You Only Have to Be Right Once (9 page)

It doesn't matter what the meeting is about: bug fixes, new partnerships, pending contracts, a new launch, important metrics. Everyone hears about them. Dorsey says he often gets thirty to forty meeting notes every day. He filters them in his in-box and reads them through on his iPhone when he gets home at night.

More incredible is that with such massive scads of sensitive information circulating to the 400-plus people at Square, not a single item has surfaced on the Web. When Starbucks CEO Howard Schultz reached Dorsey about using Square to process all credit and debit transactions in 7,000 stores, he announced the tentative discussions at an all-hands meeting hours later. No one tweeted the news. “We've had zero leaks, zero leaks,” said Dorsey, knocking twice on a table, “since day one of the company.”

• • •

ON A FRIDAY AT
Square, just days after acquiring a New York–based Web designer called 80/20 in October 2013, Dorsey sketched the program for his weekly all-hands meeting, called Town Square, at 5:05 p.m. “We have drinks, we have pizza,” he said. “Today we're having hot dogs because we're celebrating New York.” The event kicked off with Jay-Z's “Empire State of Mind” and the introduction of twenty-four new team members from 80/20, and concluded with Sinatra's version of “New York, New York.” In between Dorsey presented a recap of what he had told Square's directors earlier in the week. “We're going to show the whole company everything we presented to the board and all their comments.”

Is Dorsey thinking beyond Twitter and Square? “I do believe in the power of threes, so conceptually I would love a third company,” he mused. Such as? Well, he has an abiding interest in education and health care. Or something else, perhaps. “I don't think there has been any recent revolution of our government or how we think about running governments,” he said. “I would love to see technology help with that.”

David Karp, Tumblr:
The $1 Billion Art Project

Even among a peer group of digital mavericks that comes in all shapes and sizes (as long as you're male), David Karp physically stands out. Beneath a Ringo-esque mop of brown hair grows a six-foot-one, 140-pound beanpole, with arms that resemble a praying mantis. To address the gangliness, the Tumblr founder wears button-downs, with the sleeves rolled up past his elbows. (When we shot him for the cover of
Forbes
in a suit, our fashion director Joseph DeAcetis actually cut the arms off his shirt and pulled them down so that the cuffs would show behind the coat—a tale that went viral for a couple days after
Esquire
detailed it.) And there's a thoughtfulness and sweetness that accompany the adolescent build. Let there be no mistake: Amid these sharks, Karp is the artist, one consistently ambivalent about making money. Still, when you build something that people want in this era, the cash will find you, a fact that
Jeff Bercovici
discovered as he spent time with Karp and Tumblr throughout 2012. By May 2013, Yahoo had swallowed his company whole, paying more than $1 billion—and giving Karp, the artist, almost $100 million in additional incentives to finish his masterpiece.

 

D
avid Karp was in the midst of a rite of passage that seems universal for the young tycoons of the Internet's social era: He was buying himself a proper swank pad. And like Mark Zuckerberg's luxe but dowdy $6 million manse in Palo Alto and Sean Parker's $20 million Greenwich Village carriage house-cum-party palace, Karp's choice said a lot about him—and Tumblr, the blogging platform he founded in 2007. The 1,700-square-foot, $1.6 million loft, which he then set about remodeling, is quite modest for a twenty-eight-year-old whose net worth exceeds $200 million. That's in part because it's located in the world's hipster capital, Williamsburg, Brooklyn, where irony trumps showiness—he's quite likely the richest person in the neighborhood. But the most telling feature was on the inside, which contained . . . virtually nothing. A spartan bedroom with a half-empty closet. A living room area with nothing but a sofa and a TV. (One concession to opulence: a restaurant-grade kitchen for his girlfriend, Rachel Eakley, a trained chef.) “I don't have any books. I don't have many clothes,” Karp shrugged. “I'm always so surprised when people fill their homes up with stuff.”

“He owns, like, three items,” confirmed Marco Arment, Karp's first and, for a long time, only employee at Tumblr. “He's always looking for ways he can get rid of something.” Even Karp's person is spare in the extreme: His one suit, though trimly cut, flapped around his six-foot-one frame when he fidgeted, which he does a lot. Maybe it's all the calories he burns this way that keeps him skinny, like a teenager who has yet to fill out his bones. “I've always been forty pounds underweight,” he said.

For Tumblr's CEO, minimalism isn't just an esthetic choice. It's the key to freedom. When he travels he avoids making plans more than a few days in advance, even on his trips to Japan, and packs only the sveltest of carry-ons. “It's my Jason Bourne or James Bond fantasy, wanting to be perfectly mobile,” he said. Roelof Botha, a partner at the Silicon Valley venture firm Sequoia Capital and one of Tumblr's directors before its sale to Yahoo, recalled showing up at a board meeting in New York toting only “the tiniest of duffel bags” for his trip. “David took one look at me and said, ‘You really brought all that stuff?' ”

Karp's intolerance for the inessential permeates Tumblr. Where others looked at the twin revolutions of blogging and social networking and saw new tools for communication, Karp saw possibilities for making them radically easier and more intuitive. Tumblr lowered the bar to creating a beautiful, dynamic website and raised the payoff in the form of positive social reinforcement.

If Facebook is where you check in with your real-life friends and Twitter is how you keep up with current events, the Tumblr experience can be boiled down to people expressing themselves publicly. Like those other two networks, Tumblr is organized in the form of streams of posts. But it's far more sensory and emotive, a swirl of photographs, songs, inside jokes, animated cartoons and virtual warm fuzzies. On the main Tumblr feed compiled by its editors, a photojournalist's visual diary of Afghanistan might be followed by a cartoonist's impressionistic drawings of Darth Vader, which give way to a gallery of hamsters that look like President Obama.

Users make sense of the chaos with the aid of a dashboard, the interface for finding and following other users and keeping track of the feedback their posts receive. Hearts are good; “reblogs” are better, suggesting another user liked your post enough to share it with his or her followers. The tools for creating these multimedia posts are simple: seven buttons that let you add text, photos, hyperlinks, video, music, dialogues, or quotes with a click.

The result: classic hockey-stick growth. In November 2012 it shouldered its way into the top ten online destinations, edging out Microsoft's Bing and drawing nearly 170 million visitors to its galaxy of user-created pages, according to the measurement firm Quantcast. Since then, the number of blogs on the site has more than doubled, to 182 million—these registered users create 100 million new posts every day (the cumulative total for the site is approaching 100 billion). Its final funding round, in September 2011, valued Tumblr at $800 million. When the company looked to raise a new round of investment in the spring of 2013, Yahoo stepped in with its acquisition offer, worth a bit over $1 billion, making Karp's approximately 25 percent stake worth around $250 million.

For Karp, that wasn't the end of the story; it was just the beginning. Yahoo locked him up for four years with a cash-and-stock package worth another $81 million. Tumblr now faces three challenges: to prove that it can continue the growth. That it can actually make money. And that David Karp, the creative genius and quintessential minimalist, is the right guy to lead Tumblr to long-term glory. “The road is littered with dead companies that made the wrong move at the wrong time, the MySpaces of the world,” said Gartner analyst Brian Blau, shortly before the Yahoo deal. “They've got to be really careful.”

Karp has momentum. When Hurricane Sandy flooded massive data centers in New York, knocking the Huffington Post, Gawker, and BuzzFeed offline, all three gravitated to Tumblr as their temporary publishing platform. Hollywood has taken note, with four different network TV projects adapted from viral Tumblr blogs. And this: When Oxford Dictionaries USA designated “GIF” its word of the year for 2012, it credited Tumblr with pushing the term, a technical name for a type of compressed image file, into the mainstream. “The growth we've seen in the last year just totally overshadows everything that came before it,” said Karp. “To be honest, it's a place I never thought we'd be.”

And, in some ways, never hoped to be. Tumblr is growing up and, as anyone with a baby or a mortgage can tell you, that means expensive complications. “The pressure on Internet media companies to deliver revenues is going way, way up,” said Gawker Media owner Nick Denton. Karp, who once showed disdain for advertising, finally allowed ads on Tumblr in 2012, and it finished the year with $13 million in bookings, according to the research firm PrivCo. In 2013, it hoped for a “leap” year, with revenues of $100 million, but that didn't happen: Yahoo has said its sales are still “not meaningful” enough to be worth reporting.

The acquisition relieves some of the immediate pressure to show a profit, but Yahoo's patience won't be infinite. Investors expect CEO Marissa Mayer to juice the company's long-stalled revenue growth, and she has made it clear that Tumblr, under Karp, is a big part of her plan for doing so.

• • •

WHEN HE STARTED DOWN
the path that led to Tumblr, Karp was just another teenager obsessed with tech and too smart even for his elite public high school, New York City's Bronx Science. Karp's mother, a teacher on Manhattan's Upper West Side, and his father, a musician, knew their son, the older of two boys, needed more avenues to pursue his interests. So his mom approached Fred Seibert, a family friend whose children she taught. A longtime executive at MTV Networks and Hanna-Barbera, Seibert was running his own animation production company. “David's mom said, ‘Fred, your business has computers in it, right?'” Seibert recalled. “ ‘You know, my fourteen-year-old is really interested in computers. Could he come by and visit?' ”

“I was terrified,” Karp said of that first meeting. But his fascination with the work of the engineers outweighed his trepidation, and the visits became regular until, Seibert recalled, “One day he said, ‘I can come by every day now—I'm going into home schooling.'” That, he decided after crunching admissions statistics, was his best shot at getting into MIT—which he in turn had determined was the best launching pad for computer engineers. He also began taking classes in Japanese at the Japan Society and seeing a math tutor, with whom he worked on writing software for winning at blackjack and poker.

