February 8, 2017 CT-WebDesigners

The rise of Snapchat from a sexting app by Stanford frat bros to a $3 billion IPO

The Rise of Snap Chat

Snapchat’s beginning sounds a lot like Facebook’s from “The Social Network.”
In Snapchat’s case, it wasn’t two ousted cofounders (the Winklevoss twins) against Mark Zuckerberg. But still, it featured the backdrop of an elite university — Stanford versus Harvard — and ended up in litigation, with Snapchat cofounders Evan Spiegel and Bobby Murphy against Reggie Brown.

snapchat

snapchat

At stake was the founding story of a social network to make photos disappear. Snapchat’s founders ended up paying $157.5 million.

Snapchat survived its rocky starts to now be on the verge of a $3 billion IPO. Here’s how Snapchat went from a million-dollar idea about disappearing photos to the giant social media company called Snap today…

 

 

Screen Shot 2017-02-06 at 7.48.04 PMLike many other startups, ground zero for Snapchat’s story is Stanford University, where a young Evan Spiegel from Los Angeles befriended Reginald (Reggie) Brown. The pair decided to join Kappa Sigma fraternity — where they would meet Snapchat cofounder Bobby Murphy — although it would be a few years before they turned the idea of disappearing photos into a business.

Snapchat wasn’t Spiegel’s first startup. Murphy had recruited Spiegel, a Kappa Sig brother Screen Shot 2017-02-06 at 7.50.43 PMone year younger than him, to help with an idea he had about a social network. In 2010, they then launched FutureFreshman, a site meant to make applying to college easier. It never really took off, but Spiegel had caught the entrepreneurial bug.

It wasn’t until Spiegel’s junior year that the idea for Snapchat was born. “I wish these photos I am sending this girl would disappear,” Brown told Spiegel in April 2011. His friend immediately got excited about the concept of disappearing photos and told Brown that this was a million-dollar idea. Five years later, that idea would now be worth billions.

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Screen Shot 2017-02-06 at 7.53.11 PMIn Summer 2011, Snapchat was born — except it wasn’t called Snapchat at first. When it launched in the App Store, it was called Picaboo. Brown, Spiegel, and Murphy spent the summer working on it. Spiegel even drew the now famous Ghostface Chillah ghost icon.

But Picaboo wasn’t a smash hit. By the end of the summer, it only had 127 users. Then Brown, Spiegel, and Murphy had a fight over the startup’s ownership. It ended up in Spiegel hanging up the phone and locking Brown out of all the startup’s accounts. The move would later cost them millions.

The now-duo changed the app’s name to Snapchat in September 2011, its official birthday. It still wasn’t a smash hit, but it started to slowly catch on when Spiegel’s cousin started using it at a high school in Los Angeles. Teens had found a way to send photos and messages that would disappear seconds after opening.

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By spring 2012, the app that once had just over 100 users now had 100,000 daily active users. That also came with a problem: rising server costs. Spiegel and Murphy were paying nearly $5,000 a month to keep the app going, and just as they were about to run out of money, Lightspeed Venture Partners’ Jeremy Liew found Spiegel and gave Snapchat its first check.

Screen Shot 2017-02-06 at 7.55.58 PMRead the full story of how Jeremy Liew discovered Snapchat here. When the money hit his bank account, Spiegel walked out of school. He was just three credits shy of graduation from Stanford. He and his team (which had then expanded to two other developers) moved into Spiegel’s dad’s house in Los Angeles. By the end of 2012, Snapchat had hit a million daily active users.

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That’s when Facebook gave Snapchat a huge gift. In December 2012, it launched its own Screen Shot 2017-02-06 at 7.59.03 PMSnapchat competitor, Poke. At first Spiegel was worried it was going to crush his app, but Snapchat quickly surpassed Poke. Spiegel now calls it the “greatest Christmas present” to Snapchat. The app continued to grow and only attracted more attention from venture capitalists. But that’s when Snapchat’s story turns into a founder drama like “The Social Network.” In February 2013, Reggie Brown — the guy who came up with the idea for disappearing photos — sued Murphy, Spiegel, and Snapchat for cutting him out of the business.

