The seed round is the easiest to raise. “But the descent from seed-funded startups to Series A and B is often much steeper than people expect. Raising some money for an idea is not that difficult. Staying in the game round after round, as the world changes and targets are met or not met, is extraordinarily difficult.”
Too much cash killed Clinkle; it made them lazy. “Clinkle never came close to feeling this sort of pressure. This long runway, combined with their insistence on perfection, became toxic as they spun their wheels, creating many products that never saw the light of day.”
The yellow logo. “Evan studied the hundred most popular apps in the app store and noticed that none had yellow logos. To make Picaboo stand out, he put the Ghostface Chillah logo on a bright yellow background.”
Why Snapchat works. “Teenagers also felt pressure to post the most glamourous representations of their lives on Facebook, Twitter, Instagram, and other social media sites to rack up likes. Even designed Snapchat as an antidote to this obsession with likes and retweets. Snapchat was not meant to be a social network — it was designed as a small, private network, to share with your closest friends. Snapchat had no lies, no permanence, no social anxiety.”
All the VC passed initially. “But the first venture capitalist who met with Evan, including blue chip firms like Sequoia Capital and Benchmark Partners, passed on the investment. Disappearing photos? It sounded like a sexting app at best, or a fad at worst.“
Facebook tried to bully Snapchat into selling. “Evan explained that they weren’t just interested in selling the company. In response, Zuckerberg showed them something new that his team had been working on. Poke, a new Facebook app, would be released in a few days, What was it? A messaging app for disappearing photos and videos. The message was clear: join us, or we will crush you. It was an exact replica of Snapchat. An unabashed copy, Poke even stole Snapchat’s user interface for recording videos. This was a show of might from Zuckerberg and his team up north. Veteran Facebook director of product Blake Ross had led a small team in developing Poke in just twelve days.”
Copycats from bigger competitors often fail. “On the day it launched, Poke shop up to the top spot in the iOS app store, pushing Snapchat down to ninth. But just a week later, Poke had dropped to thirty-fourth, while Snapchat rose back up to third. Why did Poke fail? It failed to solve any problems for young users, who were more than happy with Snapchat, and it solved a problem that didn’t exist for older users, who still didn’t get the appeal of disappearing content. Poke was further hampered by the fact that teens were drawn to Snapchat because it explicitly was not Facebook, which was populated by their parents and collected everything they posted forever.”
A new metric when things are going so well. “teenagers were so addicted to the app — opening it and sending and receiving snaps dozens of times per day — that the company started focusing on hourly active users.”
Snacpchat wasn’t easy to use, which made it stickier and collaborative. “So teenagers would ask, “How did you do that?!” and show each other how to use new and hidden parts of the app.“
Low options pricing helps recruiting. “We will benefit from having lower strike price as we hire over the next few years.”
At some point, you cant be a startup. “In 2012, Snapchat had fewer than ten employees; in 2013 the number jumped to thirty. In 2014, it would soar past one hundred, and Evan and Bobby needed to put more structure in place.”
The impact on communication. “By not allowing users to message unless they were sending photos or videos, Snapchat had taught users to communicate through media rather than around it.”
Ad business isn’t growing. “Despite the wild changes in media formats over the past century, the amount of money spent on advertising has generally remained constant. In the advertising business, the only way to make money is to steal some else’s share of the pie. In the first quarter of 2016, a Morgan Stanley analyst estimated that for every new dollar spent on online advertising, 85 cents would go to either Google or Facebook.”
It’s ok to be expensive when you’re figuring things out. “Snapchat’s early ads were very basic and extremely costly compared to peers’ ad offerings — they charged advertisers hundreds of dollars for a very short spot, typically ten to thirty seconds. This was partially done on purpose to be prohibitively expensive and keep demand low, as Snapchat had a small team and was still building its infrastructure, both technically and organizationally.”
Good design. “Snapchat was cleverly designed so that it was easy for users to ignore features they didn’t like. Because of this, when Snapchat misses, they missed small. That is, misses didn’t cost them users. And when they hit, they hit big, with wild successes like Stories and Live.”
Speed is critical. “As Evan understood with the camera opening and the speed of delivering snaps, speed is everything on mobile. Every millisecond users waited for content to load, they thought about switching apps.”
Brand marketing done right. “They have slapped their eponymous logo — with no mention of Snapchat or any words at all — on the luggage bins at security at LAX and on massive billboards in Times Square. Many of the billboard panels in Times Square simply were covered in Snapchat yellow. People who knew what the logo means are in on the cool secret; those who don’t either ask or simply remain ignorant and uncool.”
How a CEO spent his time. “Evan continued to be very aggressive in hiring, spending 40 percent of his time recruiting. (He devoted the rest of his time to product and attending meetings and events. 40 percent and 20 percent, respectively.)”
Ads needed to be good content. “As frustrating as it was for advertisers, Evan was focused on what was best for Snapchat’s users. Rather than looking at advertising as a tax on using free products or necessary evil, he considered it as another product and more content for users. Evan personally rejected ad campaigns that he didn’t like or that he thought users wouldn’t like; Kevin Systrom had done the same when Instagram launched ads.”
sammy@blossomstreetventures.com