089 – File sharing – 1999

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I think that the most beautiful thing lately hasn’t been in hardware or software per se but collaboration
– the idea behind Napster, which uses the distributed power of the Internet as its engine. Steven Levy

Sean Parker was eight when his father taught him to programme an Atari 800; he became a keen programmer and hacker. When he was in his teens his father pulled the plug on a late-night session and he was unable to log out of a corporate site. The FBI traced him and he ended up doing community service; he was too young to be formally punished.

He later won prizes at science fairs, one of which led to him doing work for the CIA. Before the end of high school he was earning $80k pa from his enterprises; he skipped college.

1999 Parker with his friend Shawn Fanning launched Napster; Parker provided the funding. The site was designed for music lovers to find and download MP3 tracks. The service was named after Fanning’s hairstyle.

February 2001 Napster had 25 million users exchanging 80 million music files between themselves.

The Recording Industry Association of America took legal action and was soon followed by big hitters such as Madonna and Metallica when they found their music being distributed through Napster.

Napster suggested that it provided a valuable promotional service for artists and bands, but the courts were unimpressed. Napster had to pay over $26m to intellectual property owners and tried to switch to a chargeable service but this was not well received.

July 2001 the site closed. Napster attempted to sell to Bertelsmann of Germany but a judge blocked this and the operation went through Chapter 11 to Chapter 7 in September 2002. Without Napster however, iTunes would never have happened.

2002 Parker launched Plaxo, an online address book service that integrated with Microsoft Outlook. It was an early social networking tool that was the first to use a viral approach. It invited all those listed in a user’s address book to join – it soon had 20million users.

Parker was edged out of the operation by the money men for no publicised reason. Subsequently he offered some early advice to Jonathan Abrams who was developing Friendster, and had equity in that operation.

Mark Zuckerberg of Facebook met Parker who introduced Facebook to Peter Thiel of PayPal. Thiel became one of Facebook’s first investors with a placement of $500k.

Parker helped the Facebook team as it incorporated, helped supervise its move to Palo Alto and served as its first president from 2004; he held 7% in equity. He advised on the photo-sharing features of Facebook and was a keen advocate of keeping the interface clean and simple.

2005 Partying at a rented beach house, Parker was arrested for cocaine possession; his was the signature on the rental. No charges were brought and Zuckerberg stated he was not concerned but the biggest Facebook investor forced Parker out.

2006 Parker became managing partner of the Founders’ Fund, established by Peter Thiel to invest in early-stage companies.