In the startup world, everyone is looking for the next big thing. Yale grads Mahbod Moghadam (’04), Tom Lehman (’06), and Ilan Zechory (’06) think they’ve found it in Rap Genius—a website where thousands of users publicly annotate everything from Emerson to Eminem. Each line in a Rap Genius entry is a clickable link that reveals information about the many allusions and metaphors hidden beneath the surface of a text. With 1.4 million site visitors per day and $15 million in venture capital funds from Andreessen Horowitz, Rap Genius has expanded to include annotations of political speeches, poetry, legalese, and even art.
“This is the thing you have to understand about the magnitude of the opportunity here. We can be the website people go to to understand all of human culture,” Tom said about the future of the site.
Last week, I sat down with him, Mahbod, and Dan Berger (’05) in a Brooklyn café to hear about Rap Genius’ wild ride.
At what point did Rap Genius go from being a side project to a full-blown company?
Mahbod: About six months in, we applied to Y Combinator [a startup incubator] and we got rejected. That made us more hungry and more emotional. I was running out of money and I had been fired. So I had nothing else to work on, and I’d be working on Rap Genius all day. Tom had a crazy hedge fund job, and he reduced it to one day a week to work on the site.
What was the hardest part about starting a company in the beginning?
M: Nothing was hard because we were just doing it for fun. No pressure. If we had the pressure of thinking that we’re trying to build a business, we would’ve been constipated. Nothing would’ve ever come out.
How do you go about raising money? What has the fundraising process been like?
M: Nas was our first investor; we kick it with him all the time. He was the first verified artist on Rap Genius. The first time he saw it, we didn’t even explain anything to him, and he said, “This sh–t’s gonna be bigger than Twitter.” Our co-founder Illan kicked it the whole day with Jay Z. Jay Z basically told us, I will get a verified account and explain my own lyrics if you give me 50% of the company. I was like, “get … out of here.” He’s a goon. He thinks money will make him happy, but he doesn’t realize what he really wants is to be handsome.
What really sealed the deal is when we went to Ben Horowitz’s [a prominent Silicon Valley investor] house. We got mad drunk with him three times. And those three times sealed the deal.
T: That’s the thing. Investment decisions are not decisions made on paper with calculus or excel. It’s really how you feel about the people underlying it. It’s the most fun thing; you can never complain because you’re living your dream. But it’s also very a hard thing—a burden on you. To constantly be pushing when things don’t look great. It also sucks because you have to change your goals. In the beginning, if you had told me we would get to this size, I’d be like “Oh my God that’s amazing!” But now, it’s like we have to get 100x as big as we are now. The goalpost keeps moving.
How many people work for Rap Genius now?
M: Five hundred thousand people have written explanations. Five or six thousand put it as their job on Facebook. We pay thirty, twenty-five of which are in New York. One is in Paris, running Rap Genius France. One is running Rap Genius Germany.
What’s your approach to managing this startup?
T: It’s based on two things: crowds and decentralization. The website itself is very decentralized. The main thrust of the product development is very centralized. We have to pick our priorities. We can’t just let people do whatever. It’s a mixed model.
M: We’re corporate. But we try to be corporate thugs. There are seven developers. So those are the crown jewels of the employees. That’s who’s building the site. And they all report to Tom. And then there are fifteen non-developers and they all report to Illan. I’m just kind of the Peter Pan. I do whatever I want. I work a lot with the people who aren’t getting paid. Community development.
So you really want to annotate everything?
M: Yeah. By annotate we mean open a dialogue. People have conversations about stuff they’re interested in. The famous people chime in with their fans listening to them via the verified accounts. Everyone’s just f––in’ around. It’s meant to be playful. It’s meant to get you to look at something closely.
What have you been working on over the past year?
And what are you most excited about going forward?
M: Fashion Genius, Rap App, Art Genius. Art Genius is going to be built in 6 months from now and it’s going to let you annotate different parts of the canvas.
T: iOS. That’s the whole thing. The whole website is a prototype—that’s what people don’t understand. The real thing is an app on your phone. 52% of traffic is mobile. 60% of that is iPhone. It’s going to be one of the biggest apps in the world.
M: For an app to sell one million downloads is crazy. It’s like going platinum. And for us one million downloads is gonna be cakewalk. So it’s going to be the first time that in the tech community, people are going to go “holy sh–t.” Nobody believes us about our traffic. They think we’re lying or we’re gaming it somehow. But then the one million downloads is going to completely change the game. It’s going to make us the biggest deal in the world. It’s a guide to human culture—whether it’s music, poetry, speeches, current events—in your pocket, broken down. It’s an incredible idea. It’s gonna be called Genius.
When did you start work on the app?
T: Two months ago. We didn’t have the talent. You could take a good programmer and give him a year to work on something. A great programmer could do the same work in a month. The economics are hard to understand if you’re used to the physical world. The best taxi driver in the world is maybe 2x as good as a good taxi driver. The best programmer in the world is 20x, 100x as good as a good programmer.
M: That’s why he’s looking for the best of the best. They give a very, very difficult technical exam. And if the person passes, whether they take the job or not, he gives them $1,000 in cash. It’s called the Rap Genius genius grant.
Are you focusing on revenue at all? What’s your business model?
M: Not until we become one of the ten biggest websites. Right now, we’re the 93rd biggest website. When we’re in the ten biggest websites, we’ll worry about revenue. Eventually we want Nike to pay $20 million to have its own verified account. And they explain the Nike references in songs. And they pay us to feature it. The other idea we have is Enterprise Genius—to build closed versions of Rap Genius for the CIA to use, for Procter & Gamble to use. Then the most important thing that’s going to happen in the site’s life is about a year away. It’s when you can do annotations on other websites. You go to the New York Times and you can annotate any line, and it’s powered by Rap Genius.
What was the entrepreneurial culture at Yale like when you were around?
T: When the Yale Entrepreneurial Society came out, everyone gave it a lot of props. But by entrepreneur, they meant start your own hedge fund. Now, everyone wants to do their own app. In our day, finance was insanely huge. They’d have these info sessions at the Omni Hotel. And everyone would be there with their leather-bound things. Consulting, finance, law school, done. Now, I think it’s changed.
Do you feel that your Yale education has been relevant?
T: It gave us good taste. You hang out with different people. You understand the world better. Anyone can learn to program, as long as you’re fast on the computer. You don’t need to learn that in college. What you need to do in college is hang out with friends. Understand the trail of political Islam. I think Yale is very relevant — it’s just an illustration that you can’t go straight towards the goal in life. You have to take the winding road.
M: Yale is close reading. At Princeton, they teach you to dress boat shoes and country club. At Harvard, they teach you to be powerful. At Yale, all you learn is how to read a text closely and take it apart line by line. Yale is intellectual. Harvard is corporate. Princeton is corporate. And that’s why we haven’t built a corporation. We’re corporate thugs. We’ve built a society of intellectuals. [Rap Genius] is more like a university.
What advice would you give to aspiring entrepreneurs?
T: Worse is better. A lot of people think, “Oh I’ve got to come out this perfect jewel. I have to protect it until it’s perfect and then release it. Otherwise, I’ll be embarrassed.” If you’re not embarrassed, you waited too long. Get it out there.