#7 - The Hippie With A Billion Dollars

Michael Birch sold his social networking site to AOL for $850M....and then bought it back for $1M years later. (buy low, sell high. boys and girls). His business portfolio is impressive. He's an early investor in companies like Calm and Pinterest, owns two giant hotels, and bought a private island off of Richard Branson. Despite all that success, he's a down to earth guy, and in this podcast he talks through his early struggles and failed ideas before he had his billion dollar breakthrough and reminisces his days being head to head with Zuckerberg. See acast.com/privacy for privacy and opt-out information.

Speaker names marked ? are inferred from speaking time and the show’s known hosts — they are not voice-verified.

• 0:01Speaker 00

  Then the Bebo story started, this was now January 2005. It took only a couple of days to develop it and we went live and we had a million users after nine days.

• 0:13Speaker 01

  Bebo. Bebo. Bebo.

• 0:14Speaker 00

  Friend of Bebo, Michael Birch.

• 0:15Speaker 01

  Buy low and sell high. Bebo, which has 40 million global users.

• 0:19Speaker 02

  Media giant Time Warner is buying the social networking website Bebo.

• 0:23Speaker 01

  For 850 million dollars.

• 0:29Speaker 03

  Alright, I'm recording this, I just finished my conversation with Michael Birch. For those of you who don't know, Michael is an internet entrepreneur. He built a social network back in the day when he competed head to head against Facebook. And although Facebook won the war, Michael didn't end up too bad. That company, Bebo, if you've ever heard that before, sold for 850 million to AOL. And when I met Michael, we got back together and we bought it back for 1 million years later. And then we actually sold that again just now to Amazon. So, I've had an interesting history, I've worked with Michael for six years. He was my boss, then he gave me his job to run the company. He's my investor, he's my friend, he's a mentor. I've learned a lot from him, from building companies to investing.

• 1:11Speaker 03

  I mean, he's invested in 75-plus companies, things like Pinterest. He was one of the first investors. Calm, the meditation app, he was an investor when nobody believed in Calm. And he's done all kinds of crazy things. He's built hotels, he's bought a private island off of Richard Branson. He gives tons of money to different charities, like Charity Water that he supports. He's a very, very humble guy, you guys are gonna hear that and you're gonna hear the humble beginnings. When he quit his job as a programmer at an insurance company and made the leap of faith to build his own company. He wanted to work for himself. He wasn't planning to become a billionaire, he had that, you know, that was a great outcome. He really just wanted to work for himself and not have a job. He wanted to work on things he was interested in.

• 1:56Speaker 03

  We talk about the years of struggle, the all the different ideas he had. It's almost sort of in the weeds, but I think a lot of people have talked about his success with Bebo and the big sale, 850 million bucks. Very few people have heard the backstory before that about the different products that he tried to build, the failures, the learnings, all that good stuff, before he had his big breakthrough. You'll also hear him talking about viral marketing or viral products. And for those of you don't know, it's a method of growth where instead of doing ads, or sales, or paid marketing, you are relying on your users to send the product to other users. So things grow through word of mouth, just from one user to the next. And Michael

• 2:38Speaker 03

  was really a pioneer of this. Before people were even saying viral marketing, that's what he was doing. Because, you know, like you'll hear him talk about, he didn't have the money, and he didn't have the sort of sales skills. That wasn't fun for him. So he really focused on building products that would grow, just via essentially word of mouth, or users spreading it to other users, which is kind of crazy. So he's a real legend in the growth world for that. And so I think you guys will really like this conversation. I had a great time doing it. Enjoy.

• 3:14Shaan Puri?

  The audience wants to know who are we sitting down with today? So just tell them a little bit about you. You're Michael and...

• 3:20Speaker 00

  Sure. I'm Michael Birch. I'm a 49-year-old hippie. Originally from a little island called England. I've been living in San Francisco 17 years. Been doing internet stuff since 1999. Just startups early on, and then went on to do a few, and obviously kind of culminated in selling Bebo 11 years ago in 2008. And then since then, doing a lot of investing. So that's a very brief, polished history.

• 3:47Shaan Puri?

  Yeah. Before I even met you, I moved to San Francisco for you, almost. I was living in Australia. I wanted to come to the startup Mecca. I was like, okay, if that's where all the action is, I just got to go there. I don't know much else besides that, but might as well go where the action is, and then figure it out from there. I had never heard of you, had never heard of Bebo before, but I really liked the idea lab you had created. And so I started doing some research. And there's not many like podcasts or interviews of you online. Do you like doing these? Are you doing this as a favor to me? Like, because there's not much... Out there, but your story is really interesting. So what's the, what's the catch?

• 4:21Speaker 00

  I don't mind doing them. I just sort of question why I often would do them. I don't do really any conferences now. So I don't tend to do a lot of talks. You know, I'm actually heads down doing starter. We'll talk a little bit about that later again, but.

• 4:33Shaan Puri?

  Well, you've done some interesting things. I know you did the, like a BBC documentary, like what was it called? Like how to be a billionaire or something, right?

• 4:39Speaker 00

  Yeah, they didn't tell me what they were going to call that documentary until after. I actually can't quite remember. It may have been called something like that, but he threw the word billionaire in it. And I'm like, oh no, this is like not what I wanted to do.

• 4:51Shaan Puri?

  Yeah.

• 4:51Speaker 00

  I'd already filmed it at that point.

• 4:53Shaan Puri?

  You know, when I first looked you up, I was like, wow, this guy sold a company for 850 million bucks. Not bad. Like I want to do something like that. I should just go work for this guy. Maybe I can learn something from him. So I think that there is something to that, that spark or that initial motivation, even if you don't have much else to go on besides that.

• 5:10Speaker 00

  I would agree with that.

• 5:11Shaan Puri?

  Did you have anything like that when you took sort of the leap of faith? Cause if we rewind the clock, right? Your story starts where I think 1999, you're, you're working as a programmer for insurance companies.

• 5:22Speaker 00

  Correct.

• 5:23Shaan Puri?

  As boring as it gets.

• 5:25Speaker 00

  That's pretty kind of a low point in life, I think. It's hard to get much lower than that.

• 5:30Shaan Puri?

  And how did you get there? Well, how did you even get into that position?

• 5:33Speaker 00

  So originally I did a degree in physics at Imperial College in London, which I found quite a few people in Silicon Valley seem to do physics for some reason, but. I had no interest in doing physics. Like it's one of those subjects that unless you're the top, like point zero zero one percent, it's probably not that interesting. You're doing boring experiments or something. And I definitely wasn't in that top even 1%. But I got a good degree and then I left college. At the time, there was kind of a mini recession in the UK. So the job market was hard and my brother was working as a programmer at an insurance company. And he said, why don't you come do this? You'll love it. And I was like, Paul, that's fucking programming at a fucking insurance company. It doesn't get more boring than that.

• 6:15Speaker 00

  It's like one boring thing on top of another boring thing. Yeah, it's like exponentially boring. And he said, no, no, trust me, you'll like it. And I was like, well, it's not like I have a lot of other offers. So I'll go and again, do the interview. And they had like a graduate intake scheme where they employed 10 people at a time and they trained you on the job. So I was like, okay. So I actually wasn't one of the top 10, but one of the people didn't accept the job. So I was number 11, I was like the backup guy. Nice. And I got the job. And, uh, and then I learned programming COBOL, which is like pretty old school. Right. Mainframe. It's the insurance company of programming languages. Yeah. And a little bit to my surprise, I actually really enjoyed it. I didn't particularly enjoy insurance. I was fairly correct on that one, but the programming side, I got into it.

• 6:59Speaker 00

  So didn't love COBOL, but I did like a six week training course and then immediately picked up a book and learned another language and started programming in that instead. So, uh, and I joined a data warehousing team. So it was analyzing data and I got, became friends with the, uh, chief actuary at the company. And then started doing all this stuff with him and, and kind of enjoyed it. Actually got into it. Um, so then found myself a program insurance company, somewhat enjoying work. Right.

• 7:27Speaker 00

  And so that sounds all good. Why, why switch? Why leave? Well, my father has always been an entrepreneur. What did he do? He was a botanist, so he did a degree in botany, worked for a company in the UK called PBI, sort of rose to like number two in the company, but would never get the top job. Cause the guy was not leaving and was very good. Still alive. He may still be alive, I don't know. He wrote, I think he wrote the world's best selling paperback, nonfiction paperback books, like gardening expert books. So he was a hard guy to replace. He did that for a number of years and then left and started doing his own soldancy, but was always like coming up with new ideas and inventing ideas. And he did one as a new type of dental floss that was made out for a special type of rubber.

