News

YouTube co-founders become Silicon Valley superstars

Constance Loizos [San Jose Mercury News]

SAN JOSE, Calif. -- Google's deal to buy the popular video-sharing company YouTube for $1.65 billion means different things for different people, from users to Wall Street to both companies' employees.

But the people whose lives will be transformed the most are YouTube co-founders Chad Hurley, 29, and Steve Chen, 27.

Though Hurley and Chen have been on a surreal ride since February 2005, when they started the company in the garage of Hurley's Menlo Park, Calif., home -- at times, they have been besieged by conference attendees, journalists, and YouTube fans -- the deal ushers the two into that much smaller pantheon of Silicon Valley superstars.

It might be a strange fit for people whom friends characterize as "humble" and "low key." Then again, their entire story is decidedly short on flash.

Hurley, a native of suburban Philadelphia who studied design at Indiana University of Pennsylvania, first crossed paths with Chen, a self-described math geek, at the payments processing startup PayPal in 1999.

Chen had been studying computer science at the University of Illinois at Urbana-Champaign when Max Levchin, a PayPal co-founder and former classmate, recruited him. Meanwhile, Hurley landed a job soon after e-mailing the company a job application. Neither had senior roles at PayPal, but they stayed in touch after the company was acquired by eBay in July 2002. (Chen stayed on; Hurley left to become an independent consultant.)

Fast forward to an informal dinner early last year, one attended by a number of PayPal alums. When their friend Jawed Karim noted that he couldn't easily share his video footage of the evening, a light went off for both Hurley and Chen. A company was born; Karim was made an adviser.

"It only took them a few hours to come up with their architecture, which is something they still use," said Tom McInerney, the chief executive of video-sharing service Guba and a friend of Chen. "The whole idea was just to do something really simple and elegant; it was very commonsensical."

McInerney, who used to play poker with Chen and various other Web 2.0 entrepreneurs "before YouTube blew up" and Chen's schedule rendered regular get-togethers impossible, calls Chen both "extremely low key" and "very smart," although he adds that "I think I beat him at poker the last time we played."

Serial entrepreneur Josh Felser, who recently sold his video-sharing service, Grouper, to America Online for $65 million, credits Hurley with being more than a pretty face, too. (Hurley's curtain of shoulder-length blond hair has attracted almost as much media attention as YouTube's ever-skyrocketing traffic numbers.)

Though the two aren't close friends, as a peer in the same, highly competitive space, Felser says Hurley has "always been open and humble. Despite YouTube's success, he has always invited interaction and conversation."

Adds Felser, "He's also just very nice."

Of course, the acquisition means much more than an elevated profile for the two. It also means that Hurley and Chen -- respectively the designer and the engineering brains behind the company -- are about to become supremely wealthy.

The math isn't hard to figure. Neither YouTube nor its sole venture capital backer, the renowned firm Sequoia Capital, has ever disclosed how much of the company Hurley and Chen own. But Sequoia has given YouTube just $11.5 million over its 18-month-old life.

Assuming standard venture capital terms, Sequoia received anywhere from 10 percent to 40 percent of the company for its millions. To attract talent -- YouTube currently has a staff of 67 -- YouTube also likely dedicated 15 to 20 percent of its shares to an employee options pool. Finally, YouTube's board, its key advisers, and its earliest employees likely own a collective 2 to 3 percent of the company.

Unless YouTube accepted more exotic terms from Sequoia, Hurley and Chen now own a minimum of around 40 percent of the company -- or several hundred million dollars in Google stock.

Not bad for 18 months' work.

___

© 2006, San Jose Mercury News (San Jose, Calif.). Distributed by McClatchy-Tribune Information Services.

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