Biglaw, Technology

‘The Snapchat Story’ Has All The Salacious Details Legal and Tech Nerds Will Love

If you are a legal and tech nerd, then you will thoroughly enjoy Gallagher’s new book.

By  
on

“81, they’ll bring the crashers to the party / And you know me / Turn the O2 into the O3, dog.” — Drake

Yesterday, Kylie Jenner tweeted that she doesn’t open the Snapchat app anymore. And in one fell swoop, its stock price ended the day down 6%, erasing over $1 billion in market value — giving Evan Spiegel and his company plenty of reasons to drink on National Margarita Day.

As an aging Millennial, I haven’t really used Snapchat [N/K/A Snap Inc.] much. But many of my friends do and they insist that “you would love it!” Although I haven’t “Snapped” much, I’ve been quite intrigued by its business model and extraordinary run to an IPO, as well as its ability to maintain a SEAL Team-esque level of operation.

This week, I had the opportunity to review the newly published book titled, How to Turn Down a Billion Dollars: The Snapchat Story, by Billy Gallagher (affiliate link), a former fraternity brother of Spiegel. Whether you are a Snap power user or completely unfamiliar with the social media platform, if you are a legal and tech nerd like myself, then I firmly believe you will enjoy Gallagher’s new book.

Overall, I was thoroughly impressed with how the former TechCrunch reporter covered the nuanced legal aspects of Snap’s unicorn-run to fame and fortune — despite, at many times, fawning coverage of his subject.

Above the Law recently highlighted a very unhappy memo penned by the powerhouse attorney John Quinn, whose firm is covered in this book as “much more aggressive” than Snap’s other counsel, Cooley LLP. In 2013, ATL also wrote about the infamous naked-man deposition incident, which occurred at Cooley before Quinn Emanuel took over on the dramatic case pitting the Snap founders against each other.

Representing the other Snap founder, Reggie Brown, was Lee Tran & Liang LLP (founded by former QE attorneys), a firm which itself has had quite a meteoric rise during the last several years. In another Shakespearian twist of the Snap story (a detail that was glossed over in this book), it was ironically QE, who took over for Cooley, that originally referred Brown’s case to Lee Tran & Liang, who in return attempted to bar QE from the case because of its prior dealings with Brown. And the plot thickens!

Sponsored

Two lessons I took away after reading this compelling book: you better review the “standard terms sheet” because it can come back to haunt you, and your casual social media actions can and will often be formally constructed against you in a deposition.

In Snap’s case, Spiegel believes he was screwed by an early venture investor due to the hidden language in the “standard terms sheet.” And in another painful, dramatic lesson for Spiegel, Lee Tran & Liang was able to negotiate a $157.5 million settlement for its outcast founder, Reggie Brown.

Without further ado, here are eight of my favorite legal-related excerpts from the book:

  • Evan was born on June 4, 1990, to a pair of highly successful lawyers. His mother, Melissa Thomas, graduated from Harvard Law School and practiced tax law as a partner at a prominent Los Angeles firm before resigning to become a stay-at-home mother when Evan was young. His father, John Spiegel, graduated from Stanford and Yale Law School and became a partner at Munger, Tolles & Olson, an elite firm started by Berkshire Hathaway’s Charlie Munger…. When Evan was in high school, Melissa and John divorced after nearly twenty years of marriage. Evan chose to live with his father in a four-million-dollar house in Pacific Palisades, just blocks from his childhood home where his mother still lives.
  • At a young age, Evan would listen in on his father’s long legal calls, which he credits for giving him early business exposure that helped develop his critical thinking and business accumen. He can often become obsessed with ideas, hungrily learning everything he can about them at a rapid pace. Evan is constantly curious and is learning and getting better at being a CEO very quickly. But his two superpowers are (1) his ability to get inside his users’ heads and think like a teenage girl and (2) his knack for attracting brilliant, powerful mentors.

