by Randall Lane
Koum was kicked out of high school and had to attend an alternative program, but by eighteen had taught himself computer networking by purchasing manuals from a used-book store and returning them when he was done. He joined a hacker group called w00w00 on the EFnet Internet relay chat network, squirreled into the servers of Silicon Graphics, and chatted with Napster cofounder Shawn Fanning.
He enrolled at San Jose State University and moonlighted at Ernst & Young as a security tester. In 1997, Koum found himself sitting across a desk from Acton, Yahoo employee number 44, to inspect the company’s advertising system. “You could tell he was a bit different,” recalled Acton. “He was very no-nonsense, like ‘What are your policies here? What are you doing here?’” Other Ernst & Young people were using touchy-feely tactics like gifting bottles of wine. “Whatever,” said Acton.
It turned out Koum liked Acton’s no-nonsense style, too: “Neither of us has an ability to bullshit,” said Koum. Six months later Koum interviewed at Yahoo and got a job as an infrastructure engineer. He was still at San Jose State University when, two weeks into his job at Yahoo, one of the company’s servers broke. Yahoo cofounder David Filo called his cell phone for help. “I’m in class,” Koum answered discreetly. “What the fuck are you doing in class?” Filo said. “Get your ass into the office.” Filo had a small team of server engineers and needed all the help he could get. “I hated school anyway,” Koum said. He dropped out.
When Koum’s mother died of cancer in 2000, the young Ukrainian was suddenly alone. He credits Acton with reaching out and offering support. “He would invite me to his house,” Koum remembered. The two went skiing and played soccer and Ultimate Frisbee.
Over the next nine years the pair watched Yahoo ride multiple ups and downs. Neither of them liked dealing with ads. “You don’t make anyone’s life better by making ads work better,” said Acton. In his LinkedIn profile, Koum unenthusiastically describes his last three years at Yahoo with the words, “Did some work.”
In October 2007 they left for a year of decompression, traveling around South America and playing more Frisbee. Ironically, both got rejected for jobs at Facebook. Koum was eating into his $400,000 in savings from Yahoo and drifting. Then, in January 2009, he bought an iPhone and started using the App Store. Here was a new industry in the making. He visited the home of Alex Fishman, a Russian friend who would invite the Russian community to his place in West San Jose for weekly pizza and movie nights. Up to forty people sometimes showed up. The two of them stood for hours talking about Koum’s idea for an app over tea at Fishman’s kitchen counter.
“Jan was showing me his address book,” recalled Fishman. “His thinking was it would be really cool to have statuses next to individual names of the people.” The statuses would show if you were on a call, your battery was low or you were at the gym. Koum could build the guts of the service, but he needed an iPhone developer. So Fishman introduced Koum to Igor Solomennikov, a developer in Russia whom he’d found on RentACoder.com.
Koum almost immediately chose the name WhatsApp because it sounded like “What’s up?” A week later, on his birthday, he incorporated WhatsApp in California. The code hadn’t even been written yet. Koum spent days writing the software to synch his app with any phone number in the world, poring over a Wikipedia entry that listed international dialing prefixes—he would spend many infuriating months updating it for the hundreds of regional nuances.
Early WhatsApp kept crashing or getting stuck, and when Fishman installed it on his phone, only a handful of people in his address book had downloaded it. Over ribs at Tony Roma’s in San Jose, Fishman went over the problems, and Koum took notes in one of the Soviet-era notebooks his mother had brought over, which he’d saved for important projects. Koum almost gave up and muttered to Acton about the need to look for another job. “You’d be an idiot to quit now,” said Acton. “Give it a few more months.”
Help came from Apple when it launched push notifications in June 2009, letting app developers ping users when they weren’t using an app. Koum updated WhatsApp so that each time you changed your status—“Can’t talk, I’m at the gym”—it would notify everyone in your network. Fishman’s Russian friends started using it to ping each other with jokey custom statuses like “I woke up late” or just “I’m on my way.”
