At the very same time that Michael Moritz decided to sell his YouTube shares, inside YouTube's headquarters conference room, the company's three co-founders were gathered together, discussing a suddenly arrived letter of investment intent.
Yes.
Unlike Nathan Bailey personally visiting Sequoia Capital, when it came to investing in YouTube, Barry Meyer did not send a trusted lieutenant to negotiate face to face. Instead, he chose to make a formal written inquiry, asking whether YouTube had any intention of accepting outside investment.
The reason for doing this was simple.
Investing in a startup is really a bet on people. When you believe in someone, if you barge in like a thug, kick down their door, and ask whether they want to work with you, there's a very high chance the deal will fall apart.
And even if it somehow goes through, the final outcome of that investment will most likely still be a failure.
Because the person you believe in will be frightened off by your brute behavior.
But dealing with Sequoia Capital is different.
They are already players in the capital world, so using the most "capital" way to communicate with them is far more efficient:
I want to buy what you're holding. Are you selling?
If you sell, we sign a contract.
If you don't sell, I kill you and have your heir sign the contract.
Precisely because business is dead, and people can be too, but the business of investing in people has to follow rules.
That's why Warner restrained itself, sent a formal letter to YouTube, and even clearly stated the real investor's name in the letter: Isabella Haywood.
And this—
"I didn't expect the day we imagined would come so quickly?"
Jawed Karim, the uploader of YouTube's very first video Me at the Zoo, smiled as he looked at the invitation letter in his hand and shook his head slightly.
"So what do you think? Do you think this is simple cooperation, or—have we been targeted?"
"Uh… I think this is probably just cooperation?"
Another YouTube co-founder, Steve Chen, pushed up his glasses and said, "Because I remember Isabella saying she's someone who surfs the internet?"
"And she even wore an Iron Man glove at the premiere of Azkaban?"
"To respond to fans and netizens' affection?"
"If she already likes going online, maybe she just stumbled upon us? Saw that someone uploaded behind-the-scenes set photos of her and posted them on our site? Got interested and wants to invest?"
"I don't think so."
Before Steve Chen even finished, the third co-founder, and the one with the largest equity stake, Chad Hurley, immediately shook his head.
"If it were just simple interest, she would only use our platform."
"Because when the cartoon beaver memes went viral online, she never stepped in to handle it."
"And in the past, she doesn't seem to have invested in even a single internet company."
"She only set up her own entertainment company."
"So in this situation, she suddenly sends us a letter asking whether we want investment?"
"And the one sending the letter for her is Warner?"
"To be honest, I have reason to suspect this might be a warning from Warner."
"Or possibly Hollywood keeping an eye on us."
"We might be in trouble."
As soon as those words were spoken, the conference room fell silent.
The three YouTube founders were all highly educated individuals who were already financially independent.
Before founding YouTube, they were early employees at PayPal. After eBay acquired PayPal, all three achieved financial freedom. Even the least wealthy among them had millions of dollars in cash.
They founded YouTube purely because, after achieving financial freedom, they were bored and wanted something fun to do.
Because they were rich and knowledgeable, they knew from the very beginning that YouTube would be difficult to scale.
So their goal was simple: build YouTube a bit, then sell it.
Cash out and exit.
The logic behind this was simple, with two main points:
First, a fully realized YouTube would be taking the life out of traditional media.
Old-school media giants would never allow them to develop unchecked.
Second, if YouTube wanted to grow, it would inevitably have to skirt legal gray areas.
Although since YouTube's founding they had emphasized that YouTube was a platform where ordinary people could become TV channel operators, and that users were encouraged to upload moments from their own lives—
All of that was just high-sounding rhetoric.
Because 99% of ordinary people in this world are just NPCs in "Earth Online." When everyone's life is monotonous suffering, who wants to watch such boring records of daily life?
So for a website to grow, there are only two options.
Either let the top 1% of real players upload videos.
Which is impossible, because YouTube can't afford them.
Or walk the legal tightrope and steal original content.
For example, at the moment, YouTube has no content moderation.
And the videos with the highest view counts all clearly have copyright holders.
Take the 38th Super Bowl halftime show clip, the one involving the wardrobe malfunction between Justin Timberlake and Janet Jackson. When Janet Jackson's chest flashed, YouTube's traffic surged instantly.
And the copyright for that content belongs to CBS.
Another example: the first video on YouTube to surpass one million views was Ronaldinho's Nike commercial.
The second was Isabella's behind-the-scenes set footage from a few days ago.
When celebrity gossip is the real source of traffic, YouTube has no choice but to walk a tightrope.
Because allowing users to upload pirated videos is illegal.
CBS and Nike could both take YouTube to court.
They didn't, not because they were kind, but because YouTube hadn't harmed their real interests.
After the exposure incident, CBS was fined heavily by the FCC for broadcasting obscene content on public television. CBS refused to accept it, arguing that the incident had nothing to do with them and that such videos were everywhere online. If the FCC wanted to fine them, it would have to fine all websites. The court agreed and overturned the FCC's ruling.
So if YouTube spreading that clip was actually protecting CBS, would CBS sue YouTube for infringement?
Impossible.
Nike not suing followed the same logic.
Once they realized their ad was spreading extremely well online, who would reject a free advertising platform?
Right?
But now, things were different.
Because the massive traffic YouTube was getting right now came from behind-the-scenes footage of The Devil Wears Prada.
In fact, when YouTube discovered that its latest viral hit was connected to an unreleased film by a Hollywood giant, they had already prepared themselves to be sued by Warner. They knew this behavior was legally questionable.
But after waiting two days, instead of receiving a lawyer's letter or a court summons, they received an investment letter of intent.
On the surface, this was good news.
But from another angle—
Didn't sudden capital injection look a lot like being absorbed?
Accept my investment, and you live.
Refuse it—and you die.
"So—what do you think?"
After a pause, seeing that the other two weren't speaking, Jawed Karim smiled and said, "If you two don't have ideas, I'll share my thoughts on this invitation."
With someone taking the lead, Steve Chen and Chad Hurley immediately nodded.
Jawed Karim continued, "Honestly, I kind of want to embrace this investment."
"Because once we accept Isabella's investment, we can gain massive traffic overnight."
"When Isabella can casually produce a children's show and get tens of millions of paid views, if we announce today that she's invested in us, tomorrow our daily active users could hit ten million."
"And then—no need to say more."
"If she's willing to upload videos, maybe in less than a month our daily visits could exceed one hundred million."
"Then we sell the site and cash out."
"And isn't that our ultimate goal?"
The beautiful prospects made Steve Chen nod immediately.
Chad Hurley pressed his lips together, about to speak.
But before he could, Jawed Karim suddenly changed tone.
"But at the same time, this kind of embrace could also drag us straight into the abyss. Because once news of Isabella investing in us gets out, I guarantee we'll instantly attract the attention of every copyright holder in the world."
"When our site is filled with infringing content…"
"To be frank, Time Warner, Disney, Viacom, NBCUniversal, Fox—any one of them could crush us. If they strike together, we might become the next Napster."
"We might not even get a chance to cash out."
Steve Chen fell silent.
Chad Hurley nodded in agreement. "That's exactly what I meant."
As mentioned earlier, Napster was a pirated music site.
Founded in 1999, it nearly destroyed the entire record industry by allowing people to easily obtain pirated MP3s.
To kill it, the five major music companies joined forces.
In less than three months, it was dead.
Then Jobs appeared with the iPod and iTunes.
The music industry officially entered a new era.
If you really think about it, YouTube today isn't fundamentally that different from Napster back then.
So being watched by media giants was exactly what YouTube feared most.
Or rather—
Before YouTube officially launched, Chad Hurley, Steve Chen, and Jawed Karim had even prayed that God would protect them from being noticed by media giants before they reached a certain user scale.
But now—
Sigh.
Isabella's invitation was truly a beautiful poison.
"Should we call Michael Moritz?"
"Ask Sequoia Capital for advice?"
Seeing how serious the situation was, Steve Chen voiced his idea.
The suggestion was immediately supported by the other two.
After all, Sequoia Capital was powerful.
So why not listen to powerful people?
But when they got through to YouTube's angel investor Michael Moritz—
"What did you say?"
All three shouted at once over speakerphone. "Mr. Moritz, you just met with people from Warner?"
"Yes."
"And you sold them your shares?"
"More accurately, I sold them to Isabella. Though at the moment it's only a verbal agreement. The contract hasn't been signed yet, because—Warner is a bit ridiculous. They don't know the name of Isabella's investment company."
Michael Moritz spoke lightly, but the three founders' expressions turned ugly.
Because Warner's actions shocked them.
In their memory, there seemed to be no precedent of anyone kicking out angel investors before Series A.
Because Sequoia Capital's choice shocked them—
Sequoia Capital isn't some small outfit. So why on earth were they being pushed out by Warner?
And the reason for that—
"Oh, that's because I find it hard to say no to Isabella," Michael Moritz said. "So when Warner told me Isabella really likes you guys… well—ask Warner for the specifics."
"If you're willing to accept Isabella's investment, I think Warner will explain everything to you."
Maybe it was because everyone would soon have nothing to do with each other anymore.
After a few brief words, Michael Moritz hung up, saying he had other matters to attend to.
This only left the three of them even more bewildered.
"Was Michael Moritz taken out by Isabella???"
"What kind of madness is this???"
"No, this won't do. I think we need to call Peter."
"This situation looks way more serious than we thought."
Chad Hurley slammed the table.
The "Peter" he referred to was their former boss, the founder of PayPal, Peter Thiel.
After selling PayPal to eBay, Peter Thiel moved into Wall Street.
At present, he was a Wall Street star, managing a hedge fund with over five billion dollars in assets.
At the same time, he also ran a venture capital firm, where one of the partners was Sean Parker.
And Sean Parker was the founder of Napster, the service that nearly killed the record industry.
Yes.
The tech industry has "genes," too.
The reason YouTube's founders dared to dance on the red line was because someone in their lineage had already done it.
Like begets like. Mice raise tunnel-digging children.
When they finally got through to Peter Thiel—
Their former boss's words made their hair stand on end.
"What did you say? The YouTube you founded was noticed by Isabella?"
"Which Isabella are we talking about? The actress who played Hermione Granger?"
"Oh—if it's her, then just accept her investment."
"What? You're asking why?"
"It's simple. With her in your company, you won't have to worry about a lot of things."
Peter Thiel cheerfully revealed a whole new world to his former subordinates.
When the three learned that—
Being an actress, singer, and variety show producer was only Isabella's shallowest identity;
That besides those, she was also the boss of an entertainment company, a music company, and a talent agency;
That the global rights to The Voice were all in her hands;
That the recording and management contracts of the breakout singers from The Voice of America were all controlled by her alone—
The fact that she could lie at home and make half a billion dollars a year left the YouTube founders utterly stunned.
"Peter, by what you're saying—she's richer than you?"
Chad Hurley asked in disbelief.
"Of course," Peter Thiel replied with a laugh. "She's much richer than I am. Or rather—you know The Devil Wears Prada, right? The second video on your site to break a million views. That film was jointly sponsored by fourteen luxury brands including LV, Chanel, and Prada. Each one paid one hundred million pounds."
"She makes more money shooting one movie than we did building PayPal."
"What???"
Steve Chen couldn't believe his ears. "Why???"
"Have those brands lost their minds?"
"Why would they give her that much money?"
"Because Disney and Time Warner are her allies."
"Because she can casually reach Viacom and the BBC."
"Because Rupert Murdoch, Edgar Bronfman, Michael Eisner, Ted Turner, Steve Case, Carl Icahn—put together—haven't beaten her even once."
Peter Thiel laughed loudly. "Gentlemen, I know this is hard to digest, but that doesn't matter. You just need to know that once you embrace Isabella, until she withdraws or you sell the company, you don't need to worry about Time Warner, Disney, or Viacom coming after you."
"After you accept her investment, the only ones who might target you are Fox and NBC Universal."
"Of course, how you choose is up to you."
"And one more thing. If you successfully embrace her, I might even come to you for help next year."
"I may call you about a deal, because—as Chen knows—I invested last year in Facebook, which he was involved with before. Its user growth still hasn't met my expectations."
"I can tell you clearly: next year Facebook will allow users aged thirteen and up to register."
"At that time—if there's a massive traffic pool—I'm confident I can make Facebook the world's largest social network within a month. And for that, I can get Facebook to give up at least ten percent equity."
When the call ended, the YouTube trio fell silent once again.
After Peter Thiel explicitly hinted that Facebook might proactively bring Isabella in as an investor, they suddenly felt that the world they had lived in all along was nothing but a simulation.
If they had to describe it—
They felt like they were living inside The Matrix.
What they saw.
What they heard.
Might not be real.
"Is Isabella from some old-money family? Michael and Peter both surrendered the moment they met her?"
Steve Chen frowned deeply.
"That seems likely," Chad Hurley said. "Peter said Time Warner and Disney are her allies. Don't you think that sounds absurd? What kind of person can be friends with the two largest media groups in the world?"
Chad ran his hands through his hair.
His body felt overheated. His brain was practically on fire.
"So now—do we accept?"
Jawed Karim shook the letter in his hand, looking at his two friends with flickering eyes.
He had originally been the most relaxed one, since he didn't hold much equity in YouTube. Whether YouTube succeeded or failed didn't affect him that much.
But now—
He felt like YouTube was a sure win.
And if that was the case, then YouTube's success suddenly mattered a lot to him.
After all, nobody ever complains about having too much money.
"Of course we accept!"
Before Jawed Karim could even finish speaking, Chad Hurley shouted, "Peter already vouched Isabella. He said even Rupert Murdoch and the rest couldn't beat her together even once. Do we really have a choice now? I'm starting to suspect that if we refuse, we'll be tossed into the Pacific by someone we'll never identify and fed to the fish. Those people have triple-digit body counts, you know!"
"And that's just the confirmed numbers!"
That shrill outburst sealed the consensus among YouTube's founders.
When Isabella, who was preparing to return home, learned that Sequoia Capital had confirmed selling its YouTube shares and that YouTube's founders were still willing to accept her investment, the speed of the outcome surprised her.
"When did Warner's efficiency get this high?"
Nathan Bailey, who came to deliver the news, almost choked.
He really wanted to say that Warner had always been efficient, but—
"Well, that's because Isabella had needs."
He smiled like a benevolent Buddha.
"Oh."
Isabella responded lightly, completely at ease with Nathan Bailey's flattery.
"How much equity is YouTube willing to give up?"
"They still have nearly two million in cash, so they don't urgently need money."
"Then what do they mean?"
"Since you like them so much, they plan to come to you for financing after they burn through their funds, around January or February next year. At that point, they'll revalue the company based on daily active users."
A very reasonable decision.
When founders still have cash, they shouldn't raise external funding.
The reason is simple: burn cash into users first, then raise money for a higher valuation.
But—
"Tell them I'll value them at 150 million right now, based on where they'll be in two months."
"I want fifteen percent equity."
"Ten percent corresponds to fifteen million in cash. The remaining five percent I'll earn by opening a channel on YouTube and releasing one video within a month of signing the contract."
"I don't like delays. I'll drive traffic directly."
"And I want three conditions."
"First, after I invest, the founding team cannot leave for three years."
"Second, once I own twenty-five percent of YouTube, if the company needs future investment, I get priority. Only if I refuse can they look elsewhere."
"Third, if YouTube is acquired and the founders want to cash out, I still retain priority rights to buy their shares and the new company's shares."
As soon as these harsh terms came out, Nathan Bailey narrowed his eyes.
He stared at Isabella for quite a while, until Isabella became displeased. Only then did he smile.
"Isabella, why do I get the feeling you don't plan to hold YouTube long-term?"
"Or rather—you just want to grow it, then sell it?"
"Bandwidth is expensive. Copyright fees are expensive. I can't support an internet company by myself. So—hand it over to a big corporation."
Isabella didn't hide her intentions.
Her frankness only made Nathan Bailey smile more.
"Then would you sell it to Time Warner?"
"No."
"Why?"
"Only internet companies understand the internet. But you can tell Barry this: even if I sell YouTube to an internet company, I won't cash out and leave. I won't give up control. I'll keep holding those shares. So—it'll still be ours."
Nathan Bailey burst into laughter.
He believed Isabella meant every word.
Because those three conditions were clearly designed to absorb the YouTube founders' shares over time.
With the price laid out, Nathan Bailey left New York once again.
His departure sent Isabella onto her flight home.
December 16 was approaching. She needed to return to London for the premiere of Harry Potter and the Goblet of Fire - Part One.
But before attending the premiere, she had one more thing to do.
After landing in London, she gathered Warner's security staff and instructed them:
"Get a Sony DV that can shoot 1080p."
"And a pile of memory cards."
"Learn how to use it. Then follow me at the premiere."
"???"
Warner's security team didn't understand what she meant.
But they followed her orders anyway.
Their confusion was answered on December 16—
"Hello~ good morning everyone~ today is December 16, 2005~ I'm currently in London, England~"