You Only Have to Be Right Once (18 page)

Read You Only Have to Be Right Once Online

Authors: Randall Lane

Two years later, in February 2013, when WhatsApp's user base had swelled to about 220 million active users and its staff to thirty, Acton and Koum agreed it was time to raise some more money. “For insurance,” says Acton, who recalled that his mother, who ran her own freight-forwarding businesses, used to lose sleep over paying the bills. “You never want to be in a position where you can't make payroll.” They decided to hold a second funding round, in secret. Sequoia would invest another $50 million to up its stake to 25 percent, valuing WhatsApp at $1.5 billion. At the time, Acton took a screenshot of WhatsApp's bank balance and sent it to Goetz. It read $8.257 million, still in excess of all the money they'd received years before.

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BACK IN 2012, BEFORE
that $50 million round and all the craziness that would soon follow, Koum had time to mull over his lunch with Zuckerberg. He and Acton had $8 million in the bank and wanted nothing more than their independence, so Facebook's overtures from then on never turned into bids on paper. Zuckerberg and Koum instead became friends, meeting once a month or so for dinner.

For the next year WhatsApp focused on its march past 300 million users. In June 2013, the founders happened to meet Sundar Pichai, who oversees Android and Chrome at Google. They talked about their love of clean and simple digital products. At some point around early 2014, Pichai decided it would be good for Koum and Acton to meet his CEO, Larry Page. They agreed to meet on Tuesday, February 11.

On the Friday before that meeting, a WhatsApp staffer ran into Facebook's head of business development, Amin Zoufonoun, and told him that Koum was meeting with Page imminently. Zoufonoun raced back to Facebook and set the wheels in motion to accelerate an acquisition offer that had already been in the works for some time. Zuckerberg got Koum over to his house Monday night and finally floated the idea of an acquisition that would leave WhatsApp independent and, crucially, make Koum a board member of Facebook. “It was a partnership, where I would help him make decisions about the company,” Koum recalled. “The combination of everything that was discussed is what made it very interesting for us.”

The next day Koum and Acton drove to Google's Mountain View headquarters and met with Page and Pichai in one of the company's gleaming white conference rooms. They talked for an hour about the world of mobile and WhatsApp's goals. “It was a pleasant conversation,” said Koum. Page, he added, is “a smart guy.”

When asked if he got the impression Page was interested in buying WhatsApp, Koum paused. “No,” he said. Maybe there was a hint? “Maybe I'm not good at reading him.”

If Page had been interested in buying WhatsApp, as some reports later indicated, his meeting may have been too little, too late. Things had already been set in motion at Menlo Park, and at WhatsApp the founders and their advisors were calculating how much they could conceivably ask for in deal talks. One source close to the company said WhatsApp's founders were more interested in independence than money, but another said they also believed themselves to be worth at least $20 billion, a number calculated by looking at the market capitalization of Twitter, WhatsApp's global user base, and the company's future plans for monetization.

That Thursday, Koum and Acton went to Zuckerberg's house for dinner at 7:00 p.m., where Acton met Zuckerberg for the first time. “One day I want you to become bigger than us in number of users,” Zuckerberg told them. “What you guys do is a much more common-use case.” Zuckerberg said he wanted them to keep doing what they were doing, but with the might of Facebook's legal, financial, and engineering resources.

At 9:00 p.m., Acton went home to tend to his young family. Koum and Zuckerberg played high-stakes poker. One source said that Zuckerberg offered a range of $15 billion and higher, and that Koum said he was looking for something closer to $20 billion. Facebook's founder asked for some time.

The following day, Friday, February 14, Koum and Acton posed for a photo shoot with
Forbes
at their office. When the photographer left at 6:30 p.m., Koum got into his Porsche and stopped at Zuckerberg's house for another meeting. Koum denied reports that he interrupted the Zuckerbergs' Valentine's Day meal. “It wasn't like there was dinner and candlelight, and I barged in through the door.” Until then he had tended to leave the Zuckerbergs' house when Mark's wife, Priscilla Chan, came home from work. Over snacks, Koum and Zuckerberg hammered out the final details of the partnership and WhatsApp's all-important independence under Facebook, but the two weren't yet in agreement.

Finally, on Saturday night, Koum and Zuckerberg went from talking in the kitchen to the living room couch, before Zuckerberg offered $19 billion as well as deal terms that Koum liked. It was “something we can probably do on our end,” Koum replied.

Koum waited for Zuckerberg to leave the room and got on the phone to Acton, who was at home. It was 9:00 p.m. “I just want to check if you've made a decision either way,” Koum said, giving his friend the finalized details. “Do you want to move forward?”

