Zuckerberg wore his then-standard uniform of T-shirt, jeans, and Adidas open-toed rubber flip-flops. It certainly wasn’t calculated to impress. Thiel recalls that he seemed kind of introverted. Zuckerberg said little, occasionally answering questions, and asking a few. Yes, they were receiving requests from hundreds of schools that wanted Thefacebook on their campuses. He talked about some of his ideas for how the product might evolve. He also spoke briefly about his hopes for Wirehog. He showed absolutely no impulse to kowtow, and that, combined with his matter-of-factness about what Thefacebook was achieving, made him seem even more impressive. He didn’t need to wear a tie to convince someone he was an entrepreneur worth backing.
But Zuckerberg was also unself-conscious about admitting what he didn’t know. The conversation quickly turned to the mechanics of an investment, and Thiel was slinging around technical phrases and jargon about the deal. Zuckerberg repeatedly interrupted: “Explain that to me. What does it mean?”
Within days, following a little back-and-forth with Parker, Thiel agreed to what may go down in history as one of the great investments of all time. He agreed to loan Thefacebook $500,000, which was intended to eventually convert into a 10.2 percent stake in the company. That would give Thefacebook a valuation of $4.9 million. One reason Thiel agreed to provide the money as a loan was because until everything was settled with Saverin there were legal obstacles to a formal stock investment. The provisions of the loan were that if Thefacebook reached 1.5 million users before December 31, 2004—less than six months later—it would convert to an equity investment, and the company wouldn’t have to pay it back. Zuckerberg and Parker had a big incentive to keep their growth going.
The $4.9 million valuation was lower than others that had been dangled in front of Zuckerberg, but he was pleased to have found an investor who seemed to believe in giving the entrepreneur the benefit of the doubt. Thiel told Zuckerberg “just don’t fuck it up,” which the CEO now says was pretty much the only advice he got from Thiel in the company’s early years. “I was comfortable with them pursuing their original vison,” says Thiel, looking back. “And it was a very reasonable valuation. I thought it was going to be a pretty safe investment.” Though Thefacebook didn’t meet the December 31 deadline for 1.5 million users, Thiel let the loan convert shortly afterward anyway. Thiel sold almost half his stock in 2009, but even so his remaining shares today are worth—at a minimum—several hundred million dollars. When he made the loan Thiel also joined the company’s board of directors.
Hoffman put in an additional $40,000, as did his friend Mark Pincus, and a couple friends of the company invested small amounts, bringing the total financing to around $600,000. Attending the investment presentation also made a deep impression on Hoffman’s LinkedIn employee Matt Cohler. He wanted to buy stock in Thefacebook, but Zuckerberg and Parker felt they had enough money for now. Later, however, Cohler would find a way to get some.
Harvard’s incoming freshman class in the fall of 2004 was both flattered and shocked when college president Lawrence Summers, former Treasury secretary of the United States, greeted them by announcing he had already acquainted himself with many of them by viewing profiles on Thefacebook. The service was already so entrenched in Harvard’s undergraduate culture that incoming students heard about it and created profiles even before they arrived. But the information they had included was intended to impress their peers, not be seen by the president of the college. It made some uncomfortable to think that their personal details and trivia were now so accessible to authorities like Summers. Already Thefacebook was making people wonder how much online self-disclosure was appropriate.
Thefacebook, however, did meet a concrete need among students at Harvard and other colleges. Paper facebooks were handed out freshman year at most schools and typically showed photos of every student along with just their name and high school. Yet for all their limitations they had come to play an outsize role in the social life of schools. If you met a guy at a party, the next morning you’d pull out the facebook to show your roommates what he looked like. If you were by now a junior, the picture would be more than two years old, but it was still the best people had. It was referred to at some schools as the “Freshmenu,” and people would play games with it if they were bored on Friday nights. Open to a random page. The winner was the one who had to turn the fewest pages before they came to ten people they’d slept with. Things like that.
So at Harvard, Dartmouth, Columbia, Stanford, Yale, and other schools, Thefacebook quickly became an essential social tool—a considerable advance over the outdated paper book. Now if a girl met a guy at a frat party, an elaborate set of electronic rituals was set in motion. They took on even more significance if you had already “hooked up” (slept together). The first key question was whether the guy immediately friended you on Thefacebook. If he didn’t, that was a disastrous sign. At the time, any student could see everyone else’s profile at his or her school. Another urgent key activity was to closely examine the friends of your new acquaintance. Thefacebook told you which friends you shared. A large number was a promising indicator.
Thefacebook had a strong sexual undertone. You were asked to list your relationship status and whether you were interested in men or women. One of the site’s standard data fields was labeled “Looking for.” Possible answers included Dating, A Relationship, Random Play, and Whatever I Can Get. Flirting on Thefacebook became a sort of art form, though one feature—the poke—made doing so absurdly easy.
Poking was a particular fascination in those days, even among the supposedly sophisticated students of Harvard. There was no certainty that a poke on Thefacebook would be seen as flirting—at least in theory it could be construed as just a friendly gesture—so even the shy occasionally found the gumption to click on it. The very fact that the meaning of a poke was so indeterminate was one of its appeals. It could mean you liked someone, found them attractive, enjoyed their comment in class, wanted to distract them from their homework, or just wanted their attention. The recipient was only told that he or she had been poked, so was left to interpret that information however they would. The proper response? A poke back, which Thefacebook’s software politely inquired if you’d like to do.
