm only showing the traffic, but everything is been taking of. You know, but very recently only the last basically three, four, five

110 months. So it looks like maybe.. You know like an overnight success. Started literally a thousand days ago and we now have really interesting spaces. We have this amazing apartment in Paris. This is pretty similar to what we were expecting, but we also have things like a tree house. This is actually one of our most popular listings on our website. We have igloos, you can actually stay in this igloo. We have boats, 23 people have stayed in this boat this summer. We have water villas, we have castles. And in fact the amazing part of this castle is people throwing actually events here, because you are not just gonna rent it out for two of your friends. But if you have... well maybe you will. Some of these people might. But you, you know people have weddings here. So we're now facilitating not just spaces to stay, but spaces to do activities... to experience. And this was pretty amazing. We are actually now getting private islands. And people are booking… we have an entire collection of private islands on our website.

22:33 So basically what we are today is a community market place for space. It's a really big idea, but if we back in 2007 said we're gonna create that... it would have been impossible. So basically it started with an air bed in our living room to solve our own problems and now people are listing all types of spaces, all over the world into. And we throw this big party tonight so make sure you come.

*Audience is applauding* *Somebody is asking a question*

23:25 When you have 50 users it is pretty easy to know who to go to.

*Audience is laughing*

23:28 Ehm... Right right. So what we would do... is we would find people that are already on the website. We figured... we just need to find a few more people like you. And so we basically meet the… we wouldn't just go to random people. We would meet the few people that were on our website and we want to know do you have friends, who's like you.

*Audience is laughing*

23:47 Luckily yes.. do you have friends, yes. So ehm.. And that’s what we do. So we go to Barry Manilow's drummer, we realized okay this means there is a whole bunch of musicians. Where do they talk? And that would give us an idea that there's a whole bunch of musicians and there will be things like that.

*Somebody is asking a question*

24:11 Haha..oh my god we had no idea. Eh.. it seems so scary at that time and you know it's kind of like that.. that... that dogma... it's like you deliver the results and everybody was thinking... Everybody said: “you be insane to process payments through your website, you can't block a normal person space”. And for a while I think they proved right. We tried Amazon Payments and that was a nightmare. We wanted essentially do something where we could split the transaction and weed in... we only collected our 10 percent fee and the other money would go straight to the user. Eventually we decided to bite the bowl and collect the 100 percent of money. I mean at that time… now it seems like a great idea you know when you... But at that time... like when you are a couple guys working in an apartment that seems really, really scary. So we essentially started with Pay Pal and now we work with Chase and other banks.

*Somebody is asking a question*

24:57 So we did... we did a number of things. I think... I think doing kind of things... leveraging press was our most, our best strategy. So ehm... we notice we leveraged a conference where there is already a blog right. So that original design conference... The reason the designers knew about it is, we put up this little logo and they said... they posted about it. The DNC we put… the way we worked on the

111

DNC is we launch this website and then we wrote... we started with the Denver bloggers. We don't want to get national bloggers. We needed the listings first. We started at the Denver Blog and we said: "now there is a new site you can list your place". You always book some supply first, and you get press, and you get people talking about the supply. Once that… there is a certain threshold then you shift the press to the demand and so eh.. Denver that is what we did. In Aguration same thing.

*Somebody is asking a question*

25:52 Ehm... That one very specific demographic. Ehm.. Well you noticed the three people to stay with me. I had a 30-year old from India, a 35-year-old woman in a 45-year-old father of five from Utah. Ehm... there is this, I think you call it a misconception that its young kind of people in their mid-twenties who don't have a lot of money, use AirBnB as an affordable alternative to hotels. And I would say those type of people exist on our site. But you know we have a third of our users that are over the age of forty. Ehm... AARP did a huge story about this, because a lot of retirees... like you know once they retire, the baby boomers are starting to retire and they want to travel. And you know its kind of a drag to be going to all these hotels. You know they kind of done that, they want a new adventure. So I would say the demographic is pretty expansive. I would say the demographics... a common theme is that they are pretty open minded, they're willing to try something new.

*Somebody is asking a question*

27:10 Absolutely, absolutely. So you know we agreed with the spirit of this bill of New York. And the spirit of that ehm… of what’s happening in New York is that they want a bill to protect travelers and this debate that happened in 2003, well before us. And the idea was that if there is no big hotel brands... how do you know somebody is legitimate? How do you know they are gonna provide a good experience? And that's fundamentally the open question. And we believe that through things like reputation online you can actually do that. And it's funny that you ask about New York, because ehm... you know the bill... or… or the situation that happened in New York. Ehm... once we actually met with the bill's sponsors. They actually said: “no this isn't... you are not the intended target”. And actually now we are looking if we are able to work with them to figure out a way that we can both live together. And I think we will, because ultimately I think we're good for the community. And ehm... you know most of these regulatory people are going after the “professional” property groups. So what they don't like are people that are buying up entire buildings and kicking out permanent residence. And that's really not the culture at Airbnb.

*Somebody is asking a question*

28:10 Okay so... that’s another really good question. How did we scaled to.. we are in 8200 cities. And we basically made a decision early: on you can either provide a really good focus user experience in one city or you can decide to be global from day one. If your global from day one you could have a bad user experience and we did for a while. What happens, we had a search bar on the home page. The problem is anything you search for... we hardly had anything. So that wasn't so super good. So the classic are.. eh... eh... theory would be: just start city by city and limit what cities you can post to. At the time a couple of other companies tried to do that and I think it looked like that was the winning strategy, but once we got enough critical eh... we showed… it turned out that we had the right strategy. And how did we do it? We allow you to list any space as long as you can find it on a Google Map and that’s simple.

*Somebody is asking a question*

29:19 So it was literally PR and viral effects. Okay, so this is a really cool thing about... starting a travel company. So we have a two sided market place and a two sided market place is really, really difficult. Because as I said buyers want to go were the sellers are, sellers wanna go were the buyers are. The other good thing about being in that business is you have a natural mode. Because it is really hard to get started. Ehm... but this other thing that happened was... when you are a travel site the ideas

112 tend to spread, right? A lot easier, it's a natural spreading by people traveling. So when we focused on the DNC, what happened was that people came to Denver literally from all over the world. I mean it wasn’t just the United States, they actually came to DNC from all over the world. Same thing with Inauguration. After Inauguration we focused on New York. So basically we focused on international destinations like New York. Travelers come from all over the world to come to New York. Then when they left and went back home, we would focus and retarget to them and say: “hey now you can list your space it's free... there is no friction”. Had we focused on Lake Tahoe you probably only would be popular in California or… or wherever people are coming from. So think being... focus on international destinations where now we're very popular in even Tokyo, because Tokyo they're coming to New York and then we stream marketing to them when they are back.

30:22 Alright…

*Audience is applauding*

Source 5: Two tech billionaires just interviewed each other in my Stanford class (McCann, 2015)

Here is an essay version of myclass notes from Class 18 ofStanford University’s CS183C — Technology-enabled Blitzscaling — taught by Reid Hoffman, John Lilly, Chris Yeh, and Allen Blue.

Errors and omissions are my own. Credit for good stuff is Reid, John, Chris Yeh, and Allen’s entirely.

This class was an interview by LinkedIn cofounder and executive chairman Reid Hoffman of Brian Chesky — the founder and CEO of Airbnb.

Reid Hoffman: Can you tell the story of Airbnb in the early days? How did you get the idea? What was the founding story?

Brian Chesky: A number of people have told me that Airbnb is the worst idea that has ever worked.

Before Airbnb I was different than most tech founders because I went to art school at the Rhode Island School of Design (RISD) and studied industrial design.

Growing up, I never thought about being an entrepreneur, in fact I had never heard about anyone being an entrepreneur before. The closest thing to an entrepreneur I knew of was Bob of Bob’s Pizza in the town I grew up in. My parents were both social workers and when I told them I was going to art school they were sure I was going to move back home. My parents always told me if I got a job I should make sure I got one with health insurance. That was the extent of my perceived ambitions.

Going to RISD had a profound impact on me. All my life I had been taught to look straight ahead and do the normal path — anything different would lead me to the principal's office. However at RISD they told you because you were a designer, you could change things — that I could go out and do and change anything I wanted to do.

After school I got a job and one of my college friends Joe Gebbia kept trying to convince me to leave my job and move to San Francisco to do a startup. We had no idea what we wanted to do but we knew we wanted to do something. When I told my roommates I was leaving they thought I was crazy and needed an intervention.

At the time, I had $1,000 in my bank account and I drove to SF, this was in 2007. Upon arriving to San Francisco I had learned my portion of rent for the place we had was $1,200 so I literally didn’t have enough to pay rent. At the same time, there was this international design conference coming to SF and on the event page it showed all of the nearby hotels were completely sold out.

113

We had this idea that the designers coming to attend the conference needed a place to stay — we had no money — so what if we created a bed and breakfast for the design conference. The problem with this idea was we didn’t have any beds — however we did have 3 inflatable air beds. This is where we came up with the name “Air bed and breakfast” and our first site wasairbedandbreakfast.com.

