hello everyone welcome back to case
studies with the biz doc this week I’m
taking another one of your suggestions
and it’s whatsapp but I’m only going to
use whatsapp to illustrate sequencing
the importance of getting sequencing
right when you’re building your company
or product and the important of getting
sequency right when you’re building the
financial support and investment and
capital fundraising of your company both
of those things are important and we’re
going to talk about those through the
lens of whatsapp so I’m going to teach
you this week is about sequencing what
it is what it means and how to do it and
why it’s important and how it can have
huge ramifications downstream patients
opportunity luck all play a factor so
let’s dive in whatsapp I’m going to
dispatch with like the detailed nitty
gritty story of whatsapp but talk about
the key milestones and how that relates
to sequencing which is the subject this
is what I want to help you understand
this week so yawn command Brian Acton or
at Yahoo and they leave they leave in
2007 it’s kind of funny this week my
purple pen was like leaking all over the
place and it makes Yahoo look like this
melting pile of goo which I guess is now
the official description you go to
Bloomberg it says Yahoo a media company
that is now a melting pile of goo I
think that’s pretty accurate
anyway they leave and they’re looking to
do some other things they go to South
America to talk about things and they’re
looking into remember this is o7 they’re
looking into things like you know
something more that mobile phones could
do wouldn’t it be great to have the
status and my friends available to me
things like that they hook up with a
friend Alex Fishman back in United
States in San Francisco and they’re
basically living on savings of about
four hundred thousand dollars during
this planning stage now what’s
interesting about this they didn’t jump
right into business after Yahoo they’re
spending a lot of time you know just
living on the savings and mulling over
and planning and thinking which is
really important to really plan and
think and test your ideas and test your
thoughts and challenge them and they had
a friend of theirs that helped it well
right along in this time Apple launches
the app
store and these guys are not dumb they
come from Yahoo they come from a an
inventive tech world and they’re like
you know something those apps could be
everywhere doing all kinds of things and
what we’re talking about we need to have
an app developer to help us build it so
fishman goes out and he finds through
rent a coder yes there is such a website
rent a coder and they find this guy Igor
so a menikoff if I get that right
although those of you who can remember
Young Frankenstein maybe we pronounce it
I Gore anyway Igor Solomon a cop starts
doing the coding for them they’re using
savings and they get to 2009 and it’s
coming together in February 2009 they
actually had they incorporated in
California so their idea became so the
planning then they incorporate no.9 so
they spent two years thinking about it
using savings rent a coder get something
going so they didn’t just jump in they
were able to do that and they were
actually working with little odd jobs
and working with other startups so in
other words have a real job have a
back-up plan while you’re using your
savings you get going all this planning
stage leads into the bootstrap stage so
when they are out there and they have
basically bootstraps it with savings
then they incorporate in February 2009
and they go out and get FN f FN f stands
for friends and family so they get a
seed round of two hundred and fifty
thousand dollars they found four five
six something like that as the story
goes friends some of which were from
Yahoo where they got them to bring their
money together so they had another two
hundred and fifty thousand dollars
because building companies and living
isn’t cheap but at the same time you
don’t always want to jump in with both
feet and just dive well they get it
going and you know the prototype was
having some issues it was crashing and
at one point they were going to give up
and I think it’s as the whether it’s
fable or fact who knows right around in
June they were like no let’s stick it
out let’s keep going for a couple more
months and toward the end of oh nine is
when they said no wait a minute
let’s make a change to the product and
let’s
incorporate status so as they were
planning now they got this experience
with what they’re doing they said let’s
go ahead and have status right next to
the names of the people so you can find
out what’s going on and so you know they
get going with that but they did not
give up and they felt like giving up and
they had they done that that would have
been bad so from your planning into your
bootstrapping save what it says that
there’s going to be periods of despair
there’s also going to be periods of
challenge where you’re trying to decide
you know is this going on too too much
or should I get going but they had their