But MIT was not in the cards. By the time his peers were writing application essays, Karp was working as head of product at the parenting website UrbanBaby. After CNET acquired the site in 2006, Karp used the proceeds from the sale of his shares to start his own little for-hire development firm, Davidville, where he also dabbled in creating products of his own. While he'd built a multiuser blogging platform for Seibert's company, he wasn't satisfied with it. “One day he came by and said, ‘This blogging thing is really hard. Isn't it too hard?'” recalled Seibert, who had no idea what Karp was talking about. Knowing he was out of his depth, Seibert turned to one of his own investors, Bijan Sabet of Spark Capital.

“Fred called me up and said, ‘Hey, you've got to spend more time with David. He's unbelievably talented,'” Sabet remembered. They got together, and Karp showed him a Web application he'd invented that made creating and sharing all kinds of digital content—text, photos, videos, hyperlinks—remarkably simple. It was Tumblr. “I was just blown away,” said Sabet. “I hadn't seen anything that beautifully designed.”

But getting Karp to commit to it as a business was tough. He “didn't want to be known as a business guy. David didn't conceive of Tumblr as anything other than a tool he wanted for making his life better,” said Seibert. “He exhibited a passion early on, but it wasn't a passion for building a business.”

“I basically spent the summer of 2007 trying to talk him into starting a company around it,” added Sabet. “He was like, ‘Hey, I like my consulting company.' But he was also intrigued about startups.” When Sabet brought Karp his first term sheet for a proposed venture investment, Karp balked, saying it was “too much money with too much pressure.” But when the kitty was reduced to $750,000 at a valuation of $3 million, led by Spark and the famously founder-friendly Union Square Ventures, Karp allowed himself to be persuaded.

Or, partly so, as Karp had to be talked out of his initial reluctance on a lot of fronts. As Tumblr grew from embryo to leviathan, he had to learn to subordinate his own instincts and inclinations to those of Seibert, Sabet, and his other investors, whom he refers to collectively as “my mentors” and speaks of only in the most complimentary of ways, even when disagreeing with them.

One focus of disagreement was over Tumblr's proper size. In its first year it was a two-man shop, Karp and Arment, whom Karp recruited via a Craigslist ad. In April 2008 they hired Marc LaFountain to handle user support, but he was in Virginia, and it took over a year before he met either of them in person. “So even when he had an employee, it didn't feel like we did,” said Arment.

Around this time Karp told Sabet he'd been looking at the organizational structures of other digital media companies, from Craigslist, which had twenty-six people, to MySpace and Facebook, which each employed roughly 1,000. “And he says, ‘I could do it with four people for the rest of my life,' and he really believed it,” said Sabet.

But reality bit. As Tumblr's user base climbed into six and seven figures, the site increasingly had stability issues. Product fixes and improvements got stuck in a bottleneck. “We were getting overwhelmed,” said Arment.

“I was a little too clever at times,” Karp acknowledged. “The fact that I didn't have the foresight to build out a bigger engineering team earlier cost us some serious months. The reason we're so much more productive today is we've got people now who've been through this stuff before.”

But there's a trade-off. The bigger Tumblr gets, the more time Karp spends doing things that don't play to his strengths: Schmoozing clients, dazzling analysts, navigating the politics of Yahoo, raising the fear of God with his troops—these don't come easily to the reserved Karp. “We've never seen him angry,” said Rick Webb, who helped run a digital marketing agency, the Barbarian Group, before joining Tumblr as its “revenue consultant.”

For years most business-side duties were handled by John Maloney, whom Karp had hired as Tumblr's first president after working for him at UrbanBaby. But as the company took on executives to oversee those areas, Maloney told Karp he was ready to leave. “There weren't a lot of politics around it,” said Maloney. “It got to the point that there were a lot of people in the room. I wanted to go and do my own thing.” He left in 2012, with Karp taking over his reports.

These days what keeps Karp up at night isn't buggy code but “team stuff. Am I being a good enough leader for these guys? Am I giving them everything they deserve and setting this up as a collaborative, positive environment? When it feels like it's slightly off, it's all I can think about until I fix it.”

After Maloney left, insiders discussed bringing in a bigger-league version of him, à la Sheryl Sandberg at Facebook—adult supervision, leaving Karp free to focus on product strategy and vision. “David's smart enough that if he needed to manage, he could, but he doesn't relish that, so why put him in that box?” asked Sequoia's Botha. The board was still interviewing prospective candidates when the Yahoo deal rendered it moot.