We ended up hosting 3 people in our home during the conference and at the time we thought this was a cool and funny way to make some money. While these three people were living with us, we had realized that the normal arc of a friendship that takes years to build — now took a few days when people were living with you in your home.

You normally don’t get to know people this quickly in the real world — in contrast the time it took to develop longstanding relationships is longer. One of the guests who stayed with us invited me to his wedding, one of the other ones changed his whole career trajectory because of that trip.

After this experience, Joe brought in Nathan Blecharczyk — one of his old roommates — and we decided to do this as a company. The core idea was — what if you could book someone’s home just like you could book a hotel room, anywhere in the world.

We didn’t have this flash of inspiration that Air bed and breakfast was going to be huge. In fact we started building a different product — a roommate search tool. We worked on this for 4 months and then realized “roommates.com” had already built this service. I couldn’t believe how much time we wasted on this before checking the URL roommates.com

When I went home for Christmas, my parents asked what I was doing — I didn’t want to say I was unemployed so I said I was an entrepreneur. This is when I learned that being an entrepreneur and being unemployed is just a difference in mindset (lol). When they asked what I was working on I told them about the Air bed and breakfast idea. After thinking about the idea more and talking about it more I decided that we should go back to the drawing board and do this idea.

We started off with air beds for conferences — we launched at SXSW in 2008. For all of SXSW we had 2 customers and I was one of them.

Reid Hoffman: I didn’t know you did a roommate search product until now, one of the first companies I did, Socialnet, also included a roommate search component in 1997.

Brian Chesky: It’s funny but the we didn’t think Air bed and breakfast would be a big idea. We thought it might be able to pay the rent until we could think of the big idea.

One thing I learned is, big ideas sound stupid in the beginning. I’ve always heard that if your idea is any good there is no problem with sharing it because people will dismiss it. Many ideas come from solving your own problem which aren’t life changing problems — but these ideas could potentially become life changing ideas.

Reid Hoffman: Can you share more about the early days after you had launched, how did you hustle to keep the idea going?

Brian Chesky: We actually “launched” multiple times. If you launch and no one noticed — you can just launch again. We had press that wrote about us multiple times for launching.

The first time we launched was with 3 people with air beds and the design conference, we launched a second time and no one noticed, then we launched a 3rd time at SXSW. At the time there wasn’t any payment system in the product and you had to stay in an air bed — we actually made our hosts provide air beds, you couldn’t stay on a real bed.

114

At this point we got the question that one of our guests wanted to stay in London but not for a conference — why did we have to only host around conferences? Someone asked to be able to book a real bed — why did it have to be an air bed? We reluctantly decided to list real beds and let guests book rooms without a conference.

The other thing we looked at differently was payments — we wanted guests to be able to book and pay hosts directly through us without an intermediary. We might have been the first people to do this. We looked at eBay and Etsy — who both started before us — but both of these sites would send you to Paypal to make a payment.

Trying to do our own payments was a crazy idea and it scared us. The ability for people to directly pay other people and have a reputation system attached to each person — it was scary — but we decided to do it.

In the summer of 2008 we completed the final version of Airbnb which let you book someone’s home — in 3 clicks. We took inspiration from Steve Jobs who created the iPod — designed to always be 3 clicks from a song. We designed Airbnb to be 3 clicks to get to a paid booking. Our initial site had a home page, search, reviews, and payments — most of the core components which are on the site today.

After this version of the product we were introduced to 15 angel investors — we were trying to raise $150K at a $1.5M valuation. 7 investors never responded, 8 replied — of those 4 said no “it didn’t fit within their thesis,” 1 said they didn’t like the market, and 3 just passed.

One of the people we met was Mike Maples of Floodgate and we were so confident after launching we decided to not have a deck and just show him our website. That day we launched (again) on TechCrunch and our whole site went down. I was in the pitch meeting without a deck and I typed in our website and our site was down — I was in the pitch meeting for an hour and the site was down the whole time it was really embarrassing. One lesson I learned is you should always have a deck just in case….

In the meantime how we were funding the company is we had a baseball card sleeve (ex. pictured to the left) which we used to put our credit cards in there. Joe and I both had ~$30K in credit card debt and this is what we were using to fund the company.

Our hope was looking bleak and we had a tough challenge ahead of us — the chicken and the egg problem — where we had to acquire both hosts and guests at the same time. We had the additional problem of we couldn’t just focus on one city because people were booking homes from out of town for conferences — so we had to focus on more than one city from the start.

We knew we needed to generate a ton of press to get a spontaneous combustion of both hosts and guests at the same time. We wanted to do this through an event so we thought of the most high profile event we could think of — the Democratic National Committee (DNC).

The DNC in 2008 had 80,000 people coming and there were only 27,000 rooms in Denver where the conference was being held — we thought wow what a big opportunity.

We contacted CNN and the NYT and told them what Airbnb was about and they responded “no way, people don’t want to sleep in other people’s beds.” We contacted local newspapers and they ignored us. We were desperate for anyone to write about us so we started with small local bloggers. Once we had that, when people would google DNC they would see a story about us, local newspapers covered what the bloggers were saying, and national press covered what the local newspapers were saying.

We were still in debt but we got 80 bookings during the DNC. The downside was, after the DNC we had no bookings, we were a year into the business, we were in debt, every investor said no, we

115 launched 3 times, we had national press, and it was unclear if we were going to be around. We were at rock bottom.

In debt and desperate one midnight, we had the idea if the “air beds” in air bed and breakfast wasn’t working — maybe we can sell “breakfast” instead. We started thinking about president themed cereal and we convinced a producer to make cereal for us and since we couldn’t pay them he would get a portion of the sales.

We hand folded 1,000 boxes of cereal, numbered each one, and sold them at $40 a box — We sold $30,000 worth of cereal and this is how we funded the company and came up with the phrase “be a cereal entrepreneur”.

In November 2008 we were back to being broke and we did not feel successful or talented at this point. A bunch of people had recommended we should go to YCombinator. We said “but we already launched already?” and they responded “but you are dying, you should apply to YC.”

We met with Paul Graham and he thought the idea was terrible, he said “are people really staying on air beds? what’s wrong with them?”. We told him the cereal story and he told us “if you can convince people to buy cereal, you might be able to convince people to rent air beds.” He told us we were the cockroaches of startups, that we could survive anything — this was the best compliment we had ever gotten — we were cockroaches.

Reid Hoffman: But YCombinator didn’t make your numbers change — what did you do that changed the inflection of the company?

Brian Chesky: YCombinator did two things that helped a lot.

First — YC created a structure for all of us to work on Airbnb full time and live together. Before we had other things going on — life is the enemy of a startup. Paul Graham always says that startups don’t die they just fade away.

While we lived together, we decided to wake up at 8am and sleep at 12am midnight and only work in between — nothing else. We did this for 4 months and completely dedicated ourselves to Airbnb.

Secondly — Paul Graham gave us a series of advice that changed our trajectory. The most important of this advice was that it was better to have 100 people who loved us vs. 1M people who liked us. All movements grow this way.

The problem with Silicon Valley is when you build an app you are expected to make the app go viral and reach millions of people. This is the worst way to think about it — it’s much better to get 100 people to love you. There was no way we could get 1M people on Airbnb, but we could get 100 people to love us.

This is when we decided to do things that wouldn’t scale. Getting 100 people to love you is hard — getting people to like you is much easier than getting people to love you. During YC, we would commute from Mountain View to New York City (where most of their hosts were) and we would meet with every single host. We would live with each of the hosts and write the very first reviews. We would also help them take photos because this was pre-iPhone and it was hard to get pictures onto your computer for our hosts.

We asked the host “what if we had a button you pushed and a photographer showed up to take pictures of your home?” The hosts loved this idea and I went out and borrowed a camera from a friend. The hosts were shocked that the founder was also the photographer — in fact we would also hand deliver the rent checks to our first hosts too.

116

If you can get even 1 person to love you, then you can go person by person — the challenge is how to scale that. It’s much easier to scale something — 100 people love vs. getting 1M who like you to love you.

At the end of YCombinator, Paul Graham said we needed to be ramen profitable because in 2009 Sequoia Capital had just published the RIP Good Times (below) presentation and warned the economic crisis was going to affect the venture capital market.

Paul Graham had warned us that there might not be any investors at demo day — can you imagine that? We had the choice to defer a batch or plan on getting profitable so we would never need funding.

We were really lucky to be able to raise $600K from Sequoia Capital despite the presentation — it was a big deal for us.

Reid Hoffman: Once you were doing well in New York City, when did you start moving to other cities? How did that happen?

Brian Chesky: Everyone loves to say they have network effects but Airbnb is a network. When we were in NYC our hosts were in NYC but our customers were all over the world — this is different than other marketplaces like Uber where both supply and demand are both location. Our guests in NYC would go back to their home locations, become hosts, then spread the word.

In the early days we also targeted a lot of events: the DNC, the Presidential Inauguration, music festivals, the World Cup, Olympics, etc. Events and PR were the main way we bootstrapped the network in the early days.

We also built this one-click-to-post integration with Craigslist where hosts could distribute their listing to Craigslist and get more distribution. We tried Google advertising but the main way we spread was word of mouth and PR. We didn’t do many partnerships — as a startup, partnerships never work because there is too much red tape and paperwork.

