The Accidental Billionaires

1. The birth of Facebook: From Harvard dorm room to global phenomenon

"We're gonna call it the Facebook," Mark said, and his eyes were positively on fire.

Humble beginnings. In October 2003, Harvard sophomore Mark Zuckerberg created Facemash, a website that allowed students to rate the attractiveness of their classmates. Though shut down by the university, it sparked an idea for a more comprehensive social networking site. In February 2004, Zuckerberg launched "The Facebook" from his dorm room, initially exclusive to Harvard students.

Rapid adoption. The site quickly gained popularity among Harvard students, with thousands signing up within days. Its success led to expansion to other Ivy League schools and then to colleges across the United States. Key features included:

• User profiles with photos and personal information
• The ability to connect with friends and classmates
• A "wall" for public messages and interactions
• Groups and networks based on schools and interests

2. Eduardo Saverin's crucial early role and financial backing

Eduardo had immediately realized—it was the Facebook, it wasn't just about Mark Zuckerberg.

Co-founder and CFO. Eduardo Saverin, Zuckerberg's friend and fellow Harvard student, played a vital role in Facebook's early days. As co-founder and Chief Financial Officer, he:

• Provided the initial $1,000 to pay for the servers
• Helped develop the business model and strategy
• Sought advertising deals in New York

Equity structure. The original ownership of the company was divided as follows:

• Mark Zuckerberg: 65%
• Eduardo Saverin: 30%
• Dustin Moskovitz: 5%

3. The Winklevoss twins' claim and legal battle over Facebook's origins

To Tyler Winklevoss—whether wrong or right—that damn kid had stolen his idea and made it his own.

Harvard Connection. Cameron and Tyler Winklevoss, along with Divya Narendra, had been working on a social networking site called Harvard Connection (later ConnectU). They claim they:

• Approached Zuckerberg to work on their project in November 2003
• Shared their ideas and plans with him over several meetings
• Were led to believe he was actively working on their site

Legal action. When Facebook launched and gained popularity, the Winklevosses believed Zuckerberg had stolen their idea. They:

• Sent a cease-and-desist letter to Zuckerberg
• Appealed to Harvard's administration for intervention
• Eventually filed a lawsuit against Facebook and Zuckerberg

4. Sean Parker's influence and Silicon Valley connections

Sean Parker knew everyone, and everyone knew Sean. Through him, everyone was getting to know Mark, too.

Silicon Valley veteran. Sean Parker, co-founder of Napster and Plaxo, became involved with Facebook in 2004. His contributions included:

• Introducing Zuckerberg to key Silicon Valley players
• Helping to secure initial funding and partnerships
• Advising on business strategy and growth

Cultural shift. Parker's involvement marked a turning point for Facebook, as it:

• Moved the company's focus from East Coast to Silicon Valley
• Introduced a more aggressive growth and funding strategy
• Began to sideline Eduardo Saverin's role in the company

5. Facebook's explosive growth and expansion to other colleges

"Classes are being skipped. Work is being ignored. Students are spending hours in front of the computer in utter fascination. The facebook.com craze has swept through campus."

Viral adoption. Facebook's expansion strategy proved highly effective:

• Launched at new schools in a carefully planned sequence
• Leveraged existing user networks to drive adoption at each new campus
• Reached 1 million active users by December 2004

Key metrics:

• User engagement: 67% of users returned to the site daily
• Growth rate: Adding thousands of new users daily
• Expansion: From 1 school to over 800 colleges in less than two years

6. The pivotal move to California and securing angel investment

Five hundred thousand dollars.

Silicon Valley relocation. In summer 2004, Zuckerberg and key team members moved to Palo Alto, California. This move:

• Placed them at the heart of the tech industry
• Allowed for easier access to investors and talent
• Created tension with Saverin, who remained on the East Coast

Peter Thiel's investment. In August 2004, Facebook secured a crucial $500,000 investment from PayPal co-founder Peter Thiel. This funding:

• Provided necessary capital for growth and server costs
• Lent credibility to the young company
• Set the stage for future rounds of investment

7. Eduardo's gradual exclusion and ultimate betrayal

Eduardo was no longer a member of Facebook. He was no longer part of the management team, no longer an employee—no longer connected in any way. He would be expunged from the corporate history.

Growing disconnect. As Facebook grew and moved to California, Eduardo's role diminished:

• He remained in Harvard to finish his degree
• Communication with Zuckerberg became less frequent
• His focus on traditional advertising conflicted with the company's direction

The dilution. In a shocking move, Zuckerberg and the new management team diluted Eduardo's ownership:

• New stock was issued, drastically reducing Eduardo's stake
• Eduardo's role in the company was effectively terminated
• This action led to a bitter legal battle between the former friends

Last updated: August 16, 2024