• 8:08Speaker 00

  So as you stretch the rubber, it would get thinner and thinner and go through very tight teeth and things like that. And so he took a few products to market. He never found that like one big thing that he never found like the retirement money. So he always continued working, doing the app watching, sold and renting. And he was. Working from home and my bedroom was next to his office. And there was like an interconnecting door that was kind of didn't open, but I could kind of hear everything. And so I'd always listen to him on the phone, like coming up with the next idea and speaking to someone and. And I actually found it quite intimidating, but at the same time, I kind of loved it.

• 8:42Shaan Puri?

  Yeah.

• 8:42Speaker 00

  Like I wanted to be able to do that. And so, you know, I went through a fairly normal childhood, very middle class suburban family. Again, a little bit dulled, you know, it defines my early life, although I had a great childhood. And went to university and then got this job and and then I realized that it's very hard to be entrepreneurial in insurance for sure. I mean, not that you can't do it, but it's not exactly the world of entrepreneurs, right? Dime a dozen, whereas computers were clearly evolving and becoming more and more relevant and the internet was like in its early days. But not when I wasn't really around in any meaningful way when I started, but then as I kind of went on, it was becoming a real thing. And I I thought, well, this is it. This is my chance to kind of do what my dad did and be an entrepreneur and.

• 9:27Speaker 00

  I don't even have to phone anyone up. I can just like learn a different language and start programming and build a website.

• 9:33Shaan Puri?

  And so was there like a specific day you remember that you're like, okay, this is my last day of doing this. I'm gonna take the leap.

• 9:40Speaker 00

  Yeah, pretty much. There was a guy I was working, I left insurance a little bit, worked for Mothercare, which is a retail chain in the UK. Doing data analysis and there was a guy there building internet stuff and he was starting to show me HTML. And I was like, oh, this is cool.

• 9:56Shaan Puri?

  The good stuff.

• 9:57Speaker 00

  Yeah, so I started like reading some books and and doing a bit of a development. And then my wife Soochi got pregnant with our first child, who was born obviously nine months later, Isabella. And it was maternity leave time and she was gonna like leave her job and I was like, that's not fair.

• 10:16Speaker 00

  Well, she get to sit at home. And so I pretty much handed in my notice like at the same time that she gave her date.

• 10:22Shaan Puri?

  So you went the opposite way as most people. Most people are like, oh, I'm having my first child. I need security.

• 10:27Speaker 00

  Yeah.

• 10:28Shaan Puri?

  I need to provide. You're like, no, I want to be at home. I want to.

• 10:30Speaker 00

  That wasn't lost on me. Yeah. Or her, in fact.

• 10:33Shaan Puri?

  Yeah, I'm sure she loved that.

• 10:35Speaker 00

  Yeah. I mean, we were, we're both from kind of these stable, middle-class families. And we knew that it may not go well, and we may run out of money. But we also knew we weren't going to be homeless.

• 10:45Shaan Puri?

  Right.

• 10:46Speaker 00

  And we knew, worst-case scenario, I mean, we talked about it, worst-case scenario, we go and live with one of our parents, apply for another job, we'll get another job, we're young, and we'll start working again, go back to our kind of former life. But it sounds silly, we didn't feel we had anything to lose by doing this.

• 11:01Shaan Puri?

  So was it like a negotiation, like, all right, give me, give me X amount of time. I'm going to see if I can make something work.

• 11:06Speaker 00

  Yeah, I'd said three months.

• 11:08Shaan Puri?

  Oh, three months. That's it?

• 11:10Speaker 00

  I recommend not saying that.

• 11:12Shaan Puri?

  So you, you asked for three months. How long did it actually take?

• 11:16Speaker 00

  It took three years.

• 11:18Shaan Puri?

  And so were you just rolling, being like, I'm just three more months away? Or what happened?

• 11:22Speaker 00

  Pretty much, yeah. You know, it's like waiting for a bus. You're like, you know, we're three months in, it's obviously gonna happen soon. And so the goal, like when we left, it wasn't even to make our first million. Like, when I left to do, my entire 100% goal was to earn as much money doing my own thing as I was earning working for someone else.

• 11:42Shaan Puri?

  Gotcha. So what was that number? What's the target for you at that time?

• 11:45Speaker 00

  Well, we would freelance, we were both working. Between us, we were making about $300,000 a year, which is great, back in 99. I mean, it was really good money. So it wasn't like, super easy to get to that level. But you also felt that that must be achievable. So that was the goal. And then if I could get there, I felt I'd actually be happy just doing that the rest of my life.

• 12:04Shaan Puri?

  Right.

• 12:05Speaker 00

  But then there'd always be that opportunity that maybe you go to the next level beyond that, right?

• 12:09Shaan Puri?

  Yeah. And so you were like, okay, if I can make as much money as I'm making in my job, but doing my own thing, I'll be happy. And did you have an idea already? Or it was like, first day at home, okay, time to think of ideas?

• 12:20Speaker 00

  I had some ideas. So the first idea that we started on, and I did it with a friend of mine to begin with, the very first idea, and it was called Interview Test. Now, actually, some startups recently doing this.

• 12:31Shaan Puri?

  Okay.

• 12:32Speaker 00

  And the idea was if someone was applying for a job, they, a technical job, programming job, you want to know how good they are technically.

• 12:40Shaan Puri?

  Right.

• 12:40Speaker 00

  So you'd send them a link with a timer and they would answer questions and do some exercises. And you'd find out how good they were at certain programming languages.

• 12:48Shaan Puri?

  I literally had someone pitch me this idea yesterday.

• 12:50Speaker 00

  Oh, really?

• 12:50Shaan Puri?

  He's like, you know, we need a screener. We need a practical test.

• 12:53Speaker 00

  Yeah, there are. I can't remember the name. There's some startups now doing that. But this was 20 years ago, and I think probably a little too ahead of its time. And we pretty much developed it, never went live with it, came up with another idea, so we pivoted.

• 13:05Shaan Puri?

  Okay. So you didn't even ship it. You were like, you got excited by something else.

• 13:07Speaker 00

  Yeah, basically. And so the other idea, we knew that was a hard one to market, like it would be a slog. So the other idea was purely viral, and it was called Lemon Link. And it was a self updating address book, so similar to kind of Plaxo type thing, but not software, purely web based. So we developed that, did go live with it, and got, I think by the time we closed it down, a total of about 2,000 registered members.

• 13:31Shaan Puri?

  Okay.

• 13:31Speaker 00

  Not the most viral website ever.

• 13:33Shaan Puri?

  At the time, were you like, hey, 2,000, not bad? Or were you like, this is bad?

• 13:37Speaker 00

  No, that's pretty bad.

• 13:39Shaan Puri?

  Okay.

• 13:39Speaker 00

  I mean, it's funny, looking back in the 90s, like 90s, early 2000s, like a million was the holy, you know, your website, the first million users rather than the first million dollars was kind of, if you could get to a million users, you were like, you'd made it.

• 13:52Shaan Puri?

  Right.

• 13:53Speaker 00

  Internet land, yeah.

• 13:54Shaan Puri?

  I mean, so that's, that's why I picked Million for this podcast, because I remember when I was young, all my hypotheticals, like, would you cut off your arm for a million dollars? Because I thought, well, a million dollars, that's like infinite dollars. That's all the dollars.

• 14:07Speaker 00

  Right.

• 14:07Shaan Puri?

  And

• 14:07Speaker 00

  When you're a kid, it is.

• 14:08Shaan Puri?

  When I was a kid, it was, right? And I, and I think for many people still today, they're like, shit, if I had a million dollars, I wouldn't have any problems, type of thing. So I think Million is just this. You know, like this sort of fantastical number that exists in people's brain. Million users, million dollars. I know now it's sort of creeping into, you know, tens of millions or a billion is the new.

• 14:27Speaker 00

  Yeah, you need to add a comma nowadays.

• 14:29Shaan Puri?

  Yeah, but I'm still in the million land. Okay, so, so you wanted Lemonlink to work. It's not working.

• 14:34Speaker 00

  Right.

• 14:35Shaan Puri?

