So I lobbed in a call to Sequoia Capital this morning to get its VC-of-the-moment Jim Goetz’s take on the blockbuster deal in which Facebook forked over $19 billion dollars to buy one of its portfolio companies, WhatsApp.
The high price paid for the multimedia messaging app has certainly caused a lot of hubbub in Silicon Valley, especially because Sequoia had put what now looks like a modest amount of money in two investments as its only venture investor, with about $60 million in funding over three rounds. The A-Series was in early 2011, with Sequoia investing $8 million at a post-money valuation of a little less than $100 million.
Goetz, who has a degree in electrical and computer engineering, worked at companies like AT&T and then did a stint at Accel Partners before joining Sequoia in 2004. There, he has focused on mobile and enterprise — his other claim to investment fame is social business software company Jive, where Goetz is on the board.
But instead of taking the typical puffy-chest laps that most in his profession do, Goetz insisted on talking less about the funding win than about WhatsApp and its two founders, Jan Koum and Brian Acton, and how their iconoclastic ways made the difference.
Hindsight is 20-20, of course, but it certainly seems to be the case here.
Re/code: How did you meet WhatsApp?
Jim Goetz: They were founded in 2009, but we intersected in the spring of 2010. They were mission-based and taking an unorthodox approach, but growing so rapidly that it was most interesting.
In what way?
Well, I was involved in AdMob (the mobile ad company that was bought by Google) and saw how app companies used it to get their apps in front of consumers. And many app companies did a lot of things to promote themselves in the app store. But without any advertising, WhatsApp stood out country by country, so I recognized that a new business model was under way.
What kind was that?
Like I wrote in my blog post on the deal, it was mission-based and very different than what everyone else was doing at the time. A lot of companies, for example, would spend a lot to get recognized by new users and would not worry much about engagement. But WhatsApp only wanted to focus on how current users were engaging with the product. Like how they did not use advertising and kept the experience uncluttered.
Why was that?
I think it came because they were designing something for themselves first. Jan, for example, wanted to reach out to friends and relatives in Russia and how to do that was the most important part. Both he and Brian were very driven, just not by financials and not by economic outcome.
That came, I think, from their lives and frustrations from working at Yahoo (both Koum and Acton worked there) and seeing what happened when the company shifted its focus to advertising and away from the user. Meanwhile, they were watching Google run away with the business by doing the opposite — a simple approach that started with consumers. They defined WhatsApp by simplicity and that’s spectacular. They were passionate about connecting people.
What attracted you to them?
They are a joy, and it did not take much to encourage the firm to buy in. At the time we began investing, these were heady revenue multiples, but no company was growing as fast and all with no marketing.
Why were there no other VCs around?
Like I said, Jan and Brian were unconventional, wanted simplicity, an intimate and close board, and did not see a need to add complexity. And we were willing to pay a market price. It was attractively priced at well under $100 million valuation in the first round [of $8 million], which was not a small number then. But, at our firm, we are known for being attracted to those cut from a different cloth.
Was a sale the goal?
Their focus had been to build an independent company and they had considered a public offering. There was obviously always a lot of strategic interest involved with the usual suspects.
Why Facebook and why now?
I think it is reflected in the announcement — the enormous mutual respect. The fact that Zuck (Facebook co-founder and CEO) asked Jan to join the board shows there is a deep trust.
What are you now focused on?
I spend about half my time in mobile and half my time on enterprise. I am looking for unknowns, who are passionate and mission-based. But I don’t try to tout the next great thing I want to get in front of, because I don’t set that course. The entrepreneurs do that.
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