Founder of SparkNotes and OkCupid Shares Key Lessons From His Entrepreneurial Journey
Back in the 1990s, when the internet was just starting to become a big deal, a young entrepreneur named Sam Yagan and his buddies, Max Krohn, Chris Coyne, and Eli Bolotin, got together in their college dorm room to start their first company. As they studied arithmetic together, they questioned why there weren't any online study aids similar to Cliff Notes. Thus, they developed SparkNotes.
The dot-com boom and bust
Remarkably, after just seven months, their small product began drawing interest from large corporations interested in purchasing it. Yagan saw an abrupt change of fortune when he sold his startup during the dot-com boom. Before that, he was a penniless college student earning $4,000 each semester. But after that, things quickly became worse.
After SparkNotes' purchase, the company's stock price dropped and SparkNotes was relisted for sale. It would have been easy for Yagan and his buddies to buy it back, but they chose not to. After 25 years, Yagan, who is now a prosperous investor and entrepreneur, claims that his worst professional error was not purchasing SparkNotes back. He now uses that experience as a teaching tool for the business owners he assists.
Reflecting on regrets
Yagan and his partners founded the business in March 1999 and sold it for $30 million, with half of the money paid upfront and the remaining amount paid over time, to iTurf, another online startup. Regretfully, this happened right before the February 2000 dot-com bubble burst. About a year later, iTurf was still in debt to Yagan and his team, having had financial difficulties. They consequently decided to sell SparkNotes to pay off their debts. Barnes & Noble had the chance to pay iTurf $1.75 million to recover full control when they made an offer of $3.5 million—a meager 5% of the true value.
Who is Sam Yogan?
Sam Yagan, born in 1977 in Chicago, Illinois, is an American entrepreneur famous for co-founding tech start-ups, including OkCupid in 2003. Raised by Syrian immigrants in Chicago, Yagan graduated from the Illinois Mathematics and Science Academy before attending Harvard University, where he earned a B.A. in applied mathematics and economics in 1999. During his time at Harvard, he co-founded SparkNotes, later selling it to iTurf for $30 million in 2000.
After leaving Barnes & Noble in 2002, Yagan led the development of eDonkey, a peer-to-peer file-sharing network until legal issues arose in 2005. He then reunited with his SparkNotes partners to launch OkCupid, known for its innovative matchmaking approach. In 2011, OkCupid was sold to IAC/InterActiveCorp for an estimated $90 million. Yagan held various leadership positions within IAC, including CEO of Match, Inc., and later CEO of the Match Group, overseeing its successful IPO in 2015.
In 2014, Yagan co-founded Corazon Capital LLC, a venture capital firm focused on supporting local tech start-ups. One of its investments, Rocketmiles, was acquired by the Priceline Group for around $20 million in 2015.
Missed opportunities and lessons learned
Looking back, when Yagan reflects on that time, he realizes that he was so overwhelmed by the stock market crash that he couldn't fully grasp the internet's long-term importance. Despite the tough decisions they would have had to make, like letting people go, they could have persevered. Keeping hold of SparkNotes would have allowed them to introduce OkCupid to a wide audience. Just picture being able to announce the launch of a new dating service like OkCupid directly to SparkNotes users. They would have named it SparkMatch.