  And you're just at home. How are you feeling at this time? You're in a bedroom, you're working on this, you know, you guys have Isabella, you have your first baby.

• 14:41Speaker 00

  Yeah.

• 14:42Shaan Puri?

  Uh, what's life like at this time during, during this period?

• 14:45Speaker 00

  It was a little bit stressful because we didn't have like financial security. But at the same time, I was enjoying it. I was enjoying the learning process and, you know, I felt I was creating things. It felt like a very creative process. And yeah, our daughter was born sort of during the period of the early startup days. And so we entered parenthood and then came up with another pivot.

• 15:06Shaan Puri?

  Okay.

• 15:06Speaker 00

  But new startup, really, not really a pivot. And that was called Babysitting Circle.

• 15:10Speaker 03

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• 15:54Speaker 03

  Highly recommend checking it out.

• 16:02Speaker 00

  Basically, parents babysit for other people's children in a circle.

• 16:05Shaan Puri?

  Mm-hmm.

• 16:05Speaker 00

  And so you kind of exchange credits within the circle. Sometimes people use tokens. And so we kind of took that online and created a digital thing where you could find a local babysitting circle and, and hopefully join one and do, didn't really work.

• 16:19Shaan Puri?

  And what was going wrong? Is this execution? Is this, in your opinion, all right, nobody knows, but is it, you weren't doing a good job? Or was it the market wasn't there?

• 16:27Speaker 00

  Yeah, I mean, that one, again, now we'd moved away from the viral thing. We thought it would be somewhat viral because parents all know other local parents and they would tell them about it and ask them to join, right? But it wasn't like, like ever going to be exponentially viral. I don't know. I mean, I think every startup, every like new website we launched, I felt, oh, I know so much now that I didn't know before. You never know what you don't know.

• 16:50Shaan Puri?

  Right.

• 16:50Speaker 00

  And then the next one would be like, oh, my God, the last one. I don't know. I have a clue what I was doing. Now I think I've really worked it out. And of course, each time I was wrong, eventually it became true. But yeah, it just went from one to the next. And this all happened relatively quickly. It wasn't like I was spending one to two years on each, you know, I was spending maybe six months.

• 17:07Shaan Puri?

  Yeah.

• 17:07Speaker 00

  And then moving on to another complete.

• 17:09Shaan Puri?

  And what were the big things? I mean, I don't even know if you can remember now, but what were the big kind of like realizations? What were those big learnings where you looked back, you're like, oh, shit, I didn't know this, or I didn't understand this before, but now I know.

• 17:20Speaker 00

  And part of it was just becoming technically better. So I was becoming a lot faster and able to build more stable websites. And this is back in the day when there wasn't any kind of cloud hosting. So, you know, you're racking servers and doing the whole shebang on my own. So there's definitely a technical learning, but I think the, the thing that I should have like insisted on and not done anything other than was focused on viral. Because the, the problem that we always hit upon was I never tried to raise any real money from anyone that would allow us to like have a real marketing budget. And so I was coming up with these ideas that then needed marketing and marketing was not my forte. Like, I'm not a sales marketing guy. And so it's like creating products, but then unable to convince people to use them.

• 17:59Shaan Puri?

  Right.

• 17:59Speaker 00

  And didn't have the budget, even if I knew how to spend that money really wisely, I just wasn't going to be very good at that. So I do a little bit of Google AdWords and like, that was sophisticated for me.

• 18:09Shaan Puri?

  Right.

• 18:10Speaker 00

  So had I focused on viral, I could have, you know, it only becomes a technical challenge, right? But then you've got to focus on products that are inherently viral. So I kind of eventually worked out.

• 18:19Shaan Puri?

  You found your sweet spot, really?

• 18:21Speaker 00

  Yeah. We did one other website that was another, you know, pay to get customers. You write your will online. It was called Friendly Wheels.

• 18:28Shaan Puri?

  Okay.

• 18:29Speaker 00

  Great name. Yeah. The unfriendly wheels website never got anywhere.

• 18:32Shaan Puri?

  It sounds like it would be a good bar too, you know, there's this friendly wheels, wheels, the bartender, he makes great drinks.

• 18:38Speaker 00

  Yeah, so that one didn't work either. And then eventually we hit on an idea.

• 18:44Shaan Puri?

  And did you lose confidence at all during this time? Because most people would, you know, I don't know if you just don't have that gene.

• 18:49Speaker 00

  No, I'm too arrogant to lose confidence. I mean, a little despondent at times, you know, I think my friends were like, why don't you go get a job?

• 18:59Shaan Puri?

  When friends start having like semi interventions.

• 19:01Speaker 00

  Yeah, but I mean, the reality was I was enjoying doing this so much more than I ever was. Like my last job was like just a hell of a miserable job. And I just hated it. And this was just, this was fun. I was sitting at home. I was very self disciplined. I was working from a spare bedroom. But I would get up early in the morning and then take like a 20 minute lunch break and then work through to kind of early evening hours. And just loved every moment of it, doing it. It was like creating something, learning, building, that didn't have the financial success. We mortgaged our flat twice, so it went up in value by about a factor of three. And so we took money out twice and basically lived off that.

• 19:39Shaan Puri?

  Okay, all right. So no stranger to risk. And so you, I like the, I like the way you're thinking about that because I've worked on projects in both fronts. I've worked on projects where I'm like, this will be great if it works. And when it doesn't work, which it's most likely not going to work, then I'm bummed out and I'm like, fuck, that was a waste. You know, but then, you know, yeah, there's learnings, but like I wasn't, if I wasn't enjoying doing it, A, it's hard to just wake up and do it every day. But B, then success is kind of dependent on it working out.

• 20:08Speaker 00

  Right.

• 20:08Shaan Puri?

  And now I've basically made it a mandatory thing where I'm only going to do projects where I enjoy doing them. So at the very least, I have a good time.

• 20:15Speaker 00

  Yeah, and I would always prioritize enjoying work over any financial. I mean, obviously you do need to do something where you can afford to live.

• 20:22Shaan Puri?

  Yes.

• 20:23Speaker 00

  I certainly spend a huge portion of my life working. So if I don't enjoy doing the thing that I spend more time doing than anything else, what am I doing it for?

• 20:32Shaan Puri?

  Some later happiness.

• 20:34Speaker 00

  Yeah, you're always optimizing for the future, but never the present.

• 20:37Shaan Puri?

  Right.

• 20:37Speaker 00

  So and that's become one thing that, and it's not always obvious because you're, it's so easy to be like planning. Like it was John Lennon made the quote famous like life is what happens whilst you're busy making other plans. And I just think it's such a such a true quote that it's so easy to say, well, once I've done this and then that and then that, then everything's going to be great.

• 20:56Shaan Puri?

  Right.

• 20:57Speaker 00

  And then I'll be happy.

• 20:57Shaan Puri?

  That's a trap.

• 20:58Speaker 00

  Yeah. And the moment of arrival is is very finite. The journey is really long. So don't like optimize for that one moment where you're like, oh, I'm ecstatically happy because that worked.

• 21:08Shaan Puri?

  Yeah.

• 21:09Speaker 00

  And then like, well, then what? What do you do next? There's something after that, you know?

• 21:13Shaan Puri?

  You finally stumble into, you know, that first thing that starts to work.

• 21:18Speaker 00

  Right.

• 21:19Shaan Puri?

  Describe what that is and how you even stumbled into it.

• 21:22Speaker 00

  So the website was called Birthday Alarm. When we did one of our early websites, Lemon Link, one of the options on that was you could enter a birthday, right? And no one ever said anything nice about Lemon Link of the 2000 members. No one ever said, oh, thanks for creating this. It's awesome. The only thing people ever commented, and I think it was my cousin kind of commented for New Zealand, emailed me and I think we used to send out like a reminder to say it was someone's birthday. I said, I think he might have got a reminder saying it's my birthday. And he said, oh, that's really cool because, you know, I didn't actually know your birthday. And then he sort of sent me a nice email or an e-card. I can't remember what.

• 21:59Shaan Puri?

  Nice.

• 22:00Speaker 00

  And I thought, oh, okay, that's cool. So it just it just kind of stuck in my head that that was cool. Then, um, and then we thought, well, why don't we just, why don't we try just see if we can, now we were thinking viral, viral, viral, like, can we do a website? And all it does is just remind people of birthdays. Like, that's it. Super simple, simpler than Lemon Link by far in many ways. And we knew it will, we thought it could be inherently viral because the reality is, if you think about whose birthday do you really know by heart? You know, you're like children's, your parents, siblings. You probably don't know your cousins. You may know one or two best friends, but that's it.

