More Awesome Than Money (21 page)

Max nodded. He would go back to Ellen. Exhausted, they all gave themselves the afternoon to recuperate at the Sofaer house.

—

For pastrami, and chaos, no place in New York can match Katz's Delicatessen on the Lower East Side of Manhattan, so it took a few minutes for me to spot Ilya, even though he was the only person in the place with
bright orange plastic sunglasses. He treated them as if he had spent four hundred dollars on them. Katz's was a kosher-style deli, heavy on the cured meats, knishes, and obscure soda drinks like Dr. Brown's Cel-Ray. The line went out the door, and once inside, it was self-serve at each of the big glass-covered stations, where countermen cut paper-thin slices of tongue or corned beef as samples. The tables were elbow to elbow, and when it came to finding a seat, it was every diner for him- or herself. It added a Darwinian touch to the bedlam of clattering plates and shouted announcements—“Who's brisket? You brisket or tongue? Rye or wheat?”—that a sandwich was ready.

“I love this place,” Ilya said. “I only have a couple of days in New York, so I figured, bring it on.”

The day before, he had been in Philadelphia to take the oath of citizenship; over the eleven years his family had been in the United States, his parents, Alexei and Inna, had already gotten theirs, and a baby sister, Maria, had it by birth. He had always intended to get it; as antiauthoritarian as he could be in his political views, he was quite sure that he viewed himself as a citizen of the United States. They might have chatted in Russian at home, but, like many children of immigrants, he wanted to be accepted in his new society. One of the final hurdles to citizenship was a civics test, he said, with questions like, What are the first ten amendments to the Constitution called, and name one civil right granted under the First Amendment.

I proposed another question.

“Whose picture is on the ten-million-dollar bill?”

“There's a ten-million-dollar bill?” he said. “No way.”

I assured him there was.

“Okay,” he said, half laughing, but a little uncertain. Maybe there was. “What's the picture on the ten-million-dollar bill?”

“Randy Komisar's face,” I said.

He laughed. The session at Kleiner Perkins had been on Tuesday, and it was now Saturday.

“The night before was wild,” Ilya said. “Yosem came in and basically tore up the proposal. He made it much better. We were so tired, after the presentation we came back to Rafi's house. Max and Rafi took naps. Dan and I stayed up, working on some problem in the code.”

He did not know what to expect from the session, he said, but he wasn't worried. For all his instinctive candor, he had said nothing about his sudden departure from the project before Thanksgiving, or the circumstances of his return. Nevertheless, when asked how things were going for himself, he knew that the question was more than polite chitchat.

“I got a bike, and it's totally changed things,” he said. “Things are much better now. I'm getting into things out there. Right after Thanksgiving, I got totally stressed out, and had to go home.”

He was connecting with people every day. Life in San Francisco was turning out to be much better now that he was living in a real house. He promised that he would be sure to get help before things got to be too much.

A few tables away, there was a sign marking the spot where an auspicious moment in movie history was filmed.

“WHERE HARRY MET SALLY . . . HOPE YOU HAD WHAT SHE HAD!”

Ilya wasn't familiar with the reference. The movie had come out in 1989, a year before he was born. So I annotated the joke. Sally, played by Meg Ryan, meets her platonic friend, Harry, played by Billy Crystal, for lunch at Katz's. He insists that he can always distinguish authentic sexual satisfaction in a woman from a faked performance. To prove that he absolutely cannot, Sally proceeds to provide the sounds and sights of a hearty orgasm right at the table, a performance so audible and unmistakable that it manages to override the clamor of Katz's, stunning the place into near silence.

At that moment, a waiter comes by to take the order of an older woman, who is sitting nearby and watching the writhing, moaning Sally. Looking at the waiter, then glancing back to Sally's table, the older woman eschews the menu and declares: “I'll have what she's having!”

Thus the sign at the landmark table.

Ilya howled.

“Maybe we should find out and order it, too,” he said.

—

Yosem phoned Max a few days after the session at Kleiner Perkins to learn what he had been told by Ellen Pao in the follow-up contact. He was
certain that KP was pulling back, but was not convinced they were bailing out altogether, particularly since they had spent so much time with them. It was not that the company did not want to put money into Diaspora, or was requiring a specific revenue stream—a good idea may be profitable in unexpected ways—but the more speculative the bet, the less likely they were to put down.

“I haven't called her yet,” Max said. “We've been so busy with the product. Anyway, I don't think that they want to do a deal. We went for too much.”

“They do want to do a deal, but not for ten million dollars,” Yosem said. “It's not your fault. Don't beat yourself up because Mitch Kapor advised you.”

“Actually,” Max said, “he didn't advise me to ask for that.”

“What do you mean he didn't advise you that?” Yosem said. Had he misunderstood how they had arrived at the figure?

