Hatching Twitter Part 6

Biz stared off into s.p.a.ce for a second and then said, "I got it." He grabbed a pencil and a piece of paper and scribbled down a short speech that he then handed to Jack.

Noah, now the outcast of Twitter, was seated next to the group and held a video camera, taping what was about to happen. He whistled and whooped as the word "Twitter" echoed throughout the room.

Noah had come to South by Southwest to explore other start-up ideas he was thinking of building alone and had b.u.mped into his former coworkers and best friends outside the theater. After chatting about the mundane and about the extraordinary rate at which people had been signing up for Twitter at the conference, Ev had made a peace offering.

"Hey, Noah, would you like to sit with us?" Ev had asked.

It had been a rough few months for Noah, as he had recently written in a very personal blog post explaining that 2006 had been the "hardest year" of his life. "i lost more than i knew i could. i lost my two best friends. changed my definition of self," he wrote on his Web site. "i left my company, and everything i spent years creating. i learned about stress. about trust. about sadness ... i cried more tears than i ever have."

Now, as he was picking himself back up, Ev was holding out a hand. "Sure, that'd be great," Noah had said to him. "I'd like that."

As they sat in the audience together listening to Ze Frank, the Twitter guys were all excited, but they were also completely exhausted from the past few days.

Ev had been to South by Southwest several times before, and he knew the way people crowded in the hallways between conference sessions to chatter with friends. So months earlier, he had suggested an idea. Why don't we "put a flat panel with a cool Twitter screen in the main hallway where people hang out," Ev had written in an e-mail to Jack and Biz in the weeks leading up to the conference. "On that, put the twitters from people who are at the conference (and, of course, instructions on signing up)." He noted that it would be "highly compelling to see all these updates, with pictures, from people all around you."

Biz and Jack had been immediately sold on the idea and corralled the troops to get to work. The team at Twitter was still very small-just a handful of engineers and designers-but Blaine and Jeremy had started on the servers. Ray, who had done something similar for the disastrous Twitter Love Parade unveiling, had built a Flash animation that could be set up on fifty-one-inch plasma displays. A few days before the conference began, Biz and Jack had flown out to set up the screens throughout the halls. In the background of each display a large beige Twitter logo hung in the air surrounded by instructions telling people how to tweet what they were doing.

Attendees loved seeing their names, faces, and commentaries stream across the screens for all to view. It didn't take long for the plasma displays to became digital billboards, with people huddled around to see which talk or panel to attend as pithy updates scrolled down.

The Apple iPhone would not go on sale for another three months, so the act of peering down at a cell phone for hours on end wasn't part of the social vernacular yet-even at a technology conference. Most people, like Jack, had a Motorola Razr, which was a slim phone that flipped open to offer an extensive menu of features: sending text messages or making phone calls.

Since Twitter worked via text message, people with all types of cell phones could use the service and it started to spread quickly among the conference attendees.

As people sat in panel discussions, rather than look up at those speaking, they instead peered longingly at their phones, staring patiently while they waited for an update, hoping to find some snippet of information more important than real life.

As usage of the site started to spread, investors who were at the conference in search of the Next Big Thing soon found out about Twitter. One young investor, Charlie O'Donnell, a shorter man with a head as bald as Mr. Clean's, was standing on an escalator on Friday afternoon talking to a friend and couldn't believe what he was witnessing.

"This is f.u.c.king crazy," Charlie said as he wandered through the conference halls peering from side to side at everyone glued to their phones, constantly pecking for new updates. "Everyone here is on Twitter," he said.

"I've gotta tell Fred," Charlie added as he pulled out his phone to e-mail his old boss, Fred Wilson, who was a partner at Union Square Ventures, a well-known investment firm in New York City.

"Do you twitter?" he asked Fred in the e-mail. "You should check it out ... I didn't get it at first, but now that there's a group going to sxsw, I get it," Charlie wrote. "I'd never text all the people I'm texting now ... but it's a really seamless way to text groups and individuals at the same time."

Fred wasn't convinced, telling Charlie that such a service would never work and that other companies that had tried to make Twitter-like products had all failed.

