This is the story of how two friends, Mark Zuckerberg and Eduardo Saverin, started a social network at Harvard University that today is worth billions of dollars and that you probably use every day. In 2003, after almost being expelled from Harvard, Zuckerberg, inspired, created Facebook, and revolutionized the way people communicate on the internet. With Saverin’s resources, Facebook began in Mark’s dormitory on the campus of Harvard University in Boston. The rest of the story you already know: Facebook grew and was very successful around the world, but the friendship of Mark and Saverin was never the same. Have you seen the movie The Social Network? This is the book that inspired the film.
Get to know the history of Facebook, from its inception to its accelerated growth and the IPO that made Mark Zuckerberg become one of the world’s youngest billionaires. Discover the secrets of the great Zuckerberg!
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Before Facebook, Facemash
Eduardo Saverin and Mark Zuckerberg became best friends when they met at Harvard in October 2003. Mark Zuckerberg studied computer science and was from New York, the son of a dentist and a psychiatrist. While in high school, Mark created software called Synapse. The software was a plug-in for MP3 players that allowed the device to learn user preferences and create custom playlists. Mark posted his program and distributed it free to anyone who wanted to download it. This caused numerous companies to contact him to buy the software. Rumors were that Microsoft made a $ 2 million offer for Mark to work for the company, though he declined it.
On the other hand, Eduardo Saverin didn’t know much about computers and programming. He was an administration student. However, during his summer vacation, Eduardo earned about three hundred thousand dollars by investing in oil with his brother, using an investment strategy based on understanding how weather conditions affected its price. Eduardo’s family was Jewish and had moved to Brazil after the holocaust, but when Saverian was still a boy, he had to move again, this time to Florida, where Eduardo’s father would become a very successful banker.
However, Harvard students, Mark Zuckerberg and Eduardo Saverin were far from the most popular student groups because they were different. Eduardo was working hard to get into the Phoenix Club, a sort of popular Harvard fellowship known for its uniqueness. Aside from having contact with future billionaires, powerful individuals and even future presidents, if you belonged to one of these clubs, you could spend the weekends at the best parties on campus, surrounded by girls. This last point in particular – meeting girls – was what most drew Eduardo’s attention.
On a Tuesday night, in the last week of October 2003, Mark and Eduardo went out with two Asian girls Eduardo met. Mark left early, went back to his room, and browsed the Internet. He started browsing his student house’s website – a photo database of students who lived in the same building. Mark also sent e-mails to his friends, and one of them suggested that Mark create a code to compare the students’ pictures and create a list of who was the best looking. Another friend also suggested, as a joke, that he compared the people in the database with animals.
At 11 pm that night Mark realized he would need more photos if he wanted to rank who was good looking or not. The solution was simple – to hack the server at Harvard University and access the photos of all the houses on campus. At 4 am Mark Zuckerberg had downloaded thousands of photos of Harvard’s online dormitory databases on his laptop. He decided to give a name to the domain of his project and registered the domain Facemash.com.
About 72 hours later, Mark had Facemash.com online. It was a simple website that allowed users to compare photos of two students and vote on which was the prettier. So the user watched the algorithms mathematically calculating who the most beautiful girls on campus were. He sent emails to some friends to ask what they found and went to a class. When he returned a few hours later, he discovered that Facemash.com had gone viral and in just two hours he had computed 22,000 votes.
The Winklevoss twins
The results of the brief existence of Facemash.com (only one afternoon) were impressive. It came as no surprise when Mark was called in to appear before the Harvard student disciplinary board. The council consisted of three deans and a couple of computer security experts. Mark promptly admitted his guilt and apologized for the controversy he generated. To soften the situation, he pointed out to the board that his actions had demonstrated serious security flaws in the Harvard computer system and even volunteered to help them fix them. He also pointed out that he took the site offline immediately after finding out it had gone viral, stressing it was not his intention.
