The WhatsApp Story Challenges Some Of The Valley’s Conventional Wisdom

Editor’s Note: Semil Shah works on product for Swell, is a TechCrunch columnist, and an investor. He blogs at Haywire, and you can follow him on Twitter at @semil

Silicon Valley and the tech world at large are filled with a variety of conventions. These conventions are now created, captured, and shared ad nauseam disguised as blog posts, tweets with links, and countless message boards. The benefit of such a canon is we all have access to a rich repository of knowledge — the cost, however, is we all, perhaps unwittingly, are exposed to the same suite of playbooks, which contain the same conventions, which could, if we’re not paying close attention, and especially when amplified in an echo chamber, trick us into believing a certain reality which, in turn, script our actions and lives down a path of predictability, or worse, mediocrity.

Like many of you, the entire story around WhatsApp’s acquisition this week has captivated my attention. It might be easy to quickly dismiss this whole event as an extreme outlier (which it is). Of course, this is a big outlier event, but that doesn’t mean it shouldn’t be examined. The reality is that this week’s news was like Haley’s Comet, a once-in-a-lifetime event where everyone who works in and around startups stopped what they were doing, went outside, and looked up at the sky to catch a glimpse of something they’d only read about online. In situations such as these, my mind scans back over all the “lessons” or conventional wisdom that swirls around the atmosphere, and the story of WhatsApp does call on us to examine and challenge (yet again) some of those conventions:

“Yahoo! doesn’t have talent.” For a variety of reasons, Yahoo! gets beaten up by the press and in social media. The company has problems and is working through them, but as a result, employees and alumni have kind of been a soft target. The two WhatsApp founders worked at Yahoo! They built a native mobile product at scale, across many mobile platforms, and assembled a team to build a complex, global telephony system.

“Companies like Facebook have the best talent.” One of the WhatsApp founders applied for a job at Facebook and was rejected. I’ve seen countless startups get star-eyed trying to recruit “so-and-so” from a big name company, but all that glitters isn’t always gold.

“The center of gravity for consumer products has moved north from the Valley to San Francisco.” Well, that’s largely true, but WhatsApp remained headquartered deep in Silicon Valley. They didn’t even have an office sign. Hidden from the city’s bright lights, the company didn’t seek out PR coverage or any of the other trappings in today’s startup lifestyle culture.

“The best founders are relatively young.” The WhatsApp founders were in their mid to late thirties.

“Mobile products should be delightful, beautiful.” I often shudder when I hear this refrain. Of course, apps should look nice, but at minimum, they should work to solve some problem or provide some service or entertainment. WhatsApp simply worked for people. It didn’t have fancy features. It solved a problem at scale, building products for the following platforms: iOS, Android, Blackberry, Windows Phone 7, Nokia, S40, Symbian S60, and others.

“Be mobile-first, build for iOS and Android.” The Whatsapp team took on the challenge of building products for all sorts of phones, many of which readers of this blog wouldn’t ever touch, even those running J2ME on older Nokia and Samsung handsets.

“Personal branding is important.” The WhatsApp founders did not have any personal brand. I would guess if 1,000 tech insiders were polled, less than 5% could’ve named the founders or anyone at the company.

“Preserve your startup’s equity.” In my opinion, many early-stage founders over-value the equity in their startups. Yes, a lot of sweat, blood, and tears go into starting even the smallest outfit, but an environment so competitive for products and so fragmented for talent, what was once conventional in terms of equity for early or key hires may now be outdated. Given this, I respect Zuckerberg’s aggressiveness to give up a really large chunk of Facebook to partner with WhatsApp, and to add one of WhatsApp’s founders to his Board of Directors. Instead of hoarding this equity, Zuckerberg realizes he must partner for the battles ahead.

“Don’t worry about making money, just grow big.” WhatsApp did both. Depending on what platform a user downloaded the app on, WhatsApp would charge them about $1 or, at times it was free — they also charged a $1/year subscription fee after the first year. WhatsApp was expensive to run, so it wasn’t breaking the bank in revenue, but they at least had cash flows, and one might conclude from this that such inflows helped them pace their operations and not get enamored, enveloped, and distracted by the pomp and circumstance of a modern-day fundraising process.

There are more conventions that were broken here. How about the fact that WhatsApp was a tiny company compared to their footprint, at only about 50 employees, mostly split between engineering and support? Or, how one of the Valley’s most successful venture firms — Sequoia — was quietly the major outside investor across a few funding rounds at the company, electing to not use their networks and celebrity to announce such deals or trumpet the company’s growth trajectories? Or, speaking of venture, how this particular VC firm missed the first wave of social networks, invested a large sum in the debacle known as Color, and then, in about three years’ time, turned their investment in WhatsApp into one of the great IRRs in the history of venture capital?

There are countless angles to examine, but the meta-point of this exercise is to use this rare, brilliant event to briefly hit the “pause” button and reexamine if we ourselves or our products or our companies are following a conventional path, one we’ve been told, or exposed to, or read somewhere.

I’m not suggesting we throw out all the rules and engage in chaos. But, it is a good time to reexamine them. Do we take these conventional biases into our work, into our lives? Do these conventions inform our recruiting strategies, our paths for monetization and/or growth, how we think about product design? It’s easy to start to believe something once you’ve heard it enough, or if it shows up in your Twitter feed often. It has to be true! Or, perhaps not…perhaps WhatsApp became a mega-outlier because it either consciously bucked or unwittingly ignored so many of the popular conventions we hear of today.

Image by Flickr user Robert S. Donovan under a CC BY 2.0 license