We found that with press the more absurd the idea — the better story it makes. Being provocative was good because people would tell other people about it.

When we would go into new cities, we would spend a lot of time educating the new hosts and we would host meetups with hosts in that city to turn on that market. In SF, it isn’t novel to meet the founder, but in smaller cities most people never meet the founder of the product they use — it was really novel.

I traveled city by city and our hosts would get so excited to meet us and they would tell their friends. We tracked the stats and we saw hosts got more engaged after they had met us. Building a community worked for us.

Reid Hoffman: That was a great warm-up story about the early days of Airbnb, let’s move on to the things Airbnb does which are unique. For example Airbnb is known for attention to design — and the 7 star design principal. Can you share more about this?

Brian Chesky: The paradigm with customers today is 5 stars. The problem with 5 stars is you have to be really bad to get 4 stars. Reaching 5 stars is just being nice enough — we wanted to build a product that you loved so much you would tell everyone. Travel has the potential to transform your whole life — I have met people on my own travels who changed my life.

At Airbnb, we strive to have our customers contact the company and demand a 6th star be added to our 5 star review because the experience was so good. Here’s how we think about service past 5 stars:

117

 5 star service — You leave the airport, go to the Airbnb, your hosts are in the house, they let you in. This is 5 star. Worse than this is if your host is late (4 star) and the worst is if your host never showed up (1 star).

 6 star service — All of the above + your host picks you up at the airport.

 7 star service — All of the above + there is a limo waiting for you at the airport and inside the limo are your favorite chips and coconut water.

 8 star service — There is a giant parade when you arrive at the airport and you are honored for coming.

 9 star service — The moment you step off the plane there is 5,000 screaming fans holding signs for your arrive — we call this the Beatles check-in.

 10 star — I could go all the way up to 30 stars — I won’t, but 10 stars would be when you arrive and a Tesla with your name on it is waiting for you and in the car the driver is Elon Musk, and instead of your Airbnb Elon, takes you to outer space.

I exaggerated this to make a point but the principle is if what you need to do is find 100 people who love you — 5 star is what people expect. For them to love you, you need to do more than what they expect. We play out these scenarios all of the time — once you go up to 10 stars, 6 stars doesn’t seem so crazy anymore.

This exercise can apply to anything you do in the company. For example we even story-boarded our whole interviewing experience and think through how to make that a 7 star experience.

Reid Hoffman: One of the interesting observations is in your thinking of 7 star service, it's not just about the website or mobile app — you are talking about the whole experience.

Brian Chesky: The product is what your customers are buying. In some cases your product can be the app but for us our customers are buying a house. More than that they are buying a host, the idea of belonging in a new city, the full experience.

I see ourselves as an online-to-offline business which is the next wave of the internet. The internet started with putting things online, then moved to connecting things together, and now the internet is going back into the real world.

When we storyboard the Airbnb experience — we storyboard every moment of the full experience — not just the online portion of the product.

Reid Hoffman: Airbnb is also known for applying design thinking to your culture and even your office, how do you apply that?

Brian Chesky: I consider myself a designer by trade. There is a quote from Steve Jobs I liked which is: “Design is not just what it looks like and feels like. Design is how it works.”

By using this, you can imagine everything being designed. You can design a product, a company, an organization, a building, anything you want. Once you realize everything can be designed — you don't need to use things straight out of the box — you can reinvent everything.

One of the things we thought a lot about is our office design. Airbnb is all about these spaces all around the world — we wanted our office to be different. People spend more time in their office than in their home so we better make something people are happy about.

118

An office is something most people take for granted — for Airbnb, it is our competitive advantage.

In our early office, when you walked into the lobby, we had a wall of photos of all of the homes on Airbnb. Looking at the wall, I thought there had to be a better way of showcasing our homes than photos. While walking home one day I passed by a furniture store and the showroom floor was lit up at night. I thought it would be cool to have a meeting in that showroom and the next day we held a team meeting in the showroom of that furniture store — it was fun.

We asked — what if all of our meeting rooms were modeled after apartments on our website? This is what we did. We would call our hosts and ask them if we could re-design their home in our office as a conference rooms — our hosts were shocked but loved it.

We now have 10,000+ people a year who don’t work at Airbnb, who fly into town to tour our office. Our office is also our competitive advantage to hiring. This is a small example, but one that shows how design can be applied to anything.

Reid Hoffman: In the early days of Airbnb you personally spent a year living in Airbnb homes — why did you do that?

Brian Chesky: It was partly out of necessity. When we started Airbnb, we started in our apartment. We didn’t want to move into an office space so we decided we were going to make our home the office.

Once we had 15 people working in our 3 bedroom apartment — things started to get odd. We were literally running out of space so we decided to turn our bedrooms into meeting rooms.

I went on Craigslist to look for a new place to stay and I thought to myself — why am I doing this? I should be using Airbnb. I thought it would be fun to test out the product and stay in our hosts homes — the plan was to do it for a week and this turned into a year.

The other thing it did was it sent a huge message to the team that working at Airbnb wasn’t a job — it was a calling. Part of having a strong culture is when people believe in what you are doing. It’s not about a website, an app, a system, or screens — it’s about building a mission — creating a whole new world — this is only possible if you are living the product.

Reid Hoffman: Outside of being a role model and designing your office — what are other things you have done to design your culture? I’ve seen you spend more time than most entrepreneurs on culture.

Brian Chesky: I believe culture is a shared way of doing things.

There isn’t a bad culture or good culture, but there are weak cultures and strong cultures. I wanted to have a strong culture — a shared mission, a way things are done, beliefs we share.

A big part of culture is hiring — who are you going to be spending a lot of time with — and how do you remove people who don’t fit within your culture. One of the strongest levers of culture is hiring.

I decided early on to interview every single person. I personally interviewed every employee up till the first ~200 employees. Our team was begging me to stop interviewing everyone because it didn’t scale.

Now in our hiring process, in addition to the function / technical interview, we also make everyone go through culture interviews. Two separate people conducted interviews and test for 6 core values. An example of one of these values is “be a host” — being passionate about hospitality and helping people. We can test for this through questions and looking into people’s background.

119

Reid Hoffman: When you hit scale how do you instill culture?

Brian Chesky: I do as many culture activities as I did before — now I just have people do things on my behalf — leverage.

I used to do all of the interviews — now I hand picked all of the interviewers, I spent months with each interviewer, I built an inner circle of people who have trained interviewers, etc.

I used to meet with every single new employee one-on-one — now I do weekly orientation meetings, I have recorded many of these sessions for our international hires, etc.

I also write an email every single night to the whole company. This isn’t a tactical email but something more thought provoking. One of the things with scale is you need to continue to repeat things. Culture at scale is all about repetition — repeating over and over again the things that matter.

Reid Hoffman: Moving on to the challenges of scale — what were the things that changed that you had to learn while you were scaling?

Brian Chesky: Hiring and management become a lot more important at scale.

When you first started off — defining the people around you is not the most important thing. Before product market fit everyone does everything.

Post product market fit — I now do a few things — hiring, strategy, and culture. I never managed anyone in my life before Airbnb — I didn’t even know how to manage people. Especially managing people who are older than you — it’s an odd experience.

At scale, you have to learn how to move from intuition to data. When you are first starting a company — data is not the most important thing. Pre-product market fit — data wasn’t important for us — it was much more about the person-to-person interactions with customers.

Pre-product market fit, the whole focus is on not dying. Post product market fit, you can afford to think long term. When you are a startup you don't have plans beyond 2 weeks out. Post product market fit, you need: a plan, a roadmap, a strategy, etc.

Reid Hoffman: One of the overall thesis of the class is what works in one stage will not work in the next stage. You move from being very short term focused and doing everything yourself to having year-long plans and having managers/execs.

Brian Chesky: With Airbnb, everyone always asks me about the founding story. People think we just had the idea and it takes off on its own. People tend to gloss over the other stages of a startup.

When in fact stage 2, 3, 4, 5, are much more complicated than stage 1. Stage 1 is easy — solve a problem, find 100 people who love your product, find good co-founders, etc. It’s not that complicated and the early stage is well written about.

The stages after that are not well documented. I could go out and ask questions to other CEO’s of large companies but the risk is they are telling me the wrong thing — or what they are doing won’t work in my scenario.

One CEO told me every 6 months if you keep your job, it's a promotion — I don’t believe this. I think being a CEO in a hyper growth company is every 6 months you have a completely new job. It’s like if you were a pro bowler, then became a pro football player, then a pro hockey player, etc. Every stage is a completely different sport.

120

It’s very rare to be the person who starts a company and be the person who scales it to 1,000 people. You have to be a very different person at each stage. Now speaking and writing are my primary tools — in the early stage we could just get around a table with everyone. All of a sudden the skillsets start changing and you have to be adaptable.

I have personally seen and know people who have scaled and people who can’t scale. The two traits I see in common with the people who scaled is:

1. Intelligence 2. Curiousness

If you think you know everything, you can’t scale. I am shameless about getting feedback and knowing I don’t know it all.

There is a quote from Pablo Picasso I like: “It took me four years to paint like Raphael, but a lifetime to paint like a child.”