Moved by Mark Zuckerberg’s obvious social awkwardness, the deans decided they wouldn’t expel or suspend him from Harvard. Instead, Mark received a kind of “probation” and was warned that he should stay out of trouble for the next two years. Mark’s reputation with other students was also hampered, especially with girls.
Shortly after the Facemash disaster, Mark received an email from some Harvard students, inviting him to work on a project. These students were the twins Tyler and Cameron Winklevoss and Divya Narenda, who were in their last year. Almost everyone on the campus knew who the Winklevoss twins were, blonde athletes almost six feet tall. They were also members of the rowing team, with a good chance of reaching the Olympics.
Their friend, Divya Narenda, was less well known because he wasn’t an athlete like the twins. All three were members of the Porcellian Club, Harvard’s most exclusive club, whose members were recognized for success after graduation. The twins Winklevoss and Divya Narenda had been working for two years on a business plan to launch a new startup called “The Harvard Connection,” which purported to be a site that would put Harvard social life online and make it easier for students to meet. It would be a place for online meetings where students could share information and connect. The only problem was that neither the twins nor Divya had the skills to set up the site.
After Mark Zuckerberg became famous with Facemash, the twins and Divya decided to invite him to the Harvard Connection project. They sent an email to Mark, and he replied that he was interested.
Tyler and Cameron met with Mark to talk about The Harvard Connection. They suggested that the site would need only ten or fifteen hours of work to get ready.
The Facebook is born
When Mark and Edward returned to Harvard after a two-week vacation in the winter of 2003, Mark was filled with enthusiasm for a new site he wanted to build. This site would be an extension of the Facemash experiment – a social networking platform that would be unique. People could create their own profiles with the photos they wanted. Users could then describe their interests and what they were looking for online – friendships, love interests, etc. Mark also suggested that users might have the ability to invite their friends to join the site.
In many ways, Mark’s inspiration came from Friendster, another social network growing at the time. TheFacebook would be a mix of the best features of Facemash and Friendster. He also had some elements of Course Match, an old project that allowed students to access other students’ stories. Eduardo liked the idea immediately.
Mark asked Eduardo for the money to start, rent servers and put the site online. Eduardo agreed to provide $ 1,000 to start, and the two friends decided to split the company by 70% -30%, respectively for Mark and Eduardo. They also discussed Eduardo becoming the company’s first CFO.
Although Mark was working hard on his site, for one reason or another, he continued to give the Winklevoss and Divya twins the impression that he was enthusiastic about their site as well. He exchanged more than fifty emails and talked to them several times over the phone. Over the weeks, the twins were getting anxious because Mark made no progress.
Of course, without their knowledge, Mark was working hard on his own project, TheFacebook. The domain name was registered on January 12, 2004. In early February 2004, Mark was missing classes to finish programming TheFacebook.
To register for the site, you must have an e-mail address for the Harvard.edu domain and you could then set up your profile with pictures, attributes – class year, your course, clubs, where you come from, a list of friends, your relationship status, and other important issues you could choose from.
At the end of each page of TheFacebook.com, Mark inserted the line: “A production of Mark Zuckerberg.” Eduardo had no problem with it since Mark who developed the site. Then, in February 2004, TheFacebook.com went live for the first time. Eduardo sent an e-mail to the members of Phoenix, announcing the launch of the site and inviting everyone to register.
TheFacebook.com had more than 900 Harvard students registered in four days of operation. Within two weeks, 5,000 people registered – nearly 85% of Harvard undergraduates. Quickly TheFacebook began to become part of everyone’s daily routine.
Then a letter arrived by email, straight from a Connecticut law firm. In it, Brother Winklevoss and Divya reported that they learned of TheFacebook and demanded that he remove the site from the air immediately.
Mark informed Eduardo of the letter, which of course was distressed, after all, he had also invested in TheFacebook.
