Image: Biz Stone, Evan Williams
Marcio Jose Sanchez  /  AP
Twitter's official history gives credit to Biz Stone, right, and Evan Williams, whose original startup, Odeo, morphed into the popular messaging service, which is now worth more than $5 billion.
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updated 4/14/2011 10:40:31 AM ET 2011-04-14T14:40:31

How Twitter's owners and top executives say Twitter was founded is different than how Twitter was actually founded.

Mainly, the official version leaves out the role of a major co-founder. Some early Twitter investors also wonder if it also leaves out a scandal.

Twitter is now worth more than $5 billion — and climbing toward $10 billion on secondary markets — so it's worth setting the story straight.

The official telling of Twitter's founding goes like this:

Ex-Googler Evan Williams had a startup called Odeo. It was going to be a podcasting platform. Evan asked his friend, another ex-Googler named Biz Stone, to join him. When Apple launched iTunes, and made Odeo's podcasting platform irrelevant, Evan and Biz and an Odeo employee named Jack Dorsey decided to create something called Twitter instead. Odeo's investors didn't like Twitter, and Evan did them a huge favor by buying back all their stock and making them whole.

According to interviews with about a dozen early investors and employees, the story of how Twitter was actually founded begins with an entrepreneur named Noah Glass, who started Odeo in his apartment.

The story begins about six years ago ...

The real history of Twitter …
"Noah had a product where you call a phone number and it would turn your message into an MP3 hosted on the Internet. That was the technology that Noah brought that turned into Odeo," says early employee Ray McClure.

Along with Charles River Ventures and about a dozen other individuals, one of Glass' earliest investors in Odeo was a former Google employee named Evan Williams. Williams was more involved with Odeo than most investors are with startups in their portfolios, and eventually, Odeo moved from Noah's apartment to Williams'. Williams, who had recently sold a company called Blogger to Google, had just bought a nice house and wanted to put his old apartment to good use.

"I think it was something Ev was interested in, but it was mostly Noah's thing," McClure says.

Business Insider: An interview With Twitter's forgotten founder, Noah Glass

"At that time, it would have been me, Evan [Henshwaw-Plath, better know by friends as "Rabble,"] and Rabble's wife Gabba. Mostly it was the four of us working out of the apartment."

Next, Odeo moved into an office and started hiring more employees — including a quiet, on-again, off-again Web designer named Jack Dorsey and an engineer named Blaine Cook. Evan Williams became Odeo's CEO.

By July 2005, Odeo had a product: a platform for podcasting.

But then, in the fall of 2005, "the shit hit the fan," says George Zachary, the Charles River Ventures partner who led the firm's investment in Odeo.

That was when Apple first announced iTunes — which included a podcasting platform built into every one of the 200 million iPods Apple would eventually sell. Around the same time, Odeo employees, from Glass and Williams on down, began to realize that they weren't listening to podcasts as much as they thought they would be.

Says Cook: "We built [Odeo], we tested it a lot, but we never used it."

Suddenly, says Zachary, "the company was going sideways."

By this point, Odeo had 14 people working full time — including now-CEO Evan Williams and a friend of his from Google, Christopher "Biz" Stone.

Williams decided Odeo's future was not in podcasting, and later that year, he told the company's employees to start coming up with ideas for a new direction Odeo could go. The company started holding official "hackathons" where employees would spend a whole day working on projects. They broke off into groups.

Odeo co-founder Noah Glass gravitated toward Jack Dorsey, whom Glass says was "one of the stars of the company."  Jack had an idea for a completely different product that revolved around "status" — what people were doing at a given time.

"I got the impression he was unhappy with what he was working on — a lot of cleanup work on Odeo."

"He started talking to me about this idea of status and how he was really interested in status," Glass says. "I was trying to figure out what it was he found compelling about it."

"There was a moment when I was sitting with Jack and I said, 'Oh, I do see how this could really come together to make something really compelling.' We were sitting on Mission Street in the car in the rain. We were going out and I was dropping him off and having this conversation. It all fit together for me."

One day in February 2006, Glass, Dorsey and German contract developer Florian Webber presented Jack's idea to the rest of the company. It was a system where you could send a text to one number and it would be broadcasted to all of your friends: Twttr.

Noah Glass says it was he who came up with the name "Twttr." "I spent a bunch of time thinking about it," he says.  Eventually, the name would become Twitter.

Business Insider: 6 reasons you should bail On Twitter.com

After that February presentation to the company, Evan Williams was skeptical of Twitter's potential, but he put Glass in charge of the project. From time to time, Biz Stone helped out Glass' Twitter team.

