The hottest small startup in the world right now is Pinterest, a photo-collecting site that is adored by several million American women.
How hot is it?
When Facebook bought Instagram for $1 billion on April 9, All Things D reporter Peter Kafka tweeted, “So Pinterest is now worth what – $5b? $10b?”
His colleague, Kara Swisher, replied: “A kajillion.”
Pinterest gets its share of comparisons to Facebook.
This success seems to have come out of nowhere.
If you look at a chart from Google Trends, which measures how often Google users are searching for certain terms, the search term “Pinterest” doesn’t really register until about midway through 2011. Then it spikes.
But Pinterest wasn’t founded in 2011.
Pinterest was started four years ago, right as the recession was really getting underway; in 2008.
It had a different name and a different CEO, then. It had three cofounders. Two of them are no longer around. A third “cofounder” joined just last year.
The truth is just as one source close to a Pinterest investor told us: “Pinterest is an overnight success four years in the making.”
Here’s that story.
In August 2008, Paul Sciarra quit his job at New York venture capital firm Radius Capital. Across the continent, his college friend Ben Silbermann quit his gig at Google.
They started a company called Cold Brew Labs. There was a third cofounder, but he was a student still, and he quit the company after a couple weeks to go back to school.
Silbermann is a small, quiet person with a dark complexion and short dark hair. He’s skinny. He has the demeanor of an artist.
“He’s a very humble guy, and somewhat soft-spoken, but when you take the care to lean in and listen, he’s very thoughtful,” says one of his investors.
Sciarra is bigger in stature and personality. He can look like Don Draper when he wants to, but he usually doesn’t, preferring a “California” look of t-shirt, sneakers, and jeans. There is a “pretty good energy about him.”
Sciarra, thanks to his VC connections, was the CEO – the business guy. His job was to raise money. Also, his home in California would be the company’s first office, though that is a stretch of the word.
“It was kind of a house,” says an early employee. “Paul and his friend Dave lived there, and then we kicked Dave out – and then we kicked Paul out.”
An investor remembering that office says, “There was dirt on the floor. There was no place to sit. It was a really dark, dirty – a really tough place.”
Silbermann, whose job at Google was using data to improve the company’s products, was Cold Brew Labs’ product visionary from the start.
His first vision was called Tote, and it was an app for the iPhone. It pulled data from online product catalogues to create a meta catalogue for shoppers on the go. You could find particular products across retailers, sorted by location.
The app was pretty enough, and the idea interesting enough, that Cold Brew Labs found institutional funding in early 2009 from First Mark Capital in New York.
Months after launching, it was clear that Tote wasn’t going to work.
“The app was a total failure,” says one source close to early employees.
There were two big problems. One was that people weren’t using mobile apps for shopping yet. It was too early. The other was that Apple’s App Store wasn’t ready to support businesses built on the platform. It was still too slow. Cold Brew Labs would submit an app update to the store and then finish the next version before getting feedback on the prior.
Says a source that was around during the company’s early days: “Apple had two or three people on the whole team. It was like the DMV.”
Still, some people were using the app, and most of them were using it in a particular way: They were sending images of particular products to themselves. Collecting them.
Watching this behaviour during the summer of 2009, Silbermann and a very small team of technical employees began working on a product built around this behaviour. It would be for the Web, a mature platform.
The pivot from mobile app Tote to the new Web-based product “was a very progressive iteration,” not an “epiphany” says a source close to early employees.
“It makes total sense because we got the idea from a shopping app. You don’t shop for [particular items] you shop for shoes, you shop for dresses. You shop in buckets, so we were like OK, we need buckets.”
The team built a product that allowed users to put images of things in buckets. Silbermann made sure that the image collection product wasn’t described as a utility for shopping alone.
A source close to early employees says Silbermann wanted the product’s purpose to be vague, so that it could be used by everyone for anything. He learned this lesson from Twitter.
By the end of fall 2009, the new product was almost done. Silbermann had convinced the directors that the new product was the company’s future. It wasn’t a dramatic choice, says a source close to the board. “It was, let’s refine the vision given what we’ve learned.”
Over Thanksgiving dinner, Silbermann’s girlfriend thought of a name for it: Pinterest.
Ben Silbermann Is Not A Doctor
Pinterest has many cofounders – four now – and it has gone through two CEOs.But if there is a “Mark Zuckerberg” or “Steve Jobs” of Pinterest it’s Ben Silbermann.
People close to the company now say that the main reason Sciarra, and not Silbermann, was Cold Brew Labs’ first CEO, was because Sciarra was in New York the day someone from Cold Brew Labs had to sign papers to receive the company’s first investment.
But sources close to the startup’s investors uniformly describe Silbermann as the company’s product visionary from the start, and business leader for most of the past year.
He has the right demeanor for the job. One of Pinterest’s investors says how Silbermann interacts with other people is reminiscent of Google’s Larry Page and Facebook’s Mark Zuckerberg.
