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'We had no idea how to do it': YouTube's founders, investors, and first employees tell the chaotic inside story of how it rose from failed dating site to $1.65 billion video behemoth

Business Insider logo Business Insider 5/28/2020 ahartmans@businessinsider.com (Avery Hartmans,Paige Leskin)
Chad Hurley, Steve Chen are posing for a picture: Chad Hurley, left, and Steve Chen, two of YouTube's cofounders. Tony Avelar/AP © Tony Avelar/AP Chad Hurley, left, and Steve Chen, two of YouTube's cofounders. Tony Avelar/AP
  • YouTube's cofounders originally thought "a generic platform where we could host all the videos on the internet" was too bold of an idea. So for about a week, the site was a dating platform — until it wasn't. 
  • Fifteen years later, YouTube still reigns as the leader in video, but the climb to the top wasn't easy. 
  • "What's hard to appreciate is how quickly we had grown beyond our capacity to manage the business," said Zahavah Levine, then YouTube's general counsel and vice president of business development.
  • Read the full story of how YouTube grew into a multibillion-dollar behemoth, in the words of former employees and investors.
  • Visit Business Insider's homepage for more stories.

YouTube turns 15 this month. The video sharing service, founded by Steve Chen, Chad Hurley, and Jawed Karim, was incorporated on Valentine's Day in 2005, hosted its first video two months later, and launched to the public by May. 

The company has a neatly packaged origin story that has little to do with its messier, more nebulous early days. The on-paper fairy tale of the company's founding, concocted after the fact with the help of an external public relations agency, is that Chen and Hurley had the idea after a dinner party and wanted to share some videos they'd recorded that night but couldn't quite figure out how. (Karim has insisted the company was inspired by an inability to find videos of the 2004 tsunami in Indonesia or Janet Jackson's Super Bowl wardrobe malfunction.)

Either way, YouTube's founders had one central question: whether it was possible to watch and share videos within a browser without the need to download them. 

Like many Silicon Valley companies, YouTube began as one idea and quickly became something else. In the early days, when the team would meet up to work out of Hurley's garage in Menlo Park, it was a dating site.

Here, in former employees' and investors' own words, is how YouTube grew into a multibillion-dollar behemoth. The interviews have been lightly edited for clarity.

Yu Pan, YouTube's first official employee, remembers cofounder Jawed Karim showing him an early version of the site at a party. 

Yu Pan, software engineer and employee No. 1: I think he knew I liked [Adobe] Flash and he said, 'Oh look, what I can do with Flash and video' and stuff like that. I was like, 'Oh wow, that's pretty cool.' It just had a video, I think it was of Chad [Hurley, cofounder] in a convertible or something like that. That was kind of cute. I think at the time it had a dating bent to it, but it showed off the fact that you can get a link and you see the video.

Steve Chen, YouTube cofounder and former CTO: It was almost too bold of us to say we were going to create a generic platform where we could host all the videos on the internet. A week went by, we didn't receive a single video of the dating variety. At that point we just said, 'it makes no difference, let's make it a generalized site.' So a week later, we changed it. 

a sign on the side of a building: Sequoia Capital's headquarters on Sand Hill Road. Katie Canales/Business Insider © Katie Canales/Business Insider Sequoia Capital's headquarters on Sand Hill Road. Katie Canales/Business Insider

By the summer of 2005, venture capital firm Sequoia Capital had taken notice. Sequoia invested $3.5 million in YouTube's Series A round that September and another $8 million a few months later.

Roelof Botha, partner at Sequoia Capital: The internet companies in those days had a chokehold on distribution, but what was really clever about YouTube was the use of links. I was sold immediately. There were so many people who were negative on the company at the time, even after we made the investment. So many people were mocking me for making that investment: 'Online video has been tried and failed.' There was a lot of skepticism about the business. 

Chen: We were never going to get an office in Silicon Valley until we got funded. We weren't going to be able to afford that.

Botha: They worked out of our office for about three months, until they were about 12 people. Because they were in our office, I would see them every single day. We could have these sort of daily interactions and conversations.

Yu Pan: Then we moved to the San Mateo office. 