And it really was Glass' team, by the way. Not Jack Dorsey's.

Everyone agrees that original inkling for Twitter sprang from Jack Dorsey's mind. Dorsey even has drawings of something that looks like Twitter that he made years before he joined Odeo. And Jack was obviously central to the Twitter team.

But all of the early employees and Odeo investors we talked to also agree that no one at Odeo was more passionate about Twitter in the early days than Odeo's co-founder, Noah Glass.

"It was predominantly Noah who pushed for the project to be started," says Blaine Cook, who describes Glass as Twitter's "spiritual leader."

"He definitely had a vision for what it was," says Ray McClure.

"There were two people who were really excited [about Twitter,]" concurs Odeo investor George Zachary. "Jack and Noah Glass. Noah was fanatically excited about Twitter. Fanatically! Evan and Biz weren't at that level. Not remotely."

Zachary says Glass told him, "You know what's awesome about this thing? It makes you feel like you're right with that person. It's a whole emotional impact. You feel like you're connected with that person."

At one point the entire early Twitter service was running on Glass' laptop. "An IBMThinkpad," Glass says, "Using a Verizon wireless card."

"It was right there on my desk. I could just pick it up and take it anywhere in the world. That was a really fun time."

Glass insists that he is not Twitter's sole founder or anything like it. But he feels betrayed that his role has basically been expunged from Twitter history. He says Florian Webber doesn't get enough credit, either.

"Some people have gotten credit, some people haven't. The reality is it was a group effort. I didn't create Twitter on my own. It came out of conversations."

"I do know that without me, Twitter wouldn't exist. In a huge way."

By March 2006, Odeo had a working Twitter prototype. In July, TechCrunch covered Twttrfor the first time. That same summer, Odeo employees obsessed with Twitter were racking up monthly SMS bills totaling hundreds of dollars. The company agreed to pay those bills for the employees. In August, a small earthquake shook San Francisco and word quickly spread through Twitter — an early 'ah-ha!' moment for users and company-watchers alike. By that fall, Twitter had thousands of users.

By this point, engineer Blaine Cook says it began to feel like there were "two companies" at Odeo — the one "Noah and Florian and Jack and Biz were working on" (Twitter) and Odeo. Twitter, says Ray McClure, "was definitely the thing you wanted to be working on."

The buyout
At a board meeting for Odeo that summer, Noah Glass presented Twitter to Odeo's directors. They hardly blinked at it.

Then, one day in September 2006, Odeo's CEO Evan Williams wrote a letter to Odeo's investors. In it, Williams told them that the company was going nowhere, that he felt bad about that, and that he would like to buy back their shares so they wouldn't take a loss.

In his letter to Odeo's investors, Williams wrote this about Twitter:

By the way, Twitter (http://twitter.com), which you may have read about, is one of the pieces of value that I see in Odeo, but it's much too early to tell what's there. Almost two months after launch, Twitter has less than 5,000 registered users. I will continue to invest in Twitter, but it's hard to say it justifies the venture investment Odeo certainly holds — especially since that investment was for a different market altogether.

Evan proposed buying back Odeo investors' stock, and, eventually, the investors agreed to the buyback. So Evan bought the company — and Twitter. The amount he paid has never been reported. Multiple investors, who had combined to put $5 million into Odeo, say Evan made them whole.

Five years later, assets of the company the original Odeo investors sold for approximately $5 million are now worth at least 1,000 percent more: $5 billion.

How do those investors feel now?

We spoke to most of them, and in general, the answer is that most feel at peace now — if only now. Some are wistful. Others are hurt. Speaking to one or two, you can detect a suspicion that they were somehow conned by Williams.

Most echoed the sentiments of James Hong, the co-founder of HotOrNot.com and an Odeo angel investor.  Hong told us, "Obviously, I wish what happened hadn't happened. There was a dark period where I didn't want to hear about Twitter."

Many of the Odeo investors still appreciate Williams' gesture.

"At the time, it was well received as a gracious act," says one individual investor, Don Hutchinson. "Often when you're investing in early stage companies you end up with a dead loss."

A few wish that Williams had been more upfront about what he was planning to do next, as they would have loved to re-invest in Twitter.

"I wish he had reached out to me," says Mitch Kapor, still an active and successful investor in Silicon Valley. "I think he could have, but didn't. And I'd say it’s sort of a shared responsibility."