Silbermann is “reserved,” “mild-mannered,” “almost nerdy,” and “somewhat socially awkward.”
“You know the gears are moving inside at a remarkable rate but it’s not visible to the outside.”
He “doesn’t give you a lot of verbal satisfaction when you are talking to him, but he takes everything in.”
“When you are talking to him, he won’t say ‘Oh, I think that’s interesting.’ He’ll just nod and move onto the next topic. But the next time you talk, that thing you said will come back up.”
Silbermann grew up in Des Moines in a family full of doctors. His father, his mother, his sister, his father’s father, and his father’s mother were all doctors. He thought he’d be one too.
As a kid, Silbermann looked up to entrepreneurs like George Eastman, Walt Disney, and Steve Jobs. But he didn’t identify with them.
“I looked up to them same way I looked up to Michael Jordan,” Silbermann said in a keynote speech at the Alt Summit 2012 in Salt Lake City, Utah earlier this year.
He went to Yale and began the pre-med track.
Then, during his junior year, he decided to get into business. Clueless where to start, he became a consultant at the Corporate Executive Board in DC. He made a lot of spreadsheets.
He got put in the firm’s IT group because that’s where there were openings. He found himself reading TechCrunch.
“I remember I had this feeling that this was the story of my time and I was in the wrong place,” Silbermann said at ALT. The movie “Pirates Of Silicon Valley,” about Steve Jobs and Bill Gates, inspired him to move west. One line got him in particular: “There might be something going on in California.”
So to California he went.
He didn’t start Cold Brew Labs right away. First there was a job at Google.
While at Google, he took some classes at Y-Combinator, the famous incubator for Silicon Valley startups that spawned hits like Airbnb, Instagram, and DropBox.
At Google, Silbermann says he got frustrated because Google wouldn’t let him build products. He complained a lot. Finally his girlfriend – the same one who eventually came up with the name Pinterest – said: stop complaining and just go do it.
So, in 2008, he did. Then came Tote. Then came Pinterest. Pinterest Takes Off – SidewaysWhen Cold Brew Labs decided to bench Tote and launch Pinterest in late 2009, the company was not expecting the site “to be one of the top 15 properties on the Web in two years,” a source close to investors tells us.
“There wasn’t any grand vision.”
This is good, because when Silbermann and Sciarra showed off Pinterest to their friends and family at the end of 2009 and the beginning of 2010, their friends and family responded with a resounding: “Huh?”
“No one got it,” says Silbermann.
Not many people did for the first months of 2010.
More people were using the site every day, but adoption remained so limited that when TechCrunch hosted its Disrupt conference in New York from May 24 to May 26, team Pinterest found itself in a booth nowhere near the main stage startup competition. It didn’t even get the booth on its own merits; First Mark Capital was a Disrupt sponsor, and it had to pull strings.Then, over Memorial Day, Silbermann and his team got a very strong signal that their product was resonating. Unsolicited, former IAC M&A boss Shana Fisher called the company and said that she loved its product, and wanted to invest if they would let her.
A source close to the company’s board says, “It wasn’t like the company was going to run out of money if she didn’t save it, but she said, ‘Here’s why I love it and why I think it’s important and here are the relationships I could bring to the table,’ and I think that all resonated with Ben and Paul.”
Pinterest, as the company now called itself, completed a second round of funding. Importantly, Eventbrite CEO Kevin Hartz joined the round as an angel investor. Hartz is a PayPal veteran, and his involvement exposed Pinterest to one of the Valley’s most powerful investor networks.
As 2010 ended, Pinterest looked very healthy – having grown, on average, 50 per cent per month.
Says a Pinterest investor about the site’s growth during 2010: “It looks flat when you look at the curve now, but if you rescale it and take it back to that point, you start to see people using it and liking it. Even as an individual engaged with the site, you started to see that work.”
A Cofounder Joins The Company
Even now, Pinterest only has 30 employees. So it’s pretty easy to say which people at the company have had a huge part in its success: The answer is all of them.But at the beginning of 2011 Silbermann made a crucial hire: He poached a designer named Evan Sharp away from Facebook.
To entice Sharp away from a secure job at one of the industry’s most valuable companies, Silbermann, Sciarra, and Pinterest’s board agreed to give him the title “cofounder” – even though he joined three years after the company was founded.
Some sources hint that Sharp was working on Pinterest while he was at Facebook.
Sharp is now such an important presence at Pinterest – a site built on design, after all – that he’s sometimes given credit for being there longer than he has been. There’s a strange Mashable story about how Pinterest’s first investor met Silbermann and Sharp, not Sciarra, at a business plan competition. This did not happen.
The Exponential Curve
2011 was the year Pinterest took off. Two years after turning off Tote and abandoning the iPhone App Store, Pinterest launched an iPhone app in early March.
