WhatsApp is an internationally available American freeware, cross-platform centralized instant messaging (IM) and voice-over-IP (VoIP) service owned by Meta Platforms. It allows users to send text messages and voice messages, make voice and video calls, and share images, documents, user locations, and other content.
But how did they end up selling this app for $19 billion? and what’s the story behind the huge success of this StartUp?
Planing
The story started in 2007 when both Brian Acton and Jan Koum left Yahoo, and they went to South America to look for something to do and figure out things.
In 2009, after purchasing an iPhone and realizing the potential of the app industry on the App Store, Koum and Acton began visiting Koum’s friend Alex Fishman in San Francisco to discuss a new type of messaging app that would show “statuses next to individual names of the people”. They realized that to take the idea further, they would need an iPhone developer. So What Fishman did, he visited RentACoder.com and found a Russian developer “Igor Solomennikov”, and introduced him to Koum. and because building a company and living isn’t cheap they started the app with their savings (about $400,000).
They named the app WhatsApp to sound more like “What’s up”, and then Koum incorporated WhatsApp Inc. in California. but, since the early versions of app kept crashing, Koum thought about giving up and looking for a new job, but his friend Acton encouraged him to wait a little bit more.
So, after Apple launched push notifications, which allowed users to be pinged when they were not using an app. Koum changed WhatsApp so that everyone in the user’s network would be notified when a user’s status is changed. WhatsApp 2.0 was released with a messaging component and the number of active users massively increased to 250,000.
At This Point Acton was working on another startup idea but decided to join the company. In October 2009, Acton persuaded five former friends at Yahoo! to invest $250,000 in seed funding, and he became a co-founder and was given a stake. He officially joined WhatsApp on November 1.
Bootstrap
In 2010, a WhatsApp version for blackberry and android has become available. In that same year, they were subject to multiple acquisition offers from Google which were declined.
By early 2011, WhatsApp was one of the top 20 apps in Apple’s U.S. App Store, and they caught the attention of a company called Sequoia.
Sequoia was an American venture capital firm that invested as a “Serie A” investment about $8 million for more than 15% of the company, after months of negotiation by Sequoia partner Jim Goetz. For a “Serie A” that investment was so good compared to other StartUps.
Venture
2 years later, the app reached 200 million active users and 50 staff members. Serie B was valued at $50 million and the investment was by the same company -Sequoia- which made the valuation of WhatsApp going from $50 million to $1.5 Billion and they start acquiring small startups like Santa Clara based startup, SkyMobius, the developers of Vtok, a video and voice calling app.
By the end of 2013, they reached 400 million active users used the service each month.
Exit
In February 2014, just one year after a venture capital financing round at a $1.5 billion valuation, Facebook, Inc or as we know it today by the name of Meta Platforms announced it was acquiring WhatsApp for US$19 billion, At the time, it was the largest acquisition of a venture-backed company in history. Sequoia Capital received an approximate 5000% return on its initial investment.
Facebook, which was advised by Allen & Co, paid $4 billion in cash, $12 billion in Facebook shares, and (advised by Morgan Stanley) an additional $3 billion in restricted stock units granted to WhatsApp’s founders Koum and Acton. Employee stock was scheduled to vest over four years subsequent to closing.
In August 2014, WhatsApp was the most globally popular messaging app, with more than 600 million users. By early January 2015, they had 700 million monthly users and over 30 billion messages every day. In April 2015, Forbes predicted that between 2012 and 2018, the telecommunications industry would lose $386 billion because of OTT services like WhatsApp and Skype.
By September 2015, it had grown to 900 million, and by February 2016, one billion. Voice calls between two accounts were added to the app in March and April 2015.
Lessons From WhatsApp Success Story
1. Be Patient: Patience is a really important factor almost in everything in life and especially in the startup world. Master the art of timing.
2. More Brains: Don’t use just your brain, know who you talking to and getting your advice from, talk to trusted people and not just friends, talk to those who have a lot of experience more than yours
3. Numbers Never Lie: It’s just the truth, if your numbers doing good then you are doing good, that’s it, sometimes entrepreneurs get attached to their startup and forget that the investor won’t look at how much you believe in your startup he will look at how much money he could make if he invested with you.
My name is Muhammad Islem I’m a college student, I have 3 years since I started learning about digital marketing, I like talking about businesses, marketing, books, and ways of making money.
I’ve created this blog to talk about things that interested me and to help young entrepreneurs start their own businesses and escape their boring 9 to 5 jobs.