Some of the investors who sold Odeo and Twitter to Evan Williams for a few million dollars wonder about his intentions at the time.

Had Evan tricked them into thinking Twitter wasn't worth much, when he already knew it would be a gold mine?

One investor asked: "Could Evan have known this would be the world's best thing ever and hid it while re-capitalizing the company?"

"If there's ever any litigious stuff in the air," says this investor, "it will be: How much did Evan know about the user engagement and numbers of Twitter at the time of buying it out?"

For more on the history of Twitter, visit Business Insider

Copyright 2012 by Business Insider, Inc. All rights reserved. Reproduced with permission from Business Insider, Inc.

Video: Why there's trouble at Twitter

  1. Closed captioning of: Why there's trouble at Twitter

    >>> to reveal this week's new issue of "fortune" magazine. andy, i love this cover, twoubl twoubl -- trouble at twitter.

    >> you wonder how things are monetized. are they monetizing it well? what's the future?

    >> that's the thing. it's problematic now. amazing, this company is only four years old, striking because it's a part of popular culture. oprah uses it, part of politics, dissidents in your ran and the arab world of used it to plan against the regimes, an amazing thing. on the other hand, it's been in disarray, they've had three ceos in four years and boards fighting each other.

    >> why? they don't know how to monetize?

    >> that's part of the problem. they don't know how to monetize and only have $45 million in revenue opposed to over a billion for facebook . what is twitter? is it a social media ?

    >> there is a little bit of confusion there.

    >> problems there and the other thing is, it's not, when you come down to it, not so easy to use as facebook . your know, facebook people spend every second of everyday trying to make it easy to use and also trying to figure out how to turn it into a business. the twitter people say just let it grow and they let users really create the system.

    >> how many people do they have on twitter now?

    >> they have 200 million accounts but only 20 million active customers right now. there's a big disconnect between the number of accounts and people using it. 20 million is a lot. in four years is a great number of growth. but the growth in the united states has plateau'd and growing overseas tremendously and half of the people are not using it as much as they used to.

    >> it's in decline in usage?

    >> it's plateauing. overseas, it's growing. the u.s. market is so important for these types of markets. you have to keep growing and adding people to the network. we use is, halperin, right?

    >> the only way i know where joe is at any given time.

    >> exactly. i can see how for news junkies, something you use on a daily basis and part of what you do in terms of gathering information. how does it translate?

    >> the twitter people say it's unfair and compared to facebook . they say that's unfair because facebook is for everybody, for your kids, your grandparents, it's like a telephone. this is a more specific niche product. obviously, people in the news and people trying to get information that way can use it. it's not the same thing. there's a lot of people betting a lot of money on it. raised $360 million. those investors will want their money back. we're not saying that this company is dead or anything even close to that. what we're saying the company is kind of in disarray and need to figure out what they will do, how they will make money and what kind of business or product they spending that money on?

    >> they're spending money on engineers and servers and building out the company right now. you invested $360 million, only have $45 million in revenue and no profits, that's a tough proposition to keep doing year after year.

    >> what does twitter hope lies in their future?

    >> frankly, a lot of people --

    >> give me the names. who's running the company? who's the ceo?

    >> a guy named dick costello is the ceo.

    >> what's his background?

    >> he worked in it and developed a company he sold to google. ed williams and stone and jack dorsey were the three founders and kind of the technical celebrities in silicon valley . i think one possibility is the company gets sold. both facebook and google have looked at buying the company and the board decided not to sell. that could be a problem. yahoo looked to be bought by microsoft, turned down the offer and the company is not worth as much as it used to be.

    >> quickly, if you don't mind, you brought up yahoo . it is sort of being squeezed between google. then you have google being squeezed by facebook . everybody is chasing everybody in silicon valley . what's the latest status on yahoo ? where are they?

    >> they're in a tough place. they used to be a newsportal when that word was in vogue and seemed like a real business model . at this point, you have to ask what's the point of yahoo ? what do they do? still have search. supposed to go there for news. but most are going to see its like msnbc and news organization sites like the "new york times." you have to ask what is the point of yahoo ? do you go to yahoo ? do you guys use yahoo !? you have to ask the questions and raises viability.

    >> they have really good horoscopes, i use it for that.

    >> probably good business.

    >> what is the story of john roberts ?

    >> we're considering putting him on the cover next issue, you know, because it generated tremendous interest from tv news talk show hosts.

    >> the fact you put him on three months in a row is fairly impressive.

    >> sort of like our princess diana . really works for us.

    >> that says something about your

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