Reid Hoffman: I call these types of people “infinite learners.” With Brian, the first time we ever did a press event together, the very first question he asked me was — “what could I have done better?” It was the first time someone asked me this as their first question.

Moving on to competition, how did competition and international challenges change as you scaled Airbnb?

Brian Chesky: The first stage of a startup is survival. Not dying is being able to work on it the next day.

The second stage of a startup is firefighting. There are all of these problems going on and you need to fix them all.

The third stage is now other people can see what you are doing and now other companies try to copy and destroy you. The big existential threats to Airbnb were both competitors and the government.

Once we started to become successful we were warned about the Samwer brothers. The hottest company at the time was Groupon, which was thefastest growing internet company. A big reason why they were growing was due to their European operations — they bought the Airbnb clone created by the Samwer brothers.

This was something we did not want to fight, and after we raised $7M from Greylock Partners this giant dragon appears. In 2011, the Samwer brothers created an Airbnb clone, raised $90M, hired 400 people (Airbnb was 40 people at the time), and opened 20 offices all at the same time.

Airbnb couldn’t afford to lose Europe because travel sites needed to be all over. This became the “bet the company” moment for Airbnb. The Samwer brothers made a proposition for Airbnb to buy their clone (what they normally like to do) but it would have been a huge cost financially and culturally.

I went out and asked advice from some of the smartest people I knew including Mark Zuckerberg, Andrew Mason, Paul Graham, and you (Reid). Andrew warned us the Samwer brothers were ruthless and would do everything they could to kill us. Mark Zuckerberg said not to buy the company because whoever has the best product will win. Paul Graham said they are mercenaries and we were missionaries and missionaries often win.

Our strategy was even though the Samwer brothers created this clone, they didn’t want to run the company long term. We recognized that they might be able to move faster than them for a year but

121 they would have a hard time sustaining the company for 10 years. Airbnb wanted to build something for the long term and they would force the Samwer brothers to do the same.

Ultimately Airbnb won because of a better community and better product, but this was the “bet the company” moment. Because of this, Airbnb built out their European team fast — opened 10 offices in 3 months, hired 100’s of people, and the speed of the company picked up dramatically. 1 year later Airbnb was the clear winner.

Reid Hoffman: One of the principal reasons why companies have to Blitzscale is because of competition.

Brian Chesky: The gift the Samwer brothers gave to Airbnb was the reason to scale fast. We went from just a U.S. company to an international organization within a year.

Reid Hoffman: The other trigger for Airbnb was the government. How did you guys face this unique challenge?

Brian Chesky: The problem with these challenges is they are a punch in the face while you are casually walking down the street. You have no idea where they are coming from. The Samwer brothers was the first punch and government was the second.

In June 2010 NYC passed a law which was going after a landlord who was converting his room to a hotel. We asked on numerous occasions if this law would affect Airbnb but we were told it wouldn't affect us.

Several years later we got a call from the attorney general of NYC informing of us of this law we were violating and they demanded to see all of our customer data to see if we were breaking the rental laws in NYC. Attorney general’s are scary people, especially the ones in NYC who have a reputation for putting people in jail.

We had no idea if we should or how we would fight the attorney general. However they wanted sweeping data about users, before they knew if we had broken any laws and we weren’t going to do that — so we challenged them in court and we won.

Reid Hoffman: Without going to much into the specifics of the case, the broader principles are more interesting — how does a startup deal with government relations?

Brian Chesky: Our first instinct was to fight — in 2010, we staged a political rally in city hall. After thinking about it some more, we realized that this approach was not the right approach for us. We were a company about people living together — it’s not good to have a fighting approach.

Instead of fighting, we decided to kill them with kindness and partner with cities. I had always had this belief that if people didn’t like me — I wouldn’t talk to them. Instead, I learned to meet with everyone who hates me because you will hate me less if you get to know me.

We went on a listening tour and invited all of the people who hated Airbnb and explained our side of the story. Months later there was a lot less hatred towards us because people understood us. We now meet with senators regularly, politicians, we were on the ballot in SF, it’s crazy.

Because we are a business in the real world — the scope of what I had to learn is astounding. The responsibility of having millions of people live in strangers homes all in different countries — all while keeping them safe — these are tough challenges that very few companies have faced. The challenges never stop and one of the biggest things I had to learn was how to learn about new things quickly.

122

Reid Hoffman: I have to ask about Paris, the Airbnb team was out there during the Paris attacks?

Brian Chesky: Airbnb hosted the Airbnb Open for the 3rd year in a row in Paris from November 12– 14, 2015. This is our annual convention where we have employees and hosts from all around the world fly in for the conference — it’s our version of Dreamforce.

This year, we had 640 employees and 5,000 hosts in Paris. In addition to this I had my parents there, my girlfriend there, my sister, everyone important in my life was in Paris with me.

We were two days into the conference — I had just finished my second keynote — and I was ready to relax and celebrate the conference. We hosted a dinner to celebrate the first 40 employees in Airbnb and during the toast my phone starts buzzing.

I quickly look down and I see the news alert of a shooting at a restaurant in Paris. We kept going, then my phone buzzed again, and this time it’s about a hostage situation with 100 people in a theater in Paris. We continue, and my phone buzzed again, and this time it’s a bomb blast in the stadium in Paris.

While all of our employees and hosts were celebrating throughout the city there were 7 coordinate attacks within a 1 hour period all across Paris — particularly the places our employees and hosts would be visiting on a Friday night.

A fear struck over the dinner and we felt like there could be more attacks and these attacks could be anywhere. In fact, one of our employees was next to the theater and saw some of the hostages running for their life after seeing people get killed right in front of them. Some of our team was at the stadium and there was a stampede of people trying to exit the stadium.

This wasn’t something I ever had to deal with before. We pulled in our head of security and we created a remote command center. The house we were in was a 2 bedroom place and there was 50 of us in there so we had to use the shower room and all of the available space in the house.

We were told we might lose internet so we started counting for all of our employees and host as quickly as possible. We called and emailed every single one and checked off each person who was safe.

Next we contacted the local government, federal government, and our hosts in Paris (300 of them) and opened all of our homes for housing for people who needed them.

We canceled the conference, contacted the family members of our employees, made sure everyone had a safe flight back, and generally supported our employees and hosts in any way we could. I never had to deal with anything like this before in my life.

This whole experience reminded me of the immense responsibility I have. Airbnb has 1,000’s of employees, 100,000’s of hosts, 1,000,000’s of guests — their lives depend on us — the responsibility is real. It was a humbling realization and experience to have gone through.

Question from the audience: How do you learn how to learn?

Brian Chesky: I don’t have all the answers but here’s a tip.

If I was to ask you to learn about a topic in a week ex. the basics of UI design — how would you do it?

Read a ton of books, talk to people, do exercises? This is a fairly exhaustive process but you could do it.

123

Now what if I said in the same week you have to learn UI design, front end development, accounting, and how to incorporate a company — how would you do it?

There isn’t enough hours in the day to learn everything. So you have to short circuit the process somehow.

One approach is to learn from definitive sources. The downside is, if you pick the wrong source, you learn the wrong thing; however, if you pick the right source, you don't have to read anything else.

For example with management I read High Output Management. I just read one book so I don't need to read anything else about management. PG was a version of this at YC and he would point us to the resources that mattered.

One benefit of being more successful is you have access to talk to more successful people. But even before being successful, you can read about the best people.

Another tip is most people will help you if you ask a question — we are here to share information and knowledge. I was shameless in asking Reid Hoffman questions — I was probably annoying but I didn’t care — I just wanted to learn.

Question from the audience: What is difficult for you right now?

Brian Chesky: This is hard to answer there are so many things.

One of the challenges of transitioning from a city to a nation is, now that Airbnb is working — we’re scaling, we have an exec team, we have management. I could go away for awhile and the company would still be fine, the core product would be fine. Two challenges I think about a lot now though are:

1. Scaling culture for our new size. What has worked for us for 500 people aren’t going to work at 2,000 people. I want us to still feel like a fast growing startup and be mission-driven but things need to change for us to keep our culture at this scale

2. Most companies that are significant have more than one product line: Apple, LinkedIn, Facebook, Google. Our core product at Airbnb is growing but what opportunities do we have for new products?

I know how to start a startup but how do you create a new product within an existing business that is successful? This is so much different from starting a business from scratch.

On one hand, you have all of these things that are helpful — top talent, unlimited funding, etc. But internal culture and process also fights to keep things the way they are — people don't want you to take the best people and put them on a new team.

Going from a single to dual product company is a big shift but all enduring companies have to go through this process. It’s highly unlikely the original product we are selling now is the thing we will be selling 10+ years from now.

124

Appendix F – Sources Snapchat

Source 1: LinkedIn Evan Spiegel (Spiegel, n.d.)

Evan Spiegel CEO at Snapchat, Inc.

Summary Studied Product Design at Stanford University while building Snapchat, a real-time picture messaging app. Snapchatters have shared over fifteen billion unique images through the service since January 2012, making Snapchat one of the Top 10 apps in the iTunes AppStore.

Experience Co-Founder & CEO at Snapchat April 2011 - Present (5 years) Developing Snapchat, the first real-time picture chatting app on iPhone.

Software Developer at Intuit February 2010 - August 2010 (7 months) Worked on stealth project involving SMS technology.

Paid Intern at Abraxis BioScience July 2009 - August 2009 (2 months) Worked at the California NanoSystems Institute to enhance the accuracy of vHTS screening using AMBER force fields and molecular dynamics simulations.

Education Stanford University B.S. Product Design, 2008 – 2012

ArtCenter College of Design Graphic Design, Advertising, Letterpress Printing, 2007 – 2008

Honors and Awards Columbia Scholastic Press Association First Place Award for Newspaper Infographics, 2008

Source 2: The inside story of Snapchat (Colao, 2014)

THIRTEEN MONTHS AGO Facebook’s Mark Zuckerberg, the richest twentysomething in history, reached out to Snapchat’s Evan Spiegel, who oversees a revenue-less app that makes photos disappear, with an invitation, delivered to his personal e-mail account: Come to Menlo Park and let’s get to know each other. Spiegel, now 23 and the brashest tech wunderkind since, well, Zuckerberg, complete with his own legal battle against a college buddy who helped him start his company, responded to his role model thusly: I’m happy to meet you… if you come to me.

And so, armed with the premise of meeting with architect Frank Gehry about designs for Facebook’s headquarters, Zuckerberg flew to Spiegel’s hometown, Los Angeles, arranging for a private apartment to host the secret sit-down. When Spiegel showed up with his cofounder Bobby Murphy, who serves as Snapchat’s chief technology officer, Zuckerberg had a specific agenda ready. He tried to draw out the partners’ vision for Snapchat–and he described Facebook’s new product, Poke, a mobile app for sharing photos and making them disappear. It would debut in a matter of days. And in case there was any nuance missed, Zuckerberg would soon change the large sign outside its Silicon Valley campus from its iconic thumbs-up “like” symbol to the Poke icon. Remembers Spiegel: “It was basically like, ‘We’re going to crush you.’”

125

Spiegel and Murphy immediately returned to their office and ordered a book for each of their six employees: Sun Tzu’s The Art of War.

Snapchat represents the greatest existential threat yet to the Facebook juggernaut. Today’s teens have finally learned the lesson their older siblings failed to grasp: What you post on social media–the good, the bad, the inappropriate–stays there forever. And so they’ve been signing up for Snapchat, with its Mission: Impossible style detonation technology, in droves. FORBES estimates that 50 million people currently use Snapchat. Median age: 18. Facebook, meanwhile, has admittedly seen a decline among teenagers. Its average user is closer to 40.

Zuckerberg understood this, which might explain the gamesmanship. When Poke debuted, on Dec. 21, 2012, Zuckerberg e-mailed Spiegel, telling him that he hoped he enjoyed it. Spiegel, who had deactivated his Facebook account, frantically called Murphy for his review. It was, Murphy responded glumly, a near-exact copy.

But a funny thing happened on the way to obsolescence. The day after its launch Poke hit number one on the iPhone app store. But within three days, on Dec. 25, Snapchat had pulled ahead, boosted by the publicity, as the Facebook app disappeared from the top 30. Laughs Spiegel: “It was like, ‘Merry Christmas, Snapchat!’ ”

Which helps explain what happened in the fall when Zuckerberg reengaged Spiegel, basically ready to surrender on terms so generous, on paper, they seemed preposterous: $3 billion in cash, according to people familiar with the offer, for a two-year-old app with no revenue and no timetable for revenue. (Facebook refused to comment for this article.)

Even more preposterous, of course: Spiegel turned Zuck down. It was the most scrutinized business decision of the past year, complete with head-spinning math. FORBES estimates that Spiegel and Murphy each still owned about 25% of Snapchat at the time, which means they were both forgoing a $750 million windfall. “I can see why it’s strategically valuable,” one leading venture capitalist tells FORBES. “But is it worth $3 billion? Not in any universe I’m aware of.”

The roots of that decision, however, were obvious to anyone who knew about the primer that Spiegel and Murphy had bought for their team. Chapter 6 in the Art of War specifically addresses the need to attack an enemy where and when he displays weakness. Spiegel and Murphy sense an opening and insist that rather than selling, they’re aiming to upend the social media hierarchy, armed with a $50 million war chest raised in December at a lower (but still heady) valuation of just under $2 billion. “There are very few people in the world who get to build a business like this,” says Spiegel. “I think trading that for some short-term gain isn’t very interesting.”

For those keeping score, a “short-term gain” for a 23-year-old who still lives in his dad’s house now apparently equals three-quarters of a billion dollars. In going for the long gain, Spiegel will either become the next great billionaire prodigy or the ultimate cautionary tale of youthful hubris.

A LANKY 6-FOOT-1, dressed in a button-down shirt, designer jeans and plain white sneakers, Evan Spiegel hasn’t quite molted the carapace of an awkward teen. Sitting at Snapchat’s new Venice Beach headquarters for his first-ever in-depth media interview, he shifts abruptly from raucous laughter to icy glares, constantly grabbing fistfuls of gummy bears and Goldfish crackers. His conversation is pocked with plenty of examples of “like” and “whatever.” And while Spiegel proves extremely opinionated on subjects like politics, music and other techies, he’s reluctant to discuss even the most basic CEO topics, like his ideal management team or his long-term vision for Snapchat.

If you’re patient enough, however–one of my conversations with him lasted two and a half hours– you’ll get the full backstory, one that shares an uncanny similarity to that of his frenemy, Zuckerberg.

126

Like Zuck he was a child of relative privilege, the first-born child of two successful lawyers (mom Melissa went to Harvard Law and practiced tax law before Spiegel was born, while litigator dad John, a Yale Law grad, has represented the likes of Sergey Brin and Warner Bros.), living in tony Pacific Palisades, just east of Malibu. And like Zuck he was a middle school nerd who found refuge in technology, building his first computer in sixth grade, experimenting with Photoshop in his school’s computer lab and spending weekends at a local high school’s art lab. “My best friend was the computer teacher, Dan,” Spiegel laughs.

In high school he began to display the moxie that Zuckerberg would later exhibit, promoting Red Bull at clubs and bars and using his parents’ divorce as a leverage tactic. He first moved in with his dad when he gave him a free hand in outfitting his room and who could come over. “I had some notorious parties,” he smirks. But when Pop reportedly refused to shell out for the lease on a BMW 550i, he moved in with Mom. Days later the BMW was his. Except for college, he’s been based in his dad’s home, a stone-faced mansion a half-mile north of the ocean, ever since. “A lot of things have changed very quickly, so it’s nice to have that one constant,” he says by way of justification. “It’s also pretty grounding.”

He entered Stanford’s product-design program and in 2010, during his sophomore year, moved into the Kappa Sigma fraternity house. Bobby Murphy, a senior major in mathematics and computational science, lived across the hall. “We weren’t cool,” Murphy says of the fraternity. “So we tried to build things to be cool.”

While Spiegel is animated, albeit measuring what he’s saying, Murphy, the Berkeley son of state employees (his mother emigrated from the Philippines), sits placidly, one leg tucked under the other. “I’d describe him almost like a monk,” says David Kravitz, Snapchat’s first hire. “I don’t think I’ve ever seen him upset.” At Stanford it was Murphy who first hired Spiegel, recruiting him to design an online social network inspired by Google Circles. It went nowhere.

Still, Spiegel was getting noticed. Intuit’s Scott Cook was impressed by an answer he gave while guest lecturing at Peter Wendell’s popular graduate level class, “Entrepreneurship and Venture Capital.” “After class concluded, I commented on the intelligence and reasoning in this particular student’s response,” says Cook. “And Professor Wendell said, ‘Well, you will be surprised to know he isn’t an M.B.A. student. He is an undergraduate who is auditing this class.’” Cook quickly hired Spiegel to work on txtWeb, an Intuit project that broadcasts Web-based information via SMS texts in India.

Spiegel, however, was in too much of a rush to remain content as an apprentice. In the summer of 2010 he and Murphy developed Future Freshman, a suite of online software to help parents, high schoolers and guidance counselors manage college admissions. “It ended up being this unbelievably full-featured website,” Murphy recalls. One problem: “We got, like, maybe five people on the service,” says Spiegel.

That’s when fate, in the form of another fraternity brother, Reggie Brown, stepped into Spiegel’s room to discuss a photo he wished he hadn’t sent someone. The ensuing set of events makes The Social Network look like C-Span2.

WHILE OWNERSHIP of Snapchat remains hotly disputed, all sides seem to agree on the genesis: Brown said something to the effect of “I wish there was an app to send disappearing photos.” Brown refused to speak to FORBES, citing the pending litigation, but his side of the story comes through via numerous court documents, including a leaked deposition. According to Brown, Spiegel became “physically animated” and repeatedly called Brown’s remark “a million dollar idea.” (Spiegel acknowledges he was excited, but won’t comment about the “million dollar idea” line.) That night they set out to find a developer. Brown claims two candidates declined; regardless, they settled on Murphy, who had just graduated.

