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The Billion Dollar Battle for Snapchat
  • February 25, 2014 : 07:02
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When then 18-year-old Evan Spiegel, future founder of Snapchat, the multibillion-dollar mobile application start-up, set off on the seven-hour drive up Interstate 5 from Pacific Palisades to Palo Alto, California, home of Stanford University, he was embarking on more than a college education. He was journeying into the engine room of America’s greatest wealth-producing machine. Long one of the world’s elite colleges, Stanford, by the fall of 2008, had also become a noteworthy incubator of young entrepreneurial talent. For freshmen like Spiegel, cruising down Palm Drive past the majestic, 40-foot-tall Canary Island date-palm trees and beneath the white-on-cardinal WELCOME TO STANFORD banner, there was of course the eagerness and anticipation of living away from home for the first time, but there was also a sense that here, in this unique period in history, anything was possible. For a young man to complete his education and embark on a promising career was not only likely but a given; for a young man of Spiegel’s temperament and talent, to leave Stanford as anything less than a multimillionaire might even have been considered a disappointment. As it turned out, Spiegel would leave Stanford well on his way to becoming a billionaire, though the circumstances of Snapchat’s conception and launch would be the subject of a lawsuit, filed by former classmate Frank Reginald Brown IV, that has cost Spiegel friendships and could ultimately cost him hundreds of millions of dollars.

Silicon Valley has always embraced meritocracy, the idea that it is the quality of one’s ideas and one’s willingness to put in 20-hour days that make for successful start-ups and lasting businesses. Unlike, say, hustlers in Hollywood or on Wall Street, the founders of tech companies are supposedly monastic programmers who toil away in harmonious teams and remain chaste when it comes to fucking over their peers. If that myth has been eroded by the saga of Facebook, Mark Zuckerberg and the Winklevoss twins, as described in The Social Network, it is now being destroyed by the lawsuits that surround the founding of Snapchat.

Snapchat, a messaging service that allows for disappearing text messages and photos, has become the latest hottest internet start-up, an app that seems to have a significant grip on younger users. It enables users to send photos and messages to other users or to post photos and messages to their Snapchat network, with little risk that the photos will be circulated on the web because they self-destruct in 10 seconds. Although tech writers initially dismissed Snapchat as a “sexting app,” it is actually the first application to exploit what Spiegel calls the “value of the ephemeral.” Why, Spiegel has asked, should everything on the internet be around forever? “Data permanence is a big issue,” he says. “We were the first to understand that.” Teens and 20-somethings have embraced that ethos, making the app among the fastest-growing in history. According to the company, 400 million photos are sent daily; Facebook, by comparison, claims 350 million photos posted daily. The company became so successful so quickly that Spiegel turned down a $3 billion offer from Mark Zuckerberg and Facebook, calculating that Snapchat would eventually be worth even more.

The lawsuit in which Frank Reginald Brown claims, as originator of the idea and one of the founders of Snapchat, to be entitled to 33.3 percent of the company, proves that every tech company has not only its visionary founders, inspiring genesis story and long nights of programming but also its personality feuds and bitter battles that inevitably, it seems, end up in depositions and courtrooms. It happened at Facebook; it happened at Twitter, where co-founder Noah Glass was forced out of the company with virtually nothing to show for his contribution; and it is happening at Snapchat, where Spiegel has proved as ruthless and cunning as any of his tech forebears. The Snapchat story, as laid out in court filings, affidavits, depositions, recollections from college classmates and interviews with Spiegel before Brown’s lawsuit was filed, is the latest saga of just how fast and furious the journey can be from dorm-room dream to next big thing in today’s Silicon Valley.

“At Stanford and in Silicon Valley, we perpetuate the myth of meritocracy,” Spiegel said last April in a speech to the Stanford Women in Business organization. “We believe that the harder we work, the more we will achieve.… This is not true. I am a young, white, educated male. I got really, really lucky. And life isn’t fair. So if life isn’t fair, it’s not about working harder; it’s about working the system.”

