The Exchanges

Q this experience you had. You took this class at the business school, and Scott Cook of Intuit, founder of Intuit, came to the class, and I don't know if that was a turning point for you, but if it, what, what was, what happened, you know, when you saw him and met him? Because I think it did, it was kind of a turning point for you as a student.

A Yeah, taking that class, it's called Entrepreneurship and Venture Capital. It's taught by Peter Wendell and Eric Schmidt. It's still taught today, I try to guest lecture. Uh, once a year. And that class was an absolute game changer for me. And, you know, Scott Cook was one of the guest lecturers and gave the whole case study on Intuit. And during the case study, I guess I, I asked a couple of questions in the, in the class about how they were capitalizing the business at the time or something like that. So we'd had an opportunity to engage a little bit. And after class, I talked to him and basically begged him for a job. And so he gave me an internship at, at Intuit. That really sort of changed my trajectory, because on a very small team of people, we were, you know, I think it was three or four of us, we made web apps at the time, actually for, you know, touchpad phones, not touchscreens or anything like that. But I learned that with a really small team, you could build software and deploy it all around the world. And so it sort of demystified a lot of the process of building stuff.

AI assessment note: “after class, I talked to him and basically begged him for a job.”

Q Tell me about the idea for Pickaboo. How did that come about?

A Well, I had come back from studying abroad in Cape Town. I was living in a dorm back on campus, hanging out with a friend of mine, um, and he was like, man, it'd be really cool To be able to send disappearing photos. We were like, oh, that's a super interesting idea. So we started prototyping like what that could look like and came up with the name Pickaboo. And ultimately I presented it to my design class. And I think the first piece of feedback we got was basically, you know, that's not going to work because you can always take a screenshot. And that piece of feedback was really, really helpful because I think early on there were some other competitors in the space. They were all very focused on like security. But what we found was that what people loved using was just sending pictures back and forth really, really quickly. MMS was really slow. I mean, I think it took more than a minute to send a photo via text message at the time, and so our friends just started using it to send photos all day.

AI assessment note: “he was like, man, it'd be really cool To be able to send disappearing photos”

Q How did you guys build it? Because he built it, obviously, as an app. Kind of take me into doing that. Did it require any money? Could you just do it on your own at Stanford?

A Yeah, we, it didn't require any money. We could just do it. I just sketched out on one piece of paper, the screens, um, you know, the different flows. And one of the things we learned from future freshmen is not to build something huge and complex. It was to build something as simple as possible and get people's feedback as quickly as possible. And so we really just started with a couple key screens, you know, add a friend with their username, tap to send them, A snap. But there were, there were a couple principles that we really anchored to, like opening up to the camera, uh, for example, so you never missed a moment. You could just open up to the camera and snap really quickly.

AI assessment note: “it didn't require any money. We could just do it. I just sketched out”

Q And what, what were you doing? What do you remember about twenty-twelve, like, Were you on the phones? Were you in meetings? Were you working on the user experience? What were the things you, you specifically were doing?

A There were a couple of big things happening at the time. One is we started working on the Android application. So Daniel and David were spending a lot of time doing that. Um, the other thing that we were doing was really starting to work on video, because at the time it was only photos. And we had invented this really cool idea that, you know, back in the day you had to toggle between photo and video on your smartphone. So you'd open the camera app, and then if you wanted to make a video, I'd just press the video button. It would flip into video mode. There was a lot of friction. We had invented this idea that you could just tap to take a photo or hold the button and start recording a video. And that at the time, based on the way the camera worked, was actually quite difficult to engineer. And then, you know, a lot of time hiring, you know, one of the challenges we were up against around that time, maybe a little bit later, we had decided to stay in LA. But up until then, we were in LA, which doesn't have the same sort of tech ecosystem or tech talent that San Francisco or the Bay Area has. So hiring was very time consuming, especially for tech Contact talent and, and really trying to convince people to come move to LA to work on, on Snapchat. And then fundraising, of course, at that time was also a pretty big project. And then I was answering all the support email, uh, as well…

AI assessment note: “I was answering all the support email, uh, as well at the time.”

Q had, um, you had a friend. Bobby Murphy, who I guess he lived across the hall from you, and later he would actually become one of your co-founders at Snap, and we'll talk about that. But before that, you, you guys, you and Bobby started another company. It was completely different. It's called Future Freshman. Can you tell me a little bit about that? Like what, what was the business?