Sponsored

  • When Jeremy Liew and Lightspeed had invested just a few weeks prior, Liew had included terms giving Lightspeed the right of first refusal to invest in Snapchat’s next round of funding, as well as rights to take 50 percent of the next round. Essentially, Lightspeed controlled Snapchat’s next round of funding and made Snapchat unattractive to other investors, who would want to take a larger stake in the Series A round. Evan was furious. He felt betrayed and taken advantage of. Liew had told him these terms were standard. Evan would warn other students about this betrayal for years to come…
  • At one point, Lee’s partner Luan Tran took a copy of Forbes magazine with Evan on the cover, scrawled red devil horns over his head, and pinned it to the wall in his office. The combative trial would wage for months, and each side had plenty more cards to play.
  • Cooley’s Mike Rhodes began deposing Reggie, attempting to establish that Reggie had accomplished little since graduation: ‘What is your current employment, if any?’ ‘Well, currently I’m working in the South Carolina attorney general’s office….’ ‘And what were you doing, if anything, for employment prior to that date?’ ‘Well, I was applying to law school.’ ‘Were you working?’ ‘No.’ Reggie became distracted midway through answering a question about which lawyers he had spoken with. A naked man had chosen the sidewalk across from the Cooley office as his performance stage for the day and was gesturing at Reggie through the window. The lawyers hastily closed the blinds and continued the deposition much less eventfully.
  • Evan and Bobby [Murphy] were convinced Quinn Emanuel could use their experience from the most infamous startup lawsuit [Winklevoss Twins vs. Zuckerberg] of all time to help them defeat Reggie. Quinn Emmanuel was much more aggressive than Cooley had been. They filed a sea of requests for documents, depositions, and subpoenas. They tried to dismiss the case and remove it to federal court, and they sought contempt sanctions and a restraining order against Reggie and Lee Tran & Liang.
  • James Lee asked Bobby if he had ever referred to Reggie Brown as an employer at Picaboo [N/K/A Snap]. Bobby said he hadn’t. Lee showed him an automated email from Facebook, reading ‘Bobby Murphy tagged you in Picaboo under Employers.’ Bobby’s eyes darted, his head tilted down, and he twitched his mouth nervously. Glancing up at Lee, he sheepishly replied ‘Uh … Well it looks like here that I did something to that effect,’ Murphy said. ‘I don’t have a specific recollection of this happening … although I would say that it would have been unclear to me what … tagging someone as an ‘employer’ under Facebook would mean.’
  • The lawsuit was also a major distraction to Evan, Bobby, and Snapchat, during a time when they needed to focus more than ever. Finally, they reached a settlement. Reggie would receive $157.5 million and sign a gag order to never speak about Snapchat, the founding, or the lawsuit…. So what is fair for each side to receive? Snapchat’s valuation soared so high and so quickly during the lawsuit that it was hard for each side to wrap their heads around it, let alone arbitrate what each side deserved. This question isn’t going away. The Social Network, featuring courtroom scene after courtroom scene of friends hurling accusations at each other through expensive lawyers, spurred scores of young college students to pursue startups. Evan’s massive success with Snapchat has only increased the startup fervor on Stanford’s campus. And Reggie’s lawyers’ firm, Lee Tran & Liang, has become the hot law firm for ousted startup cofounders to sue young tech companies.

The Snap Inc. founders, Evan Spiegel and Bobby Murphy, along with its various employees, probably had a few extra shots of tequila on National Margarita Day. But after reading Gallagher’s comprehensive guide on its history, I have a strong inkling that this is just a small bump in the road for Snap — and its team will have many things to toast to it in its future.

As for me, I just downloaded the app on my phone. I’m even thinking of buying some shares. After all, my friends insist that I would love it. But then again, I have just imbibed in three Mambo Taxis… Anyone know how I can do the puppy face on Snap?

Renwei Chung is the Diversity Columnist at Above the Law. You can contact Renwei by email at projectrenwei@gmail.com, follow him on Twitter (@renweichung), or connect with him on LinkedIn. 

 

CRM Banner

Topics

, , , , , , , , , , , , , , , , , ,