Why did file sharing drive so much startup innovation? – TechCrunch

by Joseph K. Clark

One of the great things about editing our deep-dive EC-1 startup profiles is that you start noticing patterns across successful companies. While origin stories and trajectories can vary widely, the best companies come from similar places and are conceived around very peculiar themes. To wit, one common theme from our recent Expensify and NS1 is the centrality of file sharing (or illegal file sharing if you are on that side of the fence) and internet infrastructure in the origin stories of the two companies. That’s peculiar because the duo honestly couldn’t be more different. Expensify is an SF-founded (now Portland-based) decentralized startup focused on building expense reporting and analytics software for companies and CFOs. New York-based NS1 designs highly redundant DNS and internet traffic performance tools for web applications.

Yet, take a look at how the two companies were founded. Anna Heim on the origins of Expensify:

To truly understand Expensify, you first need to closely examine a unique, short-lived, P2P file-sharing company called Red Swoosh, which was Travis Kalanick’s startup before he founded Uber. Framed by Kalanick as his “revenge business” after his previous P2P startup Scour was sued into oblivion for copyright infringement, Red Swoosh would be the precursor for Expensify’s future culture and ethos. Many of Expensify’s initial team met at Red Swoosh, which was eventually acquired by Akamai Technologies in 2007 for $18.7 million.

[Expensify founder and CEO David] Barrett, a self-proclaimed alpha geek and lifelong software engineer, was Red Swoosh’s last engineering manager, hired after the failure of his first project iGlance.com. This P2P push-to-talk program couldn’t compete against Skype. “While I was licking my wounds from that experience, I was approached by Travis Kalanick, who was running a startup called Red Swoosh,” he recalled in an interview.


Then you head over to Sean Michael Kerner’s story on how NS1 came together:

NS1’s story begins at the turn of the millennium, when [NS1 co-founder and CEO Kris] Beevers was an undergrad at Rensselaer Polytechnic Institute (RPI) in upstate New York and found himself employed at a small file-sharing startup called Aimster with some friends from RPI. Aimster was his first taste of life at an internet startup in the heady days of the dot-com boom and bust, and he met an enterprising young engineer named Raj Dutt. The latter would become a critical relationship over the next two decades.

By 2007, Beevers had completed his Ph.D. in robotic mapping at RPI and tried his hand at co-founding and running an engineered-wood-product company named SolidJoint Research, Inc. for ten months. But he soon boomeranged back to the internet world, joining some of his former co-workers from Aimster at a company called Voxel that Dutt had founded.

The startup provided a cornucopia of basic web hosting, server co-location, content delivery, and DNS services. “Voxel was one of those companies where you learn a lot because you’re doing way more than you rightfully should,” Beevers said. “It was a business built out of love for the tech and solving problems.”

The New York City-based company peaked at 60 employees before it was acquired in December 2011 by Internap Network Services for $35 million.

Note some of the similarities here. First, these wildly different founders worked on critical internet plumbing. This makes sense, of course, since back two decades ago, building out the networking and computing capacity of the internet was one of the significant engineering challenges of that period in the web’s history.

In both cases, the founding teams met at little-known companies defined by their engineering cultures and sold to more giant internet infrastructure conglomerates for relatively small amounts of money. And those acquirers ended up being laboratories for all kinds of innovation, even as few people remember Akamai or Internap these days (both companies are still around today, mind you).

The cohort of founders is fascinating. You have Travis Kalanick, who would later go on to found Uber. But the Voxel network that went to Internap is hardly a slouch:

Dutt would leave Internap to start Grafana, an open-source data visualization vendor that has raised over $75 million. Voxel COO Zachary Smith founded bare-metal cloud provider, Packet in 2013, which he ran as CEO until Equinix acquired the company in March 2020 for $335 million. Meanwhile, Justin Biegel, who spent time at Voxel in operations, has raised nearly $62 million for his startup Kentik. And, of course, NS1 was birthed from the same alum network.

What’s interesting to me about these two companies (and others in our stories) is how often the founders worked on other problems before starting the companies that would make them famous. They learned the trade, built networks of hyper-intelligent present and future colleagues, understood business development and growth, and started to create a flywheel of innovation amidst their friends. They also got a taste of an exit without getting the whole meal, if you will.

In particular, with file sharing, what’s interesting is the rebellious and democratic ethos that came with that world back at the turn of the millennium. In that era, working in file-sharing meant fighting the big music labels, overturning the economics of entire industries, and breaking down barriers to allow the internet economy to flourish. Apparently, it attracted a weird bunch of folks — the exact kind of weirdness that happens to make promising startup founders. It echoes one of the critical arguments of Fred Turner’s book, “From Counterculture to Cyberculture.”

This begs the question: what are the “file sharing” markets today that these sorts of individuals congregate around? One that seems obvious to me is blockchain, which has precisely that balance of rebelliousness, democratization, and technical excellence (well, at least some of the time!) And then there are the modern-day “pirates” today, such as Alexandra Elbakyan, who invented and operated Sci-Hub to democratize the world’s research and knowledge.

It’s maybe not the current batch of companies that we see which will become the next extraordinary unicorns. But watch the people who show up in the exciting places — because their following projects often seem to hit gold.

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