“I like Mark,” Acton replied. “We can work together. Let's make this deal.” Koum walked out of the room and found Zuckerberg. “I just talked to Brian,” Koum said. “He thinks we should work together and that you're a good guy and we should do it.”

The two of them shook hands and then hugged. Zuckerberg remarked it was “fucking exciting,” and whipped out a bottle of Johnnie Walker Blue Label, which he knew was Koum's favorite Scotch. They each called their business-development directors to come over and finalize the process. About an hour later, Koum drove home in his Porsche and went to bed.

Lawyers and bankers raced through the weekend to get deal papers to sign by Wednesday morning before everyone broke for the annual Mobile World Congress in Barcelona. Rather than signing them at WhatsApp's headquarters, they drove two blocks, at Jim Goetz's suggestion, to 101 Moffett Boulevard, the abandoned building where Koum once collected food stamps as a teenager. Koum signed them on the main door.

When they got back to the office, Koum sent a WhatsApp message to “WhatsApp All,” the chat group for all employees, saying there would be an all-hands meeting in the conference room at 2:00 p.m.

“Look, here's what's happening,” he said after everyone had piled into the room. “We're merging with Facebook.” Koum and Acton told their shocked employees they would be okay and still operate on their own. At 2:30 p.m. the conference-room door opened again and in walked Mark Zuckerberg. He spoke briefly with WhatsApp's small staff and shook hands. After a conference call with investors, Koum got back to work. “We still have a company to run,” he said matter-of-factly.

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NOW IT'S DOWN TO
Zuckerberg and Koum to figure out how to make WhatsApp worth the $19 billion Facebook paid for it. The first move was to make sure the app keeps working. The Saturday after the deal was announced, people around the world slammed WhatsApp's servers with new sign-ups. The app suffered a four-hour outage. The founders said it was coincidental, but it was bad timing for a startup that prides itself on reliability. Koum and Acton are so fixated on uptime that no one is allowed to talk to WhatsApp's server guys in the months before Christmas as they prepare for the message deluge. Visitors are rarely allowed into the office, lest they be a distraction. A whiteboard in the office shows the number of days since the last outage or incident, as a factory might show a tally for injuries or deaths. “A single message is like your firstborn child,” said Acton, a new parent. “We can never drop a message.” He pulled up a photo of his late stepfather, sent to his phone in April 2012. “This is why I hate Snapchat,” where photos and messages disappear after viewing.

The dollars will start coming in greater numbers once WhatsApp can iron out dead-simple billing arrangements with wireless carriers. Koum doesn't want to risk putting users off with a complicated payment-request system and watch them run to free rivals. Right now, it charges only in the handful of countries where credit card penetration is high and mobile payments systems are culturally prevalent. Google is striking billing deals with carriers on behalf of all Android apps, but progress has been slow: Android carrier billing is available in just twenty-one countries, and to the ongoing chagrin of other developers, mobile payments still aren't standardized. Koum thinks the real money will start flowing by 2017 and beyond, at which point he plans to have 1 billion users. “We are very early in our monetization efforts,” said Neeraj Arora, WhatsApp's business development manager. “Revenue is not important to us.” Arora has brokered partnerships with about fifty carriers to prebundle the app into texting plans. It has also struck a noncommercial partnership with Nokia to put a WhatsApp button on the inexpensive Asha 210 phone.

Keeping people from switching to another service is another priority. The fear of losing eyeballs is what drove Zuckerberg to pay so dearly, and there's not much stopping them from leaving WhatsApp. “For the last five years WhatsApp has been exclusively focused on delivering âSMS but free,' and they have done a great job at that. But at some point the user is going to move on,” said Ted Livingston, a former BlackBerry engineer who founded the teen-friendly mobile messenger Kik. “This is why WhatsApp feels like BlackBerry to me. For years BlackBerry was exclusively focused on e-mail. But once the consumer understood this, they asked, âWhat comes next?' The iPhone answered that question, and all of a sudden BlackBerry was left behind.”

Koum is staying focused on keeping WhatsApp running and keeping users from going away. A couple of nights a month he pulls up to a nondescript cinder-block building in San Jose, grabs a gym bag, and walks into a dimly lit gym for a private boxing lesson with a gum-chewing coach standing next to a boom box blasting rap music. “He likes Kanye,” said the coach, smiling, during one visit. He held two mitts up high as the six-foot-two Koum threw measured, powerful punches. Every few minutes Koum sat down for a break, slipping the gloves off and checking messages from Acton about WhatsApp's servers. Koum's style was very focused, the coach said. He doesn't want to get into kickboxing, like most other students, but just wants to get the punching right. You could make the same case for a certain messaging service that wants to be as straightforward as possible.

It's true, Koum said, ruddy-faced as he put on his socks and shoes. “I want to do one thing and do it well.”