Checking In from the Meebo Bar: A Social Startup’s Latest Big Swing at Bat

10/12/11Follow @wroush

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the startup’s venture backers, who include Draper Fisher Jurvetson, Khosla Ventures, Jafco Ventures, Sequoia Capital, Time Warner Investments, True Ventures, and KTB Ventures, have poured $70 million into the company. (The most recent infusion, a $27.5 million Series C round, came in December 2010.) That means an acquisition or, less likely, an IPO, would need to bring in almost a billion dollars to satisfy the typical venture-scale hopes for a 10x return or greater.

But Roelof Botha, a partner at Sequoia, says the company has shown an admirable ability to adapt so far. “I’ve known Seth, Sandy, and Elaine since they were working out of their respective living rooms,” Botha says. “They have continued to grow all the way. The team has been willing to question what it is they do and how they continue to make the service better.”

In particular, Botha says Sternberg is “one of the best strategic thinkers when it comes to the Web that I know.” He credits Sternberg with realizing about three years ago—just as people began flocking to Facebook and Twitter by the tens of millions—that social recommendations would join search engines as major sources of page views for large Web publishers.

“If social is going to drive this much traffic, how are you going to take advantage of it?” Botha asks. The answer, for Meebo, has been to continuously tweak its communications tools to win wider distribution, weave the brands of its advertising and publishing partners into consumers’ social activities online, and translate the act of sharing into something monetizable. “Now people talk about the value of a share, and you see people catching up to an insight that [Sternberg] had years ago,” says Botha. (Sternberg, melding terms from the social networking and search industries, calls this “social graph optimization.”)

Sternberg says he has an entrepreneurial gene that first showed up when he was young. “When I was eight I had various business ideas, but my mother told me that they were all illegal,” he jokes. While he was still Yale, majoring in political science, he started a college consulting firm called IvyBound. He went on for some formal business experience—an MBA from Stanford, a couple of years with IBM in its mergers-and-acquisitions department—but he says he’s one of those people who can’t sit still in a real job, since he has an idea for new business about every three days. “I’d keep calling up my friends on the West Coast and saying ‘What about this one!’” he says. “I think if you can’t stop thinking of new business ideas, you eventually will start one that gains traction. It will ultimately just happen, because you cannot turn it off.”

Sternberg met Jen and Wherry at Stanford, and the trio spent about two years testing their various business schemes. They were eventually attracted to the world of instant messaging, which, at the time, was fragmented into separate silos, each based on its own desktop software client. People on AOL couldn’t chat with people on Yahoo, neither group could talk with people on ICQ, and so forth. “The original idea [for Meebo] was to do for IM what Hotmail had done for e-mail,” says Sternberg—namely, bring it to the Web and make all of the services interoperable.

Introduced in the fall of 2005, Meebo Messenger quickly proved popular. But something unexpected happened. “Immediately after we launched people started coming to us to say, ‘Can you put Meebo into our site?’ Which we didn’t understand at first,” Sternberg says. “But what they meant was … Next Page »

Wade Roush is a contributing editor at Xconomy. Follow @wroush

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