Entrepreneurs

Justin Kan Talks Twitch, Startups and When to Pivot or Cut Bait on Your Idea

As a child Justin Kan’s mother told him that he could do anything in life as long as he did it well, and that laid the foundation for the path he’s been on since his early 20’s. Kan says he was inspired by his entrepreneur parents and would tell them that he wanted to be a CEO when he grew up. While his path to get there hasn’t been at all conventional, and for a time included him broadcasting a 24-hour live stream of his own life, the Twitch co-founder seems to have gotten his wish.

For Kan, it all started in college when as a senior at Yale, he and friend Emmett Shear started a company. They created a digital calendar app that they hoped would partner well with online email servers like Gmail, (which had just launched.) Even though Kan and Shear were undergrads and new to the technology space, they were funded by a Silicon Valley incubator called Y Combinator, which gave them $12k to start their company.

“A friend of mine who was in the computer science department at Yale got an email,” he says. “Paul Graham the founder of Y Combinator had emailed all these different computer science departments around the country [saying] I’m funding technology startups from students. And so, he emailed it to Emmett and I and we were like, let’s apply.”

Y Combinator was funding their first batch of startups and they weren’t entirely sold on Kan and Shear’s concept. Eventually Kan says he and Shear convinced them that the idea was worth pursuing, and they received their funding.

“We interviewed in Cambridge,” he says. “We went to their office. They mostly thought that rich Java script applications on the Internet weren’t going to work. And so, we spent the whole time arguing about how this was the future, and people were going to use these heavy client-side apps, and we didn’t know how we did. We left and we’re walking around Cambridge and a couple of hours later they called us and said hey, we want to fund your company.”

Kan and Shear spent the summer working in Cambridge, Massachusetts developing their app with several other startups that were selected by Graham and his team. It was a very exciting time in the tech world. Just the year before, Mark Zuckerberg had released Facebook from Cambridge’s Harvard campus and as Kan and Shear were working on their calendar app, companies like Dropbox and Twitter were in their nascent stages.

Kan and Shear spent the summer working on different ideas for their app. They were in good company too. Others in the Y Combinator incubator with them were folks like Steve Huffman and Alexis Ohanian who created Reddit.

Each week, Kan says that he and Shear would share their ideas with their “batch mates.” He says they were surrounded by a lot of programmers so there was a lot of trading engineering tips. At the end of the summer, they launched the first version of their calendar app, and it did well enough for them to raise an additional $50,000 from investors. They worked on bug fixes and upgrades and launched a second version of the app a little over a year later. But then, they hit a big roadblock.

“Google calendar came out the next month,” he says. “And so that sort of murdered our infantile startup. If you have an email, you’d want calendar with it, right? Outlook on the desktop was bundled email and calendar. So, it didn’t take a rocket scientist to be like, oh, the web version [of email] is going to have a calendar component.”

Kan maintains that they never felt like Google stole their idea. It seemed like the obvious next step for Google to add a calendar to their email. Kan says that he and Shear took meetings with Yahoo and Google and that the Google team took copious notes about their app before launching Google calendar, a tidbit that he finds amusing.

Later, Yahoo offered to buy the company for $1 million. Kan says he was ready to sign the deal but got ghosted by Yahoo’s executive and fell into a bit of despair.

Kan and Shear didn’t know what to do. They seemed to be out of options for buyers and they also knew they couldn’t compete with Google. Kan felt like maybe he didn’t have what it took to be in the game and thought maybe it would be best to get out and go get a “real job.” He was prepared to fold, but Kan says he felt like it was their moral obligation to get the $50k back to their investors.

“There was no real plan B,” he tells me. “It was like, I’m gonna move back to Seattle and move in with my parents and we said, how can we get the money back for our investors? So, we ended up listing the company on eBay as a last-minute Hail Mary to just recoup some of the money. I took money and I considered that a sacred responsibility, so I was like, I want to pay them back.”

Kan and Shear listed the company on eBay, with the website and all of the code, for a reserve price of $50k, and before their auction closed, they had met that reserve price. But then something kind of amazing happened, their luck changed substantially.

“The day the auction was going to expire we had bids that started off at $50k, which was our reserve price, then it went up to like, $85k,” he says. “And then it went up to $100k, then $113k, $150k and as I’m clicking re-fresh on this eBay page it just goes all the way up to $258k. At that point we make a little bit of money. It was a good feeling, [and] that made me convinced that entrepreneurship wasn’t all bad.”

Kan and Shear were the second company to ever sell on eBay and they ended up doubling the record of the previous company that tried this trick. Paul Graham at Y Combinator was impressed and asked if they had any other ideas that he could invest in and that’s where Justin.tv came into the picture. Paul Graham and his team were into the idea and Justin.tv got funded, with one investor saying he’d fund it just to watch Justin make a fool of himself. With that Kan and Shear were off to the races.