Yet by Monday morning, Twitter was gaining such popularity at the conference, and thus receiving so much attention on the tech blogs, that Fred changed his tune. As he sat sipping coffee, his short, dark hair still scruffy in the early morning, he went to Twitter.com and registered his name. "trying twitter," he wrote, sending his first tweet.

Fred was forty-five years old at the time, already a legend in the investing circles after having sold GeoCities to Yahoo! for $3.57 billion in stock in 1999. He had also gained a reputation for making adept predictions about new Internet services or themes. Now here he was, watching a stream of tweets fill his screen. Some of the messages talked about the conference, others mentioned Austin, and of course people complained about their hangovers from the night before.

At South by Southwest, one of the main pastimes of attendees is a treasure hunt for the biggest buckets of free liquor. After a few days, Twitter had become the equivalent of a decoder ring in a cereal box to find such a bounty. On several occasions, Jack, Biz, Ev, and Goldman were sitting in a packed bar, sipping beers and reeling from the day, when all of a sudden people's cell phones would start dinging with text messages. Like clones, people would look down at their tiny two-inch screens, read a tweet about a new party, then one by one grab their coats and trickle out of the bar. Off to the next alcohol-soaked gathering with Twitter guiding their way.

Soon bloggers at the conference were referring to the ma.s.s exodus from one place to the next as "flocking."

Back in San Francisco, Jeremy, Blaine, Ray, and the other engineers spent the weekend hunkered down at the offices, tinkering and tweaking the servers to ensure that the site stayed alive during the critical few days of the conference. When ma.s.sive spikes of usage and conversation happened on Twitter, their hearts palpitated with anxiety, hoping the Web site could live through the influx of updates.

After the launch at the Love Parade-now a distant memory they would rarely speak about again-Twitter had been growing at a healthy pace, partially because of the chatter about the service, but mostly because Ev's well-known name was attached to it. That week in Austin, the sign-ups made the last few months look like Twitter had been growing in slow motion.

As Ze Frank stood on the stage preparing to announce the winner for the best new start-up, the servers were about to get battered again.

"And the winner is ...," Ze Frank said into the microphone as he looked down at a piece of paper, the audience quieting for a brief moment as he prepared to tell them all what they already knew.

"Twitter!"

Noah began whistling and clapping as he heard the announcement. But his happiness was diluted in a matter of seconds as Jack, Biz, Goldman, and Ev rose from their seats, squeezing past Noah as if he were just another conference attendee and then wading through the ocean of applause and up the staircase to the stage. Jack's brown cowboy boots. .h.i.t the floor as he rushed toward the microphone. Biz stood to his right holding the award in his hands. Ev and Goldman stood back, giving the spotlight to Jack as he delivered the pithy speech that Biz had written.

"I would like to thank everyone in 140 characters or less," Jack said to the crowd as he leaned forward into the microphone "... and I just did." He waved, then said, "Thank you," as the group walked off the stage to thunderous applause.

By the time they returned to their seats, Noah was gone.

Jack, Biz, Goldman, and Ev were gleeful after the announcement. They wandered the halls of the conference, holding up the rectangular gla.s.s prize they had been given, posing for photos and shaking people's hands as they made their way to an after-party.

Jack was wearing a blue scarf that swirled around his neck and over his black long-sleeve T-s.h.i.+rt. When he arrived at the party, he was glowing and elated, like a prom queen with a crown atop her head. People continually walked up and congratulated him. Just two days earlier, he had arrived as a n.o.body. Now he was a mini celebrity.

Noah was dismayed as he wandered the halls for a short time after the awards, but he quickly decided that rather than harbor resentment at not being invited to join his former coworkers on stage, he would be happy for his friends' new success. Off he went, trudging toward the after-party, and he soon caught a glimpse of the Twitter crew from the corner of the room.

As he approached Jack, Noah reached out to shake hands, his mouth opening to offer congratulations. Yet when he was just a few feet away from his friend, Biz swooped in and placed his arm around Jack as he spun them both around and in another direction to pose for a photo. Noah was left standing there in a room full of people, his arm at a forty-five-degree angle, as if he were shaking hands with an invisible man. Jack, Biz, and Ev then slipped off into a side room as more people asked to take their photos. Noah, devastated by what had just happened, left the party.

