More Awesome Than Money (25 page)

Now they were gathered in a Pivotal conference room for the next stage of courtship. Fertik was a man of some charm and confidence in that charm. Just ten days earlier, venture funds had closed the deal with him for $42 million in investments in Reputation, atop earlier bets. That money was not going to stay in Fertik's pocket, and he had told Max as much. Saying that he did not like to sit at such meetings, he stood; at times, it seemed like he was running a seminar, asking questions and writing the answers on the whiteboard. That is, when he could pry a word out of them.

Before Fertik arrived, the guys had huddled about their strategy and goals. They thought Reputation would be staid, and that the culture at Pivotal had nourished them. Software engineers were hard to find. Max's favorite start-up guru, Paul Graham, had written essays about the process of “acqhire”—acquisitions for the sole purpose of acquiring the technical power of the team, not necessarily out of any interest in the product they were making. Companies with loads of cash might spend between $1 million and $5 million—most of it in stock, a kind of script with potential as a lottery ticket. Yosem cautioned them to play poker.

Fertik was direct.

“Level with me, guys. What will it take to get this deal done?” he asked.

There was silence.

Fertik began to go around the room, addressing each of them in turn about ambitions, based on his reading from the earlier meeting. “Which of you has aspirations of becoming a start-up CEO? I just want to know who I should place under my wing in the business development department,” Fertik said.

He added that he could see Max as the CEO of a start-up.

“You infer correctly,” Max said.

Fertik looked at Ilya. He thought he had the makings of a future chief technical officer.

“You deduce correctly,” Ilya said.

The visitor admitted that he was having a harder time figuring out the ambitions of Rafi and Dan.

“I'm going back to school in September,” Rafi said.

After some silence, Dan said he saw himself more on the technical side of things, but wanted to learn about the business as well.

To Yosem's eyes, all the energy in the room was with Fertik. The guys were not feeding any momentum to their suitor. More than once, Fertik said he did not want to waste their time, or his, and asked them to be direct.

Suddenly, Max said: “We'll only sell for eight million dollars.”

Fertik gave a moment's consideration before he spoke.

“If that's the case, I think we should no longer continue talking,” he said. “I don't want to waste my time here. There are other potential acquisitions that I could be looking at.”

To this, the Diaspora four said nothing.

Where were they getting this number from? Did they have an offer for that amount? He was there in good faith; were they playing him against another company?

Again, there was silence.

Breaking the ice, Yosem explained that $8 million was a kind of rough valuation of Diaspora, based on the $750,000 venture offer that they had gotten for 10 percent of the company. That brought the theoretical value of the company to something like $8 million.

“But of course, the guys don't have a lot of experience, so they don't know what the acquisition price is,” Yosem said. “In any case, what the guys care about more are the intangibles. Will they get to keep their own culture?” Meaning, would Diaspora continue to exist within the folds of Reputation?

Before the meeting, they had gone over an answer they could give to Fertik that would make clear how important it was for them to keep Diaspora going, even if housed within Reputation. The plan had been for Max to deliver it. Instead, Ilya spoke up.

“I mean, I can't speak for the rest of the guys, but I don't care about money. I care about Diaspora as an idea that will change the world. There are hundreds of thousands of people that believe in us and would be unhappy if we sold out. I just want to make sure their interests are protected.”

Dan chimed in.

“We really don't care about money,” he said.

The big bargaining chip was not financial: they wanted promises for the future of Diaspora if it ended up inside Reputation.

Yes, Fertik said, he wanted to keep it going, but the group was not persuaded.

The meeting ended on amicable notes. Max sent a note of apology for the awkwardness about the $8 million figure. It appeared to have rolled right off Fertik's shoulders. The Reputation team spent the weekend playing with the Diaspora site, then wrote to Max and invited them to return for another meeting. An offer was made: they would be getting salary and benefit packages worth about $200,000, and stock in Reputation, value uncertain, as it was still a private company, but it would amount to a handsome reward for their year of work.

