Flickr: How 2 broke founders transformed a failed project into millions

Hey Rebel Solopreneurs

Ever felt like you're heading in the wrong direction with your digital product?

Maybe you've spent months building something, but deep down, you're wondering if anyone will actually buy it.

The fear of wasting time and money on the wrong idea can be paralyzing.

But what if I told you that sometimes the "wrong" direction could lead to your biggest win?

That's exactly what happened to Caterina Fake and Stewart Butterfield.

They were building a game, running out of money, and everything seemed to be falling apart.

Yet they turned their situation around and sold their company for $35 million.

Ready to discover how they transformed potential failure into massive success? Let's dive into this wild ride!

1: 🎨 Early days: the artistic kid who loved to sell

Little Caterina was quite the entrepreneur at age 4.

While other kids were just scribbling with crayons, she was putting price tags on her drawings - 10 cents, 25 cents - and selling them to her parents and grandmother.

Sure, her toilet-paper-roll art and popsicle stick crafts didn't exactly fly off the shelves, but hey, you've got to start somewhere, right?

Growing up in Pittsburgh, Pennsylvania, Caterina was always a bit different.

She went from a fancy prep school (Choate Rosemary Hall) to getting her literature degree from Vassar College in 1991.

Talk about a well-rounded education!

After college, Caterina became a professional job-hopper (sound familiar, fellow multipotentialite?).

Fun fact: As a kid, she actually dreamed of being a writer and artist.

She worked in investment banking, helped out a painter, and even worked as part of the crew shooting interstitials and filler programming for Seinfeld! Yes, that Seinfeld!

2: 💻 The tech adventure begins: from zero to web wizard

In 1994, Caterina landed in San Francisco with a bold plan - to turn her artistic skills into a career in web design and programming.

When she saw the emerging tech scene in San Francisco, she realized she could combine her artistic talents with this new thing called the World Wide Web.

But instead of joining the crowd chasing traditional success, she started from scratch.

She crashed at her sister's place and taught herself programming from scratch, starting with HTML and building websites.

Talk about gutsy!

Remember, this was way back when the internet was just taking baby steps.

Caterina jumped right in, creating websites and eventually becoming the art director for Salon.com.

She even started one of the first blogs that actually got people reading it - way before blogging was cool!

3: 💝 The unexpected partnership: when love meets tech

In 2000, at a San Francisco party, Stewart Butterfield spotted Caterina.

He was a philosophy graduate from British Columbia who'd been reading her blog religiously as a fan.

Being one of the many tech enthusiasts who followed her blog regularly, Stewart had been looking for chances to meet her.

His first attempt at asking her out? Total rejection!

But Stewart wasn't easily discouraged.

A few months later, when he was back in San Francisco, he tried again with a skiing invitation to British Columbia.

This time, she said yes to the skiing trip!

During that trip, their shared interest in web development sparked interesting conversations.

Stewart suggested they create a company together, since they were both working in web development at that time.

Though they didn't end up starting the web development company they initially discussed, something else blossomed.

They fell in love and maintained a long-distance relationship between San Francisco and Vancouver.

They got married in 2001, and two days after their honeymoon (yes, just two days!), they dove straight into building their first company, Ludicorp.

Working with your spouse? Not always a piece of cake!

Early on, they butted heads since they both came from design backgrounds.

"There was a lot of jockeying for positions," Caterina admits.

But here's where it gets good - they actually balanced each other perfectly.

Stewart was the spontaneous ideas guy, while Caterina was the focused planner.

Together, they made quite the team!

4: 🎮 The original plan: building a game that never ended

Hey digital creator, this might sound familiar - you start building something thinking you know exactly what people want, right?

Just like that course outline you've been perfecting, or that super-detailed Notion template you're crafting.

Caterina and Stewart were obsessed with creating a web-based multiplayer game called Game Neverending.

Why this name? Well, it was supposed to be exactly that - a game that never ended!

They assembled a small team of just three people initially: themselves and Jason Classon, who'd worked with Stewart before.

The game was pretty unique for its time.

Instead of shipping it on CD-ROMs like everyone else, they wanted it to live on the web.

Players could form groups, chat with each other, and build a social network - pretty ahead of its time, right?

Talk about swimming against the tide!

The Canadian government rejected their loan application (though hilariously, they later approved the exact same application a few months later).

And those venture capitalists? They wouldn't even return Caterina's calls.

"If it wasn't a shrink-wrapped game sold at Best Buy, they didn't know what it was," Caterina laughs about it now.