After the festivities started to die down, Jack tweeted that the small group of founders were making their way to a diner to decompress. As they sat inside, the neon MAGNOLIA CAFE sign glistening in the rain, snacking on chips and salsa and sipping from tall gla.s.ses of beer and water, they reeled from the excitement of winning. "At magnolia's, sopping wet," Ev tweeted. Then shortly afterward Biz added, "Chowing down late night at magnolia with the guys."

But it wasn't all the guys.

Just a few blocks away, Noah wandered alone in the rain as his former friends and cofounders toasted to the award they had just won without him.

The First CEO.

The engineers were staring into their computer screens, their headphones wrapped around their heads, as Jack, Ev, Biz, and Goldman wandered toward the back of the office and into the rear room that had once been Noah's office.

No one paid them any attention; it looked just like any other meeting as they shuffled inside, each grabbing a mismatched rolling chair. Goldman slid the gla.s.s door closed behind him, giving it an extra push to make sure no one could overhear the conversation they were about to have.

In the few months since South by Southwest, Twitter had quickly pa.s.sed one hundred thousand people who had signed up for the site. There was still no revenue, or even talk of a business model, but figuring that out would be the job of the CEO.

After weeks of private discussions-some over coffees or beers, others via e-mail-they were finally going to decide who would be running Twitter, what each person's t.i.tle would be, and how they would split up the stock. Until this moment, the company had belonged solely to Ev, who had financed it with his personal money after buying out Noah and the previous investors almost six months earlier.

It had been a confusing and stressful few weeks for the top half of the Twitter mast. Though they were less concerned about their monetary stakes, their t.i.tles, and in turn their egos, were paramount.

In the early days of start-ups, t.i.tles are usually handed out without much thought or resonance. Who will be a vice president, chief technology officer, or director of X, Y, and Z is often discussed in a land of make-believe. Given that 90 percent of start-ups don't make it past their toddler years, such decisions rarely matter in the long run. At Twitter it was no different.

Although it was unlike Biz to politic for anything, he had been pus.h.i.+ng for a more important t.i.tle at Twitter for months, hoping to avoid the fate that had befallen him at his previous jobs. When he'd joined Blogger it had already been acquired by Google-no fancy t.i.tles for him there. When he'd landed on Odeo's sh.o.r.es, important t.i.tles had already been divided up there too. Throughout his career he had always been in the right place at the wrong time. To ensure he didn't fall into the same trap at Twitter, he had begun campaigning with an e-mail he'd sent to Ev and Jack a few weeks earlier.

"Maybe this is inappropriate, but if I don't ask, I'll never know!" Biz wrote in the message after debating over a long weekend about what to say. "What do you envision my t.i.tle to be? Is there a chance I could be called co-founder?" He knew that if the company grew, the t.i.tle of cofounder would garner him more respect, both internally and externally. Unlike t.i.tles like CEO, CFO, or COO, to which specific roles are attached, the t.i.tle of cofounder also meant Biz could do what he wanted, moving around the company with a lot of power but without too much responsibility.

At the time, it had been a.s.sumed that Ev would be CEO of Twitter and Jack would be president or director of technology. But Biz's role had always been unclear.

"I don't know the answer to this yet. It is not an unreasonable request," Ev wrote back to Biz, also noting that he wasn't sold on the idea. "But it might not be best, for a number of reasons." (For one thing, he worried that if he made Biz a cofounder, then Blaine, Ray, or Jeremy would want the same grandiose t.i.tle.) The room in the rear of the office had now been nicknamed the Purse Factory by some employees after Sara, Ev's fiancee, had moved into the office a few months earlier with the goal of making women's purses there. A few sc.r.a.ps of fabric hung about. Some tailor scissors. A sewing machine. And although it was rarely used to make women's handbags, this had become the impromptu office for important meetings.

