Facebook Paid $19 Billion for His Company After Rejecting Him

When Jan Koum arrived in America as a teenager, he and his mother had very little money. They relied on food stamps to get by, and Koum took a job cleaning floors at a grocery store to help support them.

Years later, he applied for a job at Facebook and was turned down.

But that rejection didn’t stop him from building something of his own. In 2014, Facebook announced it was buying his company, WhatsApp, for approximately $19 billion. And the place where Koum chose to sign the deal had a special connection to his childhood.

Starting Over in America

Koum was born in Ukraine and moved to California with his mother in 1992. They settled in Mountain View, where they struggled financially while trying to build a new life.

His mother found work as a babysitter, and Koum helped wherever he could. They received government assistance and food stamps to cover basic necessities.

As a teenager, Koum became fascinated with computers. He spent hours teaching himself about programming and computer networks, reading technical books whenever he could find them.

Money was so tight that he sometimes bought used computer manuals, read them and returned them afterward because he couldn’t afford to keep them. His dedication eventually helped him get into San Jose State University. While studying, he also found work in the technology industry.

Koum later landed a job at Yahoo, one of the internet’s biggest companies at the time. There, he met Brian Acton, an engineer who would become both a close friend and his future business partner. The two spent years working together before deciding they wanted something different.

The Job Rejections That Came Before WhatsApp

In 2007, Koum and Acton left Yahoo after becoming frustrated with the company’s direction and its heavy focus on advertising. They spent some time traveling and thinking about what to do next. Eventually, both began looking for new opportunities.

Acton applied to several major technology companies and received rejections. Koum also looked for work, including at Facebook, but wasn’t hired.

Meanwhile, something exciting was happening in the mobile phone industry. Apple had introduced the iPhone, and its new App Store was making it possible for independent developers to build applications that could reach millions of people. Koum bought an iPhone and started experimenting with an idea.

He wanted to create an app that would let people share short status updates with their contacts, showing whether they were available, busy or doing something else. He called it WhatsApp, a play on the familiar greeting “What’s up?” But the first version wasn’t particularly successful.

The App Almost Never Happened

WhatsApp’s early development was frustrating. The software had problems, users weren’t especially interested, and Koum began wondering whether the idea was worth pursuing.

At one point, he became discouraged enough to consider abandoning the project entirely. Then Apple introduced push notifications, allowing applications to send alerts directly to people’s phones.

Koum added the feature to WhatsApp, and something unexpected happened. People started using the status updates to communicate with one another. Instead of simply telling their contacts they were busy or available, they began sending short messages back and forth.

Koum realized that messaging was what people really wanted. He changed the app to focus on making communication simple, fast and inexpensive.

Acton joined him in building the business, and the two developed an approach that went against much of what other internet companies were doing. They didn’t want WhatsApp packed with advertisements, games or unnecessary features. They wanted an app that did one job extremely well.

Hundreds of Millions of Users

WhatsApp began growing quickly, especially in countries where traditional text messages could be expensive. Instead of paying for every SMS, users could send messages over an internet connection. That made it particularly useful for keeping in touch with friends and family in other countries.

As more people joined, their contacts had another reason to download the app. WhatsApp spread largely through people recommending it to one another.

Koum and Acton kept the company relatively small, even as the number of users grew into the hundreds of millions. Investment firm Sequoia Capital backed the business, but the founders remained focused on keeping WhatsApp simple and free from advertising.

By early 2014, approximately 450 million people were using WhatsApp every month. The company was reportedly gaining about one million additional users every day.

And Facebook was paying attention.

Facebook Came Back With $19 Billion

In February 2014, Facebook announced an agreement to acquire WhatsApp for approximately $19 billion in cash and stock. The price shocked the technology industry. WhatsApp had only a few dozen employees, yet its messaging service had become one of the fastest-growing applications in the world.

Koum had once approached Facebook hoping to find employment. Now he was negotiating with its founder, Mark Zuckerberg, over the sale of the company he’d built.

But Koum hadn’t forgotten the difficult years after arriving in America. His mother had died after battling cancer, long before WhatsApp became a global success. She never got to see what her son had accomplished.

When the time came to complete the agreement, Koum and Zuckerberg went to a building in Mountain View that had once housed a social-services office.

It was the same place where Koum and his mother had stood in line to collect food stamps.