'We would go into elevator shafts and custodial closets if we needed to have a private conversation'

a car parked in front of a brick building: The exterior of YouTube's first office in San Mateo. Katie Canales/Business Insider © Katie Canales/Business Insider The exterior of YouTube's first office in San Mateo. Katie Canales/Business Insider

YouTube's office in San Mateo was situated above a pizza parlor and a Japanese restaurant. The office was infamously dismal, with exposed pipes on the ceiling, drab carpeting, and a rodent problem. 

Botha: The new office was really grungy, with a helter-skelter kitchen, and a tiny conference room for meetings. There were Nerf guns everywhere. It was a bit like walking into a college dorm or something. It was just people getting stuff done.

Zahavah Levine, general counsel and vice president of business development: As soon as we started to have meetings, there were no conference rooms [available] at all, zero. We would go into elevator shafts and custodial closets if we needed to have a private conversation. 

Misty Ewing-Davis, content moderator: The office itself was disgusting. 

Gideon Yu, chief financial officer: The executives had to take turns removing some of the rats from the rat traps.

Matthew Liu, product manager: A couple of folks on the [business development] team managed to trap this rat and it was probably a good, like, 18 inches from head to tail. Quite, quite disgusting.

Ewing-Davis: The doors to the toilets were just in the room next to someone's desk. It was obviously men's and women's, but at some point they made them unisex and we were like, 'Guys, this isn't fair.' We had like six women in the office and we couldn't ever use the bathroom so we had to split them up again. 

Levine: On my first day, they handed me a sealed box from Ikea and instructed me to erect my own desk. 

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Pierre Lamond, former Sequoia Capital partner: Steve had a strange way of working. Basically, him and the engineers would work at night. They would show up in late afternoon and work most of the night. When we would show up at 9 a.m. for board meetings, there were very few people there. If you showed up at 7 p.m., all the engineers were there sharing a pizza dinner. It was a fun place. 

Kevin Donahue, vice president of content and marketing: When I first came in to interview with Chad, the very first time, there was nobody in the office. It was so empty because it was the day after a push, where the entire product and engineering team was up until all hours of the morning. 

Yu Pan: We had shots before every software push. 

Jamie Byrne, director of ad sales: The team culture was incredibly tight-knit. The early crew, the crew that was there from the mid-part of 2005 into 2006, a lot of them grew from PayPal. There was a really tight-knit community of product folks. 

Donahue: We used to sit around and have lunch together in those early days, you know, tables that were sort of like, connected together, and just eat lunch and chat.

Ewing-Davis: We were kind of like a small family. When I look back on Facebook, which is funny because it was brand-new then, all of my first photos are with Chad and Steve. There wasn't a divide between CEO and person looking at content. 

One thing that I really miss and I don't feel like I have had again in that depth is the camaraderie that we had when I joined. I feel like everyone has all these expectations now. Back then we didn't have them — we just had our friends that we worked with.

Gideon Yu: This is going to sound very corny, but a lot of us describe our time at YouTube really like Camelot. It was very pure, very innocent. The dichotomy of how big YouTube seemed from the outside and the low-key nature of Chad and Steve, the really humble office that we had, the really humble number of people that we had, the really close-knit group that we had that was unspoiled by massive amounts of venture capital or everybody having all these huge wins under their belt. It was truly astonishing how different it was internally versus externally.

'YouTube became a cultural force'

Steve Chen, Chad Hurley, Steve Chen, Chad Hurley sitting in front of a television: Hurley and Chen. Eric Risberg/AP © Eric Risberg/AP Hurley and Chen. Eric Risberg/AP

By the summer of 2006, YouTube had experienced two massive viral hits — the Saturday Night Live skit "Lazy Sunday" and a Nike ad featuring soccer star Ronaldinho. It was getting so big, so fast, YouTube was having trouble keeping its infrastructure up and running. 

Chen: Just about every 48 hours, some emergency came up. When you have a million people watching a video a day, you can't just manually log each view anymore.

Byrne: The day that I joined we had just hit 40 million views [per day], which was a big milestone. The next month, by July, it was 100 million views. The thing just kept growing. 

Liu: The viral growth was just sensational. And that's not just, 'Hey, how do we get users to watch this video?' It's also: How do we get the current infrastructure of the internet, like data centers, machines within those data centers, the software configurations, to scale without literally having computers meltdown? 

Byrne: I remember when I joined around the June [2006] timeframe, you'd meet someone out and they'd ask you where you worked and when I said I worked at YouTube, they said 'Oh that's incredible, what's it like working with Bono?' because they'd never heard of YouTube and they thought I said U2. But about two months later, same kind of conversation, anyone that I said I worked at YouTube to, they would say, 'Oh my god, I love YouTube.' Within a very short period of time, YouTube became a cultural force that everyone knew. 

Donahue: We were sitting around one night and we stayed pretty late. It was like 9:30 at night or something like that. And Brent, Chad's brother, gets a phone call and he was seated right next to me and he's like, 'Hello?' And then he's like, 'Oh, ah, hello, Mr. Hammer.' And he's like, 'Oh yeah, sure. Um, yeah, you can come on by, here's the address.' And they hang up, I go, 'What was that?' And he goes, 'Oh, that was MC Hammer. He wants to come by and just see the office.' And then he showed up and he stayed for a really long time.

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'People didn't know what was OK and what wasn't'

As the company was embracing its newfound popularity, it still had to figure out how to moderate content on its site. 

Levine: As the lawyer, one of the things that I needed to worry about was employee well-being in general. Early on, we had to have employees reviewing the content to make sure that flagged content came down and inappropriate content came down. We had these young kids looking at a queue of videos that had been flagged, and some of the content was very inappropriate. I was worried about that. 

Ewing-Davis: I think the greatest challenge was just the type of content that we had to look at was, uh ... horrible. People didn't know what was OK and what wasn't because there was no precedent set. Nobody really knew. Like, is it OK to post porn on this free website that children are looking at? I don't know! We actually caught ourselves several times in public places talking about things that were totally normal to us, but realizing that it was not normal and it was actually really terrible and people did not want to hear that while they were eating their lunch. 

Levine: It wasn't just the [content moderators] that were conducting that review, it was everybody that was walking by them in this open office. I remember one time … these fancy executives from LA pulling up in their limousine coming up to our little tiny office and we're taking them through it and they walk right by these kids reviewing inappropriate content all over their screens. 

Ewing-Davis: There were a lot of conversations about things that were like, 'Do you think that this is OK?' 'I don't know, it makes me feel gross.' And that was kind of our judge, our judge was our gut. And then we saw more and more of it, and we were able to actually write policies around it and actually have a framework around what is OK and what is not. 

'It became obvious that we had a major problem'

Growth wasn't slowing down — in fact, views were rising at an exponential rate. YouTube's staff was stretched thin. 

Levine: What's hard to appreciate is how quickly we had grown beyond our capacity to manage the business. Our global data infrastructure was cracking, our bank account was dwindling, angry music company executives demanding hundreds of millions of dollars, partners banging doors down trying to get our attention. 

Ewing-Davis: We had a company lunch at, I want to say it was a sushi place. Almost half of us got food poisoning. Remember, there's no one else to do your job. At that time, it was just so scrappy and I just remember all of us kind of working together around the clock between being sick and working. I would be like, 'I've got to go now. Can someone please take over?' It was three days of working an hour or two here and there and sleeping, because our whole team got sick, except for the guy that worked overnight, thankfully, because he didn't come to the lunch. 

Lamond: It became obvious that we had a major problem. We were spending a lot of money, we had no income whatsoever. We were approached by people who wanted to advertise, but we had no idea how to do it. It would've taken a lot of time for us to learn, and money was disappearing. Expenses were growing exponentially because our growth was exponential.

Gideon Yu: There were lots of disputes about whether our product was violating copyrights or protected by the DMCA, the Digital Millennium Copyright Act. There were a lot of very big copyright owners, namely some of the big recording studios, that were being very aggressive with us on what we should be paying them, on litigation threats and such. And because of those threats, it was very important for us to find some way to come up with a revenue-sharing, kind of payment plan that worked for all parties involved. 

Botha: The litigation around music was a very big risk for the company. It made Chad and Steve question whether it was worth soldiering on with the company. We didn't have the resources to keep on fighting.

'Is this real? Are we really doing this?'

Chad Hurley, Steve Chen are posing for a picture: Reuters/Philippe Wojazer © Reuters/Philippe Wojazer Reuters/Philippe Wojazer

YouTube's founders, CFO, investors, and board all agreed it was time to sell. YouTube had inbound interest from companies like Viacom and News Corp., but the real competition for YouTube was between two of the most powerful tech companies at the time: Yahoo and Google. A bidding war ensued, and Google won — on October 9, 2006, Google announced it was buying YouTube for $1.65 billion. 

Byrne: On the day of the acquisition, totally unrelated, we were scheduled to move our offices from San Mateo to San Bruno because we had outgrown this office above the pizza parlor. 

Levine: Months earlier, we had negotiated a lease for a new office. The move date had been scheduled for that weekend months earlier, way before we knew we were going to be selling ourselves, let alone that weekend.

Ewing-Davis: We were such a small company and we'd obviously hired movers, but we all came in wearing, you know, grubby clothes, planning on putting desks together and figuring out seating plans and stuff.

Byrne: We all show up in this new office for the very first day, we're all kind of getting our desks organized, and Larry [Page], Eric [Schmidt], and Sergey [Brin] walked in to announce the acquisition with Chad and Steve. So this completely surreal, shocking moment.

Liu: Up to that point, I thought it was just rumors, 'cause the rumors had started circulating for a while. Let's just say I was not of the pay grade where it was like, 'Yeah, this is happening.' Then they made the announcement, the entire world kind of seemed to freeze for a moment, and people started emailing me and attempting to call me. It was definitely quite a bit of a shock. 

Yu Pan: When the official announcement happened, it was my birthday. But I knew about that beforehand. I got a call that said like, 'Oh, we finished talks and we're fairly certain it will go through.' I usually take things with a grain of salt. I remember being more worried about the lawsuit stuff, about the copyright stuff and different ways to work around things. 

Donahue: I was in LA that day and I was meeting with Sony and I found out through Sony, through the guy I met with. I walked into the meeting with the guy and this guy kind of goes, 'So congratulations!' I was like, 'Oh yeah, well, thanks.' I acted like I knew. But you can imagine that whole meeting I couldn't concentrate. I think I first called Chad or somebody and said, 'Is this real? Are we really doing this?'

Ewing-Davis: We all went to TGI Friday's pretty early and, being in my early 20s, we all drank a lot that day. My mom thinks this is hilarious: I called my mom to tell her, 'cause I didn't want her to find out from the news, and I left her a voicemail at her job, and she kept the voicemail until she retired like four years ago. She kept the voicemail because she said I was so hilariously drunk screaming over the phone about how excited I was. So apparently I was very excited. 

Byrne: There's a video that we wrote on the spot, someone recorded on a camera, it was a message from Chad and Steve to the community. You can actually see the red and white of TGI Fridays in the background of the video.

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Liu: We actually went to Yu Pan's house and there was a further celebration there. 

Yu Pan: It was fairly chill. People still drank a bit but nobody went, like, insane. 

Gideon Yu: I was dead tired. So my wife, Susie, and I went to eat at our favorite restaurant in San Francisco, which is called Michael Mina, in Union Square. I grew up very humble beginnings economically and one of the things that I always wanted when I was kid was whatever the new pair of Air Jordans was. And so we walked across Union Square and went over to Niketown and I bought the then-current Air Jordans for myself. 

Levine: I do remember calling my parents who I hadn't talked to in some time because I had just disappeared off the face of the earth. And I emerge after the agreement was announced and I called my parents who had already read about the sale in the press and I remember my mom just kvelling in her effusive manner: 'Honey, you've worked so hard! No one has worked harder. You deserve this!' and then I remember my dad chiming in, in all his wisdom, saying, 'Hold on, hold on, wait a minute. Honey,' he said to me, 'I love you dearly, I really do, but I want to be clear, no one deserves this.' And that observation just resonated with me, I think it kept me really grounded at that moment.

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