"I've decided I'm not going to be CEO," Ev told Jack, Biz, and Goldman as he leaned back in his chair. He explained that although he wanted to be involved with Twitter, offering his guidance and vision for the product, he wanted to focus on Obvious Corporation and continue to build new Web start-ups from within his idea incubator.

This wasn't what Goldman wanted to hear. He was hoping that Ev would run Twitter and that Jack would report up to the CEO, not be the CEO. A few days earlier, at a private lunch with Biz, Goldman had tried to convince Ev not to make Jack CEO, telling him he "didn't think he was capable of running the company." And although he agreed, Ev believed Jack could be molded.

"So who is going to be CEO?" Biz asked.

They all looked in Jack's direction. There was no question that Jack had taken on leaders.h.i.+p of Twitter after Noah had been pushed out, but there were questions as to whether he could pull off building a real company. Especially one that was growing as fast as a bacteria in a petri dish.

Jack had already shown he could make deft decisions, including an e-mail he had sent in late January. "We have 4, and only 4, priorities: performance, usability, development efficiencies, and costs," he wrote. Then, offering a plan to take Twitter from a buggy Web site to a smooth operation, he added that the company needed to fix the servers, sort out confusing design issues on the site, and hire new engineers.

Jack had also made one of the most important decisions for Twitter to date: limiting the length of tweets. "Currently the number of characters you are allowed in your update is dependent on the length of your name," he had written to his colleagues. "We're going to standardize this at 140 characters. Everyone gets the same amount of s.p.a.ce to Twitter, no more confusion or guessing as you are typing." Until then, messages had been limited to 160 characters, which was the maximum length of a text message that could be sent from a cell phone. The move to 140 characters would allow Twitter to include someone's username in the text.

Jack's next move had been to transition to usernames everywhere on the site. Jack had written in the same e-mail, "If your name is bob2342, your friends are going to get "bob2342: walking the dog." He added: "This should clear up ma.s.sive amounts of confusion and complaints." But this was the type of thing Goldman worried about from Jack. Using usernames, rather than real names, was a typical engineering decision. People in the real world didn't call themselves bob2342; they were simply Bob.

Still, Ev had been impressed with Jack's leaders.h.i.+p. "Excellent writeup, Jack. I agree with everything, wholeheartedly," he'd written.

Back in the Purse Factory, Ev looked at Jack and asked him if he thought he could be the chief of Twitter. "We can do a CEO search and find an outsider who has experience running a company," Ev said. "That would make you something like chief technology officer."

"No, I can do it," Jack said. "I want to do it."

Goldman looked skeptical. Biz rocked on the legs of his chair. They sat silently for a few seconds thinking about it. Jack looked at them all with a sense of yearning.

"Okay. Here's the deal," Ev said, pausing again. He dictated that Jack would be CEO. Biz, Jack, and Ev would be cofounders. Goldman would be the vice president of product.

Biz and Jack immediately felt a sense of elation.

As Ev had personally financed Twitter with his own money to date, he told the group that he would retain a 70 percent stake in Twitter. Jack, as CEO, would be given 20 percent of the company. Biz and Goldman would receive around 3 percent each. The rest would be split up among current engineers and new hires.

Eventually, Ev explained, Twitter would need to seek venture funding from investors, which would dilute some of their stock, but as the company consisted of only a handful of engineers, that conversation could wait.

As the meeting wrapped up, they slid the gla.s.s door to the office open, and Jack walked out into the office as an official boss. He was beaming with pride and excitement. The CEO of Twitter.

At least for now.

The Hundred-Million-Dollar Offer.

Blaine looked up from his desk, leaning back in his chair as Ev walked briskly by, heading toward the front door. "Hey, Ev," Blaine yelled, his long, pin-straight hair hanging down over his shoulders. "Don't take less than a hundred million dollars!" Ev smiled, nodded as if to say okay, and then closed the door to 164 South Park behind him.

It was mid-June 2007 and Jack, Biz, and Goldman were already outside on the curb as Ev emerged. Small pockets of fog lingered on the gra.s.s as they started to walk, turning right onto Third Street. Their destination was a mere 350 feet away. As their sneakers tickled the concrete sidewalk, Goldman broke the silence. "This'll be interesting, if nothing else, to see what our value is," he said. "We really don't have a sense of what we're actually worth."