At this point in time, reality TV was still a novelty. Yes, MTV had produced The Real World and Road Rules in the 90’s but the idea of reality shows being on every network was far from the norm. In 2006, Youtube had just been acquired by Google and the site was still in the infant stages.

Also, this was still before digital cameras were ubiquitous, so the idea of creating a 24-hour live stream video feed broadcast to the Internet was a brand-new concept that Kan and Shear had to troubleshoot.

“The biggest hurdle was to figure out the technical part because there weren’t cameras. There weren’t Internet connections that were strong enough to carry the data. What we did was we took an analog camera, hooked it up to a computer, turned it into a web-cam feed, so it was a computer I was wearing on my back. We made a system that had multiple cell phone modems on the networks that could send the video, and broke up the stream into multiple parts, and would send it over and then reassemble on the other side for the viewers”

Justin.tv wasn’t a huge success. The first week viewers seemed underwhelmed, but their disappointment was helpful for Kan and his team because it led to something much bigger.

“After a week people were like, go entertain us… but they also said, hey I wanna create my own content. And so, the light bulb kind of went on, and we said, we should let people create their own livestream and then it became a platform for anyone to broadcast live.”

The new Justin.tv grew and Kan and Shear made $7 million, but they noticed that the website traffic began to flatten out after a while. The Justin.tv team built subject specific video categories like Social, Tech, Sports, Entertainment, News, as well as Gaming and noticed right away that Gaming developed the biggest following. People seemed inordinately interested in watching other people play video games, and with a push from Shear, the idea for Twitch was born.

Today, Twitch is one of the most successful live streaming services that focuses on video game live streaming and eSports and Justin Kan is a successful entrepreneur, as he set out to be. In addition to having Justin.tv and Twitch under his belt, Kan also served as CEO of Atrium (a law-tech company) and he co-founded the mobile social video app, Socialcam. He contributes to TechCrunch and recently launched his YouTube Channel, which is a treasure trove of information for start ups.

There are several key takeaways from my talk with Justin…

Know When to Pivot or Cut Bait on Your Idea

Knowing when to move or stay in the game was the difference between nearly a billion dollars [sale of Twitch to Amazon] or 1,000x less return–but the path or sequence wasn’t exactly clear. If Justin had quit after Google launched its calendar and rendered his app obsolete, he’d never have experienced everything that has led him to where he is today. We talk about this, and he tells me that the key to his success is being intrinsically motivated rather than being extrinsically motivated.

“If you’re intrinsically motivated instead of extrinsically motivated you will want to do [the work] more and stay with it,” he says. “Extrinsic motivations are like, I wanna get rich, I wanna be famous…even missionary ones like, I wanna change the world with this idea… that’s an extrinsic motivation. And when things are hard, you’re going to be like, oh why am I doing this? If it’s intrinsic it’s like, hey I’m showing up to work and I love doing this every day. In a startup [community], the people who I see that go the farthest, they find intrinsic motivation and joy in what they do.”

Balance Your Mental and Physical Fitness

Most of us know that regular exercise is essential to maintaining good health–especially if we’re trying to run a business and have an active lifestyle. But how many of us are working on our mental fitness? Kan tells me that this hasn’t always been easy for him. There was a time where he was more extrinsically motivated, and he had to find a way to shift himself to a place where he was making choices in his life that were about personal joy and fulfillment as opposed to being so tied to his business successes and failures. He tells me that while his mother’s advice to do anything, but do it well helped shape who he is today, feeling pressure to always do each thing to the best of your ability doesn’t leave much time for fun. He’s still figuring out the balance there.

“The big thing was realizing for myself that I had tied my ego to the outcomes and to startups,” he says. “I was always so engrossed with being successful that that was my worth and my identity and then when things weren’t going well, I felt like I was worthless. Things are always going to not go well at some point. For me having that realization and then realizing, okay how do I want to live in the world? How do I want to be in the world? …there were a lot of tactics like a gratitude journal and meditation, exercise. All of those things helped me shift my context. So, it was more about, what am I doing every day that I love verses am I living my life for extrinsic reasons?”

This is switch from scarcity to abundance mindset is probably what released him from second-guessing his decision to sell Twitch to Amazon at the price they did. Could he have held out for more? Probably yes. Twitch is likely 50-100x more valuable today compared to the selling price. But Justin’s goal wasn’t to be the richest person in world or to seek world domination like Zuckerberg or Bezos. Don’t get me wrong, Justin and Emmett made a ton of money, but Kan found peace and fulfillment in the realization that it was enough, and more importantly, that he was enough for it.

More of my fascinating and inspiring chat with Justin Kan here:

The opinions expressed here by Inc.com columnists are their own, not those of Inc.com.

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