A Product Market Fit Show | Startup Podcast for Founders
00:19:04 · Jeremy Liew, Pablo Srugo
[00:19:04] S0: My partner Barry Eggers, the reason that we got into Snapchat or we heard about Snapchat is because Barry is an engaged dad. He noticed that his daughter who was in high school at the time had changed the way that she was taking selfies. Historically she took selfies trying to look pretty. He noticed that she had started taking selfies, making weird faces or with only half of her face in the frame, just very different from the look pretty with a pretty background. He asked her, "What's going on? Why are you making these weird faces when you take photos?" She said, "Oh dad, it's this new app called Snapchat. Everybody's using it at school. There's three apps that everybody has on their phone at school, Instagram, Angry Birds, because this was 2011, and Snapchat." At the time he was like, "Huh, interesting. Instagram is pretty big, Angry Birds is pretty big, but hadn't heard the Snapchat thing." He mentioned it to me and put it on my radar. That's how we first heard about the company. [00:20:05] S1: How did you go from there to actually meeting Evan?
00:20:07 · Jeremy Liew
[00:20:07] S0: The thing is Snap is social software and so you're really fully experience using the product unless you're using it with other people and ideally people who have been natively using it. To download the product without that context, at the time, it was primarily used by high school students and I didn't know any high school students. I downloaded it, I looked at it and I was like, "Eh, they really get it." I didn't really take a lot of action on it, but again, credit to Barry, he was pretty – he's like, "Hey, did you find out more about the Snapchat thing? I think it really could be pretty interesting. My daughter and all her friends, they're using it all the time. They're talking about it." I'm like, "Okay, I'll check it out." Obviously the first thing you do is you go to the website and the website at the time was just a single page with the logo and an info@snapchat.com email address. I emailed it and I never heard anything back. Later on he was like, "Hey Jeremy." He was like, "Oh yeah, I'm working on that. I'm going to find out more about it." it's like, well, okay, what do I do? Okay, let me look it up on LinkedIn. It turns out that Snapchat had one employee, CEO and founder and sophomore at Stanford, Evan Spiegel. I was like, "Great, okay." I messaged him through LinkedIn and I never heard anything back. I was like, "Okay, well you know, let me think about what I can do." I did a whois lookup. I saw that the URL was registered to info@topoyagroup. It's like, great. I emailed that and I never heard anything back. I was like, "Oh my gosh! This is becoming a challenge. How am I going to figure out how to get in touch with this guy?" I basically started spamming every variation, evan@snapchat.com, e_spiegel@toyopagroup.com, spiegel_evan@snap, every variation of just shooting emails out into the void and I never heard anything back. Barry was constantly like, "Hey, did you get in touch with that guy? I really think it could be interesting. I'm like, "I'm on it." Finally I was like, I don't know what to do, but I noticed that Evan was a student at Stanford and I'd graduated from Stanford from the business school. Back then you could DM anyone on Facebook if you were within the same network and so I DMed him and I got a message back in two minutes.
00:22:40 · Jeremy Liew, Pablo Srugo
I was like, "Hey, I'm hearing great things about Snapchat from folks, I'd love to hear more about it." He's like, "Sure, happy to tell you about it." I'm like, "Great, I'm just down the road." We set up a meeting for maybe a day or two later and he came over and told us the story, cracked open his analytics. He said, "Look, things are going great but I'm signing max out the credit cards. We're growing so fast that I can't afford my server bills." I was like, "Well maybe we can help you with that," and so that's how we came to invest. [00:23:21] S1: That's quite an epic story. I think back to that time, and as Evan then admitted, he really needed money, so do you know why he didn't respond to those first requests? Was he just not checking? Did you ever find that out? I'm just curious. [00:23:36] S0: I think that's largely what it was. If you think about what are the native modalities that you check all the time especially in college when you're in your 19, 20s, something like that, it's definitely not LinkedIn. It's barely email. It's messaging and social. It is mostly messaging. That's where you spend your time. I remember one time because I had donated to the Obama campaign and I was trying to show off. I changed my profile picture to this photo of me shaking hands with Obama. He said like, "Yeah, the reason that I responded to your Facebook message was that I saw that your profile picture was with you at Obama and I figured you must be a halfway decent human being." Best political donation I did. [00:24:26] S1: That's incredible ROI. [00:24:32] S0: I know, right?