And get this - they were starting right after the dot-com bust!

Most people thought they were crazy.

But Caterina saw it differently: "The less money you have, the fewer people and resources you have, the more creative you have to become. I think that had a lot to do with why we were able to iterate and innovate so fast."

5: 💡 The pivot: when sickness leads to success

Sometimes, the best ideas come from the most unexpected places.

In November 2003, Stewart got violently ill during a flight to New York.

After a rough night of being sick (we're talking multiple times on the freeway and in the hotel - poor guy!), he had an epiphany: "Let's make a photo-sharing site."

Here's the cool thing - digital cameras were just starting to get popular, and more people had fast internet at home.

Before, people would take maybe 20-30 photos at special events because film was expensive.

But now? People could snap hundreds of photos with their shiny new digital cameras!

Just one tiny problem - sharing all these photos was a real headache.

People had to upload photos to their laptops, then figure out how to share them on clunky websites.

Stewart realized they could make this whole process way easier.

Plus, he and Caterina were total blog nerds (they'd been blogging since 1999!), so they understood how people loved sharing stuff online.

The timing was interesting - they were actually stuck waiting for their game's back-end development to catch up with the front-end.

The team was getting restless and wanted to do something productive during this wait.

So they started experimenting with this new idea as a side project.

They needed a name for their project, and during a brainstorming session, Stewart's friend Ben mentioned something about "flickering of the metaverse."

Everyone's ears perked up - "flicker" sounded perfect!

Just one small hiccup - the domain flicker.com was already taken, and the owner wouldn't give it up.

So they got creative and dropped the 'e', making it Flickr.

They built a sort of instant messenger app where users could form small communities and share objects.

Then they added a simple feature - the ability to share photographs through the messenger.

Users could just drag-and-drop photos into the app to show what they were looking at.

But money was so tight that they couldn't even pay salaries.

Only one developer with three kids got paid - the rest worked for free!

Talk about believing in your product!

The team grew to six people, but they were spread thin trying to do both the game and Flickr.

Eric Costello, their "DHTML guru" (that's what they called frontend developers back then 😄), worked remotely from New York because he didn't want to uproot his family.

They found creative ways to save money, like subletting office space from a friend who was barely using it.

As Caterina put it, "One of the big risks of startups is that they're inherently unstable. They don't have an established business; they're often trying to invent something new. They are relying entirely on investment and not on revenue."

6: 🎯 The tough choice: killing their dream for a new opportunity

Picture this: six people, two products, and barely any resources.

The game they originally dreamed of building had 20,000 eager fans already signed up to test the prototype.

It was their original vision, the thing that got them excited to start the company in the first place.

But they were running out of money, and something had to give.

They had one last shot at success and needed to make a choice.

They had enough money for just one last shot, so they needed the whole team to decide together.

They gathered the six team members for a crucial vote: continue with Game Neverending or go all-in on Flickr?

The team was deadlocked - half wanted to stick with the game they'd originally dreamed of building, and half saw Flickr's potential.

With the vote split three-to-three, Caterina knew they needed to break the tie.

She went to talk with Eric Costello, their frontend coding wizard who'd done all the interface work for both projects.

After a heart-to-heart about Flickr's growing momentum and its potential for success, Eric reluctantly agreed to change his vote.

They held a second round of voting, and this time Flickr won.

By this time, Flickr was showing some really promising signs.

The site's user base was doubling every month, with no signs of slowing down.

They were getting acquisition offers from several companies already, even though Flickr was just a few months old.

Their "Blog this" button was spreading Flickr photos across the internet like wildfire.

Even venture capitalists who had previously ignored them were now calling 3-4 times a week!

The game had loyal fans, but Flickr had unstoppable momentum.

Around July 2004, they made the final call to put the game on hold.

Though it hurt to shelve their original dream, the numbers didn't lie - Flickr was their rocket ship to success.

It wasn't an easy decision, but as Caterina often said, "Constraints inspire creativity."

Looking back, she reflected, "The success that Flickr has seen has been a huge surprise. Obviously, when you start a business, you hope and pray that it will be successful, but I think it's also something of a surprise when it actually happens."

7: 🚀 Building at warp speed: from idea to launch in 8 weeks

Using the technology they'd already built for the game, they created the first version of Flickr in just eight weeks.

(Sound familiar? It's like when you repurpose content from your YouTube videos into Twitter threads or newsletter issues!)

Talk about making lemonade from lemons!