“Friending” had an element of competitiveness from day one, as it had on Friendster and MySpace. If your roommate had 300 friends and you only had 100, you resolved to do better. “Competition definitely caused Thefacebook to spread faster at Dartmouth,” says Susan Gordon, class of 2006. She was on an Italian study program in Rome when Thefacebook blanketed Dartmouth almost overnight in March 2004. She immediately began receiving emails from friends telling her that she had to join, otherwise she would be way behind when she returned at the end of the quarter. “It made a lot of sense to all of us immediately,” she says. “An online green book—how fun!” (Dartmouth’s facebook had a green cover.) The fact that it was Ivy League–only was also reassuringly exclusive. It had started at Harvard. It must be okay.
Perfecting the details of your own profile in order to make yourself a more attractive potential friend occupied a considerable amount of time for many of these newly networked Ivy Leaguers. Find exactly the right picture. Change it regularly. Consider carefully how you describe your interests. Since everyone’s classes were listed, some students even began selecting what they studied in order to project a certain image of themselves. And many definitely selected classes based on who Thefacebook indicated would be joining them there. A subtle form of stalking became almost routine—if someone looked interesting, you set out to get to know them. The more friends you already shared the easier that process would usually turn out to be. Your “facebook,” as profiles on the service began to be called, increasingly became your public face. It defined your identity.
People spent hours and hours visiting the profiles of other students, initially just at their own school but soon across Thefacebook’s network at other elite campuses as well. Nick Summers, Columbia ’05, who was user num
ber 796 on Thefacebook, recalls being able to browse through the faces of every user on the entire service from A to Z. There wasn’t that much you could do there except maintain your own profile, add friends, poke people, and view the profiles of others. Nonetheless, students spent thousands of hours examining every nook and cranny of others’ profiles. You could ask Thefacebook to display ten random students from your school for you to peruse, or you could search for people based on various parameters. The latent nosiness and prurience of an entire generation had been engaged.
In September, Thefacebook added two features that gave students even more reason to spend time there. Now included on user profiles was something called “the wall,” which allowed anyone to write whatever they wanted right on your profile. It could be a message to you or a comment about you—the equivalent of a public email. Any visitor to your profile could see it. Now not only could you surf around examining people, but you could react to what you learned. Or you could simply invite someone to meet you in the cafeteria later. Or make a seductive comment. And another friend could comment on that comment in his or her own post to the wall. Suddenly every Thefacebook user had their own public bulletin board.
Over the summer, Zuckerberg, Moskovitz, and Parker had coined a term for how students seemed to use the site. They called it “the trance.” Once you started combing through Thefacebook it was very easy to just keep going. “It was hypnotic,” says Parker. “You’d just keep clicking and clicking and clicking from profile to profile, viewing the data.” The wall was intended to keep users even more transfixed by giving them more to see inside the service. It seemed to work. Almost immediately the wall became Thefacebook’s most popular feature.
The other new addition was Groups. Now any user could create a group on Thefacebook for any reason. Each group had its own page, much like a profile, which included its own wall-like comment board. Instantly, inane groups sprouted at Harvard with names like “I puke Vitamin Water,” which for some reason quickly garnered 1,000 members. Emma MacKinnon, Harvard ’05, was writing her senior thesis on the philosopher Emmanuel Levinas and remembers belonging to a group on Thefacebook called “I hate the guy my thesis is about.” Its members were women writing about men. “There was always also a little description about ‘Why I really love him,’” she recalls.
Many students began to abandon their address books because they could use Thefacebook to contact anyone by simply entering their name. You didn’t need to remember or store anyone’s email address. And if you wanted to reach someone immediately, almost everyone listed both their cell-phone number and their AIM instant-message address in their profile. These were not the anonymous identities of an AOL chat room. The Internet had entered a different era. It was becoming personal.
Thefacebook’s full-time California staff was down to just Zuckerberg, Moskovitz, Parker, and operations manager Halicioglu, who stayed in San Jose, twenty miles south. Andrew McCollum lived with them, too, still focusing on Wirehog. Thiel’s money enabled them to buy new servers, and they were expanding furiously. In the first week of the fall semester they added fifteen or so new colleges. Thefacebook was quickly losing its elitist edge. By September 10, the list included places like the University of Oklahoma and Michigan Tech.
Since they had to move out of the trashed summer sublet, they found a new rental in Los Altos Hills, a few miles south. Its yard backed onto Interstate 280. That helped solve problems with neighbors—it was so noisy there all the time that nobody noticed parties and late-night antics. But the construction dust left over in the brand new house made the house almost uninhabitable for Sean Parker. His allergies went into crisis mode there. Luckily his girlfriend let him stay at her place.