They had, at that point, no money in the bank. The Silicon Valley culture sometimes is hailed as a perfect incarnation of Darwinian capitalism, but in truth, sheer brilliance was not enough to keep young people afloat without support from someone. The backing of the Grippi, Salzberg, Sofaer, and Zhitomirskiy families allowed their four sons to look past the offer from Reputation, jobs that paid handsomely plus stock in a company that a number of Silicon Valley's savviest investors were putting bets on. There was little enthusiasm among the Diaspora Four for this prospect. They liked Fertik, but they were not excited by Reputation, and were nowhere near ready to surrender Diaspora. Not at that price, or perhaps at any price. Though he had no formal voice or vote, Yosem concurred with their decision.

“It feels like selling out,” Max said.

They thanked Fertik for his interest and declined.

O
ne evening in July, when Ilya seemed particularly amped up in the backyard of the Hive, Gardner watched him with some concern. A few months earlier, he'd had to grab something from Ilya's bedroom, and he was stopped short by what he saw atop the dresser: an array of prescription bottles. The Hive was a communal space, but the roommates respected one another's privacy. Gardner had never really spoken to Ilya about his sudden departure from San Francisco right after he'd moved in. There was depression involved, and now, months later, he could see that Ilya was on multiple prescriptions. A quick glance told him that these were medicines associated with psychiatric care.

That July evening, after his manic performance in the backyard had tailed off, Gardner waited for a quiet moment; he wasn't sure if the pills were all Ilya's or belonged to one of the young women he hosted.

“Hey,” Gardner said. “I know you started taking some stuff for depression. I was wondering if that has ever been adjusted.”

“Yeah, it has,” Ilya assured him.

—

Onstage, Dan and Ilya were a tag team of hipster couture, Ilya in an unbuttoned flannel shirt and Dan wearing a knit watch cap. A lot of clothes for mid-July in Mexico City, but they had other things on their minds when they packed. Such as, what were they going to say?

“We're going to describe who we are,” Dan told the audience. “We'll
be going into what Diaspora means. Then we're going to get a little technical.”

Ilya broke in.

“But don't be scared, because that will be at the end,” he said.

—

They had a story to tell, and their audience of Free Culture apostles were keen to hear it. No one was going to demand that they show revenue streams. It was quite enough to hear about the magic of global collaboration that was driving Diaspora. They had one hundred individuals regularly contributing code. Nearly five thousand people, known as watchers, were following the daily evolution of the code on GitHub. Meetups were being held in India, Germany, Holland, Spain, and Italy. They had regular help from online figures they knew as Mr. Minus and Darth Vader.

“Mr. ZYX manages all of our translations, more than forty-five,” Dan said. “It's a larger ecosystem, way bigger, than anything we could ever build by the four of us just being in an office.”

Ilya, at his most vibrant, deployed his knack for explaining the complicated to discuss what they were building.

“Diaspora is a federated social network. Many of us use federated social networks today. For example, cell phone providers. I am able to call Dan, who might be on AT&T, and I'm on T-Mobile. Even though we use different providers, we're still able to communicate with one another.

“Another example is the postal service. I'm able to send letters to France,” he said, even though his letter was originating in the postal system of another country.

“Or e-mail providers. I don't necessarily have to have a Gmail account; if a friend of mine has Yahoo! we can still communicate. This is something we don't have in the social networking space right now, but that's what we're building.”

Dan had an example. One of Facebook's earliest, and most lucrative, successes was a game called FarmVille, which had been built by an independent company.
Within two months of its creation, 10 million people were using it every month. In 2011, FarmVille would account for 12 percent of Facebook's income, $445 million.

“Say I love FarmVille. I don't, but say I did,” Dan said. “I would have to have a Facebook account to use FarmVille and hook up with my friends.
That kinds of sucks for me as a user. I'm required to sign up with a single provider to fulfill my urge to plant crops and buy cows. That doesn't make sense.”

It was as if videos or television shows could be seen only on certain brands of television.

“To use an application,” Dan said, “you shouldn't be told—”

“Forced,” Ilya said, breaking in.

“Forced to use any one single provider,” Dan continued. “That's what federation gives you. It's an equal playing field.”

Their audience was not techie geeks, but, like the people who had donated money a year earlier, many of those present wanted to help.