“It was one of those things you could see that there was pent up demand,” says an investor.
“24 hours after it launched, the numbers were great. We all went and read the comments [in iTunes], It was a Sally Field moment: ‘You really like me!'”
In May, Bessemer Venture Partners invested $10 million in Pinterest at a $40 million valuation. Blue chip investors, including Ron Conway’s firm, SV Angel, joined the round.
User numbers kept climbing through the summer: “The exponential curve looked like someone drew it perfectly,” says an investor.
That summer, Pinterest angel investors Kevin Hartz and Yelp CEO Jeremy Stoppelman – who knew each other from their days at PayPal – hatched a plan to reel in the biggest fish they could find to help fund Pinterest further: Über-hot Silicon Valley VC firm Andreessen Horowitz.
Hartz shares a board with Andreessen Horowitz partner and former OpenTable CEO Jeff Jordan. So, during a quarterly meeting that summer he approached Jordan and told him he should check out Pinterest. Hours later Jordan had an email from Stoppelman repeating the message.
The plan was working until it hit a snag.
Photo: djevents via Flickr
Just like it still is today, Pinterest was in an invite-only beta last summer. So when Jordan tried to take Stoppelman’s and Hartz’s advice to check out Pinterest, he was unable to. A partner at the Valley’s most powerful VC firm had to go through the same waiting period as any normal user to get into the site.
Jordan eventually got in, and he was impressed enough to reach out to Silbermann and Sciarra.
One of Pinterest’s earlier investors said the match of Andreessen Horowitz and Pinterest was meant to be.
“It was like when your friend starts dating his or her future husband or wife, they just talk about it differently. You can see the glimmer in Ben’s eyes when he talks about Jeff.”
“We knew it was going to be a fit, and the whole thing came together pretty quickly. It was a very short process that happened in August.”
In early fall, Andreessen Horowitz invested $27 million in Pinterest at a stunning $200 million valuation. The company would be able to move out of the two bedroom house and into a real office in Palo Alto.
Around back-to-school time, the site’s growth “hit a step function,” says an investor. Charts showing user growth bent dramatically vertical.
Suddenly, Pinterest was the biggest thing since Facebook.
It was a lot to handle for the company’s mere eight employees. For one, in particular, it may have been too much.
Paul Leaves Pinterest
By the end of March 2012, it had become clear: Paul Sciarra, Pinterest’s first CEO, and Ben Silbermann’s actual cofounder, was not going to stay at the company any longer.
This divorce, according to many sources, was amicable and mutual.
“Whatever Paul has agreed to do, he is doing it willingly,” says one source close to Pinterest investors. “He has lots of [shareholder] rights”
So why did it happen?
There seem to have been two reasons.
One is that it has become clear to Pinterest investors, and to his credit, Sciarra, that Silbermann, who had been the company’s product visionary from the beginning, should also be its business leader going forward.The second reason is harder to pin down. But, without ever getting too specific, several sources indicated that Sciarra may have dealt with health issues shortly after Pinterest’s growth hit that step-funciton and its valuation rose to $200 million.
We do not know what those personal issues were. Sources would not tell us.
One source, however, says he witnessed Sciarra in a state of deep anxiety at a dinner event last fall.
“We were going around a circle and [everyone was] talking about their businesses, and someone talked about theirs and he started being like, ‘That’s the stupidest thing I’ve ever heard and why would someone fund that business.’ Then he walked out.”
“It was just a weird moment. You would have said this is a person who is under a lot of anxiety, or really unhappy, or maybe really depressed – something like that.”
A source close to early Pinterest employees says that last fall Sciarra took a month or six weeks off to “deal with personal issues.”
Briefed on this story, Sciarra did not respond to emails requesting comment.
What’s Next For Pinterest
Sources close to Pinterest investors say Silbermann has some ideas for how to monetise the site – something to do with shopping, we’d guess – but he isn’t interested in trying them out until the user base has scaled much further.
Why should he be? Pinterest raised $37 million in 2011. There’s no rush.
These same sources swear up and down that Silbermann’s plan is not to be the next Kevin Systrom, who just sold his startup, Instagram, to Facebook for $1 billion.
You know they’re not lying because Silbermann could, if he wanted to, sell Pinterest to Google right now.
Because of Pinterest’s roots as a shopping app, M&A types figure Amazon will be an interested buyer at some point too.
There was a point at which Pinterest could have been bought.
Early in 2010, Pinterest investors pushed a certain New York-based magazine publishing company to invite Silbermann and Sciarra in for a look-see.
Investors dared to hope for a sale; the fit was obvious.
But the magazine publishing company resisted taking the meeting. Silbermann reached out.
And still, the magazine company’s corporate development people didn’t really see the point in Pinterest.
Pinterest’s value has only gone up about 20X since then.
You can’t blame them though, right?
This thing was an overnight success nobody saw coming.
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