Brent Summers
Steve Chen on YouTube’s Founding Story: Funded on Credit Card Debt, Acquired in a Denny’s
This article first appeared on Startup Grind
How did someone who knew nothing about videos build Youtube? On credit cards and a grand-slam breakfast. Youtube co-founder Steven Chen divulged new details about the early days of Youtube during an interview with Google’s Bridgette Beam during the Startup Grind Global Conference.
“We were self-funded, and right before we got acquired, I was reaching my credit card limit every month,” Chen said. “Funny — then I found out that I could get two to three times past the limit if I paid it off multiple times a month.”
Chen, an early employee at Paypal, said he realized it was the time to start a company after seeing Peter Theil build Paypal without any experience in banking. But he knew his window was short.
“I realized if I didn’t venture out on my own now, I wouldn’t have this opportunity later on in life,” he said. He developed a two-year plan: if his new company didn’t take off in two years, or he ran out of money first, he would try to go back to Paypal and get a job.
Instead of two years, it took nine months for Youtube to go from idea to acquisition, getting bought by Google for $1.65 billion. And it all went down in a Denny’s.
“The Only Place we Could Meet in Secret”
After deciding with fellow co-founders Chad Hurley and Jawed Karim that the best path forward for Youtube to scale was to partner with a larger company, Chen organized a meeting with Yahoo and twice with Google at the same Denny’s restaurant in Redwood City to discuss their options.
“When Yahoo approached us, we didn’t want to go to their HQ because people would know right away,” Chen said. “We had to pick a restaurant, but there are too many VCs in Redwood City. If there is a restaurant we won’t find any investors in, it will be Denny’s.”
After a successful meeting with Yahoo, Chen decided it would be funny to sit at the same table with Google. Google agreed, and after coming by for two Denny’s meetings, they arranged to acquire the video-sharing platform for a billion dollars.
Building for a Billion Users
Why Google? Besides moving faster in the process than Yahoo, Chen said that he was inspired by how the search giant monetized without hurting their users. “It translated over to Youtube as well. There are people that create content, view content and pay for content,” he said. “If there is a situation that makes all three parties happy, its a win-win-win.”
Chen said that when it came to scaling, the acquisition couldn’t have come at a better time. “We were at 65 employees at youtube when the acquisition happened, and in some ways we grew too quickly,” he said. “We hired everyone we had emails for, including a large part of the team at Paypal.”
Besides that, Chen said that once over 50% of the traffic was coming from outside the US, they had to figure out a globalization process. Fighting legal and copyright battles were becoming a daily struggle, and Google stepped in at the right time to help.
After the deal had gone through, Chen said that the entire team worked the whole weekend to make the transition final. In fact, they almost forgot to tell their users. After a long few days of celebrating, Chen said the video they made in a half-drunk, half-tired state is still the most popular video he’s uploaded to Youtube.
“You can still see it now — my face is rosy red, “ he said. “We realized we forgot and ran outside to shoot this and right away sent it to our users, thanking them for helping us make Youtube.”
Here is the original acquisition video, in all its drunken glory, for your enjoyment:
