When I talk about our approach to investing I often say that the next generation of successful companies will be most notable for their amazing products. That contrasts with previous eras where great sales and marketing capabilities and great engineering were often more important than product (think about the great enterprise software success stories of the 1990s…).
Whatsapp, which following last week’s $16bn acquisition by Facebook is now the largest startup M&A deal in history, makes a good case study. This is from a post about the company and exit from their investor Sequoia:
From the moment they opened the doors of WhatsApp, Jan and Brian wanted a different kind of company. While others sought attention, Jan and Brian shunned the spotlight, refusing even to hang a sign outside the WhatsApp offices in Mountain View. As competitors promoted games and rushed to build platforms, Jan and Brian remained devoted to a clean, lightning fast communications service that works flawlessly.
The note pictured above is apparently taped to one of the founder’s desks and it sums up what they Whatsapp is about: great user experience. They process 50bn messages per day with 99.9% uptime and a service so good that 72% of active users come back daily.
And they do that with 32 people. Amazing.
Finally a note on Whatsapp’s valuation – the $16bn price tag ($19bn including employee retention bonuses) is best understood in the context of Facebook’s valuation ($180bn as I write this). If Whatsapp as an independent company, or more likely in the hands of Google, could have become a powerful competitor that took 10% of Facebook’s business then this is money well spent.