“At some point it sort of became instant messaging,” said Fishman. “We started using it as ‘Hey how are you?’ And then someone would reply.” Koum watched the changing statuses on a Mac Mini at his town house in Santa Clara and realized he’d inadvertently created a messaging service. “Being able to reach somebody halfway across the world instantly, on a device that is always with you, was powerful,” said Koum.
The only other free texting service at the time was BlackBerry’s BBM, but that only worked among BlackBerrys. There was Google’s G-Talk and Skype, but WhatsApp was unique in that the login was your own phone number, with no password to memorize. In September 2009, Koum released a new version with a messaging component and watched his active users suddenly swell to 250,000.
He needed help and went to see Acton, who was still unemployed and dabbling in another startup idea that wasn’t going anywhere. In October Acton got five ex-Yahoo friends to invest $250,000 in seed funding and as a result was granted cofounder status and a stake. He officially joined that November. They worked off cheap Ikea tables in a subleased space in Evernote’s converted warehouse in downtown Mountain View. They wore blankets for warmth. There was no sign for the office. “Their directions were ‘Find the Evernote building. Go round the back. Find an unmarked door. Knock,’” said Michael Donohue, one of WhatsApp’s first BlackBerry engineers, recalling his first interview.
With Koum and Acton working for free for the first few years, their biggest early cost was sending verification texts to users. The founders occasionally switched the app from free to “paid” so they wouldn’t grow faster than their subscriber income. In December they updated WhatsApp for the iPhone to send photos and were shocked to see user growth increasing even with the $1 price tag on. “You know, I think we can actually stay paid,” Acton told Koum.
By early 2011 WhatsApp was squarely in the top twenty of most countries’ App Stores. (The U.S. was slow to catch on, with its proclivity for unlimited texting plans.) Koum and Acton were batting away all requests from investors. Acton saw VC funding as a bailout. But Sequoia partner Jim Goetz spent eight months working his contacts to get either founder to engage. He’d met with a dozen other messaging companies, such as Pinger, Tango, and Beluga, but it was clear WhatsApp was the leader, and to Goetz’s surprise the startup was already paying corporate income taxes: “The only time I’ve seen that in my venture career.” He eventually got Koum and Acton to meet. They barraged him with questions and told him ads would be verboten. They eventually agreed to take $8 million from Sequoia in April 2011 at an $80 million valuation.
Two years later, in February 2013, when WhatsApp’s user base had swelled to about 220 million active users and its staff to thirty, Acton and Koum agreed it was time to raise some more money. “For insurance,” says Acton, who recalled that his mother, who ran her own freight-forwarding businesses, used to lose sleep over paying the bills. “You never want to be in a position where you can’t make payroll.” They decided to hold a second funding round, in secret. Sequoia would invest another $50 million to up its stake to 25 percent, valuing WhatsApp at $1.5 billion. At the time, Acton took a screenshot of WhatsApp’s bank balance and sent it to Goetz. It read $8.257 million, still in excess of all the money they’d received years before.
• • •
BACK IN 2012, BEFORE that $50 million round and all the craziness that would soon follow, Koum had time to mull over his lunch with Zuckerberg. He and Acton had $8 million in the bank and wanted nothing more than their independence, so Facebook’s overtures from then on never turned into bids on paper. Zuckerberg and Koum instead became friends, meeting
once a month or so for dinner.
For the next year WhatsApp focused on its march past 300 million users. In June 2013, the founders happened to meet Sundar Pichai, who oversees Android and Chrome at Google. They talked about their love of clean and simple digital products. At some point around early 2014, Pichai decided it would be good for Koum and Acton to meet his CEO, Larry Page. They agreed to meet on Tuesday, February 11.