They launched in February 2004 at the O'Reilly Emerging Tech Conference, and while the initial response was positive, it wasn't exactly setting the world on fire.

Here's something wild - they didn't do any market research before launching.

And thank goodness they didn't!

(Quick question: How many times have you talked yourself out of launching something because you saw "too much competition"?)

Caterina later admitted that if they'd done their homework, they probably wouldn't have started Flickr at all.

Why? Because the big players like Ofoto and Shutterfly were running their photo-uploading as a loss leader, making money from printing services instead.

"We were blissfully unaware of them and had only the vaguest idea of how they worked as we were building Flickr," she chuckles.

But then they did something that changed everything: they made photos public by default.

It sounds simple now, but back then, it was revolutionary.

Unlike other photo sites that kept everything private, Flickr embraced sharing with the world.

They even added a "Blog this" button that let users easily share their Flickr photos on their blogs.

As Caterina puts it, "We were very small and very poor, so we built a lot of features that were deliberately viral."

Smart thinking for a bootstrapped company, right?

8: 🌟 The unexpected magic: when users take control

Here's where it gets interesting for you, digital creator!

Flickr's success wasn't just about photo sharing - it was about building a community.

From day one, Caterina and her teammate George Oates took turns spending 24/7 on the Flickr website, personally welcoming every single new user who joined.

They'd hop onto the Flickr site, introduce newcomers to other users with similar interests, and chat with them right there on the platform.

But they didn't stop there - they spent hours browsing through photos on Flickr and leaving genuine, thoughtful comments.

No generic "great photo!" comments from this crew.

Instead, they wrote detailed paragraphs explaining exactly what they loved about each image.

They weren't just building a product; they were creating a culture.

A wild thing happened - other Flickr users started doing the same thing!

Users started forming unique groups like "What's in my bag?" where people would photograph the contents of their bags and tell stories about each item.

"We anticipated it would be used for things like weddings and baby photos," Caterina says, "but people made these groups around fascinating subjects we would never have thought of."

And here's a fun twist - while other photo sites were battling nasty comments and toxicity, Flickr's community was surprisingly positive.

You see, back then, most online forums and websites were plagued with negative, derogatory comments.

But Flickr was different, and it was no accident.

Their secret? Leading by example right there on the website.

The team wrote detailed, genuinely enthusiastic comments about why they loved certain photos.

And guess what? The community followed their lead!

As Caterina says, "You can shape the conversation of a community by joining the discussion early on and adding positive commentary."

She firmly believed, "This is a social product. People are putting things they love—photographs of their whole lives—into it. All of these people are your potential evangelists. You need to show those people love."

9: 💰 The road to acquisition: from zero to hero

Remember those VCs who wouldn't return their calls?

Well, the tables turned completely.

Once Flickr started growing, they were getting 3-4 calls from VCs every week!

But instead of jumping at the money, they played it cool.

"When you need money, nobody will return your calls. When you don't need money and you say, 'Sorry, guys, don't need any money,' they can't stop calling you," Caterina laughs.

The site kept growing like crazy, doubling its users every month.

They introduced cool features like tagging (borrowed from del.icio.us - because why reinvent the wheel?), which let users organize and discover photos in whole new ways.

Then something unexpected happened - news organizations started using Flickr photos.

When the Australian embassy in Jakarta was bombed, three people had uploaded photos within 24 hours.

Flickr had accidentally become a source for breaking news photography!

🎉 The happy ending

In January 2005, Yahoo saw Flickr's potential and acquired it for $35 million.

From a team of just 7 people working with barely any resources, they built something that changed how people share photos online.

They went from being almost broke to creating a platform that millions of people used worldwide.

What made them finally decide to sell?

One of their early investors who had believed in them was ill, and selling would help him financially.

Plus, as Reid Hoffman (LinkedIn's founder) told them, "You can always do it again. And the amount of money that you'll make on this will change your life in a way that you'll be able to be entrepreneurs for the rest of your lives."

🌟 Your turn!

You might be sitting there thinking, "But I'm just one person trying to create digital products."

Well, guess what?

Caterina and Stewart started with nothing but an idea that didn't even work out!

They proved that sometimes the best opportunities come disguised as setbacks.

Your digital products might not turn into the next Flickr, but who knows?

Maybe that Notion template or workshop you're hesitating to launch could be the next big thing.

The only way to find out is to build it!

Keep Zooming 🚀 🍩

Yours "Making you win" Vijay Peduru