127

The original roles were fairly defined: Murphy as CTO, Brown as chief marketing officer, Spiegel as CEO, honing the idea as part of a design class he was taking. The first iteration was a clunky website that required users to upload a photo and set a timer before sending. The eureka moment only came when the idea migrated to mobile. “At some point it was like, ‘Hey, there’s a camera on your phone,’” Spiegel says. “‘Wouldn’t that be easier?’”

The class culminated in a presentation to a panel of venture capitalists. Brown came up with a name for the app, Picaboo, and Murphy put in 18-hour days to get a working prototype. The response was tepid. “The feedback was basically, ‘Hmmmm. Well, thank you for showing us your project,’” recalls Spiegel. One investor suggested he partner with Best Buy. Many wondered why anyone would want to send a disappearing photo.

The first version debuted in the iOS App Store on July 13, 2011… to yawns. “The Instagram fairy tale”–the app had 25,000 downloads on the first day–”that was not us unfortunately,” Murphy laments. The team had worked around a potentially fatal flaw–the fact that recipients can take a screenshot, rendering a disappearing image permanent–by building in a notification if your picture has been captured, a potent social deterrent. Still, by the end of the summer Picaboo had only 127 users. Pathetic. Brown toyed with positioning the app as a sexting tool. (“Picaboo lets you and youxr boyfriend send photos for peeks and not keeps!” reads a draft of a press release he wrote.) Murphy’s parents implored him to get a real job. And Spiegel apparently began pushing to shake up the team. According to Brown’s deposition, he overheard Spiegel and Murphy plotting to replace him.

The breaking point came when equity was being finalized. On Aug. 16 Brown, back home in South Carolina, called his two partners and laid out his case. He wanted around 30%, according to Murphy’s deposition, and listed his contributions: the initial idea, the Picaboo name and the now-famous ghost logo. Spiegel and Murphy countered that he didn’t deserve anywhere close to that. When Brown claimed that he had “directed [the] talents” of Spiegel and Murphy, Murphy remembers, an enraged Spiegel hung up. Spiegel and Murphy changed administrative passwords for the app and cut off contact except for a few tense e-mails about a pending patent. Brown was out, relegated to Snapchat’s version of a cross between the Winklevoss twins and Eduardo Saverin. (Ironically, in their battle with Brown, Snapchat has hired the legal team that pursued the Winklevoss claim against Facebook.)

Now a two-man operation, Picaboo changed its name to Snapchat after receiving a cease-and-desist letter from a photo-book company with the same name. “That was like the biggest blessing ever,” says Spiegel. But even as he and Murphy added photo caption capabilities, they seemed destined to replicate their Future Freshman experience: a technically competent product that virtually no one wanted. Spiegel returned to Stanford for his senior year; Murphy took a coding job at Revel Systems, an iPad point-of-sale company in San Francisco.

But that fall Snapchat began to exhibit a pulse. As user numbers approached 1,000, an odd pattern emerged: App usage peaked between 9 a.m. and 3 p.m.–school hours. Spiegel’s mother had told her niece about the app, and the niece’s Orange County high school had quickly embraced Snapchat on their school-distributed iPads, since Facebook was banned. It gave them all the ability to pass visual notes during class–except, even better, the evidence vanished. Usage doubled over the holidays as those students received new, faster iPhones, and users surged that December to 2,241. By January it was at 20,000; by April, 100,000.

But with growth came server bills. While Spiegel helped cover some of it with money from his grandfather, Murphy had to fork over half his paycheck. As monthly expenses approached $5,000, the guys needed a bailout.

Lightspeed Venture Partners’ Jeremy Liew came to the rescue. His partner’s daughter relayed how Snapchat had become as popular as Instagram and Angry Birds at her Silicon Valley high school. But Spiegel and Murphy proved difficult to track down; their website had no contact information, and no one was listed on the company’s LinkedIn page. Liew finally did a “whois” lookup to find the owner

128 of the Web domain, linked the obscure LLC to Spiegel and tracked him down via Facebook. “His profile picture was with Obama,” shrugs Spiegel. “So I thought he seemed legit.”

In April 2012 Lightspeed put in $485,000 at a valuation of $4.25 million. “That was the greatest feeling of all time,” says Spiegel. “There is nothing that will replace that.” On the day the money went through, he sat in a machine-shop class busily refreshing the Wells Fargo app on his iPhone. In a final homage to Zuckerberg, when the money appeared he walked up to the professor and dropped out of the class and Stanford, a few weeks from graduation.

SNAPCHAT HAS MOVED THREE TIMES since the initial investment, as the company has grown to a still-lean 35 employees. The latest offices, in a former art studio a block from the Venice boardwalk, are appropriately anonymous, with just a small ghost logo to identify it. Most of the development that has made it a viral sensation, however, took place in 2012, when the company was headquartered at Spiegel’s dad’s house. “He convinced us to drop out of Stanford and move down to L.A. over the course of a single conversation,” says Daniel Smith, who was hired along with Kravitz.

The team worked around the clock, sleeping where they worked. (Smith lived in Spiegel’s sister’s room, with enough girlish orange and pink polka dots, Spiegel remembers, “to give you an anxiety attack.”) “Bobby had a habit of pushing code changes and then going to sleep,” says Spiegel, who then found himself on debugging duty. “I’d wake up in the morning and go, ‘Oh my God!’” Adds Murphy: “I still have nightmares about him stomping down the stairs.”

The arrangement proved oddly effective. Says Lightspeed’s Liew: “They can call ‘bulls–t’ on each other, which makes their ideas better.” What emerged was an app that, rather than a tool for the likes of Facebook, can potentially challenge it. By both luck and design, Snapchat addresses three red flags for Facebook. First, it’s more intimate and exclusive. Just as Facebook took the anonymous Internet and boiled it down to real people you knew, Snapchat narrows your world from Facebook “friends,” which range from long-forgotten schoolmates to nagging aunts, to your network of phone contacts. People, in other words, you actually talk to.

Second, it’s perceived as young and cool. Most teens can probably find a grandparent on Facebook. Snapchat’s mobile-first roots give it credibility with the app generation, which increasingly view PCs the way their parents viewed black-and-white televisions.

And in the age of Snowden, parental Facebook monitoring and “revenge porn” (exes who publicly post nude pictures of former lovers), the self-destruction feature has become increasingly resonant. “This isn’t a silly little messaging app,” insists Liew. “It allows people to revert back to a time when they never had to worry about self-censorship.”

An entire subindustry–so-called ephemeral, or temporary, social media–has emerged behind it. Besides Poke (which has largely faded), there’s Clipchat (a Snapchat-Twitter hybrid), Wickr (disappearing texts) and dozens of other apps pushing the boundaries of digital communication back toward what a telephone call used to be–a way to communicate with little risk it will come back to bite you.

All of them, however, are stuck chasing Spiegel and Murphy, who have evolved Snapchat into something fun and easy. To view a snap users hold a finger on their phone screens, a feature designed to make it still more difficult for people to photograph the image with another camera. Disappearing video is now an option. And while teens have embraced a medium unreachable by prying parents or future employers, grownups are catching on. All told, Snapchat users send 400 million photos and videos each day, matching the daily uploads to Facebook and Instagram combined.

“We certainly didn’t invest in this to flip it,” says Mitch Lasky, a Snapchat board member and partner at venture capital firm Benchmark, which led Snapchat’s $13.5 million fundraising round a year ago

129

(they also raised $60 million in June from Institutional Venture Partners)–and invested in Twitter way back in 2009.

ALL THE ASTOUNDING GROWTH, valuations and talk of an independent future misses one key ingredient: revenue. Asia offers a possible blueprint. There, a handful of wildly popular mobile messaging services that upsell users with “in-app” purchases. Spiegel’s party line, when discussing revenue, feels as if it’s read from a script: “In-app transactions followed by advertising, that’s the plan we’re sticking to.”

Drilling down through some of the companies that Spiegel cites raises more questions than answers. China’s WeChat, a massive messaging app owned by the Chinese Internet behemoth Tencent, encourages users to subscribe to celebrity greetings and purchase physical goods. But it’s mostly a texting app, and the messages don’t disappear. Korea’s KakaoTalk and Japan’s Line make most of their money via mobile games, which don’t seem a natural fit with Snapchat. And, of course, digital goods, like premium sticker packages, emoticons and animations, are also moneymakers in Asia, though Spiegel seems to disapprove. “It’ll make sense in a Snapchat way,” he says. “But it will not be stickers.”

Advertising is similarly tricky. Snapchat’s core strengths in gaining users (your privacy is protected and your images disappear!) cripple the targeted advertising that most social media companies rely on (Snapchat knows little more than e-mail, age, phone number–plus your ads disappear!).

But it has one advantage that few other digital advertisers can claim: guaranteed engagement. Users must keep their fingers on a photo or video to view it–and that applies to any ads thrown their way. Snapchat can tell advertisers with absolute certainty whether their ads were viewed, a useful data point in the metric-driven world of digital advertising.

Like Facebook the company can also charge businesses for setting up branded accounts. Acura, Taco Bell and the New Orleans Saints already use the app to debut new products and show behind-the- scenes footage. The company’s Stories feature, which lets users display a compilation of snaps taken over the last 24 hours, is useful for brands looking to tell a longer story. Example: Online retailer Karmaloop uses the feature to show clips of posing models sprinkled with discount codes and new items. Others, like frozen yogurt chain 16 Handles, have experimented with “exploding coupons.”

