How I Built This with Guy Raz - Yelp: Jeremy Stoppelman

Episode Date: June 24, 2019

In 2004, two former Paypal engineers, Jeremy Stoppelman and Russ Simmons, were spit-balling new internet ideas. Out of their brainstorm came a site where you would email your friends asking for local business recommendations. The launch was a flop, but they discovered that people seemed to enjoy writing reviews not just for friends, but for the general public. Fifteen years later, Yelp is a publicly traded company with more than 4,000 employees and over 140 million monthly visitors. PLUS in our postscript "How You Built That," Liz Bales explains how putting cat food inside plastic mice became her full-time business and why it could revolutionize the way humans feed their cats. See Privacy Policy at https://art19.com/privacy and California Privacy Notice at https://art19.com/privacy#do-not-sell-my-info.

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Airbnb.ca.ca. So I've got some more exciting news about the how I built this summit happening this fall in San Francisco. On top of the amazing guests I'll be speaking to on the main stage, we'll have breakout sessions throughout the summit with speakers like Kadia Beachum of Birchbox, James Park and Eric Friedman of Fitbit, James Reinhardt of Threadup, Lady Lincoln of Bar 3 and many, many more. And also, we've just launched the 2019 How I Built This Fellowship application. The Fellowship was started to make the Summit accessible to entrepreneurs who are working hard to bring their business ideas to life, but might need a little extra help to get there. This year, 60 fellows will receive free admission to the Summit, along with special programs to help their businesses grow.

Visit summit.npr.org for more information, and be sure to apply by July 15. So it was literally an afterthought that you would be able to write a review on Yelp. That feature almost didn't exist. And it was, in fact, Russ right before launch that, like, I remember I'm peeking over in his monitor and be like, oh, should there be a way to write a review? You know, if nobody asked you a question, you just wanted to write one. I'm like, no one's going to do that. Because, of course, we didn't think anyone would write reviews for fun.

That was preposterous. From NPR, it's how I built this. show about innovators, entrepreneurs, idealists, and the stories behind the movements they built. I'm Guy Raz, and on today's show, how Jeremy Stoppelman changed the way we find places to eat, drink, and shop, and built Yelp, a public company now valued at around $2.5 billion. Okay, so think about the last time you read a review on the Internet, and then use that review to help you make a decision. You know, maybe it was which restaurant to eat at. or which brand of toaster to buy on Amazon.

Or maybe even which podcast to listen to. Internet reviews are just kind of a fixture of modern life. And these review sites have put a lot of power into the hands of consumers. And some of that power is great. Customers who love a taco stand or a barbershop can totally boost their popularity. But at the same time, these sites have also irritated a lot of business owners because one bad review can do a lot of damage to a business. Anyway, one of the people who got this whole thing started is Jeremy Stoppelman.

Jeremy co-founded Yelp in 2004, and the story of how he did it. Well, in a lot of ways, it's a classic Silicon Valley startup story. And along the way, as you will hear, Jeremy crossed paths with some of the most famous names in technology, Elon Musk, Reed Hoffman, even briefly Steve Jobs. But before any of that, Jeremy grew up in northern Virginia. He was born in 1977. His dad was a securities lawyer in Washington, D.C. And like a lot of the tech founders we've had on the show,

Jeremy was still a kid when the PC revolution was happening. And one day, his dad brought home a computer for him and his brothers to play with. I mean, at first it was just fascinating to learn how the operating system works. These are the DOS days, the command prompt. And then it became very quickly about video games. And that really sucked me in. I was curious, well, how do you make these things? Yeah.

They're really fun to play, but like what's behind them. And so that started me, you know, on a journey, I started reading, you know, the manuals. Just started uncovering the mysteries bit by bit. I read that, like, at age 14, you opened up a Charles Schwab account. How did that happen? You know, probably ties into, you know, my dad being involved in the same. securities industry and, you know, was very interested in young companies and how they grow and buying and selling stocks sounded exciting to me. And then also, you know, even earlier before

I opened that account, you know, I was trading baseball cards. So even though I wasn't, I wasn't much of a baseball fan, I was collecting and trading baseball cards. That was the baseball card bubble in the early 80s. It was. Yeah. To my mom's chagrin, she still has boxes and boxes that are worth nothing, but there was a time, right? Like a Jose Canseco rookie was going for like 40 bucks. Yeah, yeah, it's sad. I lost a lot of money in that bubble. Did you have a sense of what you wanted to do with your life already at that point? I did dream of starting a tech company. That began from a pretty early age, you know, around the time that I was doing investing, 14. You know, I was reading Forbes and there was a- You're reading Forbes at 14.

There was a section I think it's called Outfront that would tell entrepreneurial stories, not dissimilar to this podcast, but a very brief little, you know, here's a couple of entrepreneurs, here's what they're doing, here's how it's going, it's taking off. And that just was really exciting to me, the idea that you could take technology, marry it with business, come up with a novel idea, grow it into a thriving company. Like that was just, there was something about that that that seemed exciting. So Jeremy eventually went off to college at the University of Illinois. where he studied computer engineering. And after graduating in 1999, he moved to San Francisco where he got a job working for a company called At Home. It was an early provider of high-speed cable internet service. But it was a chaotic time for At Home.

They had just completed a huge merger with another internet company, and Jeremy didn't last very long there. I was seeing and hearing enough weird stuff. I was just like, this is not the kind of place I think I want to be long-term. And because I was very lucky that it was 1999. And so that meant my phone was ringing off the hook with recruiters trying to get me to go interview at other companies. So I was constantly tempted. Wait, this is like pre-linked in.

So how are recruiters finding out that you even existed? They would dial into the phone tree. So they would call up the company and then start pressing extensions or just going through the different trees to try and see if they could reach an engineer. And then they would pitch you on, oh, I've got these startups you should talk to. You should check out this company. Yeah, it was crazy times. And where did you land? So, you know, one of the startups that I agreed to me was one called X.com.

Curious name to it. Fortunately, it was... Not pornography. I had nothing to do with anything typically associated with an X. It was just an online bank. And it was a little tiny office on University Avenue in Palo Alto. Really bright individuals that I interviewed with. And then the last person that I met with that day was Elon Musk.

And what was your impression of Elon Musk? Did he make an impression on you at that time? He made a strong impression. You know, I definitely liked him right from the get-go. It was also inspiring to me that, you know, here was a 28-year-old who had already sold another company, and he had these incredible ambitions for the company. He was going to, he said right out of the gate, oh, we're going to take down Visa and MasterCard. And I thought, this is just kind of crazy.

Like, he's a crazy person. You know, he's got this crazy idea, these insane ambitions. He's got a lot of confidence. It was kind of mind-blowing. I'm like, I don't know about this guy, but I just have to see this. I have to see what's going to happen. Okay, so X.com, what did they do? Like, what was their business?

Yes, I mean, X.com originally started as a bank, an online bank. It was very easy to sign up, take your money from your bank account, shifted into things like an S&P 500 fund, a high-yield money market fund. So it was doing some kind of cool cutting-edge online banking stuff that was fairly new. But they also made it very easy to transfer money between accounts with just an email address. So if you had an X.com account or even if you didn't, I could send you a payment and then you could create an X.com account very quickly and get your money. PayPal was doing something very similar.

The only difference is they weren't running a bank. They were just kind of a money transfer service. So you accepted a job with them. You become one of their engineers, I guess. Was there a sense that you were building something big? Was there like that kind of excitement or not necessarily that pronounced? I mean, I'd say it was more that, you know, by the time that I joined, there was already a product market fit. It was already growing really fast for use on eBay.

Someone would win an auction on eBay. They'd want to pay. and at that time, there weren't a lot of really fast, efficient, easy online options. And so X.com filled that gap and then also Confinity, which was running the PayPal service, our number one competitor, was also doing it. So it felt very much like we were in a very scary race. We were worried every day who was going to win, who was going to get ahead, were we growing as fast as they were and vice versa.

So it was just very intense competition. And in that first year at X.com, do you remember just working all the time? day and day out. It was pretty intense. I mean, I was only at the company maybe two or three months before it was announced, you know, PayPal and X.com merged. Yeah. So I had, yeah, an intense two months of fierce competition and stress.

And then all of a sudden we had all these new colleagues. Your enemy becomes your partner. It was pretty crazy. Yeah. Yeah, it was a bit surreal. Like I remember, you know, we had a little like happy hour mixer type thing where the teams got together and it was a little, you know, it was an interesting feeling. Like, here's these people that you've been really worried about, really stressed by, but now they're

your new colleagues. So in that merger, you've got, I mean, I'm not going to name all the names because I can't remember them, but Elon Musk is there, Peter Thiel is there, Max Levchen is there, maybe Reid Hoffman was in that room. Yep. Was it possible to look around the room and think, everyone in this room is onto something? I mean, I would say it was a bunch of ambitious, smart people with right skill set for the right time. But, yeah, I don't think you could have really predicted it. Obviously, Max was already pretty far along for a 24-year-old.

So it was obvious, you know, he was going to be someone interesting in the industry. You know, Peter Thiel, same thing. So, you know, I'd say the top executives, you probably had some sense. Yeah, they're players in the industry. But I'd say the rest of us were just all, you know, just getting started. You got promoted to be the head or the vice president of engineering once that merger happened. I mean, you were still really young. You must have been 24, 25.

How did you do that? Because all of a sudden you're like in charge of at least 20, 30 maybe more people. Yeah. I mean, in retrospect, it was pretty crazy that I was 25. Yeah, I wouldn't say I was super well qualified. But, you know, we made it work. And we put out a lot of features and functionality. We kept the site up.

So that's what's important. But you were a tech guy. That was your, you were an engineer. You were not a business guy. Yeah, I mean, I think I did have an interesting combination of being able to connect, communicate, understand people in other parts of the organization outside of engineering and then translate that into, you know, the lingo and the motions of engineering. And so as I became an engineering lead and an engineering manager and so forth, it felt very natural.

and it felt like I was actually pretty good at it. You know, it fell right for me. Yeah. So I think just two years after the merger between X.com and PayPal, it gets sold to eBay, gets acquired by eBay. You know, we know the stories of many of these founders and what they did. Did you walk away from that, like, financially set?

Could you have just not worked ever again or no? No. The company was sold for something like $1.4 or $1.5 billion. Certainly top management got rich and like Max or Peter could have retired if that was there, what they wanted to do. But I think that's actually an interesting part of the story is you had all these bright, young, ambitious people. They definitely got capital. I made some money. But it wasn't so much that it necessarily was like, oh, what's the point?

So you decide at this point, I'm going to go to business school. Like you've been through a startup and acquisition as an employee. You got a little money out of it, but not. enough to live off for the rest of your life. So business school. Yeah. After PayPal was bought by eBay, especially since I'd gone through a merger, X.com, and PayPal, that was pretty traumatic, frankly.

Traumatic because you had to combine the two cultures? Yeah, and there was so much drama within the two companies once they were combined and Elon was pushed out. Like, it was pretty crazy. And so when eBay took over, I had a feeling it would also not be that fun to be in a company that was maybe swallowed up by a very different culture and so forth. And so it just like, oh, maybe I could go do business school. Maybe I could get in somewhere that would be a pretty good school. Let me look into that.

And then I applied to a few different schools. And actually, Harvard is the only one I got into. So I was celebratory. I was very excited. I was like, well, at least I got into one. And it was the one I pretty much. wanted to go to, so I got very lucky on that and then went off to business school. So by going to, it sounds like by going to Harvard Business School, you wanted to get a better

grasp on, like, all the things that go into running a business. I mean, part of it was stemmed from the Silicon Valley conventional wisdom at the time, especially post.com bust, was founder engineer types should focus on engineering. And so I thought by getting an MBA that would round out my background and give me more flexibility and give me more credibility. Like if I did want to start a company, which I still hope to do, you know, it would be awfully hard for a venture capitalist who probably has an MBA to say, oh, you know, I don't think that you should be running the company. You should be the CTO or you should, you know, be doing technical work. So I thought it would be net useful in that regard. All right.

So the summer comes summer after your first year, 2004. And you come back to San Francisco, to the Bay Area for the summer. What was your plan that summer? Well, months prior to actually coming back, I had reached out to my old network. And so I reached out to Elon. I reached out to Peter Thiel, reached out to Max. And Peter, right off the bat, offered me an opportunity to come to Clarium Capital, his investment arm. And, you know, it was very amorphous.

We had no idea what exactly I'd be doing, but he said he certainly had a spot for me, and so I accepted. And then maybe a month later, like Elon actually took a little while to get back to me. And I think it was about a month later, Elon reached out and said, oh, you should come work for me at SpaceX. And it's kind of a funny question of what would have happened if Elon had responded faster. I probably would have gone to SpaceX just because, I don't know, hedge fund versus rocket ship company. Yeah.

I might be tempted by the rocket ship company. for the summer. Yeah, so I arrive in San Francisco and I meet up with Peter in his office and he mentions, you know what, Max has opened up an incubator called MRL Ventures. I'm an investor in it. And so he essentially offered me the opportunity instead to go work with Max. So you connect with Max left chin. He said, hey, yeah, work at our incubator. So I got to Max's little office, a little dumpy office, brick-lined room. and, you know, it was just a bunch of different folks working on little internet ideas. You know, what's going to be the next big thing on the internet?

Which I actually was intrigued by, and I thought, well, this is a fun exercise. Like, I've always wanted to start a company. Here it is. Like, this is a good trial run for me to see if I could come up with a compelling idea that I could pitch Max on that he would actually get excited about. What were some of the ideas that you were thinking about maybe starting? I had a bunch of silly ideas. Probably the silliest that I can remember was an idea for a joke phone call site. So you could go there and you could pay for a phone call to be sent to a friend or something like that. Another that was actually pretty close to a good idea was I did realize that the economics on streaming video had gotten a lot better. But I didn't have the full insight. I just, there was something going on in a video that was intriguing, but I sort of put that one on the shelf.

There was some interest within the incubator around the local space. It was, you know, we were observing that Craigslist was killing the newspaper business by carving out classifieds. Yep. And so that put a spotlight on the yellow pages is like, hey, here's another old media business that hasn't really been transformed by the Internet. You can look up basic information, you know, an address, a phone number. And so that got us thinking about what would be, you know, better than the yellow pages. And as I thought about it and talked about it with my co-founder, Russ Simmons, who was another early PayPal person, you know, reviews, capturing word of mouth, bringing it online, you know, marrying it with social networking, which was another technology that was just emerging. You had kind of friendster in MySpace.

It seemed intriguing, but we didn't think you could create a social network just around reviewing. We thought there had to be a mechanism. And Russ Simmons, he was someone you knew from PayPal. He was also at MRL Ventures trying to come up with an idea. Yeah, yeah. And so when I came into the incubator, he was, you know, one of the people that I most frequently, you know, would spitball with and bounce ideas back and forth. And actually, I give him credit for being very encouraging. It took us about a couple months, maybe a month and a half or so to really zero in an idea.

and, you know, when you're just trying to come up with a new business idea, or in this case, new internet idea, like you feel like you're spinning your tires, you're not productive. You don't know what you did the whole day as you sat there thinking and like jotting down notes and ideas. So sometimes I feel like I was just getting nowhere and he was, you know, always very positive and like, no, you're on the right track. Let's keep doing this. And so we were actually out batting around this review and social networking and how, but what's the mechanism? And, you know, I said to him, I'm like, you know what? Like, if you ask me a question, like, you know, what's a good doctor in San Francisco? Like, I would be, like, I love to be the expert.

I love to reply and, like, give you this helpful information. And so out of this sort of like back and forth conversation around questions, you know, the idea emerged, well, maybe we can build a site around asking friends for recommendations. And so we thought we had nailed the concept. We thought we had a mechanism that would pull reviews out of people because, of course, we didn't think anyone would write reviews for fun. That was preposterous. And so we got back to the office, and we were just bubbling with excitement.

We've solved it. We know how to do this local thing. But what were you going to recommend? Like what kinds of businesses? Well, whatever business that you happen to need, you could turn to the service and say, you know, hey, I'm looking for a great sushi restaurant in San Francisco. And then that would blast out to your friends. And then your friends would click a link and just be able to type the name of the place

like quick note, and then it would be saved in this site. And so over time, it would build up this incredible wealth of knowledge around recommendations in everybody's head. But to be clear, I mean, the initial idea, the reviews were not like, it wasn't going to be a site where you could post public reviews like it is today, right? No, when you would be asked, you would ask, the central part was like, come and ask a question of your friends. It would email your friends.

They would click a link. They could submit reviews back to you. It was a half-baked idea, to be sure. Like, it was not fully formed. But we were excited, and that's what matters. So you and Russ come up with this idea to have, like, a website where people could get recommendations. You take it to Max Lepchin and you say, okay, Max, here we go. This is our idea.

And he says what? He says, hmm, I'm not sure. You know, he's generally like a poker-faced kind of guy. But he was like, nah. I don't know, maybe. You seem really excited about it, so that's good. So why don't you think about it overnight? And then if you're still excited about it tomorrow, then I guess I'll fund it.

But you didn't even have a pitch deck. You didn't even have a business plan. It was just like talking about this thing. Yeah. I mean, I've gone back and talked to Max about that moment. And I think what he would say is he was just excited at the combination of me teaming up with Russ and the fact that we were both like engaged and fired up. to try something, and he figured something good will come of it.

This might not be the idea, but like if they get off to the races, and part of it is Max also prides himself like getting people to drop out of school to pursue business opportunities. So I think he also saw it as an opportunity to, you know, steer me in a different direction than finishing business school and get me involved in a project, which could turn into something interesting. Yeah, I mean, did Russ Simmons, before you got the money from Max, did he ever say, well, what are you going to do? like you're going back to school in a couple weeks. I mean, that conversation basically started as soon as we got serious.

Like once we had the idea, once Max had signed off on it, that began a process of me figuring out what my options were. So I started researching, could I defer at business school? And then fortunately, pretty quickly, I realized that it was not very difficult to defer my degree. Yeah. So you decide, all right, I'm going to, I'll drop out for now. We'll start this thing up. And how much did Max give you guys? So Max committed the million dollars.

Wow. He got a large chunk of equity. I think it was 40%. Yeah. And then we just started working on the product. I mean, it's interesting because clearly, like, you worked with Max at PayPal. He knew you. He knew Russ.

You didn't have a business plan. You didn't have spreadsheets of how much money you would make. He just gave you a million dollars. must have really believed that you guys could make something work, because that's, even for a rich guy, that's, that's a risk. I mean, definitely it was, it was bold to commit real money to these very high risk projects. I mean, he had essentially three or four, I think it might have been four as the total count in the incubator.

You know, of those, two really worked out, and then two did not. But yeah, I mean, I think that's the nature of the beast in Silicon Valley is you're working on very high-risk projects. It's R&D by its nature. Most of the projects are a good portion of them are not going to go anywhere. Ideally, you want a portfolio approach if you can make that happen. I want to ask you a kind of a delicate question here, which I think is important for people to sort of understand when you're starting a business. Max had capital to work with. He gave you a million dollars, which you needed to start this company, but you had to give up 40% of the company at that point. Do you think that...

at that point, you just did not have a better option. Like, that was truly the best option to take. I would say, given the circumstances at the time, it was a great deal. You know, 2004, we're still recovering from the dot-com bust. Yeah. And so the idea that a 26, 27-year-old would be working on an internet startup was just very out of favor. Like, no, like, that was part of why I think we ultimately were successful is there were just so few people working on, internet ideas in 2003, 2004 around that time period. And so, you know, Max was early and he was one of the few. So I think he, you know, deserves the equity that he got.

All right. So you, you drop out of business school and you guys start working on Yelp. And I read that in that fall, fall of 2004, while you guys are kind of working on this, the name that you really wanted to call it was Yoko, like, local, which I actually think is a great name. What happened to Yonaut. I mean, I thought we would combine local and yokel. And then I went to go and try and buy the domain. And there was someone that wouldn't part with it for any amount of money. And so that proved frustrating. And there was another guy in the incubator, David Galbraith, who was thinking about it as well. And he was the one that came up with Yelp. And when he pitched it to us, he was like Yelp Help, Yelp Yellow Pages. So it had some. you know, really smart connections. And then it also turned out that you could buy it for $5,000 right there just by putting in your credit card, like a domain squatter. Yeah. Owned it and had put up a page saying, it's for sale. So then two other folks overheard the conversation in the incubator and came over and one of them was Scott Bannister who had been involved, funny enough, in the naming of PayPal. So PayPal actually paid a fancy consultancy to generate its name. And so got back a hundred different options. And then Scott Bannister

as a friend of Max, pointed out immediately PayPal and was like, it's PayPal. We have to go with PayPal and convince Max that that should be the name. And so similarly, when he heard Yelp, he's like, that's your name. You're crazy. We're buying it right now. And then he and this other guy, Jared, sat down and bought the domain for us. And that's how we got the name. So that was it. So that was Yelp. All right. So you've got this thing that you're building. And by the way, I mean, a million dollars is a lot of money, but you've got to pay people. You've got server space. You've got got a, right, that's not going to last that long. So I have to assume you quickly had to go out looking for more money.

Yeah. We got pretty far along with building the site within, you know, three or four months. And right before we're launching, you know, Max encourages us to go pitch. So I went and hit the road, so hit Sand Hill Road, to be specific, and talked to maybe 10 or 15 different firms. and essentially got laughed out of the room for the most part. It did not go well, no. What were there questions for you? Like, did they not understand what it was?

I can understand that, by the way. It wasn't entirely clear at that point. You're like a website, you know, people just volunteer information. It gets emailed around. Like, what's going on? Yeah, that's fair. I don't blame them, I suppose. I mean, but the interesting thing is a lot of the pushback was it actually had nothing to do with the ideas so much.

as the people presenting it. So in our case, we're young, we're technical. And so we looked kind of like what happened in the late 90s. And so everyone still had PTSD from the dot-com bust. And so one of the common refrains to me was, you know, and this is straight to my face, was like, hey, you know, yeah, this idea is kind of interesting. We might be willing to fund it perhaps,

but would you be willing to step aside so that we can, and this is like kind of real quote, so we can bring in a gray-haired executive. Wow. And like that was a conventional wisdom was like, We need adult supervision, gray-haired executives. And so there was this feeling that enough with the kids already, you know, we need the established professionals if we're going to fund some sort of, you know, new venture. Well, you were preparing to launch this in, I guess, by the end of 2004, right?

October 2004. October 2004. Were you able to raise any outside money before then? No. I mean, we just had maxes million dollars of financing. We started conversations with venture capitalists the weeks prior to launch, and then they extended all the way through launch. And then, of course, when the launch happened,

we got some initial press, just a little bit of industry press. But also our data, as people were trying to use the site, was not super encouraging. It was not. You launched this thing in October of 2004 and what? No one shows up to the party? Pretty much, you know, our moms were on it. and maybe some friends. Did any part of that sap your confidence?

Yeah. That was a very dark period. I was pretty worried that I had made a mistake and that I was leading the team off a cliff. When we come back in just a moment, Jeremy and his team relaunched the Yelp website with some important changes and then started to see people, besides their own mothers,

actually used the site. Oh, and also, the moment Jeremy got an unexperienced, phone call and some advice from Steve Jobs. Stay with us. I'm Guy Raz, and you're listening to How I Built This from NPR. Oh, and one more thing. If you love how I built this, check out my new podcast, Wisdom from the Top. It's a show about how some of the greatest leaders in business and politics managed some of the biggest corporate and professional crises you can ever imagine. You can find Wisdom exclusively on Luminary. It's a new app that allows you to listen to all your favorite podcasts plus a bunch of amazing exclusive shows just for subscribers.

Shows from people like Lena Dunham, Trevor Noah, Russell Brand, Leon Nafok, the creator of Slow Burn, and many, many others. Download the Luminary app at your app store or go to Luminary.com slash Guy for a free, no strings attached trial. Hey, welcome back to How I Built This from NPR. I'm Guy Raz. So it's late 2004, right after Jeremy Stoppelman and his co-founder of Russ Simmons, launch Yelp. And really, no one is signing up or using the service. But remember, at this point,

Yelp is primarily a website where people ask their friends and only their friends for specific recommendations. And since that model clearly isn't taking off, Jeremy sits down to get an idea of what people are doing on the site. You know, there was one really critical insight that we had as we were looking at the data, which centered around review writing. So it was literally an afterthought that you would be able to write a review on Yelp without being asked a question. That feature almost didn't exist. And it was, in fact, Russ right before launch that, like, I remember I'm peeking over his monitor and be like, oh, should there be a way to write a review?

You know, if nobody asked you a question, you just wanted to write one. I'm like, no one's going to do that. But yeah, you know what? Why don't we add it in somewhere? Just bury it, you know, a couple pages deep. And it turns out, you know, some precocious users would find that feature. And when they'd write that first review, they would then go on to write a second or a third or even. You could see it in the data.

Like I could just see that when someone wrote a review, more often than not, they would write several reviews. And so there was something obviously entertaining or interesting or cathartic about writing reviews. And so with that insight, we started rethinking how we designed the site. And so instead of being about asking friends for recommendations, maybe it should be a platform for you to recommend things just to the wider world. And so we redesigned, you know, put the emphasis on you. We gave you a profile that was sort of borrowed from the social media world. We also, you know, took a page out of the blogging playbook. And so your reviews show in a chronological order on your profile.

And so a bunch of this features and functionality, we bundled up and essentially relaunched the site. in February 2005. You were sort of thinking, okay, let's relaunch this and give people, you know, the power to evaluate this thing, whatever they're using. And then we'll see what happens then. You know, the idea is shifted from, hey, the only way that we're going to get reviews is if you're asked a question to, hey, maybe reviews are a form of self-expression. Right. You know, just like someone writes a blog for fun to talk about what's going on in their life or what have you. Like some people want to talk about restaurants or some people want to, you know, talk about a great mom and pop business that they patronized. And like there's actually people out there that want to do that. And frankly, I could identify as one of those people. Like as I was doing it, I was getting it. I was like, this is fun. I want to do this.

So you relaunch with the opportunity to review and then does it blow up or is it still kind of quiet? With the relaunch February 2005, it did feel viscerally different. You know, when we rolled out all the new features and functionality within hours, we were seeing people pop up on the site that we didn't know, wasn't a relative, wasn't a friend. Like, we have no idea who that person is in the writing reviews. That's pretty cool. Yeah. It didn't mean that we were like, oh, you know, if jobs done, let's lean back and, like, wait for the site to grow.

Like, we still had tons of things to figure out and work to do, you know, soon after launch. We started thinking about, well, how do we really gel the community that's here in San Francisco that's trying to participate on our site? Yeah. We did our first in-person meetup with some early users, and that was a total surprise. You invited them to, like, gather and what? Talk about restaurants, or, yeah, like, what would you do? Yeah, interestingly, like, right around the time that we were about to relaunch, I hired a marketing person. And so this marketing person, niche, one of his first suggestions, right, as soon as we had,

users was let's meet them. And I'm like, whoa, no, no, no, we work on the product. Like, I do the wireframes and I work with Russ and we figure stuff out. I don't go and meet people. That's not, I don't do that, you know, but he's like, no, no, no, no, you got to do it. You got to do it. And so he arranged a meet up. It was like two users, people we had no idea who they were. And we met up, you know, for a happy hour at a nearby bar. And the crazy thing, I assumed that the first users of Yelp would be tech early adopters. You know, in my mind we're a technology site. But I would actually say the early users of Yelp were urban early adopters.

Like they're looking for what's new and cool and interesting in their city. Their focus is like, what's the hot new restaurant? Oh, have you been to that boutique? That's really cool. You know, and frankly, the demographics were different. It wasn't all a bunch of engineers and, you know, men. Those first two users were both women, actually. So you got that million dollars in the summer,

of 2004, I read that it was only in like November of 2005 where you got really the first outside raise, which was $5 million. So that million dollars, was it running out? We were definitely getting down to the lower end of that initial financing round. I think by the time we secured our A round of financing, we were pretty close. But one thing that did seem to be happening is like it did feel like, the company was alive. I mean, we had passionate users, we had traffic numbers going up and to the right. You know, it certainly wasn't all figured out. And I wasn't 100% confident. I was still a little gun-shy because we had been shot down so badly, you know, the year prior. But, you know, as I gauge the reaction that I was getting from venture capitalized, I think we have enough to raise. Did you get, would you get nervous when you would pitch? Definitely. I mean, especially, like, actually, proof to be super valuable.

you know, when Max pushed us to do the fundraise right at the first launch in October 2004, you know, one of his reasons that he gave why we should do it is just like practice. It doesn't hurt. And, you know, that ended, like, I was super nervous, I'm sure, that time around because I didn't know what I was getting into. I had never talked to a venture capitalist, really. Like, I just had no idea what was going on. Yeah. And so when we went around the second time, I at least knew what the offices looked like.

I knew what the people look like. I knew what some of the questions would be. It came with more experience. I'm sure it came through. But I was still young and just figuring things out. So I'm sure I wasn't totally confident. I mean, did you have like an inner voice that was sort of, I'm imagining you're in your 20s? You've got a bunch of people now who've put their lot in with you in this company.

Or were you saying to yourself, who are you? Why do you think you can make this work? I mean, my biggest fear was we had, obviously we knew that we could build, you know, useful internet service. Like, we could make it functional. We could design features. We could engineer them. We could put it out there?

The question was, could we connect the parts so that it turned into something that people really loved? And then, you know, also top of mind was Max was one of my most valuable, you know, professional contacts. And he had committed a million dollars, which seemed like an awful lot of money. And so I was terrified that I was going to let him down. And I probably would only get one shot at this. So it was, yeah, there was a lot going on. I was definitely worried about the implications if we didn't figure it out. There is an almost a fetishization of failure in Silicon Valley, you know, this culture of fail, fast, fail hard.

And I think it's a little misleading because it's oftentimes it's people, people who've already had some success or. You know, the stakes of failure aren't that high. And it sounds like you were actually really terrified of failing. Yeah, there's no glory in failure. Nobody wants to fail. I mean, obviously, I do think Silicon Valley can be quite forgiving of failure. It's true. But it's still not pleasant, and you don't want to do it if you can avoid it.

You know, I remember a guy who was branded a serial entrepreneur told me, I'm only a serial entrepreneur because it hasn't worked out. Nobody wants to be a serial entrepreneur. Yeah. So when you finally raised money after the first million that Max gave you, when the investor said, okay, how are you going to make money? This is in 2005. What did you say?

What was your plan? I mean, we hadn't given it a ton of thought, but between looking at Google and how they were making money off search ads and looking at city search, which had something similar in the local space, it felt like, oh, there's some obvious business models. We don't have to worry too much in that time is something that makes sense and it was worth pursuing. Did Yelp pretty much naturally kind of just become primarily a restaurant review site initially? Was that just how it happened? Yeah, definitely when users join Yelp and get excited about reviewing.

they tend to start with restaurants. And part of that is because you have so many top of mind. And it's really fun to talk about all your favorites and the dishes that you had. And it's super frequent. So just living your life, you always experience more restaurants and have more to talk about. Whereas, you know, hopefully you don't use a plumber very often. I mean, maybe you have a great plumber. And, you know, obviously people do talk about that on Yelp and that's great.

But it's not a great starting point for fun. And frankly, that was part of the key to, you know, Yelp success is we tried to make Yelp for the reviewers really about fun. You know, why are they spending their time with us? Why are they writing these great, funny, interesting reviews? It's because it's a hobby. It's something to do, you know, contributes. And so we always tried to focus on making sure that Yelp is fun. So initially, like, so as you continue to raise money, $5 million, then $10 million, was there any revenue coming in or was it just the idea, at least initially, was just to get more and more users.

Mostly it was focused on growing the community of reviewers, more content, more reviews. We eventually added photos. And also, you know, with all of that content came more traffic. Because the more review content we had, generally, the more we would show up within Google's web search. And therefore, that would attract more users, which would increase the size of the community, you know, and sort of created this positive feedback loop. You know, from a business model standpoint, it was something on our minds. So it was probably end of 2006 that we really got serious about building out our advertising products.

And eventually landed on a pretty simple ad model. And that's actually how the Yellow Pages business works, how the newspaper business works, a magazine business works. So we just started with that because it was the least friction. Businesses already knew what we were talking about. At what point were you and Russ able to actually see that this wasn't just turning a corner, but this was actually becoming quite big. Because you guys, I think you hit a million unique visitors by the middle of 2006.

So two years after, you know, you kind of bring this idea to Max Lovchin. That's a lot of unique visitors. February 2005 was really about getting the, you know, getting the initial momentum, which was really San Francisco. So getting a San Francisco community of contributors, writers, reviewers going.

And, you know, showing that that would result. in traffic. Once we got financing, the question became, well, can you do it anywhere else? Is this just the San Francisco phenomenon? And actually, like, that was the funny thing trying to raise that round of financing. You know, the most common question was like, well, San Francisco, isn't that just unique? It's a bunch of hippies. They like to help other people. This isn't going to work in New York. And, you know, so that was, once we had the money on board, that's what we aim to figure out is, like, can we get it to grow? And how? happen in New York? Can we get it in L.A.? Can we get it in Seattle? And so 2006, that's really

what we were focused on, was spreading city by city, both to make sure that we filled the gap and, you know, a competitor couldn't beat us, but also to prove that the model really did scale, at least across the U.S., and then maybe beyond. When the iPhone came out, you guys were pretty early, I think you were one of the earliest apps on there. So did you know, or did you feel like right away this is going to be, this is going to change everything for us? Yeah, I mean, we had enough experience with mobile. Like we had built, it was called a WAP site, which was like an early version of the web for really crappy mobile phones.

Yeah. And, you know, it was very stripped down and pretty much unusable. And so we knew the internet really wasn't happening on mobile devices until we saw the iPhone. And it was just obvious that, okay, finally the web has arrived on the phone. This is really exciting. So we knew we had to get involved. We had to play some role. we had to adapt our site. Something was going to happen to make room and service the iPhone.

So we actually had an app ready to go day one when the app store opened. When you launched in the app store, did that have an impact on your business pretty quickly? It didn't have, no. I mean, there was no real business impact right away. It did feel like very important for the future and the long-term health of the company. You know, we're a tiny, we're a pretty small startup still. We have very scarce resources. So committing real resources to building an app was controversial within the company. But it did feel like this is a historic device. This is the future.

We have to be there. We can't rest on our laurels and think that we're going to still be winning this game if we don't win mobile. So with this kind of product, right, with a review site, with that territory comes some really pissed off business owners, right? Because there are going to be restaurants that get three or four-star reviews or bad reviews. or bad reviews, and you guys start to get hit with some class action lawsuits. I mean, yeah, Yelp has always been controversial because we host people's opinions and not every business wants to hear the feedback or is open to the feedback. It's not totally dissimilar to a restaurant critic.

Like restaurants have a love-hate relationship with their local restaurant critic or certainly did, you know, in the years past, where, sure, if they got a great review, they thought, The restaurant critic was wonderful, but if they got a negative review, they were upset, it was unfair, et cetera. So, you know, take that and multiply at times millions of users, and it gets to be an interesting conversation. But, you know, ultimately, having all of this word of mouth that exists anyways, bring it online, creates a lot of value for society, both for small business owners who can now stand out, you know, with relatively modest marketing budgets. If they deliver great value, great service, you know, their word of mouth is right there for. everyone to see. Their great reviews are there. But it does come with, obviously, the occasional negative review. Everyone gets them. And that hurts. You know, on the flip side, I mean, I feel like

everyone has had this experience where you look up your favorite restaurant or, you know, whatever it is on Yelp, and it has a lower rating than you'd expect. And you're thinking, you know, though what, like, I love that place. This cannot be right. Well, you know, everyone's entitled to their opinion. So if you think, you know, the four-star place should be five, well, you hop in there right review. You know, I think the reason why Yelp has been successful for so long and such a strong brand is because, like, more often than not, we're right. When it says four and a half stars and there's a couple thousand reviews there, you can be pretty darn confident that business is doing something pretty impressive because that's hard. You guys got an offer from Google

in, I think it was 2009, to buy you out for, to report for half a billion dollars. That could have been totally life-changing money for you. And your partners and investors, like, you all could have walked away and then you could have started your next thing. Why didn't you take it? It was a complicated dynamic. You know, we're doing quite well. It's interesting at that time to have considered cozying up to Google, which has a worldwide

presence as we were contemplating sort of international expansion. It wasn't an easy call. And there was, of course, like, you know, behind the scenes dynamic between executives and, you know, we had been a staunch critic of Google even then and it's continued, you know, to this day. You didn't like that they were that they were scrubbing the Internet and taking your reviews and presenting it as what, their own information or what? Yeah, I mean, like, you know, we started by licensing our content to them in a way that we thought was reasonable. And then over time, it became clear that they really wanted to. compete with us directly and collect reviews themselves. And so then they said to us, well, we're going to collect reviews, but we still want your content. And we said, we're not going to

compete with ourselves in your Yelp-like property that you're building. That makes no sense. So thank you very much. Like, we're done. And so that actually prompted the conversation of like, well, maybe we we should acquire you after all. Right. And so we're like, all right, well, you know, we're venture-backed. We have to have the, you know, we have to take that seriously and we contemplated it. And ultimately, you know, the two sides couldn't get together. And we saw a very excited. independent path and taking additional financing and then going public. And that was equally exciting to me than getting swallowed up by Google. When Google offered to buy you, I read that Steve Jobs called you and said, don't take the deal. Yeah, that's true. Was that crazy to get a call from Steve Jobs?

It was crazy. It was probably one of the craziest moments of my career still to this day. What did he say to you? He said, don't sell to Google. We think you're a great company. we think what you're doing is really interesting. He didn't say, oh, well, Apple is interested in you, but he did say, is this about money? Because Apple has a lot of money. And if you need financing or something like that, you have my number now, so you should call me.

And, you know, I thought that was probably blowing smoke. But, yeah, it was pretty wild. It was very surreal because he was, you know, it was like when I picked up the phone and heard his voice, I was just like talking to God or something. Even so, right, when that deal with Google was on the table, I mean, half a billion dollars in 2009, it must have been difficult to say no and to walk away from that, right?

Yeah, it was definitely not an easy decision for anyone involved financially, but it also felt like we don't have to do it. We have a bright future. We could take the company public. We had full confidence that we could do that. We knew that there were investors ready to finance us. but the independent path, like prior to that moment, I did see myself as kind of like young entrepreneur. I'm not a public company CEO.

I really didn't think that I would ever be a public company CEO. But that moment forced me to seriously contemplate, you know, was that true? Could I never imagine myself as a public company CEO? And the more I thought about it, you know, might not be comfortable, but some of my best decisions are the ones that push me out of my comfort zone. And so, you know, the more I thought about it, the more exciting. I'm like, maybe I'm going to fall on my face, but it's pretty exciting nonetheless. And also I'm growing into being a real, you know, what I would call a real CEO as I headed towards the public markets, or at least seeing myself that way.

I'm curious, Jeremy, when you get criticized, like I read you did an AMA on Reddit a couple years back, and there's some people who just said mean things, right? And that's normally. You're in a sort of the public eye. I get mean comments on social media. Do you care about any of that? Does any of it ever get you down? I think if you're doing anything important in the world, then you will have critics.

You'll have people that don't like the dynamic that's being created. They don't like the power shift. They like the old way of doing things. And so you do have to take it with a grain of salt. Like certainly at moments you get down, especially if you spend too much time reading all of the creativity. critiques. But, you know, and there's also room to learn from critics. And at times we've adapted or we've, you know, kind of heard what people are saying and tried to, you know, mitigate some of the

problems that people are trying to bring to our attention. So you don't want to completely cover your ears. And that, frankly, that's what I would tell, you know, local businesses that don't want to hear it from their reviewers. But the fact of the matter is, like, and this is true with Yelp, too. Most people actually like you. Human nature is to focus on the negative. We all do it. We remember it more strongly. Yeah. And so I think it's important to try and like pay attention to the positive and that'll keep you going.

When you think about where a Yelp is today, your public company, you're the CEO of a public company heading towards, I guess a billion dollars in revenue, does it blow your mind? I mean, we're talking about you going down Sand Hill Road, like nervously kind of pitching to VCs who were poking holes in your idea and not particularly impressed. It wasn't that long ago. Yeah. But I do feel like, you know, the proverbial frog in the pot that's been slowly warming. Certainly now as you lay it out, I'm like, okay, yeah, that is pretty wild.

But it has felt like a just very natural progression and, you know, always challenging. And there's, you know, always new things coming up that problems you're trying to solve and goals you're trying to meet. It's a twisty, turny path. It hasn't been like a straight line. And I don't anticipate, you know, there's a. the years ahead, I'll be a straight line either. How much of your success do you think was because of your hard work and intelligence and how much do you think it had to do with just being lucky?

I'd probably give it 60% luck, would be my breakdown. I do feel like circumstances played a big role. Obviously, I worked hard to be able to understand technology, but you know, you have to look at the timing of the fact that I joined PayPal, PayPal was a success, that entire group of people was sort of dumped out back into Silicon Valley, all with Capital at a moment that, you know, people weren't really focused on building new internet companies. And so you had all of these confident technologies for PayPal, all working on new internet ideas with Capital at a time where it was kind of wide open. That's lucky, in my view.

Yeah. But, you know, if you're unprepared for that, you can miss out, obviously. So there is a preparation aspect, but you have to definitely pay attention to the luck, too. And no, it's not just all you. That's Jeremy Stoppelman, co-founder of Yelp. And as of the first quarter of 2019, Yelp users had posted

184 million reviews. And of course, with that many reviews, you do find some gems. For instance, Grand Canyon National Park, one star. Quote, every 500 feet, a new vantage point of the same thing. A really big hole in the ground. Or Yosemite National Park, one star. Quote, no concierge or valet parking.

Just forget about this place. And my personal favorite? A two-star review of a jail in Washington, D.C., quote, I spent a few nights here. The police weren't very nice, and it was so cold, but I made some friends, and the cafeteria lasagna was dope. Hey, thanks for sticking around, because it's time now for how you built that. And for a few moments, I want you to imagine the secret life of an outdoor cat. So an outdoor cat that's not being fed by a human, they will spend 80% of their waking hours hunting for food. This is veterinarian Liz Bales, where they hunt, catch, then play with their prey, and then eat that small meal. And that small meal is probably a mouse.

And if you're a cat just roaming around in the wild, you might eat several mice a day. But when it comes to indoor cats, They'll wake you up at four, five, or six in the morning to be fed. They gobble up their food and vomit it back up. They can be aggressive or destructive. Anyway, Liz says all of this is because indoor cats get stressed out when they can't hunt and kill their food. So even if your cat has never lived outside,

Mother Nature has ingrained that predatory behavior, that need into it, and it wants to recreate it. Okay, but how? how do you recreate the hunting experience and, say, your one-bedroom apartment with a totally spoiled indoor cat? Well, the answer to that question just kind of came to Liz a few years ago when she was driving home from a veterinary conference. I mean, it was pretty instantaneous. So from the time I drove home, I drew it in, I mean, five minutes. And what she drew was mice. Five little mice that had fabric exterior so the cat could use their teeth and claws in the,

in the play part of it if they wanted to. And inside would be that little mouse-sized portion of food. It's really only 30 or 35 calories per portion of food that a cat needs at a time. But the important thing is you wouldn't just plunk these mice down where the cat's food bowl is supposed to be. You would hide them in different parts of the house. And then they really start hunting and they maybe will get down, you know, in that praying position where their front feet are lower than their butt and go running around

looking for it. It's really fun. Anyway, at this point came all of the typical stops on the entrepreneurial journey. So the very next day I'm walking past that people. Like a totally chance meeting at a neighbor's house with the most perfect person you could imagine. And he said, I am an inventor and a medical device manufacturer. And I said, well, you need to sit down. And then Liz took on some partners and worked on the first design.

And my partner Sue and I sewed it ourselves in her kitchen with her mother's sewing machine. She tried out the first prototype. I would go to my colleagues at work and say, hey, take this one home, see what your cat thinks of it. And so we had... Then, of course, she raised some money, $136,000, to be exact. Day four of Kickstarter, when we met our goal, and we all were on the phone together when we hit the number, and that was super fun. And then she went to a big industry conference and got a lot of buzz. It's the largest pet product convention in America, and they have a new product category.

And gosh, darn it, we won. But of course, during the... This whole happy-sounding journey, Liz was also experiencing a ton of stress. Oh, sleepless nights. Many. And one of the biggest issues, as always, was money. Money goes lightning fast. Each spend for the website, for the packaging, for a designer, is it a good spend?

Are we doing the right thing? And where am I going to get more money from? And it's a lot of worry. But things have now kind of settled down for Liz. Since launching the cat feeder in 2016, she's gotten it on. to Amazon and Chewy.com and into small pet stores across the country. And she just partnered with a pet supply distributor that's working to get her product overseas. And all that is great, but Liz actually has bigger ambitions.

She wants to completely change the way our cats eat, one plastic mouse at a time. There's 96 million cats living in homes in America, and most of those cats are still eating from bowls. But if we can really get people to understand cat behavior and have the tools to change it in their homes, this is the opportunity of a lifetime. That's veterinarian Liz Bales from Philadelphia. Liz has now put her veterinary practice on hold to manage her business full time. It's called Doc and Phoebe's Cat Company. Her product is called the Indoor Hunting Feeder. And if you want to find out more about it or hear previous episodes, head to our podcast page, how I built this.npr.org.

And of course, if you want to tell us your story, go to build.npr.org. We love hearing what you're building. And thanks for listening to the show this week. You can subscribe at Apple Podcasts or wherever you get your podcasts. And while you're there, please do give us a review. You can also write to us at hibt at npr.org. And if you want us to tweet, it's at How I Built This. Our show was produced this week by Casey Herman with original music composed by Ramtina Raublui.

Thanks also to Julia Carney, Sanaz Mechkampur. Neva Grant and Jeff Rogers. Our intern is David Jha. I'm Guy Raz, and you've been listening to How I Built This.