$50 Million Mistakes with Ali Partovi - Ep 129

We're meeting with Steve Jobs, and this was like a Hail Mary, cross your fingers. If they acquire us, we are saved from terrible doom. We go in, and the meeting had some hiccups at first, but overall went really well. And Steve said something like, all right, I like you guys. I think you could do really well here at Apple. We want to acquire you. I'm going to let Eddy here work out the details. I have to run to another meeting. And he was literally standing up to leave. And I said, Steve, wait, before you go—

Hello, everyone. This is Paul Ollinger. Welcome back to Crazy Money. If you're an old-school listener, welcome back. So nice to have you. If you're new, this is the podcast where we explore the connection between money, happiness, work, and meaning. We define success and figure out how we're going to live as grownups in harmony with that definition. Today, my guest is a very interesting guy named Ali Partovi. Ali is an Iranian-American entrepreneur and angel investor. He has a very interesting story that includes some of the most cringeworthy anecdotes you will ever hear from a business meeting with a high-powered individual. How high-powered? Why not Steve Jobs? Why not Steve Jobs? How about that? We'll get to Ali's story, his ups and his downs in his career, and the lessons we can all take away in just a moment. First, I want to say welcome to the new members of the Crazy Money Podcast listeners group on Facebook. These folks would be Nat Hampson, Ivy Spencer, Peter Skyler Quackenbush, who has the greatest name in all of Metro Atlanta, Rich Ordona, Greg Thompson, Amy Walter Beisel, and Chad Ferrer from the French meaning to frère. I also want to say, hey, guess what? I have some comedy shows coming up. Would love to see you out at them. On December 17th and 18th, I'll be on the Best of Atlanta show at the Laughing Skull Lounge. January 7th and 8th, I'll be at the Mohegan Sun in Wilkes-Barre, Pennsylvania as the opener. I will also be the opener at the Comedy Catch in Chattanooga, January 13th through 15th, where I was this past weekend opening for Jay Bliss. Super fun weekend, great club, nice people. Come out, tell your friends in Chattanooga, make a weekend of it. Go to Rock City and Ruby Falls. It'll be a hoot. And if those venues sound glamorous, because they are, here's another couple coming up. January 19th and 20th, I will be presenting Andrew Stanley as the headliner in the Paul Olinger and Friends series at the Capital City Club here in Atlanta. Get yourself invited by a member, or if you're a member, buy your tickets now. There's only a few left for the 20th, and Andrew Stanley is hilarious. You might remember him because his dad, Andy Stanley, was an interviewee here on Crazy Money last year, and we ended with Andrew's comedy. He's great. I fully endorse him. Also, If you're going to pick one show to come to, come to Los Angeles on February 3rd, where I'm going to headline the Venice West, which is a new music venue in Venice, California, on the west side of Los Angeles. I will be their first headlining comedian, and I'm really honored. Not comedy necessarily, but I will be speaking at the Balzer Symposium on January 28th for the Atlanta Jewish Federation. Topic will be lessons about money I've learned on the Crazy Money podcast. This is a virtual event and tickets are available at atlantajewishfoundation.org. atlantajewishfoundation.org. All right, let's talk about Ali Partovi. Ali, as I mentioned, is an Iranian-American entrepreneur and angel investor. He and I used to work together. We did work together when I was a newish employee at Facebook. I was still a salesperson handling individual accounts before I got into management, and I was working on the Palm computing business. Remember Palm? They used to make phones. They used to make handheld data devices. Well, they were launching a new phone and they wanted to launch it with a music bent, with an association toward music. And I think at the time the phone could hold like 10 songs or something, maybe more. Anyway, in the old days when I worked at Yahoo, if you wanted to associate with music, you'd run ads or you'd buy program sponsorship on Yahoo Music. If you wanted to associate with college football, you'd buy like Snickers or Dr Pepper would buy ads on Yahoo Sports. Or if you wanted to find people who were checking their stocks and sell them an E-Trade account, you'd run your ads on Yahoo Finance. Well, Facebook was a platform. It's a set of tools where people can build presences on top of those things, but Facebook didn't have any editorial content. And so lacking the amazingly sophisticated ad tools that Facebook has today, back in 2008, We had to kind of cobble together ideas. And I was like, okay, Palm needs music content. There's this great new app called iLike, which is building its own music destination site, if you will, on top of the Facebook platform. And that comes with some pros and cons, as Ali will describe in a moment. And so I reached out to Ali. I think we had met once or twice when he'd come into the office to present what iLike was doing. And I said, hey, why don't we work together on a project? I'll bring the clicks and the Facebook audience, you bring the context, the music context, and we'll do a rev share and everybody will win and we'll move on. And I think we did it with another, maybe an auto advertiser as well. Anyway, that was how I know Ali Partovi. Well, about 3 months ago, I'm on Facebook and I read this post that Ali wrote, and it was about a meeting he had in 2008 with Without spoiling the story, Ali's mouth got ahead of his brain. And he said some things that he, to this day, regrets saying, and that cost him many, many millions of dollars. And it cost him the confidence of his investors and his co-founders and other things like that. I find this interesting and relevant to this program because today Ali is financially very successful. And you'll find out why when I read his resume in just a second. Yeah. But even today, 13 years later, this regret, this story that he shared will make you cringe, will make you be like, dude, why did you say that? And he's written some other things, some other anecdotes he shared with the social world that I'm really happy that he has, because it's good for people, especially young professionals, to know that you're going to make mistakes and that these mistakes might be costly in the short run, but you can recover from them. You can. Go on from doing embarrassing things and go on to become a very successful professional. I was very happy that Ali agreed to come on the podcast and share these stories in the first person. So let me tell you a little bit more. Ali Partovi is an Iranian-American entrepreneur and angel investor. He is best known as the co-founder of Code.org, which he founded with his twin brother Hadi. Your kids may have spent a good bit of time on Code.org or with Hour of Code. He's also a co-founder of iLike, LinkExchange, and he was an early advisor to Dropbox and an early promoter of bid-based search advertising. He has backed as an investor Airbnb, Dropbox, Facebook, and Uber, along with many, many other successful companies and has experienced great success. He is today using his experience, his knowledge, and his network as the CEO of Neo, which is a mentorship community and venture fund he established in 2017. Ali's passionate about sustainable food and loves climbing, guitar, puzzles, and his family. Ladies and gentlemen, this is Ali Partovi. Ali Partovi, welcome to Crazy Money.