“I came up with that number and told Mitch Kapor, and he didn't say anything,” Max said. “So I assumed he agreed with it.”

Whatever the origins of the folly, Yosem believed it essential that Max not let the connection with Kleiner Perkins get stale. “You have to call her right away,” Yosem said.

Despite the goodwill they enjoyed with Komisar, which seemed genuine, their request for funding bore no relationship to any notion of where revenue might come from, or when it could be expected. Max's reading of the Netscape moment was not wrong—that company's browser, funded in part by huge investments, did, in the end, liberate the Internet—but that was not the only lesson people could draw from that episode and era. Netscape, as the avatar of the first Internet bubble, also stood for the proposition that investors could be skinned alive if they flung money at projects without seeing any plausible way to make money. That part of the historical lesson had not been absorbed into the pitch.

Their best move, Yosem believed, was the truth. They knew nothing about business, but they and others believed in the power of the idea. He strongly suspected that Kleiner Perkins would hear that sympathetically and forgive them their youth.

A few minutes later, Max reported back on his phone conversation with Ellen.

“I basically told her that we had looked at our numbers, and after reanalyzing we realized we could do it for less. She said, well, we were stunned by the amount that you asked for her, because we were willing to do a deal for $750,000.”

Yosem would later say that he was shocked by what Max said next. “Max told me that he said to Ellen, ‘That's too low. We'll do it for $3 million but nothing lower than that.'”

How much did the others know about this second offer? That would be a matter of dispute. Max said he had kept them informed and was following their collective will; the other three founders said they knew nothing about the $750,000 offer that Max had turned down.

What was clear to everyone was that their engagement with Kleiner Perkins had come to an end. If it was a shocking turnaround, the episode did not change their strategy. It would be several more painful months before it became clear to all of them that their charm, the raw web application they had created, and the bounty of public love were not sufficient to unlock the vaults of Silicon Valley. Everything that had happened to them so far was brand-new. Adulation or rejection, it was all in a day's work.

I
t was another day for blazer coats and jeans. By early April, dressing up was an established part of their routine for pitches.

Seeing them in these getups was the first clue for Mitch Kapor when the four arrived at his office. After a few preliminaries, Max pulled out his laptop, and began to run through the slides.

“Wait a minute,” Kapor said. “Are you pitching me?”

Indeed they were.

Then they weren't. Kapor raised a stop sign.

“Why are you showing me your pitch?” Kapor asked.

“We were hoping you'd raise our round for us,” Max said.

“I think I've overstepped my bounds here,” Kapor said.

They had come to him because they were floundering, and believed that Kapor's encouragement over the months meant he was also prepared to put money into the project. After the fiasco at Kleiner Perkins at the beginning of March, the world had not come to an end. The guys continued to make presentations to the leading venture capital firms in Silicon Valley. Kapor helped them set up meetings at Greylock, Benchmark, and Google Ventures. They got an e-mail from Andreessen Horowitz inviting them in. Having watched his effort at matchmaking with Kleiner Perkins come to nothing, Yosem connected the guys with Draper Fisher Jurvetson. They also wound up pitching to Floodgate. There were others.

For the most part, the technical people at the firms seemed enthusiastic
about Diaspora; it was a pretty clear demonstration that Facebook, for all its polish and smoothness of operations, did not have any digital secret sauce that it alone was able to make. What they had, of course, was scale. But even Facebook had elements of uncertainty in its business model; its ability to bring in operating revenue, as opposed to equity investors, was at that point uncertain. Regardless, the scale of its expenses was without precedent. It held the world's largest cache of photographs, and had internal standards that pictures and other elements of an individual's page—the likes, the updates, the links—be loaded at what was lightning speed. These qualities were what made the network attractive, sleek, and fleet, and thus would help bring ever more people into the Facebook corral. The basic asset of the personal data of hundreds of millions of people throbbed with intriguing commercial possibilities. Still, online advertising had a short history, making reliance on it to unlock future streams of revenue less a matter of experience and more based on faith, hope, and awe in an entity that could consistently gather so many of the planet's humans in one virtual space.

The Diaspora project also had difficulties articulating precisely how it was going to turn its relatively infinitesimal number of subscribers into money. Federation inherently meant that every user, in theory, was sovereign. The traditional stream of income from ads was unlikely if tens of thousands, or hundreds of thousands, of individuals were masters of their Diaspora domain. As the spring advanced, they began to skin back the funding they were seeking. The $10 million ask that had choked off the Kleiner Perkins presentation was removed from the slide show. Sometimes the amount was left blank; one version of it listed their request between $750,000 and $1.5 million. They would use the money to hire engineers to build out the project.

Yosem spoke privately with Randy Komisar, pleading for the crew to be allowed to return and ask for the $750,000 that Max had turned down.