A Well, we had both experienced the college process that was super complicated. And one of the really challenging parts is all the different requirements of all of these different colleges when you're trying to apply. So it's a massive organizational project that could be better handled by software. And so we started trying to build really a beautiful software that could do that well. So you would just check all the box for all the schools you wanted to apply to. We would go out and gather all the requirements, the essay questions, everything, put it all in one place. So it made it really, really easy for you to fill out the application and do that kind of thing.

AI assessment note: “We would go out and gather all the requirements, the essay questions, everything”

Q Yeah. Did you, I mean, so up until that point, you didn't need a whole lot of money, right? But now with 500,000 dollars, I'm assuming like, you've got to build an infrastructure. Like, how did you first deploy the money? Like, did you start to make hires? Because you're still a senior in college at that point, right?

A Yeah, the first thing we did was hire friends of ours, Daniel. I was really fortunate enough to meet Daniel my freshman year during a product design seminar, and one of his friends, actually, I didn't know they were friends at the time, but I was visiting a friend of mine in her dorm, and she was like, hey, you should meet this guy, David, across the hall. He's a really cool guy, super smart. So I just went and knocked on his door, introduced myself. Turned out he and Daniel were best friends. So David and Daniel joined the team, and I think there were about five of us there. It was me and Bobby and Dina and David and Daniel.

AI assessment note: “the first thing we did was hire friends of ours, Daniel.”

Q that same article in the journal in 2013, there's a, somebody quoted in there with some skepticism about the decision that you took, um, and this person said, look at the fate Vine has suffered. You know, Vine was huge. And again, proved wrong, but at the time, like, there was no part of you at all that looked at things like Vine and just thought, what if that happens?

A Well, one of the things that helped give us confidence is we had a roadmap, right? So I think one of the big questions in technology always, and especially when it comes to these acquisitions is, is this a feature or a platform? And it's very important to know, you know, if you're building a feature or a platform. And so for us, maybe in the early days of Snapchat, of photo messaging, that was maybe more of a feature. But by the time we'd added things like stories and, you know, we would go on to add, you know, all of our augmented reality, uh, Lenses, of course, memories, our map later on, all these different pieces of our service that have really diversified it and made Snapchat much more of a platform. We, we had a bunch of that vision, so we knew that we were going to be able to continue innovating. We knew that we weren't just going to be standing still. I mean, one thing for sure in the technology industry is if you're just standing still, it's really easy for competitors to catch up, especially if they're a lot bigger. But we really, you know, believed in our ability to keep innovating.

AI assessment note: “one of the things that helped give us confidence is we had a roadmap”

Q How many people said to you in 2012, Facebook is just gonna crush you? Because I think it would have been not an unreasonable thing to think. I mean, it was a giant, and they're launching a clone. They had an order of magnitude more users that they could just basically just send this out to everybody. How many people said that to you or implied that?

A That was probably the most common piece of feedback we got from potential investors. I think that was You know, if you remember back then, there was sort of this idea that, like, if you have a really, really big social network, there are these network effects, and no one can compete with a business that has network effects. And at the time, people had not yet understood that, like, if you have a big network, but you're only talking to three or five or seven people in that network, that actually the size of the network doesn't matter that much. What matters is that those people, those, you know, that you talk to all the time are a part of it. And so that's how Snapchat was able to grow. It wasn't focused on being the biggest network. You didn't have to have the most Number of friends. But, you know, your number one best friend or your partner, in my case, my wife, is the person you talk to, you know, half the time or all the time. Um, and so if just that person is part of the network, then the network's really, really valuable to you. And so I think back then, though, people didn't understand that, you know, you could grow, uh, another messaging service. They just thought that the person with the largest social network would always win.

AI assessment note: “That was probably the most common piece of feedback we got from potential investors.”

Q you guys are working on, which is the latest Generation of your spectacles, which are these augmented reality glasses. Um, I tried them super cool. You can do some, some fun things. And I know you guys have invested a lot of money in this. I mean, there's a lot of technology packed in those glasses. Is that the future of the business? Is that where you see Snap headed?

