The WhatsApp Story

Jan Koum was working for Ernst and Young when, in 1997, he found himself sitting across Brian Acton at the Yahoo offices. He was a security tester and he’d come to inspect the company’s advertising system.

“What are your policies here?” “What are you doing here?” Jan went on, firing questions in a no-nonsense manner, something Brian would later come to appreciate because he too gave off a no-nonsense demeanor.

The two would eventually team up to create one of the most iconic messaging platforms.

But how did they do it?

The Idea for WhatsApp

Six months after that first meeting, Jan successfully interviewed for a position at Yahoo as an infrastructure engineer. They became good friends during their time at Yahoo. Brian became a source of comfort when Jan lost his mother to cancer in 2007. They’d go skiing, playing soccer and ultimate Frisbee during this period.

During their nine-year period at Yahoo, Brian and Jan watched as the company went through a series of changes, both good and bad, including the launch of project Panama in 2006. They were hardly enthusiastic about the company’s prospects

In September 2007, the both left the company and took some time to cool off in South America, travelling and playing ultimate Frisbee. They tried to apply and work at Facebook and they both failed, joining the long list of rejects who were dying to work at the tech firm.

Of course, Facebook would later come knocking at their door with a multi-billion dollar check in hand.

The Birth of an Idea

In early 2009, Jan visited his Russian friend Alex Fishman who threw weekly parties of pizza and movies for the local Russian community. Jan had earlier bought the iPhone and, looking at the App store, marveled at how, at just 7-months old, the App store was about to birth a whole new generation of apps.

By this time, Jan already had a cool idea of an app that would run on the phone’s address book and show people’s statuses or what they were doing. It would show you were “on a call,” “at the gym,” busy, can’t talk,” “low battery,” and etcetera, etcetera.

As they stood near the kitchen counter of Alex’s West San Jose home, Jan went on and on about his idea and what he intended to do. But there was one problem; he could only do the backend of the app. He would have to find iPhone app developer to do the rest.

Alex proposed an immediate solution; Igor Solomennikov.

He’d met the Russian developer on Rentacoder.com and he introduced him to Jan. About a month later, and even before the app had been developed, Jan incorporated the company and chose the name “WhatsApp” because it sounded like “what’s up.”

Jan began the infuriating process of developing the backend of the app. He worked diligently, going back and forth to create the code that would sync the app with any mobile phone number in the world.

Throwing in the Towel

It would take months of updating before and a series of iterations before he could have a working version. On the verge of giving up altogether, Jan recounted his woes to his friend Alex and later on, Brian.

After a game of Frisbee, Jan had updated Brian on the progress of his idea. “You’d be an idiot to quit now,” Brian balked when Jan admitted that he was on the verge of folding up and looking for a job.

In what seemed like serendipity, Apple launched push notifications in June 2009. It essentially developers to have design apps that would ping users through notifications even when they weren’t using the app.

Jan updated WhatsApp to ping everyone in their network whenever they changed their status. Up to that point, only Alex and a handful of his Russian friends had downloaded the app. As he sat in his in Santa Clara, Jan watched over a Mac Mini as the handful of users jokingly pinged each other with hilarious custom statuses.

And then it suddenly occurred to him; he had unknowingly created a messaging service.

The idea that you could text someone halfway around the world for free was fascinating. But there were almost similar kinds of services already in the space, including Blackberry’s BBM (which only worked among Blackberries), Google’s G-Talk, and Skype.

But none of them had a mobile phone number as the login.

Jan immediately began working on an updated version and released “WhatsApp 2.0.” It included a messaging function with its iconic two-ticks confirmation that the message had been delivered to the other phone.

The userbase blew up to 250,000 users almost overnight.

Perhaps realizing that he needed to take the project to the next level, Jan went in search of his buddy Brian who, still unemployed, had been struggling to get a certain startup off the ground. As they stood near the kitchen table bouncing messages off of each other, it suddenly occurred to Brian that the app would certainly provide a richer SMS experience than the traditional text messages and even MMS.

In November 1, Brian officially joined the company as co-founder. One month earlier, he’d gone out on a limb to persuade his five friends former colleagues at Yahoo to put up $250,000 in seed funding.

Initial Challenges

As the number of iPhone users continued to swell, Jan and Brian were soon inundated with emails. They wanted to when they would be able to text their friends and family who were on Blackberries and Nokias.

Jan hired Chris Peiffer, an old buddy from LA, to create the Blackberry version of the app. But Chris had been a bit skeptical about the whole idea, especially since Blackberry users already had SMS. Jan had explained that in many countries, text messages were actually metered.

Chris took one look at the ever-soaring userbase and immediately got on board.

The company now needed more office space and through their old Yahoo networks, Jan and Brian found some cubicles they could rent on a converted warehouse on Evelyne Avenue. Nearly half the building was already occupied by Evernote, a fast-growing tech company at the time.

Evernote eventually kicked them out as they took up the entire building. They had to find new office space.

Soaring Costs

One of WhatsApp’s earliest problems was the fact that it was growing too fast. Verification texts alone were eating into the company’s cash. Fortunately, by 2010, the company was beginning to make enough money to pay for the verification texts.

But how would the company handle the swelling number of users?

In December 2009, Jan and Brian updated the iPhone version to allow users to exchange photos. They had also alternated between paid and free versions. But even with the $1 price tag on the app, they were shocked to discover the number of users still growing.

By early 2011, WhatsApp had climbed to within the top 20 of all apps in the US App store. Despite the exponential growth, the company was barely crowing to the press about the app. Jan believed that it would interfere with their focus on developing the app.

But venture capitalists already knew that the app was going viral. They began courting the company to take up more funding and soon enough, Jan and Brian were batting off numerous such requests.

Sequoia Capital partner, Jim Goetz, had been particularly persistent. He’d had talks with several other competitors in the space such as Baluga, Tango, and Pinger but if insistence was anything to go by, he knew firmly well WhatsApp was a clear winner.

After convincing Jan and Brian that he wouldn’t push any advertising models on the company, they finally accepted an $8 million venture funding from Sequoia Capital. The company would become famous for refusing to take up any advertising models.

By February 2013, the WhatsApp user base had shot to a staggering 200 million users and a workforce of 50 employees. By December of the same year, the company announced that the app had 400 million monthly active users. Jan would later announce two years later that this figure had doubled.

It was time to raise more money.

Jan and Brian agreed to do a second round of funding with Sequoia Capital who put up an additional $50 million and valued the company at $1.5 billion.

Facebook Comes Knocking

WhatsApp continued its steady growth which was partly fueled by a series of updates that included improvements as well as new features such as voice messaging. Users could now send voice clips to each other.

The app was even becoming more popular than established social media apps like Twitter and was fast becoming a replacement for regular text messages. Coming from a country with a communist country, Jan was keen on security and privacy. WhatsApp didn’t store any user messages after they were delivered.

In 2014, Facebook announced that it had agreed to acquire the company in what would be a blockbuster transaction at the time. The tech giant was going to pay $21 billion in stocks and cash for the popular messaging platform.

Jan and Brian became instant billionaires.

WhatsApp Today

The company has continued to run independent of Facebook and maintained in its steady growth trajectory. It also made its way into the history books as the fastest company to reach more than 400 million users which, even by the super-fast-growth rates of Silicon Valley companies, is quite a remarkable fete.

Today, WhatsApp processes billions of messages every day and has become the app of choice for free text messaging all over the world.

It’s a story of innovation and great ideas, which almost always seem to unearth some great, pent-up demand for the product or service.