• 22:36Shaan Puri?

  Yeah.

• 22:36Speaker 00

  The vast majority of people you know in life, you don't know their birthdays. This is obviously before Facebook.

• 22:41Shaan Puri?

  Yes.

• 22:41Speaker 00

  Now you know far too many people's birthdays. But you don't care about. So you have to, in order to use it, you send an email and ask all of your friends to enter their birthday because you don't know it.

• 22:52Shaan Puri?

  A fair request, not spamming your friends, just saying, hey, what's your birthday? I want to keep track of it. I want to remember it.

• 22:57Speaker 00

  And this was back in the day when there weren't a lot of email requests from websites, like viral things weren't, there weren't a lot of inherently viral websites or people even really trying to do it for some reason. And so you got this fair request saying, hey, I'd like to know your birthday and be reminded each year. Can you enter it here? The response rate to that email was very good. And then the next question was, would you like to be reminded of your friend's birthday, the one that just asked you? So a lot of people would say, yes. Well, to be reminded, you need an account. So you create an account. Do you want to be reminded of lots of other friends' birthdays?

• 23:27Shaan Puri?

  You only got the one on the calendar. Let's get everybody else.

• 23:30Speaker 00

  And so then you take them through the email flow. And at the time, we did copy and paste a link. So we had kind of a little, you should obviously see everywhere, but had like a very short email. So it was more than a link. It was like a pre canned email and a text area box.

• 23:42Shaan Puri?

  Don't even need to think of what to say.

• 23:44Speaker 00

  Yeah. And just a one line, hey, I'd like to be reminded of your birthday. Can you click on this link and enter it for me?

• 23:49Shaan Puri?

  Yeah.

• 23:49Speaker 00

  And so people would copy that into their address book and send it. And it didn't work immediately day one, but we did some tweaks. And then we, I remember getting up one morning, and this was probably the most excited I've ever been during the entire, like, period career. Yeah. Like more excited probably than any highlight of Bebo even. And so as you and I got up one morning, we'd done this little tweak.

• 24:14Shaan Puri?

  Do you remember what the tweak was?

• 24:15Speaker 00

  I think it was even around copy and paste because I think originally we had people entering, like, enter all your friends' emails.

• 24:22Shaan Puri?

  Right, tedious.

• 24:23Speaker 00

  Yeah. And then we're like, why don't we just do a text area? I think that's my brother's idea, actually. Why don't we just do this text area boxing and let them copy and use their own email client rather than us sending and getting blocked because our mail server's not listed. And so we got up the next morning, let's see how it did. And we went in and we had reports written so we could see how well things were doing. But because we had so few users, the one report we had was a list of names of those who had joined and the timestamp at which they joined, right? Because, you know, we'd get a few people a day.

• 24:54Shaan Puri?

  Yeah.

• 24:55Speaker 00

  So you're like, hey, Margaret has joined. Great.

• 25:00Speaker 00

  And so we got up in the morning and then we clicked run on the report. It pulled up and I was like, oh, Jesus, look at that. And all these names were listed, but they were like, you know, within a minute, there were a few each minute. And I was like, oh, my God. So then I had to write another report to actually count how many users there were. I think overnight we'd we'd got a good few hundred users. And even then it was kind of ramping up. And so we we sort of jumped up and down and did a little dance in the office come bedroom. And kind of celebrated, I was like, we've done it, we've done it, that's it. You know, three hundred users, not good, it'd be great. But then we thought, you know, this is ramping up, we could get bigger and bigger. And so we carried on working on it and we got it to the point through the copy and paste mechanism where we're getting ten thousand users per day.

• 25:43Shaan Puri?

  Wow.

• 25:43Speaker 00

  Which, again, back in, uh, this was now two thousand, that was a lot of users.

• 25:48Shaan Puri?

  And so you're you, this is like a sort of magic beanstalk. It's like, you know, you just wake up and you get users for free.

• 25:55Speaker 00

  Yeah.

• 25:55Shaan Puri?

  Every day.

• 25:56Speaker 00

  Yeah, I know, it's great, isn't it?

• 25:57Shaan Puri?

  And so and and at this time, there's no business model.

• 26:00Speaker 00

  No, I hadn't thought about that.

• 26:01Shaan Puri?

  But you're like, I'm over the moon anyways, because people are actually using the thing I built.

• 26:05Speaker 00

  Yeah, I I was still living with this this number of a million users in my head.

• 26:10Shaan Puri?

  Yeah.

• 26:10Speaker 00

  Right, so if you're getting ten thousand a day, we need a hundred days and we're going to get to that million, right? So we just have to wait a few months and not screw it up.

• 26:19Shaan Puri?

  Yeah.

• 26:19Speaker 00

  And we'll get there.

• 26:20Shaan Puri?

  And so what what happens from there?

• 26:21Speaker 00

  Well, we still weren't making any money, but. We were in England at the time and we moved to the US, April twenty second of two thousand and two. So we'd been doing birthday alarm for a while then and we had accumulated a few million users. And we were doing, we were just doing through, I think it was tribal fusion ad network, we were just putting ads on the pages. But it's not the sort of website where you come back to every day.

• 26:46Shaan Puri?

  Yeah.

• 26:47Speaker 00

  So we were sending a significant number of reminders and we'd started doing some greeting cards. We thought, well, what's the one thing you're going to do if you know it's someone's birthday, you want to wish them happy birthday, so send them a card. So we thought we'll combine, we'll use the viral mechanics of birthday reminders to grow. And we'll use the greeting cards to one day monetize.

• 27:07Shaan Puri?

  Right.

• 27:07Speaker 00

  In a more meaningful way than we could for ads. And so from the ads at that point, we were doing ten thousand dollars a month in revenue. And that was, you know, to pay for our living costs, the server costs, you know. All the business costs and everything. So we were living on sort of in a very conservative manner and we were just about breaking even on ten thousand a month. So we hadn't reached the point where we were used to earn, but we'd reached the point of kind of financial independence, as it were.

• 27:35Shaan Puri?

  Right.

• 27:35Speaker 00

  But not living as well as we used to.

• 27:38Shaan Puri?

  But it still felt like a win.

• 27:39Speaker 00

  It felt like a win. It felt like a meaningful milestone, right? And so we moved to the US. I literally, we had two servers.

• 27:47Shaan Puri?

  And you moved because for work reasons or just life reasons?

• 27:51Speaker 00

  So she's from the East Spain.

• 27:52Shaan Puri?

  So you wanted to be with your family.

• 27:53Speaker 00

  Yeah, we always agreed we'd move between countries. We both wanted to experience living in each other's country.

• 27:59Shaan Puri?

  Yeah.

• 28:00Speaker 00

  And so the time had come. We're like, well, there's no reason that we can't move. And I thought, you know, Silicon Valley, maybe not the worst place to do a website.

• 28:07Shaan Puri?

  So. And were you talking to other entrepreneurs, internet people at this time? Were you learning from them? Were you?

• 28:12Speaker 00

  Nope.

• 28:12Shaan Puri?

  Getting, nobody knew about birthday alarm? Nobody's getting press? Nobody's?

• 28:15Speaker 00

  I thought I'd proven nothing. I was not worthy of meaning other people that did internet stuff.

• 28:21Shaan Puri?

  Okay.

• 28:22Speaker 00

  So it was literally myself. And so she was was also a programmer, got a job at that same insurance company. So she was helping me on some of the programming as well. So the both, both of us were doing programming in the early days and she was doing it between children. We had another child born in the UK before we moved. But yeah, we just made the switch. So I packed one of our two servers in a suitcase, checked it in, flew it to

• 28:46Speaker 00

  San Francisco, went and racked it.

• 28:48Shaan Puri?

  Who needs the cloud?

• 28:49Speaker 00

  Yeah.

• 28:49Shaan Puri?

  Pack your server, check it in.

• 28:51Speaker 00

  We're acting in a colo. I think we were down synchronized the databases. I think we were down for like two minutes whilst I like flipped.

• 28:58Shaan Puri?

  Right.

• 28:58Speaker 00

  Over from from the UK to the US hosting, probably violated all sorts of data.

• 29:03Shaan Puri?