A I think that's critical to our long-term future. I mean, ultimately, if you look at all the products we built, we've tried to make technology work better for people. So much of technology in the past, right, has forced people to change their natural human behavior to fit how technology, you know, expects them to behave. That certainly could be said of social media, right, where instead of having ephemeral conversations in chronological order, social media has You know, everything permanent and in reverse chronological order, and it feels inhuman. I don't think we should settle for the way that computers work today for, you know, staying hunched over these small screens as the best way to get the value out of computing. I think computers can do so much more, can be so much more, and ultimately, you know, we were talking a little bit about, you know, wanting to make sure young people in particular have a balanced relationship with technology, but what would it look like to build a computer that you really wanted your kids to use? You know, frequently, because it's the best way to learn, the best way to play together with their friends. It's something they could actually use outdoors. These are all the sorts of things that glasses, I think, can really provide people over the longer term.

AI assessment note: “I think that's critical to our long-term future.”

Q So, I mean, how did you get around that?

A Well, one of the interesting things about that point in time is that convertible notes were very new. So, what we discovered was that the language in the convertible note actually allowed us to convert that note into any type of Of stock. It hadn't, it didn't specify the type of stock that we were required to convert the note into. And that gave us a lot of flexibility to think about, do we just want to convert this note into a different series of stock and ultimately then create a new series that another investor can come into. So it helped us reach a positive and constructive solution with Lightspeed who, you know, understood, okay, we'll find a solution here. We understand this, this right of first refusal might not be the best thing for the business. You know, early VCs Early venture capitalists are actually quite open to having more founder-friendly terms early on, right? Because the amount of capital is much lower, and, you know, the idea is either, you know, you make something really, really successful, or, you know, it goes to zero. So the, but we've always shared with, you know, our friends who are starting businesses, you know, you can, you can, you have three things you can optimize for when you're raising money. You can optimize for the people you're working with, like the, the venture capitalists, You can optimize for the terms, you can optimize for the valuation, …

AI assessment note: “the language in the convertible note actually allowed us to convert that note”

Q and that's just the reality of it. How do you view that? I mean, most of your quarters are not profitable. Because it's all public. But at the same time, you clearly believe in this business, the future of this business. You've got hundreds of millions of users. So it's a robust business. But how do you kind of manage how it's seen by outsiders and investors? Now it's valued.

A Well, what's really important for us is just clearly articulating our vision for the business and, you know, our, our just consistent desire to invest in the longterm, going after really, really big opportunities and consistency in doing that is key. So as we look at the longterm future of augmented reality, for example, and, you know, our, our desire to build a new computing platform that better meets people's needs by actually being integrated in the world. Around them. That's a really big and expensive bet. And the only way we're going to be able to make progress towards that is if we really invest consistently. And so we've really prioritized going after that long-term opportunity compared to short-term profitability. And it doesn't mean, you know, we're generating free cash flow. We, you know, Q four, we generated positive net income. So it's not like we disregard our finances. We've actually run a very conservative balance sheet with billions of dollars of capital so that we can consistently invest. Invest over the longterm. But I think what's most important with investors in the broader public is to be clear about those expectations, to be clear that we are going to invest in the longterm, that we're not going to optimize for, you know, the quarter to quarter, uh, share price. And we're just going to make consistent progress towards our longterm vision.

AI assessment note: “what's most important with investors in the broader public is to be clear about those expectations”

Q because once they launched Instagram, it really blew up. And what do you remember about hearing about those guys or talking about those guys, or was it inspiring to you and to your friends in some way? Just because the parallels are so, they're so clear, you know, it's like two friends at Stanford a couple years before you with the photo app, right? And then that just becomes huge.

A You know, at the time, I think we were, we just really felt that like social media was taking itself too seriously. So Instagram and Facebook at the time, the, the whole focus was, you know, on posting the prettiest possible pictures and getting lots of likes and comments. And there was like a real focus on, you know, how many friends do you have? How popular are you? And, and of course, you know, also a lot of concerns about like the permanence of images. I mean, at the time there were all these stories of people getting job offers rescinded because somebody found their Facebook profile. So I think there was for us just a real need for something different, something that you could actually use to talk with your friends and have fun. Because Instagram and Facebook at that time were much more focused on this very public and permanent sort of status-based social media.

AI assessment note: “we just really felt that like social media was taking itself too seriously”