Thank you so much. Great to be here, Paul.

It's only been a decade since I've seen you. You and I both are still handsome. We've both maybe lost a couple of strands of hair. How's life been treating you?

Pretty well. Pretty well. Yes. I wish I had only lost a few strands, but Doing well, thank you.

So we'll get to how we know each other. I want to start with where you come from. Ali, where were you born and what year were you born in?

I was born in November 1972 in Tehran, Iran. My early childhood, I was born into a wealthy family and spent some time as a baby in the US and, you know, was exposed to English quite young, but then mainly grew up in Iran. When I was 7, there was a revolution and The government seized most of my family's wealth and most of my uncles, aunts, grandparents, all the people that loved me left the country. My mom and dad and twin brother and I were the only ones of our extended family. We had a few others who stayed, but we felt suddenly very alone. So this was a pretty important part of my childhood.

So you came to the States in '79 or '80, is that right?

No, the revolution happened in '79. We had been here as toddlers in like '74 or so. But, you know, I was then in Iran all the way until 1984. So there were about 5 years of revolution and then war with Iraq that my brother and I lived through between ages of 7 through 11.

All right, a little historical perspective for those people who are under 45 years old. This is paraphrased from Wikipedia, for what it's worth. On November 4th, 1979, a group of militarized Iranian college students belonging to the Muslim Student Followers of the Imam's Line Took over the U.S. Embassy in Tehran and seized 52 U.S. diplomats and citizens as hostages and held them for 444 days, finally releasing them on January 20th, 1981. Coincidentally— well, not coincidentally— the day that Ronald Reagan was inaugurated. U.S. President Jimmy Carter called the hostage-taking an act of blackmail and the hostages victims of terrorism and anarchy. In Iran, however, it was widely seen as an act against the U.S. and its influence in Iran, including its perceived attempts to undermine the Iranian Revolution, and for America's longstanding support of the Shah of Iran, Mohammad Reza Pahlavi, who was overthrown in 1979. After his overthrow, the Shah was admitted to the U.S. for cancer treatment. Iran demanded his return in order to stand trial for alleged crimes against Iranian citizens with the help of his secret police. The U.S. rejected Iran's demands. Iran saw the decision to grant him asylum as American complicity in these atrocities. So I was 10 in 1979, and I didn't know there were sides to the Iran Revolution. All we knew in the United States, that Iran equaled evil, right? Iranians were all the same, and they were not fans of the United States. What was it like coming as a young boy to the United States amidst that culture of not a lot of people understanding the nuances of the country's ethnic and political makeup?

Yeah, these things are always tough and it's really easy to make a statement about a whole group, whether it's what you just said about how might people might've viewed Iran. It could be really easy for me to make a statement about Americans when I arrived, but I'd say either way you'd be losing. The reality is people have lots of different opinions. Even the same person might have 2 conflicting opinions fighting inside their own brain. But I will say I personally always loved the United States, and I feel like a lot of Iranians actually love the United States. They love the principles of equality, of the rule of law, and freedom. These are things I remember reading about and being, you know, I wish we had those things. Also, on a more childish and superficial level, I remembered going to amusement parks in the US when I had been a toddler. You know, like Disney World had this like faint mythical memory for me from when I was 4 or something. And so I wanted those things contrasting the land of plenty and the land of, I would say, of principle that the US represented for me versus life in Iran, which was under sanctions. There was shortages of all sorts of things and we were being bombed. There was no question I wanted to be an American. And in fact, my dad was resisting leaving Iran because he was a professor and he had started a new university that was on track to become one of the great universities of the Middle East and of the world. And he had some patriotism around that and he didn't want to leave. And his professor friends eventually said to him, your children are Americans and they don't belong here. And so, yeah, so for me, I was quite eager to assimilate, quite eager to become American. When I got to middle school in the US, I almost instantly found my identity as a total nerd. And it found me. My brother and I were— if we had any chance of being popular, it was because we had lots of cousins in the same school who were great athletes and who were already better adjusted than we were. And they'd been there since 1979, so they had kind of established themselves. But we quickly ruined those chances. We came to school on the first day wearing 3-piece suits, literally, like button, you know, the vests and everything. And we had some habits ingrained from Iranian school that there was like physical instincts. So like every time the teacher asked any question, we would always raise our hand and wave and like compete, you know, please, please call me, because that's what all kids do in a classroom in Iran. And then if we got called on, we would stand up and proudly announce the answer. And it was just these weird behaviors that all the other kids looked at like, what are you doing? And in fact, I remember one of the other children didn't stand up and I was telling him, you have to stand up, stand up, you know? Uh, yeah. So it was difficult digging ourselves out of this, uh, initial arrival in the US.

How did you first get interested in technology?

Well, this is, I would say, one of the true privileges of my life. My dad, as I mentioned, was a physics professor. And in 1980, actually, I think when I was 8, he introduced my brother and me to a programmable calculator. And this was, you know, quite primitive and difficult, but then he read about the PC and, you know, the Apple II and the various sort of clones of it that came out in 1980. And he did a lot of research. He figured out the Commodore 64 was like the most features for the least money. It was like the most affordable or cost-effective option. And he made a trip to Italy for a conference and he came back with this very primitive computer. Commodore 64 has only 64K, the entire computer. Like, you know, today it's hard to fathom, you know, the 1 million times less powerful than the phone in your pocket. But what was, I would say, magical about the computers of that era, well, both magical and perhaps intimidating was they didn't do anything unless you wrote a program. I mean, literally you turned it on and you had to write code for it to do anything.

There's just a prompt blinking at you when you turned it on?

Exactly, exactly. Also, my dad, I don't know whether on purpose or oversight, didn't buy any software to come with it. So literally it was like, we have the computer, now we can make programs for it to do things. The context here was that life during the Iran-Iraq War was scary, and as a child I had all sorts of fears, some of which were, you know, probably childish fantasies. Like, I was always worried that my parents would be taken away. Why? I don't know why, you know, but the government wasn't friendly to its citizens. I was always worried about being sent to war, even as a child, because there were rumors that 12-year-olds had been sent into battle or something. I lived in fear, and the environment is— it was the uncertainty and unpredictability of life that was particularly scary, of you don't know what's going to happen next. So you could invent really weird ideas in your head as a little child. Compared to that, the computer was such a haven where whatever you said would happen, and if something went wrong, it's due to something you did wrong. You know, you could always say, oh, it's not working, there's an explanation, I can fix it. I'll make it work. And for a child, that is incredibly comforting, and it's also an incredibly good way to learn by progressively making things right. So that was my intro to technology. I stayed in love with coding all the way through middle school when I got to the US, and I majored in CS at Harvard, where I went to for college.

When you came over to the States, you had mentioned you were from a wealthy family. Did your family lose all their assets besides your stunning 3-piece suit that you got to wear to school? And what did that do to your mentality, if so?

Yeah, it's a good question. So I would say pretty much, to be honest, I was 10, so I don't really know the financial details, but in terms of the scale, pre-revolution, my family owned private beaches, vast tracts of land. It was probably one of the top 10 or 20 most wealthy families in the country. it was a name that was sort of famous in the country. And post-revolution, we had a 2-bedroom or 3-bedroom apartment. We went from like a whole compound of many mansions that myself and different uncles and aunts all lived on a large area that spanned city blocks to, you know, just living in an apartment. And then to get into the United States in 1984, we needed to prove that we had no intention of staying, that we had no means of staying, and that we had left everything behind. And so we actually had to, in order to be allowed in as tourists, we need to prove we're only coming for a short visit. And look, all of our belongings are still back in Iran. So the only things that we had, unbeknownst to me, I think my mom had sewn some like jewelry into the hems of our clothes so that we could— exit Iran with it or something like that. But other than that, we were, you know, largely came with just like some, some suitcases. Our grandparents had emigrated several years earlier, where my grandmother, grandfather, and my great-grandmother were all living in a 3-bedroom condo. So the 3rd bedroom became for my mom, dad, brother, and me.

According to the U.S. Census, there were 123,000 Americans of Iranian ancestry in 1980. But in the next 10 years, that number increased by 74% due to a new wave of Iranian migration. The Islamic Revolution and Iran's war with Iraq transformed the country's class structure politically, socially, and economically. Many of the best-educated and most wealthy families departed in exile to the United States and other countries. This created a large pool of highly educated and skilled Iranian professionals here in America. Years later, Iranian immigrants have become a major force in Silicon Valley as investors, executives, and creators. Iranians have been founders or senior executives at eBay, Oracle, Google, Dropbox, YouTube, Expedia, Twitter, and other major corporations. In fact, Ali's cousin Dara Khosrowshahi is the CEO of Uber. According to MIT, Iranians have the highest percentage of master's degrees than any other ethnic group in the United States. They've also played a large role in the American educational system, with over 500 Iranian-American professors teaching at top-ranked U.S. universities, which include MIT, Harvard, Yale, Princeton, Berkeley, UCLA, Stanford, and Rhodes College in Memphis, Tennessee. Did those changes in circumstances affect you? Do you remember them making you concerned or anxious or resolving to— I don't want to put words in your mouth. I mean, did it make you want to—

You asked this and I didn't give you the answer for how it affected me. You know, these things are always like easier to see looking backwards, you know. My experience in the time, probably had some anxiety, probably more feeling a bit ashamed, like we're the family that can't do X or Y or can't afford this or that. Especially, there was a very real dichotomy. My parents had very little money. My mom worked 2 jobs. She had had a degree in computer science, but she hadn't kept herself current. So her jobs were, she was a secretary by day and a department store saleslady by night. They did have income and they spent all of it to send us to a very good private school. So we went to one of the most expensive private schools in the New York area. So I had this real dichotomy of, I don't have a very luxurious life, but I'm surrounded by these kids who do. And so I'd say I was a little bit ashamed of anyone finding out how much less I had. And as I grew older, my friends, when they turned 16, would get Audis or things like that, and we would not. But I would say on the whole, my response to it, I think was pretty healthy, which was a feeling of— I think I had some pride that my grandparents' generation had built wealth. They weren't born into wealth either. They had formed companies, they had created industry and had built up this prior wealth that was then lost. So I think that inherently made me feel like, A, if they could do it, I can too, and almost a feeling of obligation that It's on me and my generation to rebuild. I knew my parents were sacrificing for me and I wanted to someday take care of them. And I just viewed money as it's our collective experience, myself, my brother, my mom and dad, and that however much they were spending on our education, it was part of, you know, I felt an obligation to make that worth something for our family. There are other people who went through the same experiences who I don't think had as positive a reaction. It's also very common for people who go through loss to stay clinging to the past and unable to move on. And I'm pretty grateful that I definitely kept looking into the future and moved on.

And that you did. So you went to Harvard, you got a computer science degree, and you came out right at the early stages of the internet revolution, if you will, or the early days of the dot-com era. And pretty early on, you had some success.

Yeah. I mean, in many ways, there are certain generations that really had good timing, and I was definitely that class of 1994 graduates. It was a magical time because the web browser had just been invented. A lot of innovation happened then. My immediate track wasn't actually that great looking back. I have a twin brother who had all the same story I just described. We both graduated from Harvard with the same degree, with top honors. And then what happened next was like a controlled study. He chose to go to Microsoft and had a software engineering job. I went to Oracle for a different— like, it was like a forward-deployed semi-consulting engineering job. So I wasn't in like a core part of Oracle. And within 2 years, he was at the epicenter of the tech industry. He was head of product for the Internet Explorer browser, which at the time was the main kind of topic of, you know, the main battle of the browser wars between Netscape and Microsoft.

Did he ever have to testify in front of Congress for that?

I don't know. He might've. He was definitely, you know, a few years further on, like by the late '90s, he was definitely supporting

For the listeners who don't get it, there is an anti-competitive suit against Microsoft for Internet Explorer, which they were using to take on Netscape at the time.

Yeah. Anyway, but besides this feeling of him being important was he made several million dollars in Microsoft stock because his job offer out of college offered stock options. Mine did not. And so mine had a higher salary. So Age 21, we're kind of equal. Age 23, he's made millions of dollars and I've maybe saved up tens of thousands of dollars from my—

How did it make you feel?

I'd say more important was that people would contact me as a way to get in touch with my twin brother. And I'd be like, oh, you know, like, dear Ali, we're trying to reach out to you because we'd like to get in touch with your twin brother who's head of Internet Explorer product. It just made me realize I guess in terms of how I feel, I mean, I guess I felt ashamed. I felt less important or less relevant, but I also felt I can do this. I mean, I think one of the— for me, having a twin brother has always— I think it's for him as well— has always served as, I know this is possible for me because he just did it. And if he can do it, I can do it. And I think a lot of humanity's advances have to do with seeing a role model do something that you feel like, I could do that too. So I had like a built-in role model where anytime he was ahead of me, I knew I could do the same. And then if I got ahead of him, he knew he could do the same. Having said that, it wasn't easy to just— I couldn't just say, let me also be head of product for— You don't just because you feel you can, it doesn't mean you can just flip a switch and change where you've ended up. I had made decisions that had consequences and I made a series of somewhat traumatic career changes. I left Oracle and joined what I thought was a cool startup. And then 2 months later, I Realized this startup was going bankrupt and I wasn't actually feeling good about this choice at all. So I was near rock bottom. All along, my true intent had been to start a company. So I had actually been planning that this oracle or whatever is just a holding pattern until I find the idea and start a company and convince some of my Harvard friends to join me. And I was close to doing that with my own idea with this friend, James Quartzman, I mean, I was probably within a week or two of starting my own company when Hadi called me and said, hey, Ali, there's an idea that's even better than your idea. Some of our Harvard friends, Tony Hsieh and Sanjay Madan, are running a startup. They're a few months into it and it's taking off. And they called me asking if I could join them. And I think it'd be a better fit for you. That was a huge favor he did for me. I remember this very clearly. I was in Boston at the time for something, and I was flying back on a Sunday night. The plane landed at 10:00 PM. I reached out to Tony and he came and picked me up from SFO to take him back to the condo where he and Sanjay had their startup. It was like, I remember walking in, it was like a typical San Mateo condo, but filled with servers and blinking lights and overheated because the servers were literally in the condo. It was a lot like an episode of Silicon Valley. There were a bunch of different people there working for them in different roles. We talked until 2 or 3 AM. It's pretty funny because I remember I was taking almost immediately the role of the business guy because I was one year older and I had a little more business experience and they were a bit techier. And I told them with great confidence and vision that this could someday be worth $10 million. Anyway, I literally the next day quit my job. I went in the next morning to my job and said, sorry guys, this is not 2 weeks' notice. This is zero days notice, I'm out of here. I found the new adventure of my life. I know what I'm doing next and it's not this. And so I literally immediately joined them. And it was partly because there was some degree of urgency. Their service was growing so rapidly. It was exponentially growing and they could plot on a graph. They could see that they had 14 days before all their systems imploded because it was not a scalable architecture. So they needed to rewrite everything in like 13 days before this D-Day. And so that was partly why they needed me to join. Like, we need a third good programmer to help rewrite everything.

So Tony Hsieh, for people who are listening, is the late founder of Zappos. So you are early with some of the biggest pioneers in the internet, and you've got great stories I want to make sure we get to. The first story is what happened when LinkExchange starts growing very rapidly. It's a way for burgeoning websites to swap advertising units, banners with other websites, and it's a lucrative business and it draws the attention of Yahoo. And you're negotiating with Jerry Yang and the leaders of Yahoo. How did you manage to screw this conversation up, Ali?

There are so many different ways I've learned to screw things up, and I've tweeted about only a few of them. Many more ways to screw up things. But for context, really, and Paul, even I have trouble remembering this, that Yahoo at the time was the center of the tech universe.

Oh yeah. This is what, '97? Something like '96?

Exactly, exactly. And the browser wars were like the battle between Microsoft and Netscape, but I would say by '97 it felt like, you know what, I'm not sure if that's as relevant as the coming search and portal. It wasn't even a war. There was really no competition. Yahoo was more dominant than Google is today, albeit of a much smaller, you know, smaller population on the internet at the time, but All roads led to Yahoo, and our dream was to be acquired by them. And so in fact, 6 months after I had joined LinkExchange, Yahoo had made us an offer to buy us for $25 million, and we declined. So we had a relationship, we had realized we had something great, we had turned that down. One year later, they came to us with an offer for $125 million. At the same time, we were at this point getting large enough to start looking for companies to acquire, Our plan B was to expand and merge with some others and build our own larger center of power. There was a company called ViaWeb across the continent. They were in Boston and we were in San Francisco, but from across the US, I could tell they seemed to be brilliant. Their website was like a work of art. The founder, Paul Graham, had been a Harvard— actually, one of the other employees had been my section leader at Harvard. So I knew that guy was brilliant. I went out and visited them. And I was, as a 25-year-old at the time, I had decided the super skill I wanted to hone was the ability to identify genius. And I felt like I have found it. These people are truly genius. We were trying to acquire them and we even reached not quite a handshake, but an understanding of what would the terms be of LinkExchange would acquire ViaWeb. And we were going to go forward with that when we received an offer from Yahoo. And so we signed an exclusive offer with Yahoo and we had to start ghosting Paul Graham and ViaWeb. And Yahoo was offering $125 million for us and several weeks of due diligence go by, everything's going well. I was meeting Jerry Yang, the founder of Yahoo, for drinks. And mistake number one, don't have alcohol when you're meeting somebody very important, especially I don't have much alcohol tolerance. So I think probably I had one drink and that was enough to make me lose a little bit of my filter. And I was excited. I was passionate about Yahoo and what we could do together, but I was also passionate about ViaWeb. And I said to him, Jerry, as soon as our acquisition deal together is closed, I know what the next thing we have to do together is. We have to go buy ViaWeb.

Oh God. He

said, ViaWeb, the Boston company, we've looked at them. Our guys weren't that impressed with their people. And I said, oh my gosh, Jerry, you're totally wrong. I can't even tell you how amazing their people are. They're geniuses. They're probably better than our people. Whoever made that decision, tell them to revisit it. ViaWeb is incredible. I don't remember exactly what else I said, but I remember clearly being— feeling like, how could you possibly not see the genius emanating from these people. A few days later, we got an email from Yahoo saying they're no longer acquiring us. And the— I'm not sure it was just because of this conversation, to be honest. They cited an accounting issue related to how taxes would be calculated on the acquisition. Anyway, my heart sank. I didn't know what was happening. Did I mess it up? What's happening? What's going on? But of course, back to plan B, you know, respond to one of the many emails from Paul Graham that, you know, I'd not been responding to. Hey, Paul, you know, Everything's still on track. Sorry, I've been busy, but let's go forward with our deal. And then he's ghosting me. I'm like, Paul, are you still there? We're super excited. And I'll fly back out if necessary to chat. And no response. And then I see in the papers that Yahoo has acquired with ViaWeb. And Paul Graham obviously is a genius and is a legend.

The founder of Y Combinator, right?

Yes. And the one part of this I'm proud of is that I was, as a 25-year-old, truly cared about developing this skill of recognizing genius. And I would say the part of the story I'm proud of is that I deeply recognized genius in those folks, especially in Paul. I'm also proud that I was honest, to be honest, but I wish I had been more patient. I could have waited a week and then shared my passion after our deal was closed.

So your gut must've just jumped into your throat. You wanted to vomit Cry, all these different emotions, but things didn't turn out terribly for you at LinkExchange.

We were a legitimate company and were doing well otherwise. And Yahoo wasn't the only acquirer in the world. And fast forward 6 months later, we had the option of going public as well as acquisition offers from Netscape and Microsoft, and ultimately sold the company to Microsoft for more than double what Yahoo had offered us. So financially, we did great, you know, but business is not just about money and it's about serving others and it's about building something great. And the ideas we could have built if we and Yahoo and ViaWeb had been united, we had visions that had a lot of similarities to what Google is today of integrating advertising with search. And those are ideas that I deeply felt were going to be huge and didn't get a chance to build them the way that I hoped

to. Did this deal make you a millionaire?

It did. Although I would say what was more important, Paul, I think that I would've been a millionaire had I taken the much earlier offer from Yahoo, 6 months after joining LinkExchange. What I realized is for me, money is about a way of keeping score and keeping score for how much you've served others, how much impact you've had, how much you have made the world a better place. So for me, what was more exciting than money was how much impact we were having. But the other thing, as far as money, was this deal made dozens of our early employees and friends and both of my roommates also millionaires because we had been very generous with our equity. And so the greatest pride I had from that deal and one of the happiest moments of my life was looking around the room and seeing how many of the people who had been through this with us of the ups and downs of a startup had earned more money than they could have anywhere else.

I only ask that because you express in your article on LinkedIn, I believe, about this conversations with Jerry Yang, that at the time, You felt like a financially insecure immigrant. Did making those millions of dollars change that mindset?

Yes. I shouldn't suggest that I had no financial stress. I would say I felt impact was more important than money, and money was a way of measuring impact. But at the time, I drove a 12-year-old car that had broken windows, like literally broken windows, open air.

I had one of those.

Yeah. I basically I had zero salary, so I was just living off the few tens of thousands of dollars of savings from my job 2 years earlier. Yeah. So I definitely had very, very little money and getting to a place where I could buy my parents a house and things that I had always dreamed of was definitely important for me. And yes, this deal switched from having to say no to all sorts of basic things to suddenly having more money than I had ever wished for.

So Ali, the way we know each other is that I was working for Facebook as a sales representative in Southern California. You had started this company called iLike, which was an app built on top of the Facebook platform. I had to look up what a platform was when they released the platform, so I was glad you were there to help me learn about it. I'll let you explain it, but this experience at iLike led you to some of the most interesting experiences of your career to that point with some of the biggest moguls in the business. Tell me what iLike was.

One of the things that was part of iLike's demise was that we started out with a simple idea, but we kept having to change and made it more complicated. So it's hard to say in one sentence what it was by the end. But the concept was a social network for music, a way to discover music through friends. And we started out as our own website where people could make friends and compare music tastes. But as soon as Facebook opened their platform, Facebook basically beckoned that, hey, anyone who wants to do social type of features can do it within Facebook, where you can build your own business, but why reinvent the wheel? People already have their friend connections on Facebook. We'll open that up so you can build your business on top of the Facebook social graph. And we looked at all the features and looked at it and said, we could literally do all the same things that we do on our own websites as an experience within Facebook, and we would have our own users but communicate to them through Facebook's platform, you know, and Facebook would enable us to send them notifications and insert stories into the newsfeed. And the core thing of what we did was music discovery, and it wasn't music consumption. And the reason I'm explaining this is relevant to some of this stuff is we were not allowing people to just play unlimited music. We were letting them listen to 30-second clips. If they like that, click on that and go to iTunes and buy it. We viewed it as in the same way that affiliate programs make money by sending sales to Amazon or whatever. We made money by getting people to buy music or by getting people to buy concert tickets, but we did it in a social way. So our company name was iLike, and we had invented this button called the iLike button. So if you like a new song by Taylor Swift, you click iLike Taylor Swift, that would issue a newsfeed story into the Facebook newsfeed telling your friends Paul has— I liked Taylor Swift.

Of course. It was before Facebook even had the like button, right?

It was before Facebook had the like button. And along with that news story would be a little play button to play a 30-second clip of Taylor Swift. And this was before Facebook's newsfeed had any media in it. It didn't have video, or it was just photos and text. So having a playable audio clip inside your Facebook newsfeed for Facebook users, it was like, whoa, this is like a feature that we haven't seen before. And iLike was benefiting from the Facebook platform, but I would also say it was making the Facebook platform much richer as well.

So your company grows very quickly. Facebook gets behind iLike for the first part of the history anyway, and you attract the attention of Apple. And one of the most interesting stories I've ever heard about a pitch happened with you and Steve Jobs?

Yeah. So by the time we got to Apple, we were being fucked by both the record labels and in some ways by Facebook. Facebook was taking away features that we depended on, not necessarily on purpose. I think they were doing that to fight spammers and try to kind of get control over this platform that had descended into chaos that they had created. And the record labels were trying to take away our rights to the 30-second clips and trying to essentially extort us We were in real trouble. Paul, what was most difficult for me about this period was that I was running a company that had raised millions of dollars and that in the press looked like it was really cool. Celebrities were working with us. You know, we were getting tons of attention. And secretly, I knew we were in deep, deep trouble. And also, again, I don't think with intent to harm us, but Facebook was copying little bits of what we had done. In ways that were probably better than our version because ours was limited to music and Facebook was building a way to do the same thing for all media, not just for music. So we— I would say even before meeting Steve Jobs, my modus operandi as a CEO was to try to pretend things are great when they're not. And no one told me, but looking back, this was deeply erosive to just how I felt in that context. We're meeting with Steve Jobs and this was like a Hail Mary Cross your fingers. If they acquire us, we are saved from terrible doom. So my co-founders, my twin brother Nat Brown and I, are meeting Steve after a year of courtship. And Eddy Cue, Steve's right-hand man, had built some trust with me and he liked us and he championed us and convinced Steve to meet us. We go in and the meeting had some hiccups at first, but overall went really well. Mostly because I let Hadi and Nat do most of the talking. And—

You hadn't been drinking, had you, at this point, Ali?

No alcohol, no. But Steve is a product guy. Steve loves just product. He loves to see how something will be useful and usable and delight customers. And Hadi, I would say, is a truly— I mean, one of the great product guys of the tech industry. And basically, I'd say the best part of this meeting was Hadi and Nat showing off what we had built and how people are using it and where it can grow. Steve would ask some tough questions and try to poke holes, and we would argue back. Steve said something like, all right, I like you guys. He said, you argue well, which was an interesting point. He said, I think you could do really well here at Apple. We want to acquire you. I'm going to let Eddy here work out the details. I have to run to another meeting. He was literally standing up to leave. I think he actually stood up. And I said, Steve, wait, before you go— here's me thinking, oh, I'm the CEO. My job supposedly is to increase the value of the company via my superior negotiation skills. That's what a CEO supposedly does. So I said, Steve— in hindsight, what an idiot I was. Steve, before you go, how much were you thinking? What range were you thinking of acquiring us for? So he said, Let me ask you, what was the valuation of your last financing round? And I said, well, that was 2 years ago before we launched, we raised at a $50 million valuation. We now have 50 million users and all these things, so I don't know how relevant that is. So he says, okay, we would acquire you for $50 million. And my heart sank, like, are you kidding me? That's what we were worth before we launched, and we've done all these things. It basically means We've created no value in 2 years. I had had a conversation a week earlier with another company where I told them, hey, we would consider letting you invest in us at a $150 million valuation. And they had said, huh, we might consider that. It was definitely not a commitment. It was more like I was trying to convince them to consider it. So I'd had a conversation like that and that made me think, okay, I should convince Steve that we're worth $150 million. He offered us $50 million and I said, Steve, $50 million? I think we're worth 3 times that. And then the big mistake, I changed my tone. I said, actually, Steve, I know we're worth 3 times that. And I said it with a body language and a tone of— I mean, I was trying to make him think we have another offer. And I think there was also probably some element of trying to outpower him, so to speak.

Trying to outpower Steve Jobs. That's

Exactly. Stupid, stupid. And I would say honestly, Paul, one of the big lessons for me from this and from a lot of my experiences is humility. But he lasered in on me. It was like, I mean, I barely— it was like, I barely remember what happened, but he just pounced and said, did you just say you know you're worth 3 times that? Are you implying you have another offer? Bullshit. You're lying to me. You're a liar. And I don't remember the exact words, but he directly isolated the dishonesty. And I honestly, I'm sort of a blank as to what exactly happened next, but he left the room. And then for the next few weeks, we did sort of go through the motions of negotiating. Eddie still wanted to do the deal. And my co-founders and I driving away from that meeting, they were both like, Ali, what the fuck did you do? And we all knew that I had messed up. And the deal basically started going off the rails from that moment. The deal fell through and we ultimately sold the company for less than half what he had offered.

Let's put Ali's meeting with Steve Jobs into perspective. Ali is the CEO of a company that he knows is leaking oil. He's got no solid long-term potential for revenue, let alone profits. And the platform on which he's building the business, mostly Facebook, is starting to turn off features that would allow him to grow and monetize. At the same time, he's negotiating with Apple, a company that had annual revenues in 2007 of $25 billion and was growing by 50% from '07 to '08 to like $37.5 billion. Suffice to say, this is a Goliath relative to Ali's David. Not only that, but this is a company that knows how to innovate like few other companies. In the 7 years before Ali's meeting, Apple had introduced the iPod in 2001, the iPhone in 2007. They had revolutionized retailing by launching the Apple Stores, which had reached a billion in annual sales by 2004, then a billion in quarterly sales by 2006. Just a year or two prior, Jobs had led the sale of Pixar Animation Studios to Disney, making him Disney's largest individual shareholder. So Ali was negotiating with a guy who personally owned 7% of Disney. Also putting a personal spin on it, let's remember it's 2008. It was only a few months later in January of 2009 that Jobs wrote a memo to his colleagues at Apple saying that he had learned his health-related issues were more complex than he originally thought and announced a 6-month leave of absence. Until the end of June 2009. He eventually did come back for a short period of time. Current CEO Tim Cook had taken over as acting CEO in his absence, but he left a short time later and died in October of 2011. So what do you take away from that?

I tweeted about it and there's been a lot of people saying, oh, you weren't really lying, or he was the mean one and, you know, Steve was abusive or whatever. And I mean, I think each person has their own demons and each person has their own flaws. My focus is on what I did wrong and what I could do better. So I'm not going to condemn him or idolize him about it. He was someone I very much looked up to. I did not take away any aspect of thinking he did not fall, in my opinion, I guess. What I took away was, you know what, I really was lying. And in fact, if I was lying here, I probably was kind of lying in other places without necessarily subtly trying to make everyone think our company's doing well when it was totally not. And I think every CEO should do that, but there's points when you can cross the line. There is a fine line. And for me, that fine line was the difference between saying, I think we're worth 3 times, versus, I know we're worth 3 times more, and the tone and body language. What I also realized was, you know what? People can tell when you're being dishonest. They just usually won't say anything to your face. They'll just walk away thinking, I don't trust that guy, without telling the person. And I would say he did me a favor. I mean, maybe his flaw is being too vicious or whatever, but either way, he said what no one else had said to me, which is, you're lying. And it made me think, oh my gosh, I don't really like this status. I don't like this behavior, and he's right about it. And I would say I took it as a favor and wanted to change that about myself.

It's hard to believe, but we're 50, 52 now, something like that, Ali. And you're sort of a silverback in the Silicon Valley world. And—

Yeah, I'm 49. I would say— All right.

You're close enough. You're close enough to 50, bro.

It counts as a fossil in the tech industry. Yeah.

But you've seen a lot. You've spent decades there. You've invested in Airbnb, Facebook, Dropbox, Pinterest, Uber, Zappos. I mean, you've been around. Mentorship is really a part of what you're all about in your new company, Neo. Tell us more about that.

I'd say one key theme from these stories for me is humility. And NEO is a mentorship community. Our business model is investing, but I would say the main thing we do is mentorship. And there's a big difference in, I think, the posture of many VCs, including when I was a younger investor, my posture was one of hubris of, I just sold my first startup, I'm the smartest person in the world. And if somebody else was starting a company, trying to poke holes in their idea. Is this a good idea? There's an implicit assumption that I'm the smartest person in the room. If this person has a startup, let me decide if it's worth investing in. That was kind of how I approached investing when I was younger. And I missed some really good deals because of that. One of the smartest people in our startup, Max Levchin, left to start PayPal. And I knew Max was a genius. I had zero doubts about that, but I thought the original idea for PayPal was Kind of stupid. And one of the smartest friends of mine from college was the first employee and CTO of Google. And he emailed us all when he's joining Google. And I knew Craig was a genius, no doubts about that, but I thought this new search engine has no chance of taking down Yahoo. And I would say I had this hubris that is pretty common of most young VCs or frankly of most VCs. Today, I approach it very differently. I want to figure out if you're the smarter person in the room. Rather than poking holes in the idea, I'm here to figure out, is this person the next Bill Gates or the next Mark Zuckerberg or the next Patrick Collison or the next Drew Houston? And if they are, I am just so lucky to be able to support them and watch them go from being younger than me and smaller than me to being much greater than me. And I've had the great privilege of having been an early Facebook investor and seeing Mark, and later Dropbox, Drew. And having seen that several times, I would say it's something that brings really great pleasure to me. And so I'd say that's the starting point of wanting to surround myself with people smarter than myself and help them accomplish their potential. So what we actually do is we search North America for the top, what we think are the most promising CS students, specifically software engineers. And, you know, the people who could be, like I said, the future Mark or Mary Zuckerbergs, I suppose. And we help them choose the more adventurous path, either by introducing them to startups where they might intern, or startups where they might join after college, or funding them if they start their own company. And the flip side of that is we help startups with hiring and diversity. We have a tremendous amount of effort to cast a wider net to reach communities of color or just underrepresented minorities in tech, female engineers or Black and Latino engineers, and rigorously evaluate them. It's meant to find truly the most promising people, but do them in a way that is even-handed and is meeting the person where they are. And perhaps most importantly is trying to predict that person's potential, not just what skills do they have today. We're trying to find people not based on What can this person do right now if we hired them, but rather who will this person be in 5 years? And that's more based on their trajectory and the slope rather than the current position they're at. In many ways, Neo is what I wish existed when I was a college student, and it's also what I wish existed when I was a founder. It's what every company that I've invested in kind of needs help with recruiting and diversity, and so that's what I do today.

That's amazing. Well, man, you've had a great career, wonderful trajectory, some amazing stories. We didn't get to all of them, but I truly appreciate you sharing your experiences with us. Where can our listeners find out more about you and the work that you do?

neo.com.

All right. Ali Partovi, thank you so much for joining us today. It's been a pleasure to catch back up with you.

Thank you so much, Paul. Take care.

Thank you, Ali. Really enjoyed catching up with you and learning a whole lot about you that I didn't know before I started my research for this conversation and even after that. So what a joy to catch up. Let's jump to takeaways, ladies and gentlemen. You can't talk about Ali's journey without talking about immigration. And I don't want to dwell on it, nor do I want to make it political. But since we talked about it in the introduction and a little bit in the conversation, I'll just say this. I believe the United States can accommodate as many hardworking, brilliant people as the world can provide for us. And, you know, the statistics I read about the success of Iranian Americans in the introduction is testament to how valuable the human capital that comes over our borders toward us is. A little statistic you may have heard before: of all the unicorn companies, that is the startup companies worth over $1 billion, 51% of those companies right now were founded by people born outside the United States. Think about the amount of tax revenue, the number of jobs that provides, and what a robust Shot in the arm that is for our economy. I'll leave it at that. Secondly, you're going to make mistakes in your career and you can recover. Now, this is especially, I think, relevant for younger listeners of the podcast. So you're going to say something stupid in a meeting. You're going to have phone calls that you regret. You're going to articulate something very poorly. And what comes out of your mouth is not what you were trying to formulate in your brain. And I think in today's working environment, it's especially important to understand that some people want to misinterpret what you're going to say. You might not get the benefit of the doubt. However, you can recover. Your career is more than one meeting. Your career is more than one missed transaction. Ali has been extraordinarily successful, even though this fumble with Steve Jobs cost him like $25 million in the valuation of his company. Who knows how much of that would've gone into his pocket. But I think if you listen to his voice and as he recounts it, he's not even talking about the money. He's talking about the embarrassment. He's talking about the fact that he didn't do his part and support his co-founders and his employees in that meeting the way he wanted to. So, if you can recover, know that your career is long. And that's the third takeaway right here. Careers are long. Older folks, you know this already, but for the younger listeners, The people you work with right now, your clients, your customers, your coworkers, your vendors, they will be around in 10 or 20 years. You will see them again, and they will remember the experience they had working with you, whether it was a good one or a negative one. So your brand is something that you build every day, and if you make a mistake, you can get up, dust yourself off, ask for forgiveness, and move forward. Speaking of that, if Ali and I had had a terrible experience working together all those years ago, he probably wouldn't have done my podcast. So. If you want to have a podcast in 8 or 9 years, be nice to the people around you. We got some great guests coming up in the next few weeks. Warwick Fairfax will tell the story of how he, as a 26-year-old CEO, lost control of his family's media empire in Australia that had been in his family for like 150 years. Again, another story of not exactly professional success. I also speak with Ken Honda, who is one of the bestselling money authors in Japan. He sold over 8 million books. And he's a wonderful human being. So, lots of good stuff coming for Krazy Money toward the end of the year. We're on the home stretch, ladies and gentlemen. Thanks for sticking around. Be sure to rate and review Krazy Money wherever you listen to this podcast. I appreciate it. And in the meantime, Mike Carano, make me sound smart.