On the Friday before that meeting, a WhatsApp staffer ran into Facebook’s head of business development, Amin Zoufonoun, and told him that Koum was meeting with Page imminently. Zoufonoun raced back to Facebook and set the wheels in motion to accelerate an acquisition offer that had already been in the works for some time. Zuckerberg got Koum over to his house Monday night and finally floated the idea of an acquisition that would leave WhatsApp independent and, crucially, make Koum a board member of Facebook. “It was a partnership, where I would help him make decisions about the company,” Koum recalled. “The combination of everything that was discussed is what made it very interesting for us.”
The next day Koum and Acton drove to Google’s Mountain View headquarters and met with Page and Pichai in one of the company’s gleaming white conference rooms. They talked for an hour about the world of mobile and WhatsApp’s goals. “It was a pleasant conversation,” said Koum. Page, he added, is “a smart guy.”
When asked if he got the impression Page was interested in buying WhatsApp, Koum paused. “No,” he said. Maybe there was a hint? “Maybe I’m not good at reading him.”
If Page had been interested in buying WhatsApp, as some reports later indicated, his meeting may have been too little, too late. Things had already been set in motion at Menlo Park, and at WhatsApp the founders and their advisors were calculating how much they could conceivably ask for in deal talks. One source close to the company said WhatsApp’s founders were more interested in independence than money, but another said they also believed themselves to be worth at least $20 billion, a number calculated by looking at the market capitalization of Twitter, WhatsApp’s global user base, and the company’s future plans for monetization.
That Thursday, Koum and Acton went to Zuckerberg’s house for dinner at 7:00 p.m., where Acton met Zuckerberg for the first time. “One day I want you to become bigger than us in number of users,” Zuckerberg told them. “What you guys do is a much more common-use case.” Zuckerberg said he wanted them to keep doing what they were doing, but with the might of Facebook’s legal, financial, and engineering resources.
At 9:00 p.m., Acton went home to tend to his young family. Koum and Zuckerberg played high-stakes poker. One source said that Zuckerberg offered a range of $15 billion and higher, and that Koum said he was looking for something closer to $20 billion. Facebook’s founder asked for some time.
The following day, Friday, February 14, Koum and Acton posed for a photo shoot with Forbes at their office. When the photographer left at 6:30 p.m., Koum got into his Porsche and stopped at Zuckerberg’s house for another meeting. Koum denied reports that he interrupted the Zuckerbergs’ Valentine’s Day meal. “It wasn’t like there was dinner and candlelight, and I barged in through the door.” Until then he had tended to leave the Zuckerbergs’ house when Mark’s wife, Priscilla Chan, came home from work. Over snacks, Koum and Zuckerberg hammered out the final details of the partnership and WhatsApp’s all-important independence under Facebook, but the two weren’t yet in agreement.
Finally, on Saturday night, Koum and Zuckerberg went from talking in the kitchen to the living room couch, before Zuckerberg offered $19 billion as well as deal terms that Koum liked. It was “something we can probably do on our end,” Koum replied.
Koum waited for Zuckerberg to leave the room and got on the phone to Acton, who was at home. It was 9:00 p.m. “I just want to check if you’ve made a decision either way,” Koum said, giving his friend the finalized details. “Do you want to move forward?”
“I like Mark,” Acton replied. “We can work together. Let’s make this deal.” Koum walked out of the room and found Zuckerberg. “I just talked to Brian,” Koum said. “He thinks we should work together and that you’re a good guy and we should do it.”
The two of them shook hands and then hugged. Zuckerberg remarked it was “fucking exciting,” and whipped out a bottle of Johnnie Walker Blue Label, which he knew was Koum’s favorite Scotch. They each called their business-development directors to come over and finalize the process. About an hour later, Koum drove home in his Porsche and went to bed.
Lawyers and bankers raced through the weekend to get deal papers to sign by Wednesday morning before everyone broke for the annual Mobile World Congress in Barcelona. Rather than signing them at WhatsApp’s headquarters, they drove two blocks, at Jim Goetz’s suggestion, to 101 Moffett Boulevard, the abandoned building where Koum once collected food stamps as a teenager. Koum signed them on the main door.