“They don't have the business-side experience,” Komisar told Yosem. “The very fact that you're the one asking me, and not Max or one of them, proves that.”

A few days later, Max told Yosem that he was getting strange vibes from Mitch Kapor. As Yosem recalled the conversation, he suggested to Max that they ask Mitch to be the chair of the fund-raising for the first
round. “That way you will get some clarity on the relationship,” Yosem said he told Max. And in his view, being the chair of the round was essentially an honorary position.

For his part, Max remembered it slightly differently. As he described it, Yosem suggested that they ask Mitch to be the lead investor.

Afterward, Dan looked back at the e-mail correspondence. “Max had written to Mitch saying, ‘We want to talk to you about funding.' It was ambiguous.”

Whatever uncertainty there might have been on how the meeting originated, there was no doubt about what happened at it. A few minutes into it, when Kapor realized that they were asking him for money, he interrupted Max.

“I had no idea you were going to pitch me,” he said. Kapor was not looking for new investments, and was in fact trying to cut back on his existing ones so that he could give more attention to the family foundation he had set up to support educational opportunities for disadvantaged children.

The meeting came to a quick, awkward close. “It's like when you know a girl as a really good friend, and you ask her on a date, and she gets way creeped out,” Dan said later. “It totally creeped Mitch out.”

Later, Max wrote to him, apologizing for having taken him by surprise. To dispel any sense that they had been speaking to him for months simply as a prelude to hitting on him for money, Max wrote: “We value your advice and experience first and foremost, and since we are a young team doing this for the first time, we hope we can continue to use your knowledge and experience to help us move through this crazy funding process.”

In closing, Max also said, “We would love to hear any feedback you have received from other sources.”

Replying, Kapor said he appreciated that Max had taken responsibility for the surprise in the meeting. He did not sugarcoat the feedback he'd gotten from venture capitalists. “There's a lot of agreement that Diaspora isn't yet in a fundable state,” Kapor wrote.

It wasn't clear yet what value such a system would have for users, developers, or the groups that would host Diaspora pods, Kapor said, and no way to figure out which should get the focus. “We love the vision of a federated open social network, and we want you to win,” Kapor said.

He said he could continue to be available, but did not have the time for an intensive advisory role. He needed to pull back, “though not pull away entirely,” he wrote. His most important feedback, he said, was that they should pick a group—users or developers who would come to believe that Diaspora was “something they cannot live without.”

That essentially was the end of their conversations with Mitch Kapor.

“We lost the connection there through ambiguity,” Dan said.

—

Pedaling his new bike down Valencia Street in the Mission District, Ilya caught up to his friends in the pickup truck when they stopped for a traffic light.

“Give me the Bloody Mary,” he shouted.

Ilya had gotten to brunch late, as the group was already paying the tab at Napper Tandy and heading for Dolores Park. It was Pride weekend in San Francisco, the annual sprawling celebration of gay humanity, and no one wanted to miss the fun in the park. So Ilya ordered his Bloody Mary to go. He asked his friend Katie Johnson to hold it in the truck until they got to the park. The rest of the group was several drinks ahead, though, and the merriment from the truck became irresistible.

Katie handed him the drink, expecting him to have a swig and give it back.
Instead, sipping the Bloody Mary, steering with one hand, Ilya took off, turning a corner. Everyone in the truck bed whipped out cell phones to get video of Ilya chugging and cycling. It turned out that he was better off steering with just one hand. As he lowered the drink, he lost control of the bike and it toppled into the street, followed by the remnants of the Bloody Mary, and then Ilya. Except for one person, the people in the back of the truck roared with laughter.

“Stop! Wait,” Katie hollered to the driver. “Stop.”

Having invited him to the brunch, Katie felt protective. While Ilya pulled himself together, Katie ran to him.

“Are you okay? I'm so sorry. Are you okay?”

He was okay, he said.

He held up his left palm, showing a puncture.

“Awful,” she said.

“No, totally, I fell in the right way,” he insisted.

His orange sunglasses were intact. He unbuttoned his jacket, inspecting a scrape on his elbow, and revealing his T-shirt from
Makezine
magazine, the bible for do-it-yourselfers, with a classic message: “Void your warranty, violate a user agreement, fry a circuit, blow a fuse, poke an eye out.”

The elbow scrape looked minor.

“Okay,” Katie said, relieved. “We'll get you a Band-Aid.”

“It sucks!” Ilya said. “I need another Bloody Mary.”

His injuries weren't a big deal. He gave her a big smile and promised that he was all right. Ilya's social life, so becalmed a few months earlier that he wanted to abandon California, was billowing with new friends. The surge had started, oddly enough, with a visit to Diaspora from a group of students at Stanford, at least one of whom was keen to skin back the shimmer of hype and expose all the weak points in the project.