  Right. Thousands of birthdays lost.

• 29:05Speaker 00

  Yeah. Anyway, we we made that jump and.

• 29:11Speaker 00

  And now we're in Silicon Valley, still not meeting anyone who worked in the internet space.

• 29:15Shaan Puri?

  And so where did things start to turn, where you go from sort of the 10,000 a month to, I believe you got to like 10,000 a day. What was that jump? How did you sort of ramp it up? Because Birthday Alarm, the user base grew from, you know, zero to, I don't know, where is that now? It's 50 million more?

• 29:30Speaker 00

  Uh, I mean, that, I think we still actually own Birthday Alarm. I think since its inception, it's probably registered about 200 million users. But over a very long period now, 20 years, pretty much.

• 29:41Shaan Puri?

  Yeah.

• 29:41Speaker 00

  Yeah, we're coming up for our 20th birthday. So it's a long time. Obviously, a lot of those are not active. We still hadn't made the million. So we haven't got to that part. We can end the podcast when we get there. We, we were doing it, we were still making 10,000 a month. We were living in Walnut Creek in the East Bay, rented an office, like a tiny office. We could both just about fit two desks. We were sharing it with two lawyers, well, a bigger office with two lawyers and an accountant. Uh, one of the lawyers shouted on the phone a lot, which was always entertaining. He was a litigation lawyer. And so we were there, still not meeting anyone. And then a friend of mine emailed me a link, a guy called Morgan Sowden, still a good friend today.

• 30:21Speaker 00

  He emailed me a link of Friendster and said, check this out. And so I clicked on the link. I was like, oh my God, that's amazing. This is really, really cool. And I was just kind of immediately enthralled by it. So thought, okay. So like two minutes later, I was like copying the Birthday Alarm code base.

• 30:39Shaan Puri?

  You're like, we're doing this now.

• 30:40Speaker 00

  Yeah, changed name and started, you know, it was amazing. 90% of the code I, I used from Birthday Alarm. Cause we had all these like backend systems and so on, customer support and so on. So I started developing this new website and my friend. So I did that with my friend Morgan, who'd sent me the link and my brother was also part of that. And he, he owned a domain name called Ringo, Ringo.com, which he'd bought just because he could for $1,500, it's already available. And he said, why don't we use this name for it? And so I think about two weeks later, we launched Ringo.com as a direct competitor to Friendster. So it was an early, early social network. Um, and kind of applied everything we'd learned on viral marketing to that point. And I think within, yeah, by the time we sold it, we had about four hundred thousand users.

• 31:25Speaker 00

  But we started selling it three months after launching the day that he sent me that link.

• 31:31Shaan Puri?

  Okay, from the day you heard of.

• 31:33Speaker 00

  The day we heard of it, we were selling our business and it was definitely a mistake to have sold it. We shouldn't have sold it. I still, I didn't, I was still only making ten thousand a month. This was now incurring way bigger costs because this thing was far more intense in computing power than the previous one. Because people were spending all day on it. So we had four hundred thousand users, but a lot of them were active. And so I spent six thousand dollars on a new database server, which was like a lot of cash to save up. I racked it and we outgrew it like the next week. And I was like, fuck, I can't do this. And of course, I should have gone and raised money.

• 32:06Shaan Puri?

  Right, but that wasn't even a consideration for you at the time.

• 32:08Speaker 00

  Didn't really think about it. Yeah, didn't even speak to a V C, didn't pick up the phone.

• 32:12Shaan Puri?

  Right.

• 32:12Speaker 00

  And then I went to my, we went, Sochi and I went to our first ever like internet networking event that we'd ever been to. And the founder of, of Friends, Jonathan Abrams was there on a panel, talking about social networking, of course. And we were at this event and we were just listening and then we spoke to a couple of people and I said, oh, we're doing this thing Ringo. And then two people that night said, we want to buy Ringo.

• 32:38Shaan Puri?

  Okay.

• 32:39Speaker 00

  Yeah, so one was iVillage and the other was a company Tickle.

• 32:42Shaan Puri?

  Yep.

• 32:42Speaker 00

  Not, wasn't like a formal offer, but it's like, we'd love to talk to you about this, yeah. So I had some follow up meetings with them, ended up meeting the founders of Tickle and ended up selling it to them. And it took about three months to close the sale. So it took as long to close the sale as it did to build the entire business, yeah. If you can call it a business. And we were making a tiny bit of money from advertising, but not.

• 33:03Shaan Puri?

  And how did you guys negotiate the price? Did you just have a number in mind or did they make an offer?

• 33:07Speaker 00

  They made an offer, yeah. It was mostly stock with some cash. So I think we sold it for very little. Again, still haven't got to the million dollar bit.

• 33:15Shaan Puri?

  Right.

• 33:16Speaker 00

  We sold it for, I think, in, in consideration at the time, I think it was around seven hundred thousand dollars.

• 33:21Shaan Puri?

  Okay.

• 33:21Speaker 00

  And at the time, to give some perspective, so Friends had just reached that holy grail of a million users and we were at four hundred thousand. So we were the second. And biggest social network in the world with four hundred thousand users.

• 33:33Shaan Puri?

  Right.

• 33:34Speaker 00

  And Friendza had been valued at, I think, fifty million and we sold it for like peanuts, really. Yeah, so I totally should have gone and raised money.

• 33:40Shaan Puri?

  Yeah.

• 33:41Speaker 00

  And got some help on scaling it and some money. But we sold it, it ended up, the Tickle then sold later, so it ended up being worth two million dollars. Because the Tickle stock was, went up in value.

• 33:50Shaan Puri?

  And this whole time, Birthday Alarm's still kicking off money.

• 33:53Speaker 00

  Yeah. And so I went to work, as part of the condition of the sale, I had to work with them for a while. I can't remember, it was three or six months that I would work for Tickle. But I kept Birthday Alarm, they didn't buy Birthday Alarm. And, and whilst I was at Tickle, now I, suddenly I was now meeting other engineers. Other people, other entrepreneurs, right? And they were doing something which no one else was doing, which was doing the address book importing, scraping. And so there was no APIs for like Hotmail and Yahoo, Gmail was around then, but very small. So the two big ones were Hotmail and Yahoo.

• 34:24Shaan Puri?

  Right. So instead of copy paste this and send the email on your own, you say, connect to Hotmail.

• 34:29Speaker 00

  Yeah.

• 34:30Shaan Puri?

  And it says.

• 34:30Speaker 00

  Import your address book.

• 34:31Shaan Puri?

  Here's all your email contacts, push send.

• 34:33Speaker 00

  Yeah. And so they were doing, Tickle did a, they were called E Mode and renamed as Tickle at the time that they bought us, but they, they were doing these online quizzes. And so they had a famous one, which was like, you're, what type of dog are you? It went super viral, tens of millions of users.

• 34:48Shaan Puri?

  What type of dog are you?

• 34:49Speaker 00

  Uh, I can't remember. I don't believe in that crap. Uh, they were doing this thing and it wasn't, the funny thing was, it wasn't really working for them. Like, they put it live and it didn't really move the needle for them. And I don't really know why, but I thought it was very clever. And I hadn't seen anyone else doing it. So I think they were the first people to do it. So I went home one weekend, because I was still working for them. And I was like, I'm going to put that live on Birthday Alarm. So I worked the weekend, put it live Sunday night and then looked at the data like twenty four hours later. And we'd added a hundred thousand new members. So we were still adding ten thousand a day. And then twenty four hours later, we just added a hundred thousand members. And I was sort of ecstatic and thought, this is amazing.

• 35:33Speaker 00

  But then I also thought they're obviously going to cut me off because it's not, I don't think they had anything in their terms of use against it. But like, all they had to do was block my IP address because it's all coming from one server and I'm not going to be able to do it. Or they're going to send me a cease and desist, right? And so I was, I was, went live with Hotmail and Yahoo and then it just carried on working. And so the next day we added a hundred and fifty thousand. I think it peaked at just under two hundred thousand, but it stayed there, stayed at a hundred and fifty thousand for an entire year. It didn't drop.

• 36:02Shaan Puri?

  Every day you're like, today's the day.

• 36:04Speaker 00

  Yeah.

• 36:04Shaan Puri?

  They're gonna cut this off.

• 36:06Speaker 00

  And then every now and then it would actually stop working because they changed their code. Also, we're not doing it through an API. So I'd have to like log in, look at their HTML, work out how to delineate the different contacts. And, and that's like, oh, now fix it. So I probably fixed it like a dozen times where it broke because they changed something. But every time my heart was sinking, oh, they blocked me. I was, oh no, they haven't, they just changed something. And so that was, that was definitely like the turning point where we knew would be successful. And then during that period where I was working at Tickle, I went live, we'd done greeting cards on the website. And I was like, we need to start charging for greeting cards. So we added a subscription was thirty ninety five for an annual subscription. All you can send greeting cards.

• 36:51Speaker 00

  And so we went live with that whilst I think we're still working at Tickle. And then this was, everything's always a very round number in zeros for us for some reason. But the, the first day we made ten thousand dollars. So we went from ten thousand dollars a month to ten thousand dollars a day. So financially, this was by far the biggest transformation in our lives.

• 37:11Shaan Puri?

  Yeah.

• 37:11Speaker 00

  And so we never really did reach the point of what the money we used to make in jobs. We just went

• 37:17Shaan Puri?

  Way over.

• 37:18Speaker 00

  Way over it in one go.

• 37:19Shaan Puri?

  Yeah, that's how things tend to go, right? It's like things go from sort of nothing, nothing, nothing, nothing.

• 37:24Speaker 00

  Right.

• 37:25Shaan Puri?

  To you overshoot because you've been investing in something that had more potential.

• 37:29Speaker 00

  Yeah. And so with that first year, we made just shy of four million dollars, like the first 12 months of charging. And our expenses were the same. It was still myself and Soichi in this little office. Our colo costs were the same.

• 37:40Shaan Puri?

  Right.

• 37:40Speaker 00

  So we were still living pretty much on 10,000 a month, but we were making 10,000 a day. And that's when we we moved to San Francisco. We thought we can actually now afford San Francisco. So we moved into the city. Yeah, I mean, we'd it. We just carried on building Birthday Alarm for a while. And then wanted to go back to social networking. So we had a non-compete when we sold the original social network. So we waited for that to expire. And in fact, before it even had expired, we did another website, which was going back to our first viral idea of Lemon Link and doing that again. And we called it Bebo. And it was a self-updating address book. And I was like, I'm going to see if everything I've learned since we.

• 38:17Shaan Puri?

  Can I do the same idea?

• 38:19Speaker 00

  Yeah.

• 38:20Shaan Puri?

  But now better.

• 38:20Speaker 00

  But do it properly. And so we applied all of the viral techniques. Again, it was like, you know, Birthday Alarm, Save As.

• 38:27Shaan Puri?

  Rename.

• 38:27Speaker 00

  Bebo, rename, all the viral mechanics, the scraping, all of that code will still valid. Super simple thing of just like, instead of entering your birthday, enter your contact details.

• 38:37Shaan Puri?

  I I love how you had two constraints. One was you basically between you and Zochi, you were the only programming talent you had. So you kind of just chose ideas that were somewhat similar. It's like, okay, if I can reuse 80% of what I already built, great, then I don't have to have, you know, weeks and weeks of engineering just to get something live.

• 38:52Speaker 00

  Right.

• 38:53Shaan Puri?

  And then two was, well, I don't have money, nor do I really have a sort of sales and marketing background. It's not what I enjoy. So I'm going to make products that are designed to be viral, where using the product invites more people to the product.

• 39:04Speaker 00

  Yeah.

• 39:04Shaan Puri?

  And those two constraints, I feel like made your career. Whether you consciously chose them or or not, I mean, those two things. Because if if you had had a whole bunch more resources, maybe you would have chose other projects that weren't quite as, you know, high potential. And so I think that it's amazing how within those two constraints, you found projects like Birthday Alarm, Ringo, Bebo, that all were able to hit.

• 39:25Speaker 00

  Right. Yeah.

• 39:26Shaan Puri?

  It's kind of incredible.

• 39:27Speaker 00

  And the viral thing was, we didn't hit on it in the very beginning, but it became apparent when we tried and failed at marketing.

• 39:33Shaan Puri?

  Right.

• 39:34Speaker 00

  And that's does certainly stuck true for a long time that we just focus on viral stuff. So then the Bebo story started, this was now January 2005. We it took only a couple of days to develop it because it was pretty much the same website. And we went live and we had a million users after nine days of going live.

• 39:53Shaan Puri?

  Okay.

• 39:54Speaker 00

  It was the most viral website we'd ever done by far. The the viral coefficient, the K factor, whatever you want to call it, was three point five.

• 40:03Shaan Puri?

  For reference, if it's over one, you've like.

• 40:06Speaker 00

  One is viral.

• 40:07Shaan Puri?

  One is viral. One is you're gonna win.

• 40:08Speaker 00

  Yeah.

• 40:09Shaan Puri?

  Three point five is like you're taking steroids.

• 40:11Speaker 00

  So every person who joined would get three and a half other people to join on average. And so I think on the ninth day, we added three hundred and fifty thousand new members on one day. And bizarrely, a hundred thousand of those three hundred and fifty thousand were from Singapore. So I had to look it up on a map. I looked up the population. I was like, Jesus, we just like in one day got a meaningful percentage of the entire population of one country to join.

• 40:35Shaan Puri?

  Right.

• 40:36Speaker 00

  Yeah, which was just bizarre. But as at the same time, it was the most viral website we'd ever done by far. It was also the least sticky. So I think two people came back. One of them was me. And then.

• 40:47Shaan Puri?

  One other guy in Singapore.

• 40:48Speaker 00

  Then Margaret again, she was she was back. Yeah. So, yeah, I just didn't, you know, it was it was I kind of validated the original viral concept. But as I say, even when I started doing this, I remember speaking to Sushi about it and saying, you know, no one's gonna use it. Like, it's kind of an interesting academic exercise, but like self updating address books don't work.

• 41:06Shaan Puri?

  Yeah.

• 41:07Speaker 00

  I think they could work if Apple did it and build it into the iPhone or if Google did it. But they don't work as like a standalone thing. Because you end up getting ten percent of your friends entering their address book at their contact details. But then they don't continue using it because who uses an address book with only ten percent of your contacts in it? And because they're not using it, they don't update it. So we ended up sort of calling it the non self updating self updating address book.

• 41:32Shaan Puri?

  So you realize that's not gonna work, but you're like, let's go back to that social networking thing. That sounds way more fun.

• 41:36Speaker 00

  Yeah, I mean, it was kind of filling in a gap, waiting for the non-compete to expire.

• 41:40Shaan Puri?

  Okay.

• 41:41Speaker 00

  So then we started adding photos to it. We thought, well, you're not going to visit and look up someone's address every day. But if people started sharing photos, so Flickr was a big hit around that time before that. So we thought, why don't we use the virality of the contacts, but make it also a photo sharing website, which then people may do frequently. And then obviously photo sharing becomes a big part of social networking. And so then that started working a little more, started getting some repeat use, some decent photos. And then we just, I spent actually six months, the longest time I've ever spent developing like a product. Spent six months actually developing the social network. We launched with a very simple social network, spent six months actually making it a social working site as opposed to social not working.

• 42:23Speaker 00

  Yeah, it took six months for us to go from like no engagement to really high engagement.

• 42:27Shaan Puri?

  And so paint a picture in people's minds. So Bebo at this time, is it like what we see kind of roughly with Facebook today or MySpace? For those who remember that, or was there some core differences?

• 42:36Speaker 00

  If you think of early friends who were an even early Facebook, it was kind of about profiles. And it was about posting on other people's pages and, but you would post in like different widgets or different boxes. So you'd, there'd be like a comment section or you could, um, you know, take, we, we had quizzes you could take. So you'd sort of engage on someone's page. There wasn't the concept of a newsfeed. So Facebook at the time didn't have the newsfeed concept, um, early Bebo days. What we did do was we did, basically we did a newsfeed but as an email. So we'd send a daily email. We called it the Chit-Chit Changes email. Cause you know, he doesn't like sting. And so we'd send a daily email. We do all that. So that was a way of kind of pulling people back. So they could see everything that had happened. But I don't know why we didn't make that like dynamic. I think we just thought that would be really hard to do.

• 43:21Speaker 00

  Cause it was hard work creating this email in batch and working out all the differences, but we should have sat down and worked out how to do the actual newsfeed idea.

• 43:28Shaan Puri?

  Yeah.

