Michael and Xochi Birch on starting Bebo
- 10 June 2011
- From the section Business
Michael and Xochi Birch are a husband-and-wife team of entrepreneurs who are best known for setting up Bebo, the social networking company.
They later sold the enterprise to AOL for $850m dollars in 2008.
The couple met in London, where they worked as computer programmers.
"We were always entrepreneurially minded," says Xochi Birch. She and Michael were attracted to the idea of setting up online businesses because "it seemed like the easiest thing to do".
They decided to start their own company when Michael arrived home one day and said: "I want to quit my job and let's do an internet start-up."
"I had no idea what that meant at the time," Xochi remembers. She soon found out: "I would work continuously for the next three years [to] support him, seeing as he was at home, figuring our internet start-ups."
She confesses that despite their background in computers and programming they were "complete amateurs" when it came to internet start-ups.
Michael recalls the beginning as "a comedy of errors, just trying things out".
It didn't help that they had no clear product in mind.
"We just wanted to build consumer internet websites," explains Michael. "We thought if we could get millions of users without spending much money, we could probably make some money out of it."
He says now it was a "very under-developed plan".
Michael and Xochi Birch began their venture into online start-ups in 1999, very shortly before the dotcom boom exploded. They believe they were lucky because unlike other established online companies they still had nothing to lose
"We had not spent a cent, we had not raised a cent, and we were still learning a lot," says Xochi.
Indeed, it would be another three years before one of their online start-ups became profitable.
They decided to remortgage their home twice to raise the capital to fund their venture.
"It was a bit of a gamble," says Michael. "But I always felt that we both came from stable families. I thought, 'Worst thing happens; we go and live with my parents or her parents, and look for a job'."
In their quest to launch the perfect online company, they tried out many approaches, including a will-writing facility and an online address book. But their first real success came when they launched Birthday Alarm, a website which alerts users to people's birthdays.
By 2002 they had 2 million members, had moved to California (where Xochi was born and grew up), and were making $10,000 a month from the site.
"We were very focused in the early days on growth because we realised whatever our revenue would be, it would always be proportional to how many members we had," explains Michael.
A key turning point came when they decided to charge members for sending e-cards.
"We went from earning $10,000 a month to $10,000 a day. Overnight, by flipping a switch," says Xochi.
Despite the success and profits, Xochi and Michael Birch didn't plan on packing away their keyboards just then.
Social networking sites such as Facebook and MySpace were just becoming popular and the couple decided to use their profits to create their own versions.
Their first platform, called Ringo, attracted 400,000 users before they sold it. But it was their second creation, Bebo, that became a global hit.
The couple say that despite the presence of their online rivals they felt there was room to be innovative.
"Facebook was a very good website, but it was limited to students," explains Michael.
The couple saw room for Bebo as a hybrid version of existing networks, summarising it as essentially "a very good version of MySpace… but with the product quality of Facebook".
Like other social networking sites, Bebo experienced its fair share of controversy, over matters such as privacy.
But a bigger challenge proved to be establishing the brand in a competitive market, says Michael Birch. "I'd say we partly succeeded… I was never happy enough with the product, it never lived up to the standards that I wanted for it."
Deciding to sell the company to AOL for $850m dollars wasn't a hard decision.
Although at the time of the sale Mr and Mrs Birch were no longer the sole owners, they still received a substantial proportion of the proceeds.
The large amount of money has been helpful in funding further entrepreneurial projects - but, they say, it didn't shock them.
"The biggest change in our lives was when we started making money from Birthday Alarm" explains Michael.
"By the time we'd sold Bebo, we had millions in the bank. To hundreds of millions wasn't, in many ways, that big a shift."
'Have a sense of humour'
Starting a business is always stressful but how much more difficult is it when you're also husband and wife?
"There's one person that's going to be down, at any time, and the other person's there to kind of cheer you up, and I think that's the relationship we have," says Xochi.
She adds: "You must have a good sense of humour… you need to be able to laugh at yourself."
As Bebo grew in size, the couple found managing a larger team to be something of a challenge.
"We don't really manage people, we just hope they do the right thing," says Michael.
"We enjoyed the really early stage of creating and building," he says. "When it became fairly political internally… it just stopped being fun."
But the two entrepreneurs have no intention of slowing down. They have gone on to launch a number of other start-ups since selling Bebo.
They also recently attended a business conference in Delhi, to learn more about entrepreneurship in India.
"Our work defines us," says Xochi.
"There was never a moment where we thought we would retire to an island in the Bahamas."