The class was called Ideas for a Better Internet, and the teacher, Elizabeth Stark, faintly knew the four guys from New York. The Diaspora guys knew very well who she was: Stark was a leading figure in the free-culture movement, which generally pushed for open software and free sharing of content and culture, though it distinguished itself from piracy advocates who had no regard for copyright restriction on intellectual property. Stark had cofounded the Open Video Alliance to promote technical standards that would keep the web from turning into nothing more than a one-way platform for pay television. Max and Ilya had been members of the Free Culture outpost at NYU.

A graduate of Harvard Law School, Stark had met Mark Zuckerberg when he was still a student and first building Facebook; a few years and a few hundred million users later, she gave him a heads-up about Diaspora, which led to his donation of one thousand dollars through Kickstarter. She taught at Yale and then at Stanford.

The Better Internet class studied interesting projects, met the founders, and pitched in with code or other help. Most of the students had heard of Diaspora, so Stark set up a visit to see them at Pivotal in San Francisco.

Oh, good, thought David Kettler, one of the students. I get to tell them why they suck. A little.

Kettler was a senior completing his work in a major called Symbolic Systems, which took in logic, philosophy, interface design, artificial intelligence, linguistics, and psychology. He had been working with a Stanford group, the Programmable Open Mobile Internet project, that had many goals similar to Diaspora's. And okay, he was, he knew, a little envious. Even some of the instructors regarded the four hacky kids from New York as hyped-up pretenders. They had all this attention. What else was he supposed to do besides be a little snooty?

As was often the case, it was easier being critical in the abstract, during intellectual batting practice, than in the flesh. At Pivotal, Kettler found the four Diaspora guys were friendly, welcoming, modest, and amazed at the attention they'd gotten, and showed no sense of entitlement whatsoever. Nevertheless, as soon as their presentations were finished, Kettler was ready to set them straight, cordially but firmly.

“You're focused on being your own network,” Kettler said. “You should be connected with other networks.”

Max explained, calmly, that they wanted to focus on building up Diaspora's own network, and then worry about opening it up to others.

“You're not going to get adoption that way,” Kettler told Max. “People aren't going to go to a new system that offers no benefits other than privacy, apart from people who really care about that stuff.”

He spelled out a few more particulars; his purpose was to push them, to see if they pushed back; perhaps, he acknowledged, he himself needed to be straightened out.

Ilya interrupted.

“Those are great ideas,” he said, smiling. “You should come work with us and see if you can make them work. If you want to, we'd love to have you help out.” Offered unconditional surrender, Kettler had no chance. That night, the Stanford students went to dinner with Ilya at an Italian restaurant.

By graduation, at Ilya's invitation, he had moved into the Hive. Even though he was working on another start-up, was in a band, and had a steady girlfriend, Kettler managed to become a regular contributor to Diaspora. Soon afterward, another member of the same class joined them in the apartment: Tony Lai, a lawyer from England who was as easygoing as
Kettler was confident. Lai had gone to Stanford for a second law degree, and was developing a tech project to democratize legal services.

At the hub of Ilya's constellation of new friends was the instructor, Stark, a tall, dark-haired, and striking presence everywhere, it seemed, that she went; she had a sprawling network of friends and younger people who looked to her for advice.

A few days after meeting the Stanford group, Ilya threw a party to celebrate his new status as a U.S. citizen. In notes inviting them, he said that he always had his parties on “Caturdays.” Elizabeth arrived with friends. Ilya viewed her with awe, but she quickly became another person who crashed at the Hive rather than go back to Palo Alto after an evening in San Francisco.

Also present at the party were people who had become friends of Diaspora: Rosanna Yau, an interactive designer, who was their first employee. Sort of, since she was unpaid. All four of the Diaspora guys had interviewed her one evening at the Pivotal offices. None of them had the slightest idea what they were supposed to ask.

“What is your favorite color?” Max had asked.

“I don't have one,” she said.

“What kind of a kitchen appliance would you be?” Ilya wanted to know.

Rosanna gave that a moment's thought. “A cast-iron skillet,” she said.

“What is your favorite designer tool?” Dan asked.

A special pen, which was in her bag. She showed it to them. To move the conversation along, she talked about her studies at the California College of the Arts, where she had taken a graduate program in design. She was continuing research on entomophagy—the study of eating bugs for food, and how it might be made more acceptable. There was a long history of insects as part of the human diet, and it was a far more sustainable foodstuff than what was produced by modern industrial farming. The title of her thesis was “MiniLivestock: Exploring Rhetorical Methods to Promote Consuming Insects as Food.” Or, as she explained it in plainer English, how branding could be used to change the perception of eating bugs.