sequencing right spend a lot of time
planning don’t necessarily give up your
day job
bootstrap so you can hire your own coder
with what you got bring in seed friends
and family when you got something going
and that’s something I believe in I
never believed in bringing in friends
and family on day one I believe on
stretching and pushing yourself to get
through that planning stage to get
something going before you bring in
friends and family so that’s the
planning in the bootstrap phase if you
will and from there you get validation
points one of the big validation points
would come when about 18 months later
they found themselves in early 2009 one
of the top 20 apps in the Apple Store
which is an amazing achievement and also
caught the attention of Sequoia and so
Sequoia one of the larger venture
capital firms and now you bootstrapped
you have friends and family and you have
a real product going and you have some
validation points and you’re going off
to get your venture capital and you’ll
notice because they had that and they’re
sequencing they raised eight million
dollars and they only gave up 15% of the
company to Sequoia that is a remarkably
small number for some series a I’ve seen
series A’s that were 40 50 60 % to the
investor because the investors bring a
lot of money in and if we agree that the
company is worth 20 million dollars and
I give you 10 20 and 10 is 30 and now my
10 is one third of the 30 that’s 33%
that’s the way the math
work folks and I’ll do a case study
later on finance or maybe I’ll do a you
know entrepreneur class on Finance we
can tell you all about that and walk you
through that in more detail but in terms
of sequencing you can see how whatsapp
yonkou Brian Acton they got it right
because they raised 8 million for 15%
and what that means the Sequoia thought
it was worth 45 million dollars pre plus
8 million 53 post and the 58 million is
15 percent of the 53 there’s your simple
math and they’re off and running well
here you go this was in April and in
about two years later they then raised
their series B also from Sequoia and
Sequoia put in 50 million dollars at a
1.5 billion dollar valuation you’re
telling me in two short years you went
from from a 53 million posts to a 1.5
billion dollar valuation there’s just
one word for that damn that’s great
progress and you also went top 20 app
from 200 million users that you
announced in February Sequoia does the
series B I think it was in April and
then by the end of the year you’re at
400 million and that’s the end of 13 and
you’re clearly you’re in your Venture
stage you’ve got validation and your
growth and you’re heading toward escape
velocity which is exactly what was about
to happen because in the beginning of
2014
Facebook shows up and buys what’s app
for 19 billion dollars wait a minute
that’s almost that’s like 15 times you
know in less than a year the value in at
15 times 19 billion there’s only one
word for that damn actually there’s a
word for that double-damn you know now
we have a new one double damn because
you look at something like that that’s
incredible absolutely incredible you
know at the time it was the single
largest private company exit of all time
but take a look at the sequencing this
is the way it’s supposed to happen a
planning phase followed by a bootstrap
days followed by Adventure phase
followed by an exit bays and at each
point carefully not getting ahead of
yourselves
one thing that whatsapp did that I fully
believe in and you don’t have to have a
nineteen billion dollar exit to prove it
is they raise money and call it luck
call it planning call it what you will
but this is the way that they raise
money in a company friendly way you can
also raise money in an investor friendly
way where sometimes you’re going out to
get money earlier than you need it
giving up more of the company than you
want so as you go through here we can
talk all about what happened after
Facebook bottom and the use of security
and how that is a a fantastic edge that
what tap has it really sets it apart and
you know when you talk about Facebook
arguing with the government and Apple
arguing with the government about
security and you know the unfortunate
thing that happened out in San
Bernardino the shooting that was out
there two years ago and how the US
government wanted Apple to help them
break the phone so they could see what’s
inside that security is a big concern
but but likewise the reason things like
snapchat where things disappear and
cyber does the Mark Cuban company now
just called dust is popular is because
there’s no record of what’s going on
well no record of what’s going on as a
close cousin to high security because
it’s securities you and I so the
differentiation point on security is and
their wild growth is what gave them to
here because they have product
differentiation but when you look at
sequencing from 2007 to 2014 in those
seven years this is the way sequencing
supposed to work I’m in a planning stage
and I use my own savings and I don’t
give up my day job I go to a bootstraps
age where once I’ve got something to
prove to people I bring in friends for
friends and family I don’t give up when
my software is crashing because I see
the promise I see the hope I don’t hang
on too long in their case once they
added status and did things boom they
saw things happening top 20 app I then
moved to my venture phase where venture
capitalists are eager to invest
but I don’t have to give up too much at
my series-a I then get follow-ons in the
case of whatsapp you or anybody else is
not going to see this let’s face it this
is a one-in-a-million shot here but
could you see a series B where you
raised 25 million 20 million and maybe a
hundred million dollar valuation sure
right and now at that point you’d be
giving up another say 20 percent so the
progression would be company friendly
but still having a great opportunity for
the venture capitalists to come in and
make a return for their investors and
their general partners lastly driving a
great business with differentiation from
the venture stage to exit whether that’s
M&A or it’s an IPO like recently
snapchat and Twitter did and Facebook
did of course or you just go up and you
get bought like Instagram and whatsapp
did but that’s sequencing and sequencing
is all-important and there are three
things that are necessary in sequencing
one patience to more brains than just
yours talking to people talking to
trusted confidant people that know what
they’re doing not just a friend make
friends with people that have walked the
path with you
point two and then point three the truth
of your numbers needs to speak loud
because there’s going to be a lot of
heart that you have in there and a lot
of belief that you have into it and
you’re not going to be the first
entrepreneur that just believes it’s
going to work you got to get friends
with you who know what they’re doing so
make those new friends so those are the
three points to always keep in mind what
you’re talking about sequencing and I
think this is a great study on not only
what became a great company a phenomenal
product giving you and I communications
product with security and all that is
but it’s also a great story of
sequencing on how the sequencing went in
a company friendly way and that is this
week and I need my pillow all right well
the good I was good sequencing they’re
good toss please subscribe to value tame
it the best channel on YouTube and and
the internet far and wide for
entrepreneurial content until next time
I’m Thomas Rath and I hope I led you
that [Music]
studies with the biz doc this week I’m
taking another one of your suggestions
and it’s whatsapp but I’m only going to
use whatsapp to illustrate sequencing
the importance of getting sequencing
right when you’re building your company
or product and the important of getting
sequency right when you’re building the
financial support and investment and
capital fundraising of your company both
of those things are important and we’re
going to talk about those through the
lens of whatsapp so I’m going to teach
you this week is about sequencing what
it is what it means and how to do it and
why it’s important and how it can have
huge ramifications downstream patients
opportunity luck all play a factor so
let’s dive in whatsapp I’m going to
dispatch with like the detailed nitty
gritty story of whatsapp but talk about
the key milestones and how that relates
to sequencing which is the subject this
is what I want to help you understand
this week so yawn command Brian Acton or
at Yahoo and they leave they leave in
2007 it’s kind of funny this week my
purple pen was like leaking all over the
place and it makes Yahoo look like this
melting pile of goo which I guess is now
the official description you go to
Bloomberg it says Yahoo a media company
that is now a melting pile of goo I
think that’s pretty accurate
anyway they leave and they’re looking to
do some other things they go to South
America to talk about things and they’re
looking into remember this is o7 they’re
looking into things like you know
something more that mobile phones could
do wouldn’t it be great to have the
status and my friends available to me
things like that they hook up with a
friend Alex Fishman back in United
States in San Francisco and they’re
basically living on savings of about
four hundred thousand dollars during
this planning stage now what’s
interesting about this they didn’t jump
right into business after Yahoo they’re
spending a lot of time you know just
living on the savings and mulling over
and planning and thinking which is
really important to really plan and
think and test your ideas and test your
thoughts and challenge them and they had
a friend of theirs that helped it well
right along in this time Apple launches
the app
store and these guys are not dumb they
come from Yahoo they come from a an
inventive tech world and they’re like
you know something those apps could be
everywhere doing all kinds of things and
what we’re talking about we need to have
an app developer to help us build it so
fishman goes out and he finds through