• 43:28Speaker 00

  But yeah, it wasn't dissimilar.

• 43:29Shaan Puri?

  And what was the, you know, I mean, you've been asked this a million times, but why did Facebook win? Cause you had a great sale, but Bebo, the product didn't necessarily like sort of become the de facto social networking site.

• 43:41Speaker 00

  So I think there's a few reasons. We, we started a year. So when we did our original web social network, Ringo, we were probably six months before Facebook went live. So we were definitely very early. When we launched Bebo, we were a year after Facebook. So we were always in catch up mode. They had considerably more funding. We raised, we did one round and raised fifteen million dollars. They had considerably more funding. They were probably ten times the engineers. We were always in catch up. It's not like we had the lead and then they overtook us. But I do think they made some decisions that we didn't make early on, which kind of paid dividends. They insisted on real identities and we didn't. We were more sort of, we were trying to be the kind of self-expression of MySpace, but with kind of product quality of Facebook and engineering of Facebook. That's where we were trying to kind of position it.

• 44:27Speaker 00

  And we thought that the middle ground would be the winning ground.

• 44:29Shaan Puri?

  Right.

• 44:29Speaker 00

  But it, it, everyone entered, started entering silly names and then they'd enter names which had like hearts in it. And like, and then it was just all symbols for their name. And so you try to find a friend, like A, you couldn't remember what ridiculous combination of characters each friend had chosen to use for themselves. And then you couldn't search because I can't type heart in the search box, not very easily anyway. And so I think that, that was one thing. We, we took off with a teenage demographic early on. I, I designed it for me and then realized, oh, I see, I have the mentality of a teenager because that's who it's resonating with. And it, I think it was hard then for the older demographic because it got, it got branded as a teenage website. So it was hugely popular with teenagers, like any, like every single teenager, almost bar none was in the UK.

• 45:14Speaker 00

  And Ireland and New Zealand were using it. So I kind of called it playground viral. Cause fifty percent of our new users were actually just typing bebo.com in the URL and signing up.

• 45:24Shaan Puri?

  Right. They heard, they heard about it on the playground.

• 45:26Speaker 00

  They heard about it. It was true word of mouth marketing. And so it was very popular, but then we just, we hit this ceiling and then we, we grew in those other countries. We, twenty percent of our page views were US based, sixty percent were UK, uh, so US based. Sixty percent were UK based, and I think about twenty percent, what, fifteen percent were in Ireland. We had these great markets that were English language and therefore easier to monetize. And we didn't have to do the multilingual thing we did later on, but we didn't need to in the early days. And but we just couldn't, in the end, Facebook, they kind of didn't care about other markets to be in with. They were very US centric, so they kind of left a little window open. So we launched and cared about Bebo in the UK. I think they were just starting to do UK schools and colleges.

• 46:09Speaker 00

  And so we just took off there without the sort of threat and competitiveness of Facebook. But then eventually they started gaining traction.

• 46:17Shaan Puri?

  Right.

• 46:17Speaker 00

  And we could tell because they're talk, people are talking about Facebook on Bebo. So we we could search and see and people were like posting on their profile, don't use it anymore on Facebook. Here's a link.

• 46:28Shaan Puri?

  Right.

• 46:28Speaker 00

  And I'm like, oh shit.

• 46:30Shaan Puri?

  So you, how how did you come to the sort of realization or it's time, it's time to sell? Because I don't, I don't think from the outside, people could see necessarily that it was. Was it clear for everybody or was it was it more because you were in the middle of it? You sort of knew before other people that it's time to sell.

• 46:45Speaker 00

  Well, we, I mean, we had, obviously, we knew our own data. So we we'd been growing for the first three years of we'd just been growing every month, like exponentially. Like every month was a new record in every measure. And it was very exciting to be doing that. So we'd sort of, we'd celebrate and have a champagne toast whenever we hit a certain milestone. But then we found we're doing it like every one or two days.

• 47:08Speaker 00

  And then it it tailed off. It started, didn't always grow at that rate. And then for the six months prior to, I think, closing the sale, we didn't grow. We didn't shrink, but we didn't grow.

• 47:18Shaan Puri?

  Right.

• 47:19Speaker 00

  And, you know, you could tell publicly on something like Alexa that we were kind of flat. And whereas prior, we'd been hockey sticking. And I was trying to get it far like when I hadn't really spent any time on growth for a very long time. Because I didn't need to, because it just kept growing. But then we're starting like, how do we get it growing again? And it was evident that, you know, as much as we could get someone to come in through the front door, someone else was leaving out the back door to go typically to Facebook. And so it was just evident that this is really hard to do this, certainly hard to do it alone. And so we we ended up, Joanna Shields, who was the company president at the time, I think, did a presentation. She was invited to present to the Time Warner board about social networking. And so she kind of shared her vision of of the social networking landscape and what was

• 48:03Speaker 00

  happening at Bebo, and then they were interested. So it kind of stemmed from that. Then we appointed Alan and Co, the bank. We ran a process. So we spoke to other people, other companies, to see, try to get the highest bidder, but it ended up going back to AOL.

• 48:17Shaan Puri?

  There's been a sort of question mark of, okay, it sold for this much. Is that just a matter of market timing? Like, you know, can't buy Facebook, MySpace already got bought, Bebo's sort of the, you know, you're sort of the last girl on the dance floor. If if somebody wants, if somebody wants to have a social network, you know, you're gonna have to pay a premium? Or what really caused, how did it get to that number? How did it get to eight hundred fifty million?

• 48:39Speaker 00

  It's a good question. There's not, there's no like real formula for valuing. I think we were doing, last year we did twenty million dollars in revenue, I believe. So the multiple of revenue wasn't gonna work. It was all about the potential of what it could be. I mean, you're right in your analysis that we we were kind of the only one you could buy in many ways. Like, we were, basically, we were the third place, right? We were in the medals, but only just. There were other ones like Tagged and High Five that were not dissimilar, may have even had more page views, but they were far more dominant in markets, non-English language, harder to monetize markets.

• 49:12Shaan Puri?

  Right.

• 49:12Speaker 00

  So Facebook at the time had raised, they'd done a round with Microsoft. Everyone felt it was overvalued, but they valued it fifteen billion. So, you know.

• 49:21Shaan Puri?

  They set the benchmark.

• 49:22Speaker 00

  Yeah. And we we were shooting for a billion. That was kind of the holy grail. Because, you know, I like my zeros on the end. Yeah, it's got to be a round number. And we didn't quite get there. But that was kind of the negotiation. And it's like, look, it's a really good discount versus Facebook.

• 49:35Shaan Puri?

  Right.

• 49:36Speaker 00

  And I think the hope at AOL was they, AIM was AOL Instant Messenger, was still a big deal. Like, they had, I think, a hundred million users on it at the time. Like, it was one of the big IMs. So that the the vision that they had was merge AIM and Bebo, and then.

• 49:52Shaan Puri?

  One plus one equals three.

• 49:53Speaker 00

  Yeah, that was the hope.

• 49:54Shaan Puri?

  Yeah.

• 49:55Speaker 00

  But of course, people already had their social network, so they didn't want this other thing forced on. So the reality wasn't entirely flawed as an idea, but the reality was it didn't really pan out.

• 50:04Shaan Puri?

  Turn out that way.

• 50:04Speaker 00

  Yeah.

• 50:05Shaan Puri?

  I see. What's it like waking up that day when it finally closes and you you hit refresh on your bank account and? You know, you see, you know, $700 million there. Like, what was that like? Was it, what was the emotion like? And you, you surprised me with your answer.

• 50:19Speaker 00

  I can't remember what I said to you about that, man.

• 50:21Shaan Puri?

  Well, just like, I mean, even now, like, just thinking back, what was that like?

• 50:24Speaker 00

  It wasn't even a single moment of like, hallelujah, we've done it. There was kind of this relief that we'd got through what is quite a stressful process of a sales cycle, like, which goes on for, I think, around six months in our case. We also unemployed the day of closing. We were the only, Sochi and I were the only two people not offered a job by AOL.

• 50:44Shaan Puri?

  Right.

• 50:44Speaker 00

  And so we were like, okay, what do we do? Because we'd been enjoying work, maybe not the sales cycle so much, but generally, we really enjoyed the Bebo journey. The day it closed, I think we went to get some money out and saw the bank balance and it was like.

• 50:57Shaan Puri?

  That was cool.

• 50:57Speaker 00

  That was kind of funny. Yeah.

• 50:59Shaan Puri?

  I, I just had James Hong from Hotter Not on and he said that he used to go to the ATM and just print the receipt. Like, don't take, don't take any money out. Just be like, show my balance and just be like, yeah, I got a million bucks in there. He's like, I used to just love that, that moment.

• 51:11Speaker 00

  We should have printed it and kept it. We didn't. And we obviously transferred it out of the, the.

• 51:16Shaan Puri?

  Single banking account.

• 51:17Speaker 00

  Current account quite quickly. I think we got a little bit of money out and then went to watch a, um, a film, forgetting Sarah Marshall.

• 51:24Shaan Puri?

  Good movie.

• 51:24Speaker 00

  Good movie. We got the, uh, Madden a ticket, which is a little cheaper than the evening ticket.

• 51:28Shaan Puri?

  Always good to save money.

• 51:30Speaker 00

  Always, always thinking about that. And it was the most fun thing for us to do because we hadn't been to watch a film without our kids for a very, very long time, like probably some years.

• 51:41Shaan Puri?

  Right.

• 51:41Speaker 00

  And so we could go and watch a rated R movie, just the two of us, without the kids. And, and it was really enjoyable. We enjoyed doing that.

• 51:49Shaan Puri?

  Okay. So that was the first thing you did?

• 51:51Speaker 00

  Yeah.

• 51:53Shaan Puri?

  And you used to work really frigging hard. This is what Lucinda tells me. She's like, because I've only known you sort of after that Bebo journey. And so I always thought, man, Michael's a really laid back guy.

• 52:04Speaker 00

  He doesn't do any work.

• 52:06Shaan Puri?

  Yeah, he don't, doesn't do a lot of work. He likes to do a lot of things, well-rounded life. He likes to travel. You spend time with your family, spend time with friends. And she was like, no, no, no, that's not what Michael was like back in the Bebo days. Like, Michael used to, like, not go home. Michael was like, you know, obsessed. Is that, like, fair? Is that, is that a good characterization?

• 52:24Speaker 00

  Yeah, I certainly worked. I actually started doing that again recently, which is kind of funny. First time since selling Bebo, but yeah, I would work. I think other people have worked longer hours. I'd probably do seventy to eighty hours a week. But I'd also never really stopped thinking about it. Like I'd go out in the evening, I'd have dinner with someone, I'd be talking about it. I'd socialize pretty much only with company people. And so you're always talking about it, you're always thinking, you're always brainstorming. I carried on coding to the very end. I think I was still spending fifty percent of my time writing code all the way through to the end. I remember proudly checking in code on my last day. I'm gonna do another check in.

• 53:01Shaan Puri?

  Right.

• 53:02Speaker 00

  Probably broke the entire thing. And I enjoyed that, that coding part. My favorite part of it was being in the engineering team. And so we had an open plan office and I sat, you know, basically in the middle of all the engineers and, you know, it was engineering product. That was kind of my passion in building the business.

• 53:18Shaan Puri?

  Right. You know, when this podcast comes out, there's gonna be people out there who listen and they say, uh, man, Michael seems like a great guy. I loved your story and they're gonna wanna reach out to you and all that stuff. And I always give guests, you know, an option, one, A, you can, you can shout out a Twitter or some way that people can reach you if you want to be reached. So that's one option for you. And then the second thing is I ask, what type of people do you want reaching out? Because obviously it's no fun when everybody just goes and asks you for something. So hey, hey, invest in my company or that sort of thing. But some people who are full-time investors love that. They're like, hey, send me all your projects. I wanna, I want deal flow. Is there a type of person that you like being reached out to by, that you actually enjoy when they, when they reach out to you and you're saying?

• 53:58Speaker 00

  Yeah, really talented engineers.

• 54:00Shaan Puri?

  Okay.

• 54:01Speaker 00

  Who wanna come and work with me.

• 54:04Speaker 00

  Pretty much the only person right now.

• 54:06Shaan Puri?

  And why, why would a really talented engineer want to come work with you? They have many options on the table. What's the, what's the pitch for them?

• 54:11Speaker 00

  Well, we're working on, I'm sort of getting the band back together, employing some of the former best Bebo engineers and close friends that I've worked with technically in the past. So we're doing hospitality software. We opened a private members club in San Francisco called The Battery five years ago. It's kind of the biggest project I've undertaken since selling Bebo. That was time consuming. And we realized that hospitality software sucks, so started writing our own software. So we, I started doing that six years ago and I wrote the code myself to begin with prior to opening and a little bit after. And then got a co-founder and sort of trundled along for a few years. And then this year decided that we're really gonna go for it and build this out and sell it to other private clubs and hotels and.

• 54:51Speaker 00

  And so it's just just trying to build a super engineering product centric business that's doing a very, very ambitious project because we're writing all of the software, like not just things like point of sales and dining reservations, but membership and events and finance systems. And it's a little bit ridiculous, the scope of what we've taken on. But the problem with hospitality software is most businesses use like five, six, seven pieces of software and they try to integrate them and they don't really work.

• 55:19Shaan Puri?

  Right. So the only solution is one system.

• 55:22Speaker 00

  I think it's the the only way to do amazing things. Because once you have, once you own the entire code stack, the entire code base, you can implement features which are then cross systems. And so you get these kind of magic moments, as we call them internally, where there's kind of the aha moment of like, how the hell did that happen?

• 55:41Shaan Puri?

  What's an example of one of those?

• 55:42Speaker 00

  So the point of sale system would be integrated with the membership database and knows when people have checked in at the front door. We have a, we're developing an app for members, which is very community centric, but then it allows, once we've installed the app, to know through beacons around the club where they are. So we know where members are, in a kind of stalky way. But if they walk up to the bar, we know who just walked up to the bar. And there's going to be iPads behind the bar saying, who's at the bar? The POS knows who's near the bar. So when you go to open a tab, so now you don't have to ask who they are, their membership number.

• 56:16Shaan Puri?

  Right. You greet them by name.

• 56:18Speaker 00

  You greet them by name.

• 56:18Shaan Puri?

  They don't have to take out their credit card and forget their credit card at the bar. It's all just paid. You just walk away.

• 56:24Speaker 00

  Seventy percent of the time they drink Guinness. They're like, would you like a Guinness Michael? And then at the end they walk away and then they kind of Uber style payments when they leave the club. We know when they've left the club then. And then they get an email saying, here's an email receipt of the money you spent and we've charged their card. So it's just kind of like these seamless, beautiful moments that you can have as they kind of progress through the club.

• 56:44Shaan Puri?

  Love it. And so and how does one of those engineers reach out to you? What's this way?

• 56:48Speaker 00

  Probably Facebook.

• 56:49Shaan Puri?

  Facebook. Okay. Michael Birch.

• 56:51Speaker 00

  Yeah.

• 56:52Shaan Puri?

  I love it. Anything else you want to leave us with? Any other words of wisdom? Any other, any other, any other things you want to say on the podcast before we sign off here?

• 57:00Speaker 00

  Optimize for fulfillment.

• 57:03Shaan Puri?

  Well, like when you say optimize for fulfillment, to me that means, you know, maybe by default, people are optimizing for something else. So like, what do you think people are optimizing for if not fulfillment?

• 57:11Speaker 00

  I think often financial success.

• 57:14Shaan Puri?

  And so like, where is a situation where you are like, I'm not optimizing for financial success here, I'm optimizing for fulfillment?

• 57:21Speaker 00

  I think when I first started on the journey, it wasn't, the goal was never about money. So that I left my job because I thought I would enjoy this. I didn't like reporting to people and I didn't like to develop crappy systems that I didn't care about and had no passion for. So I think, you know, that's, that very first step was entirely doing that. And, you know, to begin with, it certainly was sacrifice because I went from making good money to making zero money. So, you know, there was definitely a compromise in that.

• 57:50Shaan Puri?

  Well, you heard it here, folks. Quit your job.

• 57:52Speaker 00

  Yeah. Everyone should quit their job.

• 57:54Shaan Puri?

  That's what we will leave you with.

• 57:55Speaker 00

  Mainly our president.

• 57:58Shaan Puri?

  Love it. All right, Michael, thanks for coming in. Thanks for doing this. I know you don't do a ton of these, so I really appreciate it.

• 58:04Speaker 00

  Yeah, thank you so much.