Nothing like this existed before. Cell phones now have built-in cameras! MySpace had eclipsed Friendster. No one outside of Harvard University knew what “The Facebook” was. Three guys who worked at PayPal were about to change the world. They would create something that up until then had been unfeasible.
Methods of Prosperity newsletter is intended to share ideas and build relationships. To become a billionaire, one must first be conditioned to think like a billionaire. To that agenda, this newsletter studies remarkable people in history who demonstrated what to do (and what not to do). Your feedback is welcome. For more information about the author, please visit seanallenfenn.com/faq.
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Elon Musk took over as CEO of Tesla Motors in 2008. He ousted Martin Eberhard. A series of escalating conflicts and financial difficulties led to his dismissal. The board appointed Michael Marks as Tesla’s interim CEO, followed by Ze’ev Drori in 2007. By the next year, Musk assumed leadership of the company as CEO and product architect.
In 2008, Tesla had delivered only 50 Roadsters despite having received more than 1,200 orders. Tesla failed to secure a $100 million investment round in October 2008. Alan E. Salzman is the co-founder, CEO, and Managing Partner of VantagePoint. He allegedly blocked Tesla’s funding round, wanting to gain control of its assets. Tesla Motors announced a debt financing round of $40,167,530 in November 2008.
On December 23 2008, SpaceX received $1.6 billion as payment for twelve flights to the space station. Today, Falcon 9 has completed its 300th successful mission. Tesla’s market capitalization (market cap) stands at approximately $590.90 billion. Elon Musk continues his mission to save humanity from extinction, make us multi-planetary. He’s also restoring independence to quadriplegics. Why not redefine the boundaries of human capability?
We’re improving quality of life at scale for hard working families.
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The following is Methods of Prosperity newsletter number 36. It was originally deployed February 22, 2024. As of October 31, 2024, original subscribers have received up to issue number 72: Sam Zell.
Part 36:
YouTube co-founders
Steve Chen, Chad Hurley, and Jawed Karim
PayPal Mafia continued.
TL;DR
Three former employees at PayPal co-founded YouTube in 2005. Until 2004, sharing videos on the internet was unfeasible. Cell phones started featuring cameras installed in them around 2002. Macromedia Flash Player 7 became available in 2003. It was near impossible to share videos online. Affordable broadband internet connections allowed for it. If only someone could build a website to make it easy. Enter three friends from the PayPal Mafia. Jawed Karim, Steve Chen, and Chad Hurley. They proved the concept and secured funding from Sequoia Capital. Jawed Karim uploaded the first YouTube video on April 23, 2005. Google acquired YouTube in October 2006 for $1.65 billion in shares.
Key lessons:
For certain things, there are no experts.
Find a problem that needs to be solved.
Fill a void in your marketplace.
Make it easy to share.
Email your friends.
Why now?
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Before 2004, the concept of user generated content was not a thing. The first iteration of the internet (let’s call it Web 1.0), was read-only. Back then, one did not simply upload and share videos. Only the most advanced geniuses knew how to make a web-log (AKA blog). On-demand anything was not a reality, much less on-demand video.
Until one day, a devastating earthquake struck. It was along the Indonesian Island coast, off of Sumatra in the Indian Ocean. On December 26 2004, the 9.1–9.3 magnitude earthquake generated a gigantic tsunami. For the first time, people captured video of a natural disaster and shared it across the internet. How? With cameras built into their cell phones.
The Super Bowl XXXVIII halftime show was only one month earlier. Janet Jackson had a wardrobe malfunction. It was during her performance with Justin Timberlake. Finally, there was a way to keep watching the video clip on the internet, but not without a struggle. This was a challenge which inspired the founders of what would become YouTube.
Steve Chen, Chad Hurley, and Jawed Karim, were former employees of PayPal. They became friends. Max Levchin, one of the original PayPal founders, hired Steve. Chad was the first designer hired at PayPal. Jawed was a developer who worked on PayPal’s real-time anti-fraud system. They would meet for coffee nearby work and discuss what they wanted to do after leaving PayPal. Facebook recruited Steve as a senior engineer for a few months in 2005. On February 14 2005, they got together and started working on what would become YouTube.
Back then, there were two popular websites that showed potential. Flickr was a photo sharing website, which featured a way to tag photos. Now, that’s commonplace. Up until then, no one made it happen. The other inspiration was Am I Hot or Not, which was also an inspiration for Facebook. It was a rating site. Users could rate the attractiveness of other users’ photos.
Steve, Chad, and Jawed thought about what problem needed solving:
Where was there a void in the emerging Web 2.0 (a term retroactively applied to the new age of the internet)?
What if there was a video sharing site where anyone can upload videos, and anyone can watch them?
Why now?
The fact that this didn’t exist already suggested an obstacle.
This was during dial-up era. For the first time, it was possible to build. Affordable broadband connections at home allowed for such a thing. Proliferation of digital cameras installed in cell phones started gaining traction in 2002. Who remembers the Sharp J–SH04, the Sanyo SPC–5300, and the Nokia 7650? On August 31, 2003, Macromedia removed another barrier. They built a new multimedia software platform named Macromedia Flash Player 7. It allowed users to create and view interactive content. They released it in August and made it available to the market in September of 2003 for Windows.
There were no experts to tell them this idea was going to work or not.
on April 23, 2005, Jawed Karim posted “Me at the zoo”, the first video on YouTube. It still wasn’t getting traction after they enabled comments. To get users, the guys emailed their friends. By June that year, they enabled “related videos” (tags). They also shipped an external player. Which enabled users to embed videos on other websites. This was a game changer.
YouTube attracted Sequoia Capital, raising $3.5 million.
Do you know about my livestream podcast? It’s called Hidden Secrets Revealed Live (HSRL), and I record it live on 𝕏 every Wednesday.
Google announced that they acquired YouTube for $1.65 billion on October 9, 2006. The final price included $15 million in cash. The deal included 3,217,560 shares of Google Class A Common Stock. Google also payed 442,210 shares of restricted stock warrants. This is how they determined the number of shares. Dividing the acquisition price. It totaled $1.65 billion, divided by an average value of Google stock over the last thirty days. Based upon the closing price of $481.03 per share, the deal was worth $1.775 billion to YouTube’s shareholders.
Jawed Karim never held a formal role at YouTube. After the exit, he went to Stanford to complete his computer science education. He founded Y Ventures, a venture capital firm in 2007. His estimated net worth is around $310 million.
Steve Chen moved to Taiwan in August 2019. He received approximately 625,366 shares of Google stock. Those shares were worth around $326 million at the time of the acquisition in 2006. His estimated net worth is currently over $400 million.
Chad Hurley stayed on as CEO of YouTube until October 2010. He earned approximately $346.6 million from the acquisition of YouTube by Google in 2006. His estimated current net worth is around $700 to $810 million.
Stay tuned for next week!
I like you,
– Sean Allen Fenn
PS: You don’t have to follow me on 𝕏, but you can partner with me to bring about serious advancement for each other.
