How to Turn Down a Billion Dollars

At 23-years-old Evan Spiegel, co-founder of Snapchat, turned down three-billion dollars. Here, author Billy Gallagher takes us inside the start-up's fascinating rise.

On February 25, Reggie filed a lawsuit against Evan, Bobby and Snapchat, seeking one-third of the company that he’d been kicked out of. Seeing Evan take his idea and turn it into a multimillion-dollar company infuriated Reggie. Instead of running the company together, Reggie sat on the sidelines watching Evan soar past Poke and Zuckerberg.

Reggie hired James Lee, an up-and-coming partner at Lee Tran & Liang, as his lawyer in the case. Lee had begun his career as an LAPD detective; when he started studying at Stanford Law School, the Palo Alto campus was so quiet it gave him insomnia. Evan and Bobby still retained Cooley LLP, who responded to Reggie’s letter in May 2012, as their lawyers for Snapchat. The ensuing discovery and depositions cost Snapchat significant time and money, but perhaps most importantly it weighed heavily on Evan at a pivotal point for the company.

On April 5, Evan, Bobby, and their attorneys from Cooley, along with Reggie and his attorneys from Lee Tran & Liang, filed into a conference room in Cooley’s offices in downtown Santa Monica. Out- side, tourists strolled up and down Santa Monica Boulevard, stopping in the trendy neighborhood’s upscale shops, restaurants, and bars; they might walk down the palm-tree-lined street to the beach or the famous pier. Inside the conference room the temperature was more frigid.

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 how long have you worked there?”

“I guess about a month at this point.”

“And what is your position?”

“It’s basically an intern/clerk position.”

“Is that a nonpaying position?”

“Yes, it is.”

“And again, what was your approximate start date?”

“A few weeks ago. Probably about a month.”

“So early March?”


“And what were you doing, if anything, for employment prior to that date?”

“Well, I was applying to law school.”

“Were you working?”


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. Two days later, Bobby was deposed in the same office and had some trouble with his memory. James Lee asked Bobby if he had ever referred to Reggie Brown as an employer at Picaboo. 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 following Monday, it was Evan’s turn in front of the deposition camera. Like Bobby, Evan got tripped up a few times. After getting Evan on the record that Reggie had not been building an application with Evan and Bobby, Lee showed Evan an email he sent to Nicole James, the blogger who wrote about Snapchat, in which he wrote, “I just built an app with two friends of mine (certified bros.)” Evan reluctantly admitted that the two people he was referring to were Bobby and Reggie. The deposition continued:

“Did you come up with the idea for deleting picture messages?”


“Did Bobby come up with the idea?”

“No, he did not.”

“Who came up with the idea?”

“Reggie did.”

“Do you think Reggie deserves anything for the contributions he made on the project?”

Evan paused for seven seconds. The room was dead silent.

“Reggie may deserve something for some of his contributions.”

“Do you have any regrets?”

Evan sat still for thirty seconds. Again, the room was noiseless. Evan searched for the right words.

“That’s a really hard question for me because it’s pretty clear that I lost a good friend.”

Evan looked tired and miserable, his shoulders slumped in the chair, his eyes sullen and searching for the ground.

“I regret inviting him to my house. I regret spending that time with him at my house. I regret giving him so many chances. He exploited my attempts at generosity . . . the generosity was giving Reggie an opportunity to work on something like this . . . for experience that he didn’t have.”

“Do you regret Reggie sharing his idea with you?”

There was no pause this time. “No.”

How to Turn Down a Billion Dollars

'Reggie claimed he owned one-third of Snapchat’s intellectual property since he filed the original patent (which, again, was never approved)'

These depositions did significant damage to Snapchat, both in the case and in the court of public opinion. Someone leaked videos of the depositions to Business Insider, making Evan and Bobby look bad for cutting Reggie out of the company and inconsistencies in response to deposition questions about Reggie’s level of  involvement.

After these disastrous depositions, Evan and Bobby replaced Cooley with David Quinn and the team at Quinn Emanuel Urquhart & Sullivan, the same firm where Lee and his partners got their start. It was also the firm that represented the Winklevoss twins in their infamous suit against Mark Zuckerberg and Facebook. David Quinn was tenacious in and out of the courtroom, running Ironman triathlons in his free time. Evan and Bobby were convinced Quinn Emanuel could use their experience from the most infamous startup lawsuit 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.

Lee Tran & Liang tried to have Quinn Emmanuel thrown off the case, as Reggie had tried to get another Quinn Emmanuel lawyer to take his side of the case before he went to Lee Tran & Liang. Ultimately, the judge ruled against Reggie and said the waiver Reggie had signed and the ethical wall Quinn Emmanuel erected were sufficient for them to continue representing Evan, Bobby, and Snapchat. Lee Tran & Liang also tried to sue all of Snapchat’s investors, claiming their shares were diluting Reggie’s one-third stake. They even lined up a tell-all interview for Reggie with GQ magazine, but he backed out at the last minute. 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. Reggie claimed he owned one-third of Snapchat’s intellectual property since he filed the original patent (which, again, was never approved). He also claimed that they had entered into an oral partnership agreement when he and Evan initially agreed to split everything 50/50 (before they brought Bobby in).

Evan and Bobby claimed Reggie was merely working with them on a project, and they never agreed to an equity split; because they used the Limited Liability Company (LLC) structure that Evan and Bobby had set up for Future Freshman rather than a whole new one, they claimed Reggie should know he had no equity in the venture.

One of the most difficult parts of the case was that Snapchat’s valuation continued to soar throughout the lawsuit, climbing from $70 million when Reggie filed to $800 million in a matter of months. Soon, the company was worth billions. If Reggie was owed something, what was a fair amount? If a picture is worth a thousand words, and Evan’s disappearing pictures company was worth millions and then billions, how much was Reggie’s idea worth?

The lawsuit had a significant effect on Evan; he was already secretive and a bit paranoid by nature, but the lawsuit, combined with Snapchat’s growing public profile, made him retreat further into the bunker—he preferred to take walking meetings so that others wouldn’t overhear him, and he noted that iMessage and emails are permanent records. The stress was clearly getting to him. He would frequently blow up at his lawyers, screaming at them in the hallways in between depositions and settlement talks. It would be many months before the lawsuit reached a conclusion.

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