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Chad's greatest stroke of luck at PayPal was meeting Steve Chen and Jawed Karim, two PayPal engineers with whom he would occasionally bat around ideas for start-ups. Karim, 27, enrolled at Stanford last year to pursue a master's in computer science, and today there's some tension between him and the other founders, who have become famous while he toils in a small, modestly furnished dorm room. Although Karim is named on YouTube's site as a co-founder, Chad and Steve have promoted a highly simplified history of the company's founding that largely excludes him. In the stripped-down version--repeated in dozens of news accounts--Chad and Steve got the idea in the winter of 2005, after they had trouble sharing videos online that had been shot at a dinner party at Steve's San Francisco apartment. Karim says the dinner party never happened and that the seed idea of video sharing was his--although he is quick to say its realization in YouTube required "the equal efforts of all three of us."
Chad and Steve both say that the party did occur but that Karim wasn't there. "Chad and I are pretty modest, and Jawed has tried to seize every opportunity to take credit," Steve told me. But he also acknowledged that the notion that YouTube was founded after a dinner "was probably very strengthened by marketing ideas around creating a story that was very digestible."
No company, of course, is ever founded in a single moment, and YouTube evolved over several months. Chad and Steve agree that Karim deserves credit for the early idea that became, in Steve's words, "the original goal that we were working toward in the very beginning": a video version of HOTorNOT.com HOTorNOT is a dating site that encourages you to rate, on a scale of 1 to 10, the attractiveness of potential mates. It's a brutal, singles-bar version of MySpace, but Karim says it was a pioneer: "I was incredibly impressed with HOTorNOT, because it was the first time that someone had designed a website where anyone could upload content that everyone else could view. That was a new concept because up until that point, it was always the people who owned the website who would provide the content."
The idea of a video version of HOTorNOT lasted only a couple of months. "It was too narrow," says Chad. He notes that another early idea was to help people share videos for online auctions. But as the site went live in the spring of 2005, the founders realized that people were posting whatever videos they wanted. Many kids were linking to YouTube from their MySpace pages, and YouTube's growth piggybacked on MySpace's. (MySpace remains YouTube's largest single source of U.S. traffic, according to Hitwise.) "In the end, we just sat back," says Chad--and the free-for-all began. Within months--even before Lazy Sunday--investors such as Time Warner and Sequoia Capital, a Menlo Park investment firm, began to approach YouTube about buying in. Big advertisers started paying attention in October 2005, when a cool Nike ad-that-doesn't-look-like-an-ad of the Brazilian soccer player Ronaldinho went viral in a big way on YouTube. Sequoia--which has helped finance Apple, Google and other valley greats--ended up providing about $8.5 million in 2005--just in time for Steve to avoid having to increase his credit-card limit yet again to pay for various tech expenses.