They were good at running a website, but not so good at running a house. They turned the living room into a makeshift office with whiteboards on the periphery, tables scattered with laptops, and papers strewn everywhere. One of Zuckerberg’s high school friends stopped by and found that all the tables had been pushed to one side of the room. They’d overloaded the wiring and tripped a circuit breaker, which shut off power to some of the outlets. Rather than search for the circuit box, they’d just moved over to the remaining outlets. The visitor found the circuit breakers and flipped a switch, so the geeks could spread back out. Most of the rest of the house was empty, except for mattresses here and there and a bunch of never-unpacked boxes.
Hygiene was, if anything, deteriorating. In the kitchen, dirty dishes spilled out of the sink and nobody ever emptied the trash. Ants were everywhere. Zuckerberg continued leaving empty drink cans wherever he happened to finish them. This is how twenty-year-old college kids live.
While the housekeeping may have been immature, the company increasingly wasn’t. With its new structure and rapidly growing membership, Thefacebook seemed to be growing up. Demand was even more ferocious than they’d expected. In September alone they nearly doubled membership, to around 400,000. The number hit half a million on October 21, as growth began to accelerate. They’d figured out over the summer how to automate much of the process of adding a new school, so the painstaking assembly of dorm lists and class schedules was gone.
But it was quickly becoming clear that even Thiel’s money wasn’t enough to cover all the costs of the rapidly growing company’s infrastructure. Adding new servers was an almost daily activity. Sean Parker, whom Zuckerberg had deputized to handle all financial matters, got in touch with a firm called Western Technology Investment, which he knew from his Plaxo days. WTI, as it is known, is in the business of “venture lending.” It makes short-term loans—usually repayable within about three years—to start-ups at interest rates ranging from 10 percent to 13 percent. Maurice Werdegar, a partner at WTI, negotiated with Parker a $300,000 three-year credit line that was specifically allocated to cover Thefacebook’s costs of computer hardware and other physical assets, which WTI put a lien on until the loan was repaid. The loan closed in December 2004 with its credit line expected to run out by the following July. Werdegar, who was a big fan of Parker’s and had not had any difficulty dealing with him at Plaxo, liked what he was hearing from him about Thefacebook’s prospects. He asked if WTI could in addition invest $25,000 at the same company valuation Thiel had gotten.
Werdegar, at the time a junior partner in the firm, arranged for the two founders of WTI to join him for a meeting in October 2004 with Parker and an accountant named Mairtini Ni Dhomhnaill (she was Irish) who was temporarily working for Thefacebook. Before the meeting, Werdegar’s partners told him that while they were happy to be dealing with Sean Parker again, this company didn’t seem to merit a stock investment on top of the loan.
That attitude quickly changed. “After an hour and a half listening to Sean we all walked out and—I will forever remember this—they asked ‘How much of that equity can we get?’” recalls Werdegar. Parker was refining his rap, and the facts were just getting better and better.
The company’s latest governance structure, following Thiel’s investment, had some unusual provisions. The board of directors included four seats: One was held by investor Thiel, one by Parker, and one by Zuckerberg. The fourth seat was Zuckerberg’s to allocate as he saw fit, and remained for the time being vacant. The idea was to outnumber outsiders and make it impossible for any future investor to usurp the company. Since Thiel was himself a former entrepreneur and a believer in letting founders control their creations, it didn’t bother him.
This is a key way Parker put his stamp on the company. He had been fired twice—from Napster and from Plaxo. He didn’t want to be fired from Thefacebook, and he wanted to make it impossible for Zuckerberg to get fired, either. “What I told Mark,” says Parker, “was that I would try to be for him what no one had been for me—a person who sort of shepherds his rear and puts him in a position of power so he’d have the opportunity to make his own mistakes and learn from them.” Another provision in the company’s corporate documents guaranteed that if any of the founders, or Parker, ever left the
company for any reason, they would be able to keep both their company email address and their company laptop. After being ousted from Plaxo, Parker had found himself without either, and thus nobody could get in touch with him.
“It was really beneficial to us that Sean had been a founder who had been burned,” says Moskovitz. “We didn’t know anything about how to incorporate a company or to take financing, but we had one of the most conservative people figuring it out for us and trying to protect us.” When he calls Parker conservative he is referring not to his personal style. Parker could be erratic. But Moskovitz recalls his role at the company in those days fondly, despite some unhappy incidents later. Parker was old enough to buy the alcohol, he knew how to throw a party that involved more than Beirut beer pong, and he could talk the language of venture capital. “It was just a comfort to have him around,” says Moskovitz. “Sean is like excitable and kind of a crazy person, but it just generally makes life more interesting when you’re a bunch of geeks sitting around a table hacking all day.” Parker, twenty-four, seemed a sophisticate to these twenty-year-olds.
Zuckerberg may have been more focused and steady than Parker, but he too had his quirks. They were, however, mostly intellectual and verbal. For instance, he had a way of punctuating a conversation, when it reached a critical moment, by suddenly pronouncing, “Now you know who you’re fighting!” It was a quote from one of his favorite movies, Troy, which he had seen on Harvard Square with friends on his twentieth birthday the previous May. Zuckerberg had loved studying the classics. In a key scene from the movie, the Greek warrior Achilles, played by Brad Pitt, confronts his Trojan adversary Hector:
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