Spiegel and Murphy, slow in their college days to adapt to emerging platforms, also seem keen to not make that mistake again. In September, for example, Snapchat debuted on the Samsung Galaxy Gear smartwatch. “People haven’t thought about use cases on new computing platforms,” says Thomas Laffont, managing director of Coatue, the hedge fund that provided the latest $50 million infusion. “In one tap you take a photo, one more and you can share it. Imagine [the difficulty] trying to post on Instagram from a Google Glass device.”

Ah, Instagram. Zuckerberg’s Poke might be languishing, but he still has the last billion-dollar app to come out of Stanford. Kevin Systrom’s $1 billion sale last year, in fact, is often held up as the reason Snapchat was right to turn down Facebook’s preemptive billions. (Instagram could be worth as much as ten times more now.) Zuck is going after Snapchat again with a tweak to Instagram–Instagram Direct, a Snapchat knockoff with a key difference: The images don’t vanish unless users go in and delete them.

Spiegel and Murphy have another headache. Brown’s lawsuit, which asks for one-third of the company plus punitive damages, might go to trial this year. “It’s definitely over a billion dollars we’re seeking,” says Luan Tran, one of Brown’s lawyers. Insiders say Snapchat is eager to try the case, but videos of depositions, presumably leaked by Brown’s team, show Spiegel and Murphy far more equivocal and forgetful than their opponent. “I’m just hoping it gets resolved so it doesn’t prove to be a distraction,” says Benchmark’s Lasky.

130

The proverbial “adults” have been brought in, including Philippe Browning, the vice president of monetization, nabbed from CBS, and COO Emily White, poached from the business division of, yes, Instagram. But, tellingly, the company prevented FORBES from interviewing either of them.

And then there’s the most recent hacking scandal. On New Year’s Day, an anonymous hacker matched the usernames of 4.6 million Snapchat users to their phone numbers, then dumped the data, with the numbers redacted, on the Internet. The breach was meant as a warning to Snapchat, which has yet to secure vulnerabilities benevolent hackers pointed out months earlier.

So for now the doubters carry the day. “There’s an almost ritual incantation when these things reach 50 million daily active users and people say, ‘Well they’re not making any revenue,’” says Lasky. “It’s unfair to expect these things to generate revenue while growing so quickly.” To his point, the same was said about Twitter and Facebook. But it was also intoned by the dot-com oracles on the eve of catastrophe 15 years ago. Will Snapchat wilt like MySpace, get out at a peak valuation the way Mark Cuban sold Broadcast.com or prove the next great social media IPO?We should get our answer within two years, just in time for Spiegel to turn the ripe old age of 25.

Source 3: CEO says he knows what millennials and teens want, and it's not on television or Facebook (Stone & Frier, 2015)

Evan Spiegel begins a conversation in the offices of his startup, Snapchat, by propping a sneakered foot onto an Eames chair, leaning back, and acknowledging how infrequently he speaks to the press. “I literally have not done this in so long,” he says, before taking a sip from something called a Happy Juice—pineapple, pear, ginger, mint. When asked why, he chooses his words carefully. “I’ve been working,” he says. “This s--- is hard!”

Spiegel is the co-founder, chief executive officer, and profane enfant terrible behind one of the largest and fastest-growing social networks on the Internet. At 24, he runs a startup with 330 employees and a valuation north of $15 billion, which claims more than 100 million mostly young users. He’s also incredibly secretive about his business plans and an unknown (and arguably underestimated) figure in the intersecting gossip circles of Silicon Valley and Hollywood.

Now he’s ready to talk about a major turning point for his company. More than three years after Spiegel founded Snapchat at Stanford with his fraternity brother, Bobby Murphy, 26, he’s trying to turn it into a real business. After starting to run select video ads earlier this year, Snapchat is about to begin soliciting other big advertisers with some new numbers that assert its audience is bigger, younger, and more obsessive than anything on television. In a 23-page sales pitch it’s sending to ad agencies this month, the company says more than 60 percent of 13- to 34-year-old smartphone users in the U.S. are active on the service and together view more than 2 billion videos a day. That’s already about half the number of videos people watch on Facebook, which is seven years older and has 10 times as many members.

“This s--- is hard!”

“When Snapchat started out, I thought it seemed trivial. I was completely wrong,” says Chamath Palihapitiya, a former Facebook executive and high-tech investor who hasn’t backed Snapchat but watches it closely. “I don’t think anyone saw coming what they are building. At worst, they are the next-generation MTV. At best, they are the next-generation Viacom.”

Snapchat’s ascent has been rocky. The company pioneered a new genre of online messages that disappear seconds after being opened. It suffered a series of public-relations crises caused, ironically, by the publication of internal deliberations and embarrassing old e-mails—the kind that never go away. In late 2013, Business Insider posted leaked video depositions of Spiegel and Murphy in a lawsuit, since settled, filed by a former Stanford classmate who had the original idea for messages that

131 disappear and felt unfairly cut out of the company. Then there were the bawdy e-mails Spiegel had sent as a student to his fraternity at Stanford, leaked to Gawker and published online last May. Finally, there were the e-mails that came out in December in the hack of Sony’s computer systems, which exposed secret deliberations about business strategy among Spiegel and Snapchat board members, including Michael Lynton, CEO of Sony Entertainment.

Snapchat CEO Evan Spiegel: What Is His Grand Plan?

It all combined to give Spiegel a reputation as a cocky, misogynistic Los Angeles rich kid with entitlement issues. On top of that, he was considered egotistical and foolish for turning down a more than $3 billion all-cash acquisition offer from Facebook in late 2013, when Snapchat’s revenue was zero dollars a year.

Yet as Spiegel pointed out in a circumspect commencement address he gave at the University of Southern California’s Marshall School of Business on May 15, “Someone will always have an opinion about you. Whatever you do won’t ever be enough. So find something important to you. Find something that you love.”

So now Spiegel is eager to set the record straight. Over the course of a 90-minute interview, he discusses books, business strategy, the millennial mindset, and the future of his closely watched company. This time, the overall impression is of an independent thinker who’s taking the opposite path of many of his rivals not because he’s full of himself, but because he believes that young Internet users are not well served by other for-profit social networks. He eschews data in decision-making, ignores design conventions with his app, and has placed his headquarters near the muscle beach in California made famous in the ’70s by Arnold Schwarzenegger, among others. And his unconventional attitudes extend to advertising. “A lot of people look at Internet advertising as a tax on the system,” he says. “That’s sort of discouraging if you care about making new products and especially discouraging if you feel like you can solve problems.”

Snapchat’s office, a two-story loft, is one of about a dozen buildings the company leases in Venice, a block from the skateboard parks, T-shirt vendors, and smoke shops that line the Pacific Ocean. Illustrated portraits of celebrities such as Tina Fey and George Clooney, from a local artist who calls himself “ThankYouX,” hang on the exposed brick walls. Two Segways stand near the front desk, with nameplates for the founders: “Evan” and “Bobby.” A glass enclosure visible from the lobby is Spiegel’s office, and although he declines to offer a tour, a portrait of Steve Jobs is visible on the wall inside. “This is why we don’t allow guests in here,” he says grumpily, when asked about it.

In person, Spiegel is a lot like Snapchat: earnest, raw, and unpredictable. When he gets worked up, things aren’t “off the record,” they are “off the f------record.” He’s occasionally modest (“everyone here is stupidly way smarter than me”), while also prone to bouts of inadvertent smugness (“I literally just invented this in my head,” he says, drawing a chart on a paper demonstrating the basic elements of the service). And he can be irritable. Heaven help the interviewer who poses a tedious query, such as: What’s your long-term vision for the company? Spiegel: “These are the kinds of questions I hate, dude.”

132

His friends and investors say there’s a budding business intellect behind the attitude. To sort out tricky business issues, he favors long discussions with colleagues during walks along the cement path from his office in Venice to the Santa Monica pier, two miles away. He’s also a voracious reader who rushes to his office and returns to give me his well-annotated copy of Thirteen Days, the seminal account of the Cuban missile crisis by Robert F. Kennedy. JFK “had all these advisers, and they were all changing their minds 50 times a week, with millions of lives at stake,” he says. “You have to balance people that are trying to do their jobs.”

Although he’s a cipher in the Silicon Valley technology community, Spiegel has quietly cultivated relationships with executives such as Google Executive Chairman Eric Schmidt and SoftBank Vice Chairman Nikesh Arora. “What’s interesting to me is the pace at which Evan is learning,” says Mitch Lasky, a Snapchat board member and investor via the venture capital firm Benchmark. “That’s what should scare the competition. He is getting better at the things that are going to make him a great CEO way faster than I think anyone is aware of or expects.”

Spiegel says that in the beginning, Snapchat was less about disappearing selfies and more about letting people capture a moment that they can share freely online with whomever they want, without considering broader consequences. In a world where everything on Facebook or Twitter could become part of their permanent Internet persona, impermanence had value to young users. “Before that, most of social media stuff, you take a picture and give [it] to everyone on earth,” he says. “Our idea was not that grandiose. It was simple. Let’s just take a shot at restoring some context” to the pictures we exchange online with friends.

