You can’t make 500 million friends without making a few enemies. So goes the tagline of the The Social Network, summing up the tension between Facebook CEO Mark Zuckerberg and his cofounder (and at one point, close friend) Eduardo Saverin, who got booted from the company on its way to global domination.
But Snap Inc., Facebook’s foe with fewer friends, also has a similar character in its past: Reggie Brown, one of cofounders Evan Spiegel and Bobby Murphy’s classmates at Stanford where they originally built the app. Brown was apparently forced out of the company without equity—despite, according to Brown, coming up with the concept of the disappearing messaging app.
Brown later, like Saverin, sued. And on Thursday, with Snapchat’s filing to go public, we learned a new detail of the saga: Spiegel and Murphy paid Brown $157.5 million in a settlement over the dispute.
The IPO filing exposes both the settlement’s timeline and financial terms:
In February 2013, an individual filed an action against us, our predecessor entity and two of our officers in Los Angeles Superior Court, alleging that we were using certain intellectual property that the individual jointly owned with our founders.
In September 2014, the parties entered into a settlement agreement that resolved all claims among the parties. Under the agreement, we agreed to pay the individual a total of $157.5 million and such amounts were recorded in 2014. We paid the individual $50.0 million in 2014. As of December 31, 2015, $107.5 million was included in accrued expenses and other current liabilities on the consolidated balance sheet. We paid the individual $107.5 million in the year ended December 31, 2016.
There are no further amounts required to be paid in the future.
A TechCrunch report from March 2012 found an anonymous source who backed up Brown’s claim that he had invented the idea of Snapchat.
“Spiegel wasn’t even part of the convo at the idea’s inception,” the source told TechCrunch.
“Brown stated to Spiegel something to the effect of: ‘we should make an application that sends deleting picture messages,'” according to the 2013 lawsuit. “Spiegel acknowledged the commercial viability of Brown’s idea, repeatedly exclaiming that Brown had indeed conceived of a ‘million-dollar idea.'”
Turns out it wasn’t just a “million-dollar idea.” Snapchat’s now seeking a valuation of more than $20 billion.
And Brown, much like the images that Snapchat trades in, was himself made to vanish, too.
According to TechCrunch, Brown graduated from Stanford in June 2012 and moved back to South Carolina, where he grew up. Meanwhile, Spiegel’s gracing magazine covers, as he and Murphy continue their nice guy narrative.
The IPO filing also revealed that the cofounders created a Snap Foundation to “support arts, education and youth.” Each founder promised to donate as much as 13 million shares of common stock over the next 20 years.