Chapter 1: The Rise of Discord

Let’s delve into Discord and its remarkable journey.

As a father of twin fifteen-year-old boys, I've observed that they dedicate about half of their waking hours to Discord. Their previous hangouts with me have been largely replaced by online interactions with friends. For them, Discord has taken precedence over dad.

For those unfamiliar with it, Discord is a comprehensive platform that combines VoIP, instant messaging, and digital content distribution. Users can engage through voice calls, video chats, text messages, and share media and files in private conversations. Additionally, it hosts communities called "servers."

In an effort to connect with my sons, I sought to understand Discord better, leading me to an episode of my favorite podcast, How I Built This, featuring its founder, Jason Citron. Halfway through the episode, one particular statement caught my attention: the host revealed that Citron had declined a $10 billion acquisition offer from Microsoft.

This bold decision signifies a profound confidence in his business. It prompted me to reflect on when an entrepreneur should accept a substantial offer versus when to trust in their ability to grow their startup. Did Citron make a sound choice, or could this ultimately be a $10 billion miscalculation?

The Entrepreneurial Spirit

There’s a common belief that entrepreneurship is in one’s DNA, suggesting that some individuals are inherently predisposed to be entrepreneurs. If this notion holds true, Jason Citron certainly embodies this spirit. His family lineage boasts a history of business ownership.

Citron's great-grandfather established an electrical consulting firm in the early 1900s, which was inherited by his grandfather. His father operated two Haagen Daz stores. Given this entrepreneurial background, it’s no surprise that Citron embarked on his business journey at a young age. By thirteen, he was teaching others how to use computers, and at sixteen, he began coding websites.

Early Ventures

In today's context, a teenager managing an IT venture from home may not seem groundbreaking, but Citron quickly elevated his programming expertise. In 2009, he launched OpenFeint, a mobile social gaming platform for iPhone and Android users. He recognized that social interaction was crucial for engaging gamers.

OpenFeint distinguished itself through innovative online gaming services, including leaderboards, virtual currencies, and cloud-based achievements. It was among the first platforms to emphasize the social dimension of gaming. Just two years later, in April 2011, Citron sold OpenFeint to the Japanese gaming company GREE for $104 million, making him a wealthy man at just 27.

His timing was impeccable, as GREE discontinued the OpenFeint platform in late 2012.

Building a Gaming Community

With newfound wealth, Citron could have easily retired to a tropical paradise. However, he recognized further potential in fostering social connections within gaming. In May 2015, he introduced Discord, a voice chat tool designed for gamers to communicate while playing popular online games like League of Legends and World of Warcraft.

As eSports surged in popularity, Citron seized the moment. The prior decade had seen little advancement in gamers’ communication technology, revealing a substantial opportunity for improvement. As noted by GeekWire, "a low-impact, low-latency voice chat program is vital for strategizing and communication among players, and Discord was developed to meet that demand."

The Popularity of Discord

As the day winds down—whether after school or work—people still seek quality time with friends and communities to study, game, or discuss topics like 'The Bachelor.'

It’s not every day you hear a CEO mention The Bachelor, but Citron did so to illustrate Discord's popularity. The platform boasts over 150 million active users each month and, unlike many social media platforms, does not rely on advertising for revenue. Instead, it generates income through subscription sales for premium features, employing a familiar 'freemium' model that allows users to access basic services for free or upgrade for up to $9.99 monthly.

Discord integrates the best communication tools from various platforms, offering instant messaging, chat rooms, voice and video calls, Xbox Live integration, and unique servers.

A Multi-Billion Dollar Offer

In 2021, the global eSports market was valued at around $1.08 billion, showing a remarkable 50% growth over the previous year, with projections estimating it could reach $1.62 billion by 2024. Rather than solely catering to gamers, Discord wisely decided to broaden its scope.

Today, Discord hosts special interest groups spanning nearly every conceivable topic. In a strategic pivot, the company updated its motto from "chat for gamers" to "a new way to chat with your communities and friends." While not the catchiest phrase, this change opens its appeal beyond a niche audience.

According to the New York Times, Discord reported revenues of $130 million and achieved a $7 billion valuation after securing $100 million in private funding in December 2020, though it had yet to turn a profit.

This impressive growth drew Microsoft's interest, though the lack of profitability may have been a concern. In March 2021, Microsoft proposed a $10 billion acquisition offer, but they weren't the only interested party.

Citron stated, “We did receive a lot of offers. Our business is thriving, and we believe we are well-positioned to develop a next-generation communications service.” After months of speculation, Citron ultimately declined Microsoft's offer.

Taking a Risk

Although I can’t fully grasp the weight of Citron's decision, it must be incredibly tempting to accept a $10 billion offer. Having experienced the consequences of his previous sale, he likely pondered what might have happened had he rