Jim Goetz and Jan Koum at Startup School SV 2014

So this is really cool. This is the first time we have had a founder and a board member up here together. And I think it'll be a really interesting talk for that. It's also the first time these two guys have ever spoken together and potentially last, hopefully not. So there is a lot to talk about here. This is one of the most exciting startups of the last many years. But before we jump into what happened with WhatsApp, I want to talk a little bit about Jan's background. So maybe you could talk about sort of growing up in Ukraine and how that influenced your thoughts about coming to Silicon Valley and startups and WhatsApp.

Sure. So thanks for having.

Thank you for coming here.

It's exciting to see so many people here. Yeah, I grew up in Ukraine and I came to United States in 1992. I was 16 at a time and I left my dad stayed in Ukraine and I've left a lot of friends and people I went to school with. And so part of, part of what I experienced was it was really hard to kind of keep in touch with people back then. Think back to 1992. There was no Internet, there's no emails, there's no Skypes, There is nothing. You just have a phone. You don't even have a cell phone for the most part. You just have this landline and to call somebody and sign up with MCI or AT&T. And it was just all this kind of weird international dialing stuff you had to do. And I think part of it is, part of that influenced me. And then I think also growing up in a country where education was really valuable and there was a lot of kind of focus on just learning and studying influenced me. Like I came here and I was able to quickly start learning about computers and pick up computer science. And also growing up in a country which didn't have a whole lot of kind of advertising, it was very, kind of clean, very basic life.

And then you actually, we have a slide of this. I think this works. All right, we got Jan's resume.

Wow.

Okay, so you have a somewhat non traditional path to starting a company, or at least in the current world. I think this is probably how it happened for a long time. You spent it looks like nine years at yon.

Yeah, nine years.

And you also dropped out of college to join Yahoo.

You have that in common, Sam.

Yeah, well, I didn't get to start WhatsApp, so I was wondering if you could talk about sort of your path from how you decided to drop out of college and go to Yahoo. And then how your experience at Yahoo shaped WhatsApp and how you came together with Brian there.

Sure. Actually, the funny story about me and Brian is that we met even before I joined Yahoo because he technically interviewed me. He was my co founder, was actually one of the people who interviewed me back in 1998. And I think we also met earlier when I worked at this Ernst and Young auditing company. I was doing like computer security audits. And so I was actually recruited into Yahoo by one of the co founders at Yahoo, David Filo, who I worked with for a long time and who was a big role model and a mentor in many ways. Because when I joined Yahoo, it was still a pretty small company. We had like maybe 500 servers or 400 servers. And over nine years we grew to thousands of servers. And so to see that grow and to experience all the technical issues that you have to deal with when it comes to scaling, the company was extremely useful. When we ended up starting WhatsApp because we didn't have to make the same mistake twice. We were able to basically look at what worked at Yahoo and what didn't work at Yahoo. And we're also able to tap into our network. We had a really good network of very skilled, very senior server engineers who joined us at WhatsApp. Some who already left Yahoo at a time, some who were still at Yahoo, that we were able to recruit and convince them to join us. And we were able to have this very small team of engineers supporting obviously a lot of users at WhatsApp because we learned so much about scaling and managing servers. And so that experience and that mentorship from David and Jerry at Yahoo was really, really valuable to us.

How many engineers did you have at the time of the WhatsApp acquisition?

Engineers. Probably 20, 25 ish.

Supporting about 400 million active users. Yeah, that's pretty incredible.

So just a couple quick anecdotes about Jan's resume. He didn't know we were going to present it today. This was in the Sequoia archives. We collect resumes at times and tried to share them with the portfolio. But a lot of you are thinking about starting a company, which is wonderful. But I also think Jan took a different path. He actually joined a great company during their growth years and I think learned a great deal from David Filo. And just the whole experience, in fact, much of the approach to leadership that I think jan embraced at WhatsApp was formed at Yahoo. He watched Yahoo hire hundreds of engineers every month and realized the lack of focus was creating challenges for the company. And then over time, Yahoo, as they look, looked to monetize as a public company, spent a lot of energy on advertising, which created a distraction, if you will, for the consumer. And I think Jan's passion around simplicity and no advertising and also just the approach to focus came from that experience at Yahoo. I want to share one Philo anecdote for those of you that are looking at crucible moments. Jan was at San Jose State in a computer science class and Philo called him and said, where the fuck are you? And Jan said, well, I'm in class. And David said, get your ass in here. And that was a crucible moment that I think set Jan on this wonderful journey. And I think it's great to have kind of Philo in the mix.

Yeah. David claims she doesn't remember that ever happening, but I think that was what probably caused me to drop out. I was like, well, okay, I guess I have a real job to do.

So you were working while you were still a student?

I. I was trying to do both. I was trying to go to school part time and work full time. And that only lasted for about two weeks. And I was like, well, shit, I really love working at Yahoo. And they were using FreeBSD operating system, which was a really passionate and still am really passionate about. And it was like a dream job for me. And the learning experience that I was getting there was just like mind blowing.

Can you tell us about the moment that you decided to start this company?

Well, so the interesting thing is that I don't think I ever decided to start a company. In fact, now that I look back, I was like, well, I never thought that I'll be starting a company. I thought I was just, I would be building a product. And I think a lot of great companies actually start out that way. People just want to build the products. They're not thinking of starting a company because starting a company requires that you have a general consul and biz dev team and hr and you have to look for office space and to make sure your employees are getting paid. It's a lot of kind of complicated. And you've been there, you've done it. It's very not that exciting as compared to building a product. And so we started out just trying to build a messaging app. And you know, now looking back, I must have been so naive to think that I could build an app that millions of people would use. I was just like, oh yeah, it's easy to do, right? It turns out it's not so easy. We had a Lot of challenges on our way, but it basically started out with me buying an iPhone in January of 2009. I took a year off after Yahoo, and I kind of traveled and spent a lot of time just figuring out what to do. And In January of 2009, I bought an iPhone. And this was literally like three or four months after SDK for iOS came out, and people were trying to figure out what they can do with it. And we started just playing around with the phone and SDK and trying to build an app. And our original idea was actually not messaging. Our original idea was a status indicator. I don't know if a lot of people know about this, but because we built all this quality code that could figure out who your contacts are, who your friends are for based on your contact list, we were able to pivot into messaging because we already had that foundation, we had a server piece written, and we had the client code written for iPhone. And so in the summer of 2009, when the status thing wasn't working out so well for us, we're like, well, let's try messaging. We were able to just kind of put the backend piece and drop it in and just go from there.

So I forget exactly when you two met each other and decided to work together, but I know it happened sort of relatively quietly and there weren't a lot of people paying attention. And I'd love to just hear the story of how you guys met and decided to partner together.

Well, to be clear, I don't think Jan was interested in talking to anybody in the investment community, nor anybody in the carrier community, including CEOs or handset manufacturers. Including CEOs. He essentially ignored those emails, and he had phenomenal focus on any customer email. But certainly my initial emails were rebuffed without a reply.

No response at all.

Eventually, clearly, I did respond.

There were enough people at Yahoo that I think we collectively knew together, along with Brian, where we eventually were able to secure a brief interaction at the Red Rock Cafe. For the those of you that are in Mountain View and Jan was in a beanie and his first stare was a bit intimidating, and I didn't get him to smile for maybe five minutes. And I thought, I'm definitely in trouble.

I remember Red Rock. That definitely happened. And I remember they have an amazing copy, by the way. And yeah, I remember our. Our interactions. And we were trying to figure out. Me and Brian has always kind of focused on building a company and building a product that can sustain itself. And we were actually getting revenue at that point already because Our iPhone app was paid and our other platforms were free. We were actually doing BlackBerry and Nokia. I don't think we had Android at that point yet. But we're probably one of the few companies that decided to build for BlackBerry and Nokia. And I think that gamble paid off for us because a lot of those people who were using Nokia five years ago, who were WhatsApp users, are now using Android or iOS and they're still using WhatsApp because of the connections and group chats that they have. But, you know, I think we were able to choose our partnership and our investors because we were able to monetize our iOS app. We were actually having revenue and we were able to pay for electricity and pay for servers and pay salaries to some of our early employees. And so we weren't in this situation where like, well, we need to raise money, otherwise we're going to go out of business tomorrow. So we were able to kind of leverage our situation and take our time and make sure that we carefully partner with the people who we think will support us in building what we were set out.

And do you remember what about Jim and Sequoia made you want to partner with them?

Well, I think.

Nervous laughter from Jim.

I think Sequoia in general is. I mean, first of all, they've been an amazing partner for us. But I think in general, if you look at the history of Sequoia, you know, they've supported companies like Cisco and Apple and Google and Yahoo. And I think growing up in Silicon Valley and I lived here for 22 years, there is this heritage that Sequoia has, that and pedigrees that a lot of other venture funds don't have. And I remember sitting, after we got a few different term sheets, I remember sitting and talking to Brian and I was like, we were trying to figure out what to do. And I was like, brian, look, five years ago, if somebody told us we would have a term sheet from Sequoia and we were starting this company, we would be like, nobody would believe us. We wouldn't believe this ourselves. And now we have this opportunity. We should just do it and go for it. And so we also got some advice. I mean, Jeff Rolson, who was one of our coworkers at Yahoo, I remember me and Brian drove over to Jeff Roslin's house. It was like 11pm it was like the scene from a James Bond movie because nobody knew about us and we didn't want to tell anybody as we were raising, we didn't want to get any attention. And we got to his house at 11pm when everybody was asleep. And Jeff was kind of looking at very sumptuous. And he goes like, sequoia Company is always a Sequoia company. And we were like, okay, well, that makes sense.

And Jim, what about WhatsApp made you so excited at that point?

Well, look, we were looking at the messaging space. So we were. At the time, we had built a system we called Early Bird that was tracking the activity on the app stores. And WhatsApp had become dominant globally, not in the U.S. in fact, they were well down the charts in the US but in maybe 35 of 60 countries we were monitoring at the time. There were one or two. And we had been looking at the messaging space and group messaging. And it concluded that this pay model that they had crafted and just the utility experience, it reminded me and many of my partners of Chrome, just the simplicity. And then for the next few months, it was all about trying to get to Jan and Brian because they didn't have an address that was publicly available. There was no signage on the building. I knew that they were in Mountain View, but we literally walked the streets of Mountain View to see if we could intersect with these guys.

You actually had people just Sequoia partners walking down the street.

It was actually the partners walking around. Yes. But I'll say this about Brian and Jan's being too modest. The level of focus. We all talk about focus, but the level of focus that Jan had at WhatsApp to the product and to the client is absolutely shocking. I've never had an entrepreneur as focused as Yann. And whether it was executives from various companies or CEOs or partners from various firms, Jan ignored the vast majority of that activity, including the PR inbound, and stayed focused on the product. And I think that served the culture incredibly well.

Oh, we just didn't have time. We were such a small team. You know, Brian and me would spend hours answering customer support emails. Right. So, you know, you spend.

How long did that last? How many users did WhatsApp have the last time you answered regularly answered customer support emails?

I still do a little bit today. Obviously I don't spend hours answering customer support emails today, but people who write in to me, somehow as I find my emails, they write in and I try to answer and try to help, and I still run the iPhone beta program to this day. So. But I think at around 150, 200 million, we started hiring, like dedicated customer support folks. And we actually have. We actually have a lot. We focused a lot on our customer support and Localization. Our customer support team is probably one of the most diverse teams that exist because we have to support Italian, French, Turkish, Arabic, Hebrew, all these languages, and they help users and they translate the app at the same time.

So this is actually something I want to dig in on. You know, WhatsApp had this approach that was very different than most startups. You know, like, ignoring Sequoia is not something most startups do. Ignoring the press is not something most startups do. Charging for a consumer product, I remember in like, you know, 2011 or whatever, people would still say, well, WhatsApp is never going to work because they charge a dollar and it's a viral app, and that's just going to kill it right there. So how did this sort of culture of being sort of like anti sort of Silicon Valley standards come about and how important was that to the company?

I think. Well, first of all, me and Brian are engineers, so by definition, we just hate meetings. We just want to sit behind our computer and just do fucking work, right? It's just like, don't make us go to meetings, please. And so. And so when you have to meet press or you have to meet other people, you know, it takes you away from being in front of your computer getting. Getting work done. And when you're running at 80 to 90 hours a week speed and all you do is want to work, you don't have a lot of time to take meetings. The thing about charging is actually very interesting. We used this lever to charge to actually slow our growth. And I know it sounds very counterintuitive because, like, well, why would you want to slow your growth? We wanted to slow our growth so we could better support our existing users, so. So we could build servers that don't crash, so that we could build product that doesn't drop messages, so that we could answer their customer support emails. And, you know, a lot of people were telling us, what you're doing is wrong. You should really be growing as fast as you can. And we're like, no, no, no, no. We want to build the infrastructure first. And it's very similar a little bit to Facebook. In early days, they were doing colleges only, and they weren't open to the entire world. And that's kind of similar to what we did. We wanted to slow our growth so we could really focus on existing users, and we wanted to make sure that we have our existing users happy and that when people sign up, they have a great experience and that the app works and it's fast and the servers are up and running. All the time. And that's part of why we charge for iOS. And sometimes we would have like promotions at the end of the year, we would make it free and we would have like an influent of new influx of new users. But overall we just kind of wanted to stand as a radar, which is why we didn't do press. We felt that.

Why did you want to stay under the radar?

Right. So we felt that if people were talking about us, writing about us in the press, it would be distraction to employees, it would be distraction to me and Brian because we would have to comment on it internally or do something about it. And we just felt that if we don't talk to the press, which we tried not to do for the most part, we would be able to focus on the product. And that was our strategy. And I think that worked for us because we really were able to focus on the product.

So I think there's no marketing inside of WhatsApp. I don't believe there's a finance individual or organization. There are essentially two people who are in non technical roles. One is right here in Niraj and I think we describe his role as business operations. And over time with the regulatory issues, we begrudgingly or Jan begrudgingly hired a wonderful gc. So this is a company that's very rare in terms of its functional structure. And one of our challenges at Sequoia was to avoid encouraging Jan to go hire a marketing team or follow up on that TechCrunch request, because the authentic Yan and Brian was a very different anti Valley company in a number of ways.

Related to this approach other than deciding to charge. Could you talk about, you know, the best or one of the best product decisions you made that sort of is somewhat counterintuitive or was at the time.

Oh man, there are so many. I think the two biggest ones that people couldn't wrap their mind their head around were two. First, we chose not to do usernames. We wanted to use phone number and we had a lot of people asking us to do usernames. And I was like, well, why would you want to introduce this, an extra layer of handshake between two people when you already have their phone number in your address book. And we always looked at SMS as this very simple way for people to communicate and stay in touch. And, you know, by actually growing up in Russia and Ukraine, I would go visit every couple of years and I would like. I remember going back to Ukraine in 2004 and 2005 and like basically everybody was using SMS and then I came back to the United States and I was telling my friends about it and they're like, what is sms? Right? And so we wanted to have that simplicity of just using the phone number. It's like if you know somebody's phone number and it's in your address book, you probably call them, you probably text them. Well, you should also be able to WhatsApp them. And the second one was that we didn't want to use usernames. I think the ability to tap into your address book and use that as a graph to build a network and not use the usernames was probably the biggest one.

Yeah, at the time I remember no one else was using the phone book as the network. Everyone does know. What about the worst product decision?

It's the worst product decision. I don't know. We have a, like, we try with every release to like get rid of a feature that we don't think that useful or get rid of the settings that's not that useful. The problem is like when you have the number of people that we have, you can't just like easily remove stuff because there's always like a million people or 2 million people that find something useful and it's like, well, you don't want to like upset them. Like a small percentage. It's like 0.1% by absolute numbers. It's a lot. And so I think there's probably a couple of things that I think are not that great. We have this broadcast feature that we can probably improve on or maybe at some point get rid of it altogether or maybe improve it probably is a better thing to do. The status thing we have, you know, we started with it. So I can't really like be very negative about it because that's how WhatsApp started. But the status functionality is there, it's legacy, but I don't think anybody uses it. At some point we probably need to clean it up.

And then three people asked me to ask this this morning. Why did you choose Erlang?

Oh, it's one of those intuition things. I knew nothing about Erlang. And when we actually still don't, we have a lot of engineers who do. And we actually have like a really small server team. We probably have like seven or eight people supporting our entire user base on the backend who are insanely brilliant, who wake up in the middle of the night and fix servers. The thing about Erlang is that I was looking for an open source chat server to drop into these backends that we've built that could Identify which of your contacts were WhatsApp users. And I was thinking, like, okay, well, we can probably use xmpp, which was an open protocol for messaging. And I was looking for an open source XMPP server and I couldn't find one. There was one written in C, but it was, like, outdated. There was one written in Perl, and I knew that wouldn't be able to scale. And then, like, I came across Erling. I'm like, what is this Erling thing? It was like the first. The first time I heard of it. So I started researching it, and it turned out probably one of the best engineering decisions we ever made by just. We were forced to because there was nothing else to use. It allowed us to scale really well. It's, like, built for what we need to do. It's a functional programming language. It has message passing. It lets you cluster servers into nodes and you have this key value database built into it called Amnesia. That is really cool. It synchronizes all the data across the servers. And we obviously tweaked it a lot internally. We have a couple of guys who specialize in tuning Erlang, but part of it was just like, we had no choice. It was the only one available at a time, and it worked really well for us.

Okay, so I want to talk about the Facebook acquisition and how that all came to be, but I actually have another slide. All right, this is.

Is that a bird?

That's your car.

This is the night before the final signing. Jan had sent me a picture. We had just left Fenwick and West in Mountain View. And for the prior four days, we were kind of cooped up 18, 20 hours a day because we had no finance function. Jan and we were responsible for all the diligence materials. And we left around 2:30am after things were wrapped up. And Jan, on his way home, didn't have a flat. His tire blew out at 75 miles per hour. He almost died that night. And this is the exchange. Thankfully, Jan was able to pull over and change the tire. But this is one of those little things that happened in the deal dynamics. And when people talk about, did the deal almost blow up? Yes, it did, actually.

So if you could rewind a little from this sort of the, you know, very end of the deal. How did the conversation first begin with you and Mark, and how did you think about that and becoming part of another company?

We met probably two years ago, and as time went on, we got to know each other and we realized that Facebook has kind of gone through a lot of stuff. That we would probably have to go through like either going IPO or something and to also build this tremendous infrastructure and to have a lot of people doing things like finance that we didn't have and to have an amazing legal team and to have a big corp dev and the biz dev team. And when me and Mark would talk, we realized that we share a lot of kind of common goals and common vision. Facebook's mission is to make world more open and more connected. And when you think about what WhatsApp is doing, it's helping people to stay in touch, it's helping people to stay connected. And the other thing that we kind of realized that, you know, we would always talk about is how a lot of companies are very focused on building a product for Silicon Valley and kind of thinking about, well, if I can build a product that will take off in Silicon Valley or maybe I can have users in the United States. Mark always has this vision about, well, there is 6 billion people in the world, which is why he is taking initiative with Internet.org, because he wants to have everybody connected. And we always grew internationally really fast in the early days and we still continue to do that. And so we always kind of had this worldview of our products. And so it made sense as we got to know each other and kind of show shared our visions to merge. And you know, is that slide gone? Yeah. And the night before the announcement, obviously, as Jim said, I had that little accident.

Were there other companies that you would have sold to or was it the particular vision match with Mark that made you want to do this?

I think we just really decided that we wanted to do it together. I think it was a really good fit philosophically and just culture wise as well. I mean, they're so focused on what they're doing and we're always been so focused on our mission that it just makes sense for us to do it together.

How'd the conversation between you two go as you were thinking through that?

Well, I think a lot of people talk about they tend to focus on kind of the numbers, but we were never focused on the numbers. We were more focused on how can we make it work so it's successful, how can we make it work so that we continue to grow? And me and Brian are still obviously around and will be around and we continue to lead WhatsApp and we're in Mountaineer. So we're a little bit separate from the Memo park office because it will allow us to focus on completing a mission which we still don't think is done. I mean, we really do want to connect everybody and everybody with a smartphone. When we started out, people would ask us, what's your goal? In the early days in 2009, 2010, and I would say, well, I want WhatsApp to be on every single smartphone. Back then there was like only 200 million smartphones, so it was easy. But today, if you think about it like, we were not on every single smartphone by far. In fact, I think we should be doing a much better job. I'm sure a lot of you here probably don't use WhatsApp, and that's partially our fault. And we should make sure that no matter how much success we had, that we stay focused and keep our eye on making sure that every Single person has WhatsApp on their phone.

Just to interject, Sam, I think Jan was never focused on the money at a human dimension. The first stop he had here in Mountain View was at the food stamps line in the welfare office and social services. And if you think about being an immigrant and starting in the bottom 1% and having this ambition to connect to your family and friends. And Yann didn't mention this, but he lost his mom and his grandmother while he was at Yahoo. And I think that formed a big part of who he was. And as important as monetary gain can be to the people in the audience, I think Jan's passion really centered with connecting the world and creating it in an economically attractive way that would allow people to kind of interact with one another across country boundaries. And I think I gotta give the Facebook team and Zuck a lot of credit. I think they understood how important that was to Yan, and I think that's reflected in the board seat. And two years of wonderful conversations were over time. I think they came together on the business and I think that's what allowed the two companies to come together.

We've definitely seen at yc, the people that make the most money from startups are the ones where that is not even the number two or number three goal. You kind of have to not be shooting at it for it to really work out. It's this crazy thing. So to wrap up to whatever degree you can talk about it, what's sort of in the future for WhatsApp and what are you most excited besides getting on every phone?

Well, yeah, our job is not very sexy. We come into work and we just try to fix crashes and try to make our protocol faster and more efficient on the wire. And we just focus on little details like how can we make our application start up faster? How can we make our application more reliable? How can we make sure that our icloud backup works or that we doing the right thing? When you switch phones or when you switch SIM cards, there's a lot of kind of edge cases that we need to think about, and we're far from getting it right. And for us to get it right is a lot of hard work, and that's what everybody's focused on. We still have a lot of work to do.

All right, thank you guys so much for coming in.

Thank you. Thank you all.