Reid G. Hoffman, the start-up whisperer of Silicon Valley
A King of Connections Is Tech’s Go-To Guy
By EVELYN M. RUSLI
New York Times
November 5, 2011
MOUNTAIN VIEW, Calif.
THEY come for his money. They come for his advice. They come — duh — for his connections.
But mostly they come, with all the élan of Dorothy on her way to Oz, for a chance at some face time with Reid G. Hoffman, the start-up whisperer of Silicon Valley.
Mr. Hoffman made his name and fortune as the co-founder of LinkedIn, the social network that went public five months ago. But he has also emerged as something else — — as the man whom Internet entrepreneurs call when they dream of becoming the next, well, Reid Hoffman.
Want to brainstorm about new technology? Build a business? Raise a cool million — or billion? Mr. Hoffman is a man to see. If he can’t help, he probably knows someone who can. He is, as you might expect, a seriously linked-in guy.
On this particular day in July, a rising entrepreneur named Brian Chesky has come calling. Mr. Chesky, the co-founder of Airbnb, an online service that matches people looking for vacation rentals with those with rooms to rent, wants some pointers about expanding into China.
Mr. Hoffman, 44, leans back in his chair. Then he lets fly: Airbnb will need a team in China, a robust Chinese-language platform, Web filters to keep Beijing happy, he says. It might also need a joint venture partner. He rattles off a few names.
It’s noon, and this is the third of nine meetings that Mr. Hoffman has scheduled today. He is trying not to sneak a peek at his smartphone — or, rather, his four smartphones. He fields upward of 400 e-mails a day, not counting all the stuff that streams in via Facebook, Twitter and, naturally, LinkedIn, where he had 2,536 connections at last count.
These days, Mr. Hoffman finds himself, a bit to his own surprise, at the center of the social media universe. He has a second full-time job as a partner at Greylock, the venture capital firm. He serves on the boards of eight companies, including Zynga, the hottest game company on the Web, and Mozilla, of Firefox fame. He is also involved in three nonprofits.
Oh, and there’s that little company called LinkedIn, which, as of Friday, was worth about $7.9 billion in the stock market. Amid all the meetings and messages and tweets, Mr. Hoffman, the executive chairman, must persuade Wall Street that LinkedIn will prosper and that its lofty valuation is not just another sign of Internet mania.
For the moment, Mr. Hoffman seems to give off a golden aura, at least to many in Silicon Valley. Everyone wants a piece of him.
“He’s the first stop for every hot deal,” says David Siminoff, a technology investor.
Gina Bianchini, the founder of the Internet start-ups Ning and Mightybell, says: “He’s like an early warning system for something great in Silicon Valley.”
Cyriac Roeding, the founder of Shopkick, a mobile shopping app that has been bankrolled by Greylock, adds: “I’ve never made a significant move, decision, without consulting him.”
Hearing Mr. Hoffman wax philosophical about technology, it’s easy to understand why so many here seem to view him as something of a yoda. When he talks about “scale” — Internet-speak for having enough people use a network to make the network actually useful — he often invokes Archimedes, the great mathematician and inventor in ancient Greece.
According to lore, Archimedes created a device with a revolving screw-shaped blade to pump water against gravity: the Archimedes screw. Mr. Hoffman urges his followers to find their own levers and devices to encourage people to adopt their technologies. Entrepreneurs, he says, often spend too much time creating products and too little figuring out how to get people to use them.
Archimedes is reputed to have said that, given a lever big enough and a place to stand, he could move the world.
“It’s not really quite true, once you understand Newtonian physics, but it is an accurate metaphor,” Mr. Hoffman says. “Build a compact piece of work with the right leverage, and you can solve a very big problem.”
LONG before LinkedIn, Reid Hoffman was just another kid in California obsessed with playing games. He grew up in Berkeley, bright and precocious, despite B’s and C’s in middle school. His father, William Hoffman, a real estate lawyer, recalls that his son always showed remarkable focus.
When Reid was 5, for instance, his father read to him from “The Lord of the Rings” before bed.
“Apparently, I wasn’t reading fast enough,” William Hoffman recalls. “Whenever I picked up the book, the bookmark moved further and further ahead.”