Even before Eduardo heard about the Winklevoss’s claims, Mark had already responded. He talked to a friend who was in his senior year of law and sent a letter back to Cameron Winklevoss.
Then Eduardo and Mark began to think about how to handle the continued growth of the site. They decided to call Mark’s roommates to help with the company. Chris Hughes would be the director of advertising. Dustin Moskovitz, who studied economics and computing, would help with programming. Eduardo would still handle the company’s business and would be the CFO. Mark described himself as “founder, master, and commander, and enemy of the state.” With this new management structure, the company’s corporate structure was realigned: Mark had 65%, Eduardo kept his 30%, Dustin Moskovitz received 5%, and Chris Hughes would earn a percentage after he showed his value.
Now that others were helping, Mark and Eduardo discussed opening TheFacebook for other universities. They decided they were going to start with the big American elite first universities – Yale, Columbia and Stanford.
Unfortunately, Mark and Edward were naive to think that the problem with the Winklevoss was solved. The twins met with Larry Summers, president of Harvard University, claiming that Mark had violated the student honor code by stealing the idea from them and starting TheFacebook. They were unsuccessful, and the president didn’t consider this a university problem.
Sean Parker enters the game
TheFacebook’s growth was scary. Eight weeks after its launch, 50,000 students from Harvard, Stanford, Columbia, and Yale had registered. They found that 67 percent of the people who signed up went back to the site every day to check what was happening. These statistics were great publicity for Eduardo to hold meetings with potential advertisers in New York. Saverin took Mark to these meetings, and the result was a disaster: he refused to wear anything other than sweaters and slippers, and slept during meetings or just sat in silence. The meetings didn’t generate any interest, and the advertisers didn’t understand the site.
However, while in New York, the two had a meeting with Sean Parker. Sean had contacted them a few weeks earlier when he saw some Stanford students on TheFacebook. Sean Parker was a well-known figure in Silicon Valley for being the founder of Napster along with Shawn Fanning. Napster was an astonishingly successful case of sharing music files, but in the end, the site had to be closed due to piracy issues. Parker was looking for new business and set up a meeting with the two co-founders of TheFacebook.
Sean Parker didn’t have much money, but he had charisma. Sean and Mark, in particular, did well, since they were both nerds. Mark loved the idea of working with Sean Parker. Eduardo was much more suspicious of the potential value of Sean Parker to help TheFacebook grow.
After their first meeting, Eduardo thought Sean Parker was a fraud, but Mark liked Park, almost idolized him. Regardless, TheFacebook quickly spent its first $ 1,000 and it was clear they needed more servers to cope with growth. Mark and Eduardo also realized that they needed to hire some people to work with programming. Eduardo opened a new bank account and deposited $ 10,000 in it.
Meetings with potential advertisers didn’t generate any income for TheFacebook, but its accelerated growth was being noticed. Investors and representatives from major software and Internet companies began looking for Mark and Edward on the Harvard campus.
Formalizing the Company
With the end of the academic year, Mark and Eduardo decided that they needed to organize themselves better to cope with growth. People were using the site 24 hours a day now, so some updates and ongoing maintenance were important. Also, you had to find advertisers for TheFacebook to start generating money.
Eduardo and Mark formally incorporated TheFacebook LCC on April 13, 2004, registering the company in Florida. The merger documents established the company’s ownership as agreed before: 65% for Mark Zuckerberg, 30% for Eduardo Saverin, 5% for Dustin Moskovitz and a percentage still undetermined for Chris Hughes.
With the end of the academic year, Eduardo accepted a summer internship at an investment bank in New York. He got the job with his father’s help because he wanted to find advertisers to help TheFacebook generate revenue. Mark, on the other hand, decided that he and Dustin would move to California in the summer and work on TheFacebook in Silicon Valley. That summer, the goal was to expand TheFacebook to more than 100 universities.
Living in California
Coincidentally, in California, Mark met up with Sean Parker again. Parker was temporarily homeless, and Mark invited him to live with them while working on TheFacebook. It was an opportunity that Sean didn’t even think about turning down because he wanted to get involved with the business from the first time he found the site.
Sean was a good adviser because he knew the market and who were the important players in Silicon Valley. His previous experience with Napster demonstrated that he knew how to build a technology startup. It was easy to see that this was a good opportunity, though Mark knew Eduardo didn’t like Sean.
Sean was also surprised that Eduardo wasn’t there and concluded that he might be a beginner investor rather than someone who lived and breathed the project as Mark.
Meanwhile, in New York, Eduardo didn’t stay one day in his internship. He sat in his cubicle, looked at the pile of stocks he was supposed to analyze, and realized he didn’t need to learn how to be an investor and that he should strive to build the business he and Mark founded in Harvard dormitories. So he started looking for potential advertisers, developers, and anyone expressing interest in TheFacebook. Within a month, he got an advertising deal for the company and flew to Silicon Valley to talk to Mark about it.
TheFacebook was growing at high speed and needed money. However, when Eduardo arrived in California, he discovered that Sean was meeting with potential investors for TheFacebook in the Silicon Valley. Eduardo didn’t like what he saw and decided to freeze the company’s bank account.
Without money, Mark asked Sean Parker for help. Sean introduced him to Peter Thiel, a renowned investor and founder of PayPal. Thiel met Mark and Shawn and three hours later agreed to invest $ 500,000 in exchange for 7% in a newly opened company called TheFacebook LLC.
With that money, Mark and Sean rented a new home in Los Altos, California, to work. Mark also decided that he wouldn’t go back to Harvard in the summer but would be in California developing TheFacebook. His former roommate, Dustin Moskovitz, decided to do the same thing. Eduardo returned to Harvard to finish his course. Eight weeks later, Eduardo flew to California at Mark’s request to sign some papers from the new company that would restructure some bureaucratic issues.
On his next trip to California, Eduardo received documents to read and sign and signed without thought of the consequences or pay close attention.
In April 2005, Facebook continued to grow at high speed, approaching 3 million members. It was already on 500 campuses and appeared in several press reports.
Mark sent an email to Eduardo in early April, asking if he could go to California to attend an important business meeting. He mentioned that some large mutual funds were interested in Facebook. Eduardo decided that he would go to California and that he would reestablish his role of founding partner alongside Mark.
When Eduardo arrived in California in April 2005, he was received by a lawyer. Mark wasn’t there, and the lawyer insisted that the documents be signed promptly.
Eduardo received a document that aimed to increase the number of shares of Facebook giving more shares to Mark, Sean, Dustin, and investors. Eduardo immediately realized that he was being diluted with the company. Its current 34.4% would be diluted to a very small percentage.
The lawyer replied that Eduardo was no longer part of the company team, wasn’t an employee of the company and was only connected to the company for his initial participation in Facebook. As Edward went through this, Mark and Sean were busy with Facebook’s growth. Almost all Silicon Valley venture capital funds wanted to invest in the company. Mark and Sean chose Accel Partners.
Eduardo decided to sue Mark Zuckerberg and Facebook for 30% of the company. Although he hated fighting with his friend Mark, there was no other way out.
Sean Parker became the president of Facebook when the company was reinstated and stayed in this position until September 2005, when he was arrested for drugs possession.
He left Facebook and became a partner with the Founders Fund, the investment fund created by Peter Thiel. Its known today that the $ 500,000 invested in Facebook by Thiel are worth more than $ 1 billion and the Founders Fund continues to try to replicate this success in other companies.
From Mark Zuckerberg’s perspective, Facebook was nothing more than a revolution. He had the power to change the world by allowing free exchange of social information on the internet.
In October 2007, Google and Microsoft sought to invest in Facebook. Microsoft ended up buying 1.6% of Facebook for $ 240 million, giving Facebook a market value of more than $ 15 billion.