Read the full story of the betrayal here.

Screen Shot 2017-02-06 at 8.01.03 PMStill, the trial didn’t slow Snapchat’s growth down. In Fall 2013, the company unveiled Snapchat Stories — its first step to making things less ephemeral. Snapchat users could upload their snaps to a story that would last 24 hours. It’s the closest Snapchat would come to recreating the Facebook timeline.

Snapchat’s fast rise — and seeming defeat of Facebook Poke — soon gained the attention of Mark Zuckerberg. The Facebook CEO came to Evan Spiegel with an offer: $3 billion for the company. Spiegel famously played hard to catch before turning Facebook down.

Snapchat's fast rise — and seeming defeat of Facebook Poke — soon gained the attention of Mark Zuckerberg. The Facebook CEO came to Evan Spiegel with an offer: $3 billion for the company. Spiegel famously played hard to catch before turning Facebook down.

There was also a rumor that Google tried outbid Facebook and pay $4 billion for the company. Either way, it stayed in Spiegel’s hands.

A month later, Snapchat was hacked. The username and phone numbers of more than 4 million accounts were exposed and people were furious. After all, the app still had a reputation for sexting at this point — and people were afraid what else might leak. At first, the young CEO didn’t see the need to apologize, but the backlash was swift. The company settled a few months later with the FTC over charges that it misled its users.

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Sleazy emails from Spiegel’s Stanford days were then posted by Valleywag, a Silicon Valley news site, in May 2014. The emails shined a negative light on the CEO who was already drawing comparisons to Steve Jobs.

But that didn't slow Snapchat's success. It finally added a chat function, and launched Live Stories, or curated perspectives from thousands of people. By July 2014, investors valued the company at $10 billion. In three years, it had gone from a million-dollar idea to a $10 billion dollar one.But that didn’t slow Snapchat’s success. It finally added a chat function, and launched Live Stories, or curated perspectives from thousands of people. By July 2014, investors valued the company at $10 billion. In three years, it had gone from a million-dollar idea to a $10 billion dollar one.

Geofilters would come shortly after.Snapchat

According to Nick Bell, Snapchat’s Live Stories feature was inspired by a visit from illusionist David Blaine to Snapchat’s headquarters. He watched as all of his friends were recording video of the magic trick, and he wanted to put the different perspectives together to see if he could figure it out. That’s when they realized that you could tell a better story by having the viewpoints of thousands of people on an event instead of just one.

The company started expanding from outside the Venice Beach bungalow where it moved Screen Shot 2017-02-06 at 8.10.03 PMafter leaving Spiegel’s dad’s house and picked up more office space. It also started hiring a bunch of senior leaders to help the then-24-year-old CEO. Its Chief Strategy Officer, Imran Khan, joined in January 2015 from Goldman Sachs. Snap’s CFO, Drew Vollero, joined from Mattel in August 2015. Still, Spiegel was the one clearly in charge — and mapping where it would go next.

Snapchat also started welcoming outside content in. In January 2015, it added the Discover section, which allowed publishers to post Snapchat-friendly news items. The app became not just about sharing photos with friends, but sharing everything from Discover articles to chats to life in the moment.Snapchat also started welcoming outside content in. In January 2015, it added the Discover section, which allowed publishers to post Snapchat-friendly news items. The app became not just about sharing photos with friends, but sharing everything from Discover articles to chats to life in the moment.

Snapchat also found a way to make money — much to the relief of its investors. It started out by adding ads in its geofilters. So if you were in a McDonald’s, you could Snapchat a photo of yourself covered in fries.

Geofilters were just the start though. After Snapchat acquired Looksery, it added those famous lenses (like the barfing rainbows) that helped turn Snapchat into the sensation it is today. By the end of 2015, 100 million people were using it every day

Geofilters were just the start though. After Snapchat acquired Looksery, it added those famous lenses (like the barfing rainbows) that helped turn Snapchat into the sensation it is today. By the end of 2015, 100 million people were using it every day

Maya Kosoff/Business Insider

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