For Twitter, Success Came After Founders’ Exit; Ailing Startup Finds Its Legs After Pushing Aside Those That Brought It to Life

October 3, 2013, 8:08 p.m. ET

For Twitter, Success Came After Founders’ Exit

Ailing Startup Finds Its Legs After Pushing Aside Those That Brought It to Life

SHIRA OVIDE and YOREE KOH

Twitter Inc., which Thursday detailed one of Silicon Valley’s most hotly anticipated IPOs, nearly died without a chirp. The company was a side project of an ailing startup and riven with internal power struggles before morphing into a communications tool that has helped foment revolutions, end political careers and change the meaning of the word “tweet.” It reached that point without any of its four co-founders, none of whom now work at the company. A promising idea only turned into a steady company when Twitter outgrew its founders, and the people in charge pushed aside those who brought the company to life.Two of them, Evan Williams and Jack Dorsey, barely speak to each other, according to former employees and others familiar with the company. A third, Biz Stone, left in 2011 with Mr. Williams to start a new company. The fourth founder, Noah Glass, left even earlier, within a year of Twitter’s launch; he previously said he didn’t get enough credit for the company’s success.

Twitter’s founders didn’t respond to requests for comment. A Twitter spokesman declined to comment.

Many companies’ origins are often dotted with power struggles, amplified when big investors are involved.

Fewer than half of firms that go public have a founder as CEO, according to a 2008 study by Bharat Jain and Filiz Tabak at Towson University. The founder-CEO model is more common at tech firms—think Bill Gates, Larry Ellison and Mark Zuckerberg.

At Twitter, one pivotal dispute took place in 2010, as Twitter executives mulled how to boost its then-paltry revenue. Dick Costolo, who had joined the company as chief operating officer, wanted to sell ads linked to user posts. Mr. Williams, then the CEO, openly mused about alternatives. He wondered whether Twitter should charge companies and other professionals to set up Twitter accounts, according to people familiar with the strategy discussions.

Mr. Costolo prevailed. A few months later, he was named to replace Mr. Williams as CEO. Twitter last year generated $269.4 million from advertising, according to the IPO document.

The leadership tumult kept Twitter “shifting and changing direction,” said Thomas Arend, a product manager from 2011 until January. “Chaos can be a part of their business model but it can also be distracting,” he said.

Messrs. Williams, Dorsey, Glass and Stone initially worked together at a startup called Odeo Inc. that let people create audio files. When Odeo was faltering around 2005, Mr. Williams allocated leftover money for Mr. Dorsey and other employees to experiment with ways to swap text messages. The service, initially called Twttr, coexisted with Odeo until employees worked out which had more promise.

As at many startups, friendships and professional life intertwined. Employees, including Messrs. Dorsey and Glass, bought a rickety boat for $1,000 on eBay, and workplace outings included sailing trips across San Francisco Bay. Mr. Williams, a Nebraska native, brought aboard Mr. Stone, a friend from their days at Google Inc.

The 2007 South by Southwest, a music festival and technology-industry gathering, was Twitter’s coming out party. Twitter peppered the Austin, Texas, convention center with video screens posing the question, “What are you doing?” and an invitation to use Twitter to post 140-character replies.

Twitter’s usage tripled that week, to about 60,000 posts a day. The buzz helped convince the founders to unleash Twitter as a stand-alone company.

Within a couple of years, Twitter emerged as a way to quickly spread information. Bystanders in early 2009 posted on Twitter the first photos of a US Airways Group Inc. plane that landed in New York City’s Hudson River. Mr. Williams appeared on Oprah Winfrey’s talk show in April 2009 to help her set up a Twitter account.

But internal drama threatened Twitter during its growth spurt. Mr. Dorsey was Twitter’s CEO from its early days, but the board in 2008 handed the job to Mr. Williams.

Mr. Dorsey later told Vanity Fair the demotion “was like being punched in the stomach,” and said he wasn’t a successful CEO in part because he deferred too much to Mr. Williams. Mr. Dorsey left Twitter.

Mr. Williams also proved to be an imperfect manager. As Mr. Williams focused on new features that are now core parts of Twitter, some employees believed he didn’t pay enough attention to frequent service outages. Twitter’s “Fail Whale”—a cartoon of a whale being hoisted by birds that was posted when the service was unavailable—became a running joke in Silicon Valley.

Mr. Williams asked Mr. Costolo, a former Google colleague, to join as operating chief. A breaking point, according to people familiar with the matter, was the 2010 World Cup, when Twitter frequently came unglued from soccer fans posting millions of messages.

Mr. Costolo warned employees that Twitter’s future was in peril if the service wasn’t running all the time. The company hired 300 engineers to overhaul the site’s technololgy. “It was war,” said a former executive. Outages are much less frequent now.

In late 2010, the board replaced Mr. Williams with Mr. Costolo. Within months, Mr. Dorsey said he would return as head of product development. Mr. Williams, Mr. Stone and Jason Goldman, another early Twitter official sometimes called a shadow founder, quit to start a new company.

Mr. Dorsey’s return to Twitter prompted a cascade of employee defections. Some blamed Mr. Dorsey for pushing out senior staffers hired by Mr. Williams, people familiar with the matter said. Mr. Dorsey swapped out the coffee served at Twitter’s San Francisco headquarters with blends from Sightglass, a local shop in which Mr. Dorsey was an investor.

Mr. Dorsey is chairman of Twitter, but has stopped daily work at the company.

“There are going to be people who are great at certain phases of the company and then are not right for whatever reason,” Mr. Costolo said at a conference in May. “You gotta just get through that and fight through that as quickly as you can.”

On Thursday, Messrs. Dorsey, Stone and Williams returned to Twitter headquarters to speak to employees.