“I hate those kind of questions, dude”

133

Spiegel and his colleagues then took that basic idea and riffed on it. Users can illustrate their “snaps” with playful graphical flourishes and make them available to groups of friends by posting them, sometimes in sequence, to a daily “story,” a kind of visual diary of their day. Snapchat also culls from those stories to create compilations of snaps from college campuses and major cities around the world. Even those vanish after 24 hours. So while members of Facebook and Twitter must judiciously craft posts to avoid future embarrassment, Snapchat users are encouraged to post goofy, irreverent, or salacious thoughts (and images) and to just be themselves.

That’s not the only way Snapchat is different. The service isn’t accessible on the conventional Web, only via smartphones, and a central tenet of the company is that video and photos should take up the entire smartphone screen. He “believes his audience is young people on mobile,” Lasky says, “and he does not believe that the audience is being appropriately serviced by the existing Silicon Valley elites.” Actual teen behavior tells a slightly different story. Seventy-one percent of all U.S. teens age 13 to 17 use Facebook, while only 4 in 10 use Snapchat, according to a study this year by the Pew Research Center. And Snapchat’s rivals aren’t sitting still. Twitter has acquired the video-sharing services Periscope and Vine, and Facebook has another way it taps young Internet users—the photo- sharing service Instagram, which it acquired in 2012. Half of all teens use Instagram, according to Pew.

While Facebook and Google focus on technologies that advance material based on what’s popular or useful, Spiegel feels he has a responsibility to show Snapchat’s impressionable young audience things that are meaningful, not just popular. Instead of software decoding a user’s interests from search terms, clicks, and shares, he’s placed a bet on traditional media and old-fashioned editors. Earlier this year he signed up 11 media brands, including CNN, Comedy Central, ESPN, and People magazine, and invited them to contribute daily channels of videos and articles that disappear every night at midnight. “There’s a sort of weird obsession with the idea that data can solve anything,” Spiegel says. “I really haven’t seen data deliver the results that I’ve seen a great editor deliver.”

Snapchat’s media partners say traffic to the new Discover page in the Snapchat app started strong when it was introduced in January and fell off dramatically after the initial surge of interest. But they say it remains a good way to tap into a hard-to-reach demographic and a mass audience. “If people are going to be increasingly spending more time there, and we have the opportunity to tell a story, I want to do it,” says Declan Moore, chief media officer of the National Geographic Society.

Joanna Coles, editor-in-chief at Cosmopolitan, says her channel on Snapchat gets about 2 million views a day. “The traffic is good, and they read every story,” she says. “It’s a finite amount of content, which is a perfect snack.”

Spiegel’s averse to most kinds of online advertising. He finds targeted advertising creepy, especially the experience of shopping for a certain product on one site, only to later see ads for it on another. “It’s definitely weird when a vacuum follows you around the Internet,” he says. He’s also ruled out ads on Snapchat that accompany private one-to-one messages between users, judging it too invasive.

134

Instead, Snapchat started inserting full-screen video ads from such brands as Coca-Cola, McDonald’s, and Samsung into feeds in the media channels and in various “stories” from cities and college campuses. The ads are about 10 seconds and resemble conventional TV spots, not some novel Internet format. Their most unusual aspect is that they fill the screen when a smartphone is held vertically, without the user having to turn the phone sideways, a distinction the company asserts is important. In its sales document to advertisers, Snapchat claims its users are nine times more likely to watch an entire ad because they don’t have to rotate their phone. In separate research, Google backs up the claim that larger video ads are more likely to be seen. According to a May report from its DoubleClick unit, the most commonly served video ad on the Web and smartphones, a small rectangle that typically appears on the side of a page, is viewed by a pathetic 19.8 percent of visitors to that page. Snapchat’s vertical orientation also means that advertisers can’t repurpose their existing ads, which are in a horizontal format for YouTube and Facebook. Advertisers say the hassle is expensive, but that doesn’t concern Spiegel much. “We are fortunate that we have an audience that is compelling and big enough that people will change their video to make it a better product,” he says.

Over the past few months, Spiegel has laid out Snapchat’s ad plans in a tour of major agencies and brands in London, Los Angeles, and New York. It’s unusual for an Internet chief to make a business pitch in person. “Embracing the business side early kind of makes him a new kind of social entrepreneur,” says Tom Bedecarre, chairman of the online agency Akqa, who met with Spiegel earlier this year. “Most of these other guys have a frontman to go do their bidding.”

Imran Khan, a former investment banker for Credit Suisse who joined Snapchat as chief strategy officer in December, says that “Evan views advertising as a product, while most Internet founders view advertising as a necessary evil.” Khan is overseeing the ad effort while the company searches for an ad chief.

Snapchat may have overestimated the pull it has with advertisers. It started its program by charging about $100 per 1,000 views, or more than $750,000 for a day-long campaign, more than double the rates of YouTube or Hulu. Big advertisers with large experimental budgets chalked the rate up to research and development costs and fell in line, just to be first with a chance at wooing a millennial audience. Occasionally the ads do find a satisfying symbiosis with the content. Earlier this month, for example, spots from Coca-Cola and the jobs site Indeed.com congratulated students in ads that were interspersed in daily stories culled from snaps on college campuses during graduation day.

Other companies have balked at ponying up for ads on a service that still lacks some of the basic targeting and measurement tools now standard in digital advertising. The ads also don’t receive the crowd feedback that businesses are used to getting on other social media sites, because there’s no way to comment on spots or share them. Scott Varland, creative director at the ad agency IPG Media Lab, whose clients include Sony and MillerCoors, says none of the advertisers he’s pitched on Snapchat want to spend on something so expensive and untested. That’s even as Snapchat’s ad rates have declined rapidly. This month the company announced it would start to charge $20 per 1,000 views, a fraction of its earlier price, agencies say. The company declined to say where prices started.

That’s still higher than some rivals, and some in the industry think Snapchat hasn’t yet made a strong case to advertisers. “I don’t think users go on Snapchat as a destination for content,” says Valrand, who says Snapchat needs to give advertisers ways to expand their reach on the service and target specific bands of users. “They think of it as a platform to communicate with their friends. So unless it’s integrated into messaging, I don’t see a huge value for brands.”

In addition to addressing doubts about advertising on a messaging service, Spiegel must combat continual skepticism about his leadership. Can a 24-year-old with a few blunders in his past lead a hot social startup through its next stage of growth and beyond, toward an initial public offering?

“We don't have the skills to solve that yet”

135

Critics are quick to point out Spiegel’s latest mistakes. In the last year, he’s hired several senior executives from companies such as Facebook, including a chief operating officer named Emily White, who left after 15 months. People close to Snapchat suggest Spiegel wanted to be a hands-on boss, which left little room for a traditional COO. Spiegel declines to discuss the situation but says broadly, “Our desire to get things right is unexpected and surprising to people, so it’s easier to explain it away with a narrative” that he’s a fickle boss. White didn’t reply to a request for comment.

Some users also criticize Spiegel for developing a service that’s difficult to use and remains somewhat mystifying to anyone born before 1985. (“The user interface and design looks like the cross between a weird Japanese animation and a 1980s sitcom,” wrote the New York Times.) For example, there are no intuitive buttons, just cryptic icons and swipe gestures that trigger different functions. It’s nearly impossible to search for other users, unless you know their Snapchat names or cell phone numbers. “I get that it looks different. It looks different because it’s something that is new,” Spiegel says. He says the company could simplify the service and develop such features as a user directory, but he’s more interested in innovating—70 percent of the company’s engineers are working on new products.

Naturally, he won’t elaborate on these, but it’s not that hard to guess: anything that young people want to share, interact with, and talk about, such as games, products to buy, and other kinds of media, such as music and movies. In the e-mails between Spiegel and Lynton at Sony, published in the leaked Sony e-mail troves in December, Spiegel talked about efforts to form partnerships with the music services Vevo and Spotify and even expressed interest in buying a record label, so he could promote its artists on Snapchat.

After those e-mails were exposed, Spiegel wrote a memo to company employees, which he posted on Twitter. It expressed in personal terms how he felt about the leaks (“Definitely angry. Definitely devastated”) but also sounded like a corporate mission statement for creating a new wave of discreet communication tools. “Keeping secrets gives you space to change your mind, until you’re really sure that you’re right,” he wrote. He ended with what sounded like a battle cry: “We’re going to change the world because this is not the one we want to live in.”

Asked what he meant by that, Spiegel goes on an “off the f------record” tirade, condemning the media for dredging through the private correspondence with little regard for the Sony employees whose data had been exposed. Ultimately, though, he shies away from conceding that Snapchat’s mission is to change a culture that seems hellbent on exposing everything.

“We don’t have the skills to solve that yet,” he says. “I am 24 years old. We have been doing this for four years. I’m not going to stand up and make a statement that is that ludicrous. We just don’t have the capability to solve that. I’m sorry. We help people share pictures.”

Are you proud of what you accomplished so far? Spiegel is asked.

“I’m proud of our team,” he answers after a pause“. And I’m proud of what I think they will do.”

136