1. Happier times: Reggie Brown, Bobby Murphy and Evan Spiegel celebrate the birth of Snapchat. 2. Where’s Reggie? Murphy and Spiegel (front row) celebrate the company’s first year. 3. CEO Spiegel during his deposition in response to Brown’s lawsuit. 4. Brown giving his deposition. 5. Who needs Silicon Valley? Stanford University finds itself an incubator for the tech world, attracting students less interested in degrees and more interested in launching billion-dollar start-ups.

Incoming Stanford freshmen go through a weeklong orientation during which they meet classmates at barbecues and are told what will be expected of them academically by their assigned freshman advisors. Freshmen wear their names on lanyards, and for most of them this week is when they begin to understand the unique hierarchy they have joined. Although 70 percent of Stanford students receive financial aid—and those whose parents earn less than $100,000 pay no tuition at all—there are still plenty of scions of wealth and privilege to remind those less fortunate exactly what is to be gained from a good showing here. Spiegel, who grew up in a $4 million home in Pacific Palisades and whose father, Stanford alumnus and significant donor John Spiegel, earned $3 million a year as an attorney at the firm of Munger, Tolles & Olson, was among the latter. Six feet tall and lanky, with a rectangular head, fine, sharp features and a hank of brown hair parted down and to the left across his narrow forehead, Evan Spiegel had driven to college in his BMW 550i and stood out even among this spectacular cohort for his focus and ambition. “Evan was always hustling,” says one former classmate, “always looking to throw his energy into the next thing.”

Among his hall mates that freshman year was a stocky blond from Columbia, South Carolina named Frank Reginald Brown, whom everyone called Reggie. He and Spiegel quickly became friends. While Spiegel took a calculated approach to most aspects of college life—by the time he was a sophomore he already had the contacts to organize some of the best parties on campus and had been voted social chair of his fraternity—Brown was more laid-back, whiling away hours playing computer games and watching TV in his Donner Hall dorm room down the white-walled, gray-carpeted corridor from Spiegel’s. Spiegel was prone to wearing skinny jeans and a V-neck, while Brown tended to wear brightly colored khakis and backward baseball caps. Stanford prides itself on bringing together diverse elements of American society, and though both these boys were white and from privileged backgrounds, it was this meeting of two very different individuals that would catalyze the launch of Snapchat. Spiegel was a product-design major, which requires students to learn to conceive entire businesses, everything from the look and feel to the financing of a new product. The Institute of Design at Stanford, or “” as it is known on campus, is a hothouse for future entrepreneurs and their start-ups. Brown, on the other hand, was an English major, which at Stanford is a far less gilded journey. In the new hierarchy at elite universities, it is the business, engineering and computer science geeks who are the cool kids potentially on the fast track to launching the next Google or Facebook, while English majors like Brown are on far more prosaic career paths and could even struggle for employment when they graduate. Despite their different paths, or perhaps because of them, the two became good friends, spending late nights in Spiegel’s one-room double, drinking vodka and Red Bull. Brown regaled Spiegel with tales of growing up in South Carolina, his whimsical ideas for potential new products for Spiegel to develop and his opinion of the many attractive coeds who caught his eye. The unlikely pair had a tenuous friendship from the start. “They fought and bickered like an old married couple, even during freshman year,” says a mutual friend.

In the spring of their freshman year the two pledged the Kappa Sigma fraternity, one of seven fraternities on campus and perhaps the hardest partying and among the most selective, accepting only about 10 percent of those who rush. That Spiegel and Brown rushed together is a testimony to the bond they had formed, for Kappa Sig tends to either take or reject incoming rushes as a group. Both were tapped, Brown making enough of an impression on his older fraternity brothers that he was awarded the blue suit traditionally given to the pledge expected to party the hardest. The suit, which has never been washed, has been passed down for longer than any brother can remember. Brown, as “Blue Suit,” was expected to wear the outfit to most frat parties.

Sophomore year, they lived together in the two-story columned Santa Fe–style Kappa Sig house on Campus Drive. Among their roommates was senior Bobby Murphy, a mathematical and computational science major from nearby El Cerrito. Murphy, like Spiegel, was well aware of the possibilities Stanford offered, and he was waiting for the right tech start-up to come along. In the meantime he was ready to offer his computer skills to brothers in need. “He was down the hall, and whenever I needed computer science help I’d go wake him up at, like, four in the morning,” Spiegel says.

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read more: News, magazine, issue march 2014


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