When he was 12, Reid Hoffman arrived unannounced one Friday at offices of Chaosium, the game maker behind RuneQuest, the fantasy role-playing game first published in 1978. He thrust a manual, marked with his suggestions in red ink, into the hands of a game developer.
The man leafed through the pages and asked Reid if he wanted something else to do. He nodded — and reported to work that Monday. A few weeks later, he received his first paycheck, for $127.
“It changed my father’s view of what I was doing,” Mr. Hoffman recalls. “He realized I could make a living out of this.”
Mr. Hoffman was basically indulging his obsession for games, or, more specifically, his fascination with multiplayer game mechanics, and the way that social systems come together. The question of what brings people together still fascinates him.
In 1985, Mr. Hoffman enrolled at Stanford, where he majored in symbolic systems, the study of the relationship between computing and human intelligence. He soon befriended a fellow student, Peter Thiel, who would go on to found PayPal. Mr. Thiel, a libertarian, describes Mr. Hoffman as standing on the opposite end of the political spectrum — “politically, kind of a socialist,” he says.
But the two became close and often spent hours debating politics, economics and philosophy. One time the topic was a quotation from Margaret Thatcher: “There is no such thing as society. There are individual men and women, and there are families.”
Mr. Hoffman vehemently disagreed.
“He believed Thatcher’s maxim was wrong,” Mr. Thiel recalled. “Reid was always interested in creating communities.”
In 1990, Mr. Hoffman went to Oxford as a Marshall scholar to pursue a master’s degree in philosophy. He seemed headed toward a career in academia.
“I had this aspiration to participate in society as a public intellectual,” he said. His thesis explored the limitations of thought experiments. By his winter term, he realized that life as a professor would, in many ways, feel confining.
Again, the issue was one of scale.
“When you write a scholarly work, it tends to be understood by very few people, and has one publication point over time,” he said. “But when you build a service, you can touch millions, to hundreds of millions of people directly.”
WHEN Netscape went public in 1995, in a defining event for the Web, Mr. Hoffman and Mr. Thiel were watching. Mr. Hoffman had a hunch that the social media were going to be huge, along with gaming companies that had social media embedded in their DNA.
His gut was right, but his first foray into social media flopped. In the summer of 1997, he started SocialNet, one of the first networks of its kind. It largely focused on online dating and matching up people with similar interests, like golfers who were looking for partners in their neighborhood.
To lure users, SocialNet partnered with an Arizona newspaper. The partnership yielded two customers in the first month.
“We had it completely wrong,” Mr. Hoffman said. The ability for a product or service to go viral, he learned, must be built into the way that the product or service works.
Frustrated, he left SocialNet in 1999 and joined Mr. Thiel at PayPal.
PayPal was wrestling a host of challenges, and Visa and MasterCard didn’t know whether to view it as an ally or an enemy.
As an executive vice president, it was up to Mr. Hoffman to manage external relations. “He was the firefighter in chief at PayPal,” Mr. Thiel says. “Though that diminishes his role because there were many, many fires.”
Mr. Hoffman emerged as a connector and high-level strategist. He packed his schedule with meetings, charmed credit card companies and soothed the regulators.
PayPal survived, and when the company went public, in 2002, Mr. Hoffman and many of his colleagues became multimillionaires.
Mr. Thiel splurged on a Ferrari. Mr. Hoffman wanted to buy an Audi but instead invested his newfound riches in one of the first solar panel companies to come out of Silicon Valley, Nanosolar, and bought an Acura instead.
“I started to think about the value of money,” he says. “I thought if I only had $75,000, would I rather invest in a luxury car or make a play in changing the world?”
Nanosolar became a multibillion-dollar enterprise.
SILICON VALLEY has long since gone Hollywood. Everyone from Lady Gaga to Ashton Kutcher invests in tech start-ups nowadays. Bravo is rumored to be casting for a reality show here.
But Mr. Hoffman remains decidedly unglamorous — a nerd’s nerd. He is wide at the waist and fluffy at the top, with a slightly disheveled heap of hair. His uniform is frumpy, even by the valley’s standards. He still drives the same metallic green Acura.