When they got back to the office, Koum sent a WhatsApp message to “WhatsApp All,” the chat group for all employees, saying there would be an all-hands meeting in the conference room at 2:00 p.m.
“Look, here’s what’s happening,” he said after everyone had piled into the room. “We’re merging with Facebook.” Koum and Acton told their shocked employees they would be okay and still operate on their own. At 2:30 p.m. the conference-room door opened again and in walked Mark Zuckerberg. He spoke briefly with WhatsApp’s small staff and shook hands. After a conference call with investors, Koum got back to work. “We still have a company to run,” he said matter-of-factly.
• • •
NOW IT’S DOWN TO Zuckerberg and Koum to figure out how to make WhatsApp worth the $19 billion Facebook paid for it. The first move was to make sure the app keeps working. The Saturday after the deal was announced, people around the world slammed WhatsApp’s servers with new sign-ups. The app suffered a four-hour outage. The founders said it was coincidental, but it was bad timing for a startup that prides itself on reliability. Koum and Acton are so fixated on uptime that no one is allowed to talk to WhatsApp’s server guys in the months before Christmas as they prepare for the message deluge. Visitors are rarely allowed into the office, lest they be a distraction. A whiteboard in the office shows the number of days since the last outage or incident, as a factory might show a tally for injuries or deaths. “A single message is like your firstborn child,” said Acton, a new parent. “We can never drop a message.” He pulled up a photo of his late stepfather, sent to his phone in April 2012. “This is why I hate Snapchat,” where photos and messages disappear after viewing.
The dollars will start coming in greater numbers once WhatsApp can iron out dead-simple billing arrangements with wireless carriers. Koum doesn’t want to risk putting users off with a complicated payment-request system and watch them run to free rivals. Right now, it charges only in the handful of countries where credit card penetration is high and mobile payments systems are culturally prevalent. Google is striking billing deals with carriers on behalf of all Android apps, but progress has been slow: Android carrier billing is available in just twenty-one countries, and to the ongoing chagrin of other developers, mobile payments still aren’t standardized. Koum thinks the real money will start flowing by 2017 and beyond, at which point he plans to have 1 billion users. “We are very early in our monetization efforts,” said Neeraj Arora, WhatsApp’s business development manager. “Revenue is not important to us.” Arora has brokered partnerships with about fifty carriers to prebundle the app into texting plans. It has also struck a noncommercial partnership with Nokia to put a WhatsApp button on the inexpensive Asha 210 phone.
Keeping people from switching to another service is another priority. The fear of losing eyeballs is what drove Zuckerberg to pay so dearly, and there’s not much stopping them from leaving WhatsApp. “For the last five years WhatsApp has been exclusively focused on delivering ‘SMS but free,’ and they have done a great job at that. But at some point the us
er is going to move on,” said Ted Livingston, a former BlackBerry engineer who founded the teen-friendly mobile messenger Kik. “This is why WhatsApp feels like BlackBerry to me. For years BlackBerry was exclusively focused on e-mail. But once the consumer understood this, they asked, ‘What comes next?’ The iPhone answered that question, and all of a sudden BlackBerry was left behind.”
Koum is staying focused on keeping WhatsApp running and keeping users from going away. A couple of nights a month he pulls up to a nondescript cinder-block building in San Jose, grabs a gym bag, and walks into a dimly lit gym for a private boxing lesson with a gum-chewing coach standing next to a boom box blasting rap music. “He likes Kanye,” said the coach, smiling, during one visit. He held two mitts up high as the six-foot-two Koum threw measured, powerful punches. Every few minutes Koum sat down for a break, slipping the gloves off and checking messages from Acton about WhatsApp’s servers. Koum’s style was very focused, the coach said. He doesn’t want to get into kickboxing, like most other students, but just wants to get the punching right. You could make the same case for a certain messaging service that wants to be as straightforward as possible.
It’s true, Koum said, ruddy-faced as he put on his socks and shoes. “I want to do one thing and do it well.”
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