00:24:32 · Jeremy Liew, Pablo Srugo
[00:24:32] S0: I know, right? [00:24:34] S1: The other thing I had read, so maybe now that you're meeting with Evan at this point, how was that meeting? How quickly did you decide that, you know what? Because at that point you weren't actually fully bought in, you have this meeting –
00:24:46 · Jeremy Liew
[00:24:46] S0: Not only was I not fully bought in, I just didn't understand it because I couldn't natively use the product the way that it was being used. First of all, he did a couple of things. He just told me some of the metrics and then he cracked open his analytics dashboard and he showed me. What I saw was 50% daily active user to monthly active user ratio. I saw 50% D30 retention, extraordinary. I thought 50% month on month growth on a statistically significant number of users. I can't remember exactly what it was. It was 10 or 20,000 DAUs and that had been persistent over time. It didn't matter whether I got it or not. The dot was very clear that this was resonating, but then he explained it. That's the other importance. Today everybody understands, you know, principles behind Snapchat and how a lot of social media creates this performance anxiety, which means that you don't post, and so you get this more of a social media perspective with a small number of posters, large number of consumers. He talked about how the disappearing messages really reduced performance anxiety because there wasn't going to be persistence. You could put something that didn't look perfect and that was consistent with the behavior that I heard that people were sending these photos where they were deliberately trying to look weird or funny or ugly making faces and so forth. The context was less about the photo, it was the sub message which is, "Hey, I'm thinking about you. You're my friend, I'm thinking about you. I want to make you laugh." He went on to explain in a really clear way that – I mean he made this example like, hey, if you were with your friend and you're catching up and you're talking and I haven't seen each other a while, that at the end of the conversation he says, "Oh by the way, I recorded all of this," wait, what? What do you mean you recorded? He's like, "Yeah, I just recorded. Is that okay?" He's like, no, it's not okay, because historically when humans had conversations, nothing was recorded. He said that default changed when we started communicating digitally with the default is everything is recorded. That changed the way that people have human interactions. When you're in high school, it's a time of high drama. People have fights all the time.
00:26:21 · Jeremy Liew
If you and your best friend get into some dispute and it's like, fuck you, no, fuck you, I never want to see you again, fine with me. You have that fight. If you have that fight in person the next time you see each other, you could both pretend that it never happened and go back to normal, and that's what people do all the time. If you have that in other text chain, the next time you open that thread with your friend, you are looking at this last exchange which says, fuck you, no, fuck you, I never want to see you again, it's much harder to just pretend that never happened. He said what he was doing was restoring the default in digital communications as well as in the real world. This was an important point. He said there is no digital world in real world. There is just the world and the world should work the same. When you communicate with your friends, that should be history. It should disappear. It wasn't about ephemeral communication. It was about restoring the defaults. No one chose the defaults in digital communication that everything is recorded. That was not a deliberate design decision by anybody. He's in his view, which has turned out to be correct, it was an error which he since fixed and that's why we got disappearing messages. But if you have that either text chain, the next time you open that thread with your friend, you are looking at this last exchange which says, you, no, you're afford to see you again. It's much harder to just pretend that never happened. And he said like what he was doing was restoring the default in digital communications as well as in the real world. And he , this was an important point. He said, there is no digital world. In real world. There is just the world and the world should work the same when you communicate with your friends, that should be history. It should disappear. It wasn't about ephemeral communication, it was about restoring the defaults. No one chose the defaults in digital communication that everything is recorded. Like that was not a deliberate design decision by anybody. And he's in his view, which has turned out to be correct, it was an error which he since fixed and that's why we got disappearing messages.