Today, LinkedIn, the professional social network, is a rising giant, a monument to the emergence of the social Web. Founded in 2002, the company has ballooned to more than 1,700 employees. It has more than 135 million registered members across 200 countries. It has turned a profit in six of the last seven quarters.
Mr. Hoffman, the start-up shepherd, is now helping his friends find their way to the public markets. He is a close adviser to Groupon’s 30-year-old chief executive, Andrew Mason, and a board member of Zynga. Groupon went public last week and its stock soared, giving the company a market value of almost $17 billion. Zynga is expected to go public by year-end.
Despite such euphoria, it wasn’t always clear that LinkedIn would survive. The first year was the darkest. At the time, Friendster was the most popular social network, and by comparison, LinkedIn, a platform built on business connections, seemed dull. Mr. Hoffman was a relentless evangelist, but he had his doubts.
“One of the things I thought of every week was, ‘What happens if we don’t make this? How do we die gracefully?’ ” he said.
It took five years for the company to turn its first profit. Mr. Hoffman struggled to steer his own company even as he mentored others. In 2003, Sequoia Capital, an early backer of Google, invested $4.7 million. One of its partners, Mark Kvamme, joined LinkedIn’s board.
The moves were a coup for LinkedIn, but the relationship was strained at times, according to several people close to Mr. Hoffman. And during the early years, he and Mr. Kvamme occasionally locked horns.
“Reid is not a business-running kind of guy,” says Mr. Siminoff, the tech investor. “He likes to take off his shoes, think of the world broadly and not worry about corporate spend and margins.”
But as the economy deteriorated in 2008, more people joined LinkedIn for its premium job and recruiting services. Mr. Hoffman, who had briefly ceded his role as chief executive to Dan Nye, a former Intuit executive, took back the top job, with the intent of finding another C.E.O. Within months he hired Jeff Weiner, a Yahoo veteran.
Several years wiser, Mr. Hoffman — as the executive chairman — focused on his strengths: product and high-level strategy. It also gave him time to accept a job at Greylock.
Today, Mr. Hoffman splits his time between Greylock’s offices on Sand Hill Road in Menlo Park, Calif., and LinkedIn’s headquarters here in Mountain View. Again, he senses that a new Web is stirring. In the same way that social media redefined the Internet, he sees another tectonic shift on the horizon.
This one, he believes, will be driven by data. Mr. Hoffman has been investing in companies that are data-driven or starting to work with data in interesting ways. For instance, even though two Greylock investments, Shopkick and Groupon, focus on retailing, both aggregate a huge volume of information on user spending habits. LinkedIn, too, has been trying to leverage the data on its site by, for example, making it more searchable.
IN Silicon Valley, it’s often said that the founder is the start-up. Friends of Mr. Hoffman describe him as a walking version of LinkedIn — data-intensive, straightforward, useful. In some ways, Mr. Hoffman and his company face similar challenges.
LinkedIn, which has soared in value, is under increasing pressure to perform. Though its membership has roughly doubled annually for each of the last seven years, many wonder if the company can possibly sustain its momentum. LinkedIn can’t afford a bad quarter: one miss could hobble the company, analysts say, by slamming its share price and encouraging its best engineers to jump to the Next Hot Thing.
“The problem is, most people are not like Reid,” said Joichi Ito, the director of M.I.T. Media Lab, who has known Mr. Hoffman for many years. “Most people waste their time, so the question is, can a work-oriented site become extremely popular, when many people are not as invested in productivity?” Mr. Hoffman himself is feeling the squeeze. But he tries not to pay attention to the markets and says he has checked LinkedIn’s stock price only six times since May.
“The thing I’m working on with LinkedIn in is to create something massive and effective; the strategy horizon is three to five years,” he said.
The public markets may be less patient. Meanwhile, he also has to answer to his investors at Greylock, who are likely wondering whether he can keep the hits coming. His reputation is an advantage, but also a liability. He is so busy trying to filter out the noise that he has little down time at all — at most, a few hours on Friday and Saturday evenings. This past August, he went to Australia for his first real vacation since 2002, the year he founded LinkedIn.
Before he left, even the hyperkinetic Mr. Hoffman conceded that he could use a break — at least a small one. “I’m functioning at 60 percent capacity,” he said.
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