The first question was from a woman in that camp.

“Most of us have been looking forward to it since it was on Kickstarter,” she said. “What can I do to contribute?”

Ilya smiled. “Dan actually talked about this very point in France.”

“I gave an ‘open source for nongeeks' talk in Paris a month before. God, I have this slide.”

As he started hunting through the computer in search of the slide, Ilya grabbed the microphone.

“I can blabber on for a little bit,” he volunteered.

“Thank you,” the woman said.

“So,” Ilya said. “Blah blah blah.” He giggled. “There's actually several fronts. Coding is one front. User interface and feedback on that front is just phenomenal. And being sort of vocal about it.”

Dan triumphantly found the slide, which turned out to be on the prosaic side, reading, “It's not all just .”


“There's an impression that to contribute to open source you have to know how to code,” Dan said.


“That's a fallacy,” Ilya said.


“And it kind of just sucks. Even using a product as an end user—you're going to find a bug,” Dan said. “No software is perfect.”


“Submitting feedback,” Ilya said.


“Yeah. You don't need to know code to say, ‘Look, this right here is a total design failure and it's impossible for me to do what I want, right here.' Providing that feedback is superhelpful,” Dan said.


He and the other builders of the project needed the outside eyes to
tell them what wasn't working. There were formal channels for such suggestions. But some Diaspora users had figured out a way to get the message across: using tiny animated images, contained in files called GIFs, that packed multiple images in a single file.


“The ability to reshare a post was just put in yesterday,” Dan said. “That's because a bunch of noncoders were just making a bunch of GIFs, ‘where the hell is reshare?' That got a feature pushed out. Superhelpful.”


The audience loved them.


—


Almost every month, it seemed, one or more of the group was being flown to a conference. Dan and Rafi had been to Paris and New York; Ilya had been to Berlin and Mexico. There had been trips to Venice, Providence, Austria. “Fuck it, I want to ride this thing and go to all these places,” Dan had said. “This may never happen again.”


A month before Mexico, Dan was in Paris when he received the invitation to speak with Ilya at the Free Culture conference in Mexico City. And before they'd even gotten to the podium there, an invitation came to the group asking for proposals to speak at a new lecture series that was being set up at the end of August at Burning Man. The speakers would get free tickets.


“Awesome,” Ilya said. He, Dan, and Rafi had gone the year before, but they had not planned in time for 2011. It was the twenty-fifth anniversary of the utopian festival, and the organizers had capped ticket sales. They had been sold out at more than three hundred dollars.
The lowest price through ticket scalpers was seven hundred dollars.


The guys were in demand; even without rousing success, the ideals of the project, their climb from promise to a small but real prototype, had annointed them with charisma. In Berlin a month earlier, Ilya had been halting and hesitant as part of a panel with the ungainly title of “From Society to Technology—Implementing an Interoperable, Privacy-Aware and Decentralized Social Network.” He had spent part of his time onstage writing in his Maker's Notebook.


In Mexico, though, both were calm. After speaking, they dashed off a proposal for the Burning Man series, which Dan summarized as being about “the asynchronicities on the internet between the users and the
service providers; the amount of stuff that we get for the amount of stuff that we give is just totally skewed.” It was quickly accepted. Dan tweeted:


looking forward to speaking about #diaspora at this year's burning man with Ilya Zhitomirskiy! see y'all out on the playa.


The tweet posted automatically to Facebook. Only one person took the time to endorse it there, using the thumbs-up symbol that is Facebook emoticon-ese for “like.” That was Ilya. Both had succumbed to the siren song of Facebook.


—


They staggered and swaggered through the second month of their second summer in San Francisco. Essentially broke, unwilling to sell the project to the one company interested in buying it, hammered as irrelevant because of Google+, the Diaspora Four were, nevertheless, rolling in social capital. Ilya and Dan had just seen that in Mexico. As the days peeled away, Yosem suggested that they convert some of that spirit into cash. They needed to turn to both angel investors and crowdsourcing.


They needed to change not only their approach, he counseled, but their mind-sets.