Biz and Ev agreed. Jack was silent as he walked, deep in thought and excitement about his first acquisition meeting.

They could hear car tires thumping on the grates of the freeway up the block as they approached the large gray building on the corner of Third and Bryant streets: the home of Yahoo!'s offices. Although Yahoo!'s company headquarters were in Sunnyvale, forty miles south of San Francisco, the company had recently set up this satellite office, called Brickhouse, as an incubator for entrepreneurial Yahooers to develop entirely new start-ups. The Twitter employees had all been to the office before, often for some of the company's popular Web 2.0 parties. Usually mundane affairs-beer, wine, cheese, crackers, and lots of networking-the parties were meant to celebrate the resurgence of the Web after the cold winter of the early 2000s bubble pop. Most events were the same. People wandered around aimlessly, constantly peering down at the name tags stuck to everyone else's s.h.i.+rts, searching for a venture capitalist, a blogger, or one of the esoteric "famous" people who had sold their start-ups already (like Ev).

But this morning's meeting was different. There would be no cheese, beer, or name tags. Instead, Yahoo! wanted to buy Twitter. "They want to talk acquisition," Ev wrote in an e-mail to Jack and Goldman at the time. "Says that if our price is not hundreds-of-millions, but tens-of-millions 'even several tens-of-millions' [Yahoo!] doesn't think it'll be a problem." Although Twitter had no revenue and no projected business model at the time, Yahoo! envisioned this new start-up as an extension of its mobile offerings.

More than a year after it had begun as an experiment, Twitter had grown to nearly 250,000 active users. While the internal debates over who was in charge had been sorted out-at least for now-outsiders still often reached out to Ev, whom they knew and trusted from Blogger. It annoyed Jack, who was technically the CEO, to hear that someone wanted to buy the company through Ev, but he never let on.

When the request to meet with Yahoo! came in, Ev had been lining up meetings with five prospective venture capitalists and was preparing to put five hundred thousand dollars of his own money into Twitter to continue funding it until the company decided who would finance it. He had also talked to angel investors who came with lots of connections and could help Twitter grow. Among them was the legendary Ron Conway, a wheeler and dealer who came with a slew of connections in Silicon Valley and access to a team of private investigators, if needed.

Although lots of investors, including the big names like Fred Wilson, had started lining up with term sheets offering millions of dollars to finance the company, some investors immediately opted out, telling Ev that they didn't see a business model in 140-character updates about people's lunches. All of these discussions were put on hold when Yahoo! called.

Brickhouse was a cavernous, loftlike s.p.a.ce. Huge white columns randomly interrupted the floor like giant linebackers standing on a football field. At one end of the room, floor-to-ceiling windows looked out on the city; at the other, a wall had been meticulously covered with thousands of fluorescent Post-it notes, creating an image of a giant pixelated hand. Engineers lay about on beanbags programming on their laptops. It was a nerd's paradise.

As the Twitter team wandered in, Bradley Horowitz, who ran Brickhouse, greeted them with some other Yahoo! executives. "Hey, man!" Bradley, said as he patted Ev on the back, then shook his hand. "Great to see you."

Bradley wore his signature dark gla.s.ses, the frames as thick as his brows. The creases in his cheeks made him look more like an army general than a computer engineer. He lead them to the right, toward the conference room, where they shuffled inside, grabbing una.s.signed seats. As everyone got comfortable and introduced themselves, Ev began talking. He had learned how offers to buy start-ups work when he went through the process with Google and Blogger. It was more like trying to negotiate with a high-level escort than selling your company. In the end it almost always came down to the highest price.

Ev ran through the numbers, explaining that at the end of February, days before the company had set off for Austin, the Twitter Web site had been receiving about two hundred thousand new visitors a month. By the end of March, after the South by Southwest award, the number of people coming to the site had quadrupled, quickly zooming past one million visitors as April rolled in. He explained that there was no revenue at Twitter yet, but that would come later, he said, "possibly through advertising or some new kind of business model." For now, Ev was paying all the bills to keep the lights on.

