Facebook Early Days

Via Startup School Interviews with I got the idea of checking out some early videos. This one of October 2005 was particularly interesting. The other guy is who represents , the firm that invested $12.7 million into Facebook earlier in 2005.

After watching this video I’ve read : The Inside Story of the Company That is Connecting the World.

Facebook is a perfect example of “build something users want”. The absolute foundation of the success was that users just loved this product from the beginning. In the early days 70% of all users used Facebook every single day. It’s clear that not every product will be the next Facebook. But if you launch and nobody cares — that’s a clear message that something is not working yet! The first version of Facebook was built in two weeks. A great example of “Real artists ship” Mark Zuckerberg had the skills and he had the necessary experience. He was programming since his early teenage times. He has built several “social” products before. Course Match let you see what courses other students were taking. FaceMash was a widely popular Hot-or-Not for Harvard. And some other projects. So he knew how to code. He knew how to build products that spread virally. Facebook was not his first project. After the success in Harvard, they validated their model with 3 more schools. They picked schools that already had a popular online community — so they picked very hard environments. Once they saw that Facebook quickly overtook those established communities, they started expanding rapidly to easier targets. That means they validated their product before spending more time on it. They were cashflow positive very early. In fact for the first 18 months they were mostly cashflow positive. It was not the typical “we don’t care about revenue” Silicon Valley startup. They started burning serious cash later, but in the beginning they were pretty much bootstrapped. Mark likes building new things. So while spending the summer of 2004 in California, they were building another product — Wirehog — and according to the book Mark was spending more time on it than on Facebook. Actually some of his friends were focusing on Wirehog fulltime. There is a great lesson here: You can’t do everything. At some point you need to focus on one thing. Eventually in January 2006 they took Wirehog down. I loved the passages about in the book. I simply fell in love with him. He was described as an extremely focused and hardworking person who just got stuff done. In the early days he was responsible for growth. He was the one who opened up new colleges, one at a time, over and over and over again. He definitely deserves credit and I wish him all the best with his new company, Asana. was super-important as well. He helped Mark to retain full control over Facebook, and also negotiated the $12.7 million Accel investment in early 2005 just 15 months after the launch, with a pre-money valuation of over $80 million. They controlled their growth. They only opened up new schools once there was enough demand, and more importantly once they had enough server infrastructure to handle to additional load. They could have grown much faster. That was the reason why other social networks like Friendster got into trouble. They grew too fast and their infrastructure broke down, making the service unusable. They burned around $300 million to get to 300 million active users. That means that an active user cost them around $1. Not unreasonable. For a product like Facebook network effects are key. That is the reason why their number one focus was and still is growth. Sharyl Sandberg was a key hire. She made sure that the company made the transition to a strong and profitable business. Facebook has made tons of mistakes. This didn’t matter much in the end. What mattered was that the product worked. If the product doesn’t work, nothing else matters.

The book was very entertaining and I learned a lot about Facebook, their culture and about social networks in general. By the way, here is my first posting about Facebook from 2007 where I discovered their impressive usage statistics for the first time :)

Indeed a very impressive and inspiring story. And don’t forget: (1) Build something users want. (2) Validate your business. (3) Real artists ship.