rent a coder yes there is such a website
rent a coder and they find this guy Igor
so a menikoff if I get that right
although those of you who can remember
Young Frankenstein maybe we pronounce it
I Gore anyway Igor Solomon a cop starts
doing the coding for them they’re using
savings and they get to 2009 and it’s
coming together in February 2009 they
actually had they incorporated in
California so their idea became so the
planning then they incorporate no.9 so
they spent two years thinking about it
using savings rent a coder get something
going so they didn’t just jump in they
were able to do that and they were
actually working with little odd jobs
and working with other startups so in
other words have a real job have a
back-up plan while you’re using your
savings you get going all this planning
stage leads into the bootstrap stage so
when they are out there and they have
basically bootstraps it with savings
then they incorporate in February 2009
and they go out and get FN f FN f stands
for friends and family so they get a
seed round of two hundred and fifty
thousand dollars they found four five
six something like that as the story
goes friends some of which were from
Yahoo where they got them to bring their
money together so they had another two
hundred and fifty thousand dollars
because building companies and living
isn’t cheap but at the same time you
don’t always want to jump in with both
feet and just dive well they get it
going and you know the prototype was
having some issues it was crashing and
at one point they were going to give up
and I think it’s as the whether it’s
fable or fact who knows right around in
June they were like no let’s stick it
out let’s keep going for a couple more
months and toward the end of oh nine is
when they said no wait a minute
let’s make a change to the product and
let’s
incorporate status so as they were
planning now they got this experience
with what they’re doing they said let’s
go ahead and have status right next to
the names of the people so you can find
out what’s going on and so you know they
get going with that but they did not
give up and they felt like giving up and
they had they done that that would have
been bad so from your planning into your
bootstrapping save what it says that
there’s going to be periods of despair
there’s also going to be periods of
challenge where you’re trying to decide
you know is this going on too too much
or should I get going but they had their
sequencing right spend a lot of time
planning don’t necessarily give up your
day job
bootstrap so you can hire your own coder
with what you got bring in seed friends
and family when you got something going
and that’s something I believe in I
never believed in bringing in friends
and family on day one I believe on
stretching and pushing yourself to get
through that planning stage to get
something going before you bring in
friends and family so that’s the
planning in the bootstrap phase if you
will and from there you get validation
points one of the big validation points
would come when about 18 months later
they found themselves in early 2009 one
of the top 20 apps in the Apple Store
which is an amazing achievement and also
caught the attention of Sequoia and so
Sequoia one of the larger venture
capital firms and now you bootstrapped
you have friends and family and you have
a real product going and you have some
validation points and you’re going off
to get your venture capital and you’ll
notice because they had that and they’re
sequencing they raised eight million
dollars and they only gave up 15% of the
company to Sequoia that is a remarkably
small number for some series a I’ve seen
series A’s that were 40 50 60 % to the
investor because the investors bring a
lot of money in and if we agree that the
company is worth 20 million dollars and
I give you 10 20 and 10 is 30 and now my
10 is one third of the 30 that’s 33%
that’s the way the math
work folks and I’ll do a case study
later on finance or maybe I’ll do a you
know entrepreneur class on Finance we
can tell you all about that and walk you
through that in more detail but in terms
of sequencing you can see how whatsapp
yonkou Brian Acton they got it right
because they raised 8 million for 15%
and what that means the Sequoia thought
it was worth 45 million dollars pre plus
8 million 53 post and the 58 million is
15 percent of the 53 there’s your simple
math and they’re off and running well
here you go this was in April and in
about two years later they then raised
their series B also from Sequoia and
Sequoia put in 50 million dollars at a
1.5 billion dollar valuation you’re
telling me in two short years you went
from from a 53 million posts to a 1.5
billion dollar valuation there’s just
one word for that damn that’s great
progress and you also went top 20 app
from 200 million users that you
announced in February Sequoia does the
series B I think it was in April and
then by the end of the year you’re at
400 million and that’s the end of 13 and
you’re clearly you’re in your Venture
stage you’ve got validation and your
growth and you’re heading toward escape
velocity which is exactly what was about
to happen because in the beginning of
2014
Facebook shows up and buys what’s app
for 19 billion dollars wait a minute
that’s almost that’s like 15 times you
know in less than a year the value in at
15 times 19 billion there’s only one
word for that damn actually there’s a
word for that double-damn you know now
we have a new one double damn because
you look at something like that that’s
incredible absolutely incredible you
know at the time it was the single
largest private company exit of all time
but take a look at the sequencing this
is the way it’s supposed to happen a
planning phase followed by a bootstrap
days followed by Adventure phase
followed by an exit bays and at each
point carefully not getting ahead of
yourselves
one thing that whatsapp did that I fully
believe in and you don’t have to have a
nineteen billion dollar exit to prove it
is they raise money and call it luck
call it planning call it what you will
but this is the way that they raise
money in a company friendly way you can
also raise money in an investor friendly
way where sometimes you’re going out to
get money earlier than you need it
giving up more of the company than you
want so as you go through here we can
talk all about what happened after
Facebook bottom and the use of security
and how that is a a fantastic edge that
what tap has it really sets it apart and
you know when you talk about Facebook
arguing with the government and Apple
arguing with the government about
security and you know the unfortunate
thing that happened out in San
Bernardino the shooting that was out
there two years ago and how the US
government wanted Apple to help them
break the phone so they could see what’s
inside that security is a big concern
but but likewise the reason things like
snapchat where things disappear and
cyber does the Mark Cuban company now
just called dust is popular is because
there’s no record of what’s going on
well no record of what’s going on as a
close cousin to high security because
it’s securities you and I so the
differentiation point on security is and
their wild growth is what gave them to
here because they have product
differentiation but when you look at
sequencing from 2007 to 2014 in those
seven years this is the way sequencing
supposed to work I’m in a planning stage
and I use my own savings and I don’t
give up my day job I go to a bootstraps
age where once I’ve got something to
prove to people I bring in friends for
friends and family I don’t give up when
my software is crashing because I see
the promise I see the hope I don’t hang
on too long in their case once they
added status and did things boom they
saw things happening top 20 app I then
moved to my venture phase where venture
capitalists are eager to invest
but I don’t have to give up too much at
my series-a I then get follow-ons in the
case of whatsapp you or anybody else is
not going to see this let’s face it this
is a one-in-a-million shot here but
could you see a series B where you
raised 25 million 20 million and maybe a
hundred million dollar valuation sure
right and now at that point you’d be
giving up another say 20 percent so the
progression would be company friendly
but still having a great opportunity for
the venture capitalists to come in and
make a return for their investors and
their general partners lastly driving a
great business with differentiation from
the venture stage to exit whether that’s
M&A or it’s an IPO like recently
snapchat and Twitter did and Facebook
did of course or you just go up and you
get bought like Instagram and whatsapp
did but that’s sequencing and sequencing
is all-important and there are three
things that are necessary in sequencing
one patience to more brains than just
yours talking to people talking to
trusted confidant people that know what
they’re doing not just a friend make
friends with people that have walked the
path with you
point two and then point three the truth
of your numbers needs to speak loud
because there’s going to be a lot of
heart that you have in there and a lot
of belief that you have into it and
you’re not going to be the first
entrepreneur that just believes it’s
going to work you got to get friends
with you who know what they’re doing so
make those new friends so those are the
three points to always keep in mind what
you’re talking about sequencing and I
think this is a great study on not only
what became a great company a phenomenal
product giving you and I communications
product with security and all that is
but it’s also a great story of
sequencing on how the sequencing went in
a company friendly way and that is this
week and I need my pillow all right well
the good I was good sequencing they’re
good toss please subscribe to value tame
it the best channel on YouTube and and
the internet far and wide for
entrepreneurial content until next time
I’m Thomas Rath and I hope I led you
that [Music]
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