Jack clasped his hands together on the table, barely saying a word. He was nervous but attempted to portray an air of confidence that didn't come across to the others in the room. He simply watched Ev walk Bradley around the Twitter garden. Then the discussion turned to what Twitter actually was.

"So it's a social network?" Bradley asked.

Silence filled the room.

Almost a year into the service, there was no consistent answer to the question. Even since March, after South by Southwest, the site had continued to take on a life of its own, not just for status updates but also for news. The technorati were clearly obsessed with the site, using it mostly to talk about themselves. But other people, and companies, were using it differently. Major news outlets-including the New York Times, Dow Jones, and the Defamer blog-had set up on the streets of Twitter, all sharing breaking, local, and gossipy news. There were now a fake Bill Clinton, Homer Simpson, and Darth Vader who posted jokey fake statuses. A few "real" celebrities had also joined. Janina Gavankar, an actress from The L Word, had been the first celebrity to start tweeting-although Biz had spent a few hours trying to figure out if she was real or an impostor. John Edwards, the presidential candidate, sent messages from his campaign trail. There were also "things" on Twitter. Fire departments had joined. Police scanners. Baseball games. Food trucks. Yet even with this flood of distinctive use cases, no one in the press really seemed to understand what Twitter was. Some in the media had taken to calling it "hipster narcissism," "self-absorption," "self-obsession," "egotistical," and more than a few people who had tried Twitter called it a "complete and utter f.u.c.king waste of time."

But the question made Jack pipe up for the first time and start speaking, referencing a blog post written by Fred Wilson in late April. "What exact role is Twitter going to play?" Fred had asked in the post, discussing its place in the future of the Web. "It will be the status broadcasting system of the Internet."

"I see Twitter as a utility," Jack said. "A broadcasting system for the Internet." Then he began to describe his vision for Twitter, noting that it was "like electricity." All of this confused Bradley, who looked around the room, perplexed by the idea of a social-media company as a utility.

As the meeting came to a close, they all shook hands, and Bradley walked everyone out. He thanked them for coming, then looked over at Ev and said, "We'll be in touch soon."

As they plodded back toward 164 South Park, Ev spoke up. "What did you guys think?" he asked. There was a certain air of excitement from the meeting.

"I like Brickhouse," Biz said as they wandered back. "It seems like it'd be a fun place to work."

"Me too," Goldman said.

"So what's the lowest price we sell for?" Goldman asked.

"A hundred million?" Ev hazarded. Biz and Goldman would each get about two to three million dollars if a sale went through at that price. Although such a number is like winning the lottery for most of the world's population, a million dollars in Valley terms is like finding a quarter between your couch cus.h.i.+ons. Such a number would give Ev more money and leverage to continuing putting start-ups on the Obvious Corporation conveyor belt.

Given Twitter's growth and attention, though, Ev was thinking about pausing his idea incubator and focusing on the 140-character machine. Prior to the Yahoo! meeting, in an e-mail to Goldman and Biz, he had noted that he was prepared to "double-down on twitter," pus.h.i.+ng Obvious Corporation to the side. That still left the question of what to do next: whether to take money from an outside investor or try to sell Twitter to Yahoo! or a similar suitor. Jack didn't have the confidence, or the power within the company, to make that type of decision, so he quietly looked to Ev for guidance.

Jack had the most to win from a sale. Although he was making seventy thousand dollars a year, he was still flat broke, living paycheck to paycheck, paying off credit-card debt and student loans from a year of college at New York University before dropping out years earlier. A sale for one hundred million dollars would give him twenty million, a gargantuan sum that could change his life forever.

"Maybe we would take eighty million?" Jack asked. (This would be a sixteen-million-dollar win for Jack.) "Eighty million is the absolute lowest," Goldman said as they pulled the door open, walking back into the offices.

They didn't have to wait long to find out the real number. In the late afternoon Ev got a call from Bradley. They spoke for a few minutes, then hung up.