That meant “thinking of ourselves as a social movement rather than tech entrepreneurs,” he wrote to the team on July 24. “We currently see ourselves as tech entrepreneurs and pitch to venture capitalists as such. Venture capital pressure is driving this process: Since we want to raise venture capital money, we follow venture capitalists' advice and try to build Diaspora into something it is not.


“But think about where you came from: You didn't start as tech entrepreneurs trying to build a business model. You started as technology activists, you started with an idea that ignited a movement, and like it or not, you are now movement leaders.”


It was vital, of course, that they continue to work on the project, to integrate the improvements offered by other coders, and to refine the look. But they could not function, and Diaspora could not survive, if they did not pay attention to the reality outside the screens of their laptops, or out of earshot of the acclaim of people who wanted them—or
someone—to offer an alternative to Facebook. The notion of a foundation loomed, but they had done virtually nothing to move toward creating one. Such legal processes were grindingly slow. Months earlier, they had asked their lawyers in California to reorganize their corporate papers to anticipate shares in Diaspora Inc. being purchased by venture capitalists, and to make provisions for shares to be granted to advisers and people like Yosem. It had taken until July for that paperwork to be completed, and by then it was glaringly obvious that they did not have to worry too much about outside investments.


They had to stay in touch with their community of users and supporters. Their movement could not survive if they could not raise the money to keep it going until they could mount a functioning business. Social entrepreneurs “raise money from their community of zealot supporters and from wealthy patrons who share the same vision,” Yosem said. “And this is what we have to do now. If you're wondering, other examples exist: Craigslist, Wikipedia, Mozilla, EFF, etc.”


They had 100,000 or so people registered in the JoinDiaspora pod; about 6,000 were actively using it. There were than 500,000 more on a waiting list. Scores of pods had been set up around the world. No one had made them sign up. They believed in what Diaspora was doing, supporters in spirit and, possibly, financially. A professional fund-raiser, experienced in tapping into goodwill available for social movements, could provide a bridge of support until they were able to secure angel investments. Hiring a fund-raiser would cost money, but the arithmetic was favorable. They could pay a flat fee, betting that the proceeds of each round would easily cover the amount, or they could have a contingency arrangement, with the fund-raiser keeping a portion of the proceeds.


There was no dishonor in turning again to crowds for support. From Yosem's perspective, one of the group's bigger mistakes had been to stop fund-raising, and to go dark for weeks or months at a time with no communications with their supporters. In fairness, they were wandering in an unmapped land they had been transported to by public attention that they had not sought and by public support that they had not expected. They were kids. Everything that happened was a first in their lives. The torrent of Kickstarter money had so shocked them that Rafi had begged Max to turn it off. Kleiner Perkins had appeared to be waiting to write a
check. TV trucks had parked outside the Grippi house on Long Island. How were they supposed to act? Who was going to tell them?


Having worked on the presidential campaign of General Wesley Clark, Yosem had contacts with a few people experienced in online fund-raising. He advised that they speak with Peter Schurman, the first executive director of MoveOn.org, who himself had run in the Democratic primary for California governor the year before. They all agreed.


Further, Yosem said he would develop the kind of business plan that investors liked to see. He would begin to hunt around for angel investors. His official title in their paperwork was vice president for business development, but he described himself as the consigliere. Now the responsibility for raising funds was shifting from Max to him.


—


They had worked alongside one another hour after hour, months on end, looking like a school of fish, darting and swerving in unison. An illusion, of course, and one that could not last much longer. Any group of people in such tight intellectual and emotional space would start to get on one another's nerves. Moreover, even with their proximity, there was a great deal that they did not show one another. The decision to go back and fund-raise seemed like a rewinding to their earlier, wide-eyed days, but there were shearing forces at work.


Dan was seeing a therapist regularly. His stoic public face was the picture of hipster cool; he despaired about the project, what they were doing, what he was doing with himself. Though he was on Diaspora all day, tinkering with code and design, he did not use it except as a sandbox to see how a piece of code was behaving. Hardly anyone he knew outside geek circles was active on it. It did not serve any social function for him. He thought about leaving, but felt too bound to the others—that he owed them.