Company Stumbles its way to $75 million

Company Stumbles its way to $75 million

Internet startup's unconventional path leads it from Canada to the Bay Area — and into eBay's arms
Dan Fost, Chronicle Staff Writer
Sunday, June 24, 2007

StumbleUpon founders Garrett Camp (left) and Geoff Smith ...What's in a name? For Internet startup StumbleUpon, the name practically tells the company's story.

For starters, the name describes how people use its technology: They stumble from one Web site to another, clicking a button that they put in their browser and getting a Web site that like-minded people have recommended.

The moniker also describes how the San Francisco company's investors discovered the founders, stumbling across them on the Internet.

Most fittingly of all, it describes how the founders ultimately left their sleepy origins in the Canadian Rockies and stumbled into the white-hot center of the latest technology boom.

After toiling in obscurity for four years, the founders pulled together an A-list of Silicon Valley investors in late 2005, moved to San Francisco in early 2006, and rode the Web 2.0 wave to success. Last month they sold their 14-person company to eBay for $75 million.

"The entire nature of StumbleUpon technology is based on serendipity, and the entire history of the company has been a series of fortuitous, serendipitous coincidences that mirror the technology," said Brad O'Neill, the Silicon Valley investor who discovered the company and who has become a mentor to the founders. "There is something going on at a higher order that is difficult to grasp, something about the 'pay-it-forward' goodwill nature of it."

The founders, Garrett Camp, Geoff Smith and Justin LaFrance, all in their 20s, worked on the technology while Camp pursued his master's degree at the University of Calgary. Camp had been best friends with Smith's roommate, and Smith, who hailed from Victoria, had met LaFrance in high school at a technology camp.

In the ashes of the dot-com bust, when jobs were scarce, they had an idea to start something: Give people a button to click, and they'll find something interesting. Smith was what Camp called the "code wizard," while Camp was studying "collaborative interface design" — the way people used the technology. LaFrance, with a degree in economics, brought some business sense.

Their idea was based in part on's recommendation engine, the one that tells you that people who like the same books as you have also bought other books you might like. In addition, Camp said in one of several interviews conducted over the past year, the Web has become so vast that it is nearly impossible to surf, the way a television viewer can just click on different channels.

What wound up happening, according to investor O'Neill, was that they created a new category called "discovery" that will pit eBay and StumbleUpon against the newly released Google Dice service, as well as other startups.

In its early years, StumbleUpon attracted a following by word of mouth. By early 2005, it had 50,000 users. One was O'Neill.

O'Neill, now 35, is an expert in data storage at the Taneja Group, a consulting firm in the Boston area. But he is also a technology enthusiast who recognizes pathbreaking developments, and he instantly recognized the potential of StumbleUpon. "I became an active Stumbler, and befriended Geoff and Garrett and Justin," he said. They now refer to him as "Uncle Brad."

He questioned them about their business, expecting to find that they had terabytes of storage — huge amounts, which often present a challenge for small tech firms that try to grow. When O'Neill heard that they had a relatively paltry 80 gigabytes, he realized that they were not storing any big files, like YouTube or MySpace, but were just storing links, and would therefore have the ability to grow very large, very fast.

At the time, O'Neill said, "They were getting interest from less-than-savvy actors from Europe and Canada, so I asked, 'Are you serious about looking for funding?' "

They were. So O'Neill said, "I'm more than happy to pay for you guys to come down here. You're cash-strapped. I'm well connected in the valley. I'll help you assess what your options would be."

Camp recalls attending a conference at Stanford University, and then Smith took him to dinner. "In two weeks, I met six people, and every single person was interested" in investing, he said.

O'Neill knew storage and networking, but was not an expert in Web 2.0 or consumer technology. He brought in Josh Kopelman, who founded, sold it to eBay for more than $300 million and now runs First Round Capital, an early stage venture capital fund in Philadelphia; and Ariel Poler, who founded LinkExchange, which was sold to Microsoft, Topica and several other Internet startups.

"I was blown away by the level of traction that these guys had without any marketing budget," Kopelman said. "And they were outside the (Silicon Valley) ecosystem. They built it without the benefit of relationships or history or partnerships or experience that you typically think is required to get that type of traction."

The network got to work. Poler brought in Mitch Kapor, another tech leader who had founded Lotus Development Corp., even though the two didn't know each other well. "In 15 minutes, I was completely taken with it and said, 'I'm in,' which I never do. Really, never," Kapor said.

Other investors followed: Ram Shriram, a former Netscape and Amazon executive who sits on the Google board of directors; Ron Conway, a widely known angel investor; and Rajeev Motwani, a Stanford professor and early Google adviser.

The total round was less than $2 million, giving further proof to the Web 2.0 maxim about the low barrier to building something big on the Internet. And StumbleUpon was making money right out of the gate, first by asking for $20 contributions from users, and ultimately by selling ads.

The number of registered Stumblers exploded in 2005, rising to almost 1 million, Camp said.

Calgary had some advantages for the team, he said. "It's pretty cheap in Canada."

But there were disadvantages as well. "It's not the same kind of culture for technology," Camp said. "There's wireless, and there's oil and gas and environmental technologies."

Still, there was hope for Web 2.0 ideas coming out of Canada. Stewart Butterfield and Caterina Fake started Flickr in Vancouver, eventually selling it to Yahoo and moving to San Francisco.

Camp and Smith moved to San Francisco, as well, while LaFrance stayed in Canada. Camp started working out of his South of Market apartment in January 2006. O'Neill put the team on his personal Verizon wireless plan.

The company moved to a one-room office at Fourth and Market streets, then to 1,000 square feet on New Montgomery Street, and then to even larger digs above 111 Minna St., the Web 2.0 party hotspot.

The company also hired Dave Feller as vice president of marketing. Feller had worked with Kopelman at, and stayed on at eBay for six years.

"The team was able to quickly get acclimated to the valley," Kopelman said. "They surrounded themselves with entrepreneur-friendly investors … and quickly learned about the Silicon Valley ecosystem."

The founding team, not the investors, deserve all the credit, Kopelman said: "I don't think this is a story of, 'Look at these great investors and how they took three naive ducklings and made them into a company.' These guys really built something. We helped around the edges. This is story of how working very hard and building a community over years can build value.

"I don't think I had to educate them much. These guys are very sharp. They did not have a significant amount of corporate experience, but they understood what their users wanted."

Camp said the move to San Francisco "accelerated change." In Calgary, "Months would go on and no one knew what I was doing." In fact, he said, "I'm not sure we knew exactly what we were doing."

Over the year and a half in San Francisco, StumbleUpon has grown to 14 people. The user base grew 150 percent in the past year, Feller said, to 2.35 million people. The Web site handles about 6 million "stumbles" per day.

Feller, as a former eBay employee, says it's a coincidence that eBay bought the company. Likewise, Kopelman would not discuss whether he had any role in the deal.

Kopelman did say the board had many discussions about whether to expand the company or seek a buyer. Many venture capitalists wanted a piece of the action "at an attractive valuation," Kopelman said. O'Neill referred to the pitches as "over-eager capital from our friends on Sand Hill Road."

The company had to choose between two classic Silicon Valley paths, O'Neill said: "You can grow and become a profitable business, and you may or may not have an IPO exit. Or you can build a company and hope to seek a home for it in an acquiring company."

EBay emerged this year as a logical fit. It wants to keep StumbleUpon as a separate brand, but it also wants to learn about the technology, which could be used to recommend products to eBay auction shoppers.

"It's a great platform," said eBay spokesman Jose Mallabo. "We went after this company really from a community perspective and from a learning perspective."

In announcing the deal on May 30, eBay appointed its executive Michael Buhr to serve as StumbleUpon's general manager, working in the San Francisco office.

Will their newfound tech celebrity go to the StumbleUpon team's heads?

"I'm not at all concerned about that with these guys," O'Neill said. "I lived through the first round of this. I've seen what happens when arrogance takes hold. The 'I'm so special' syndrome takes over. In final days of negotiating this deal (with eBay), I would give them updates of where we were, and they would say, 'OK, great, can we go back to work?'

"They are extremely generous guys and they engendered that generosity in other people. I felt compelled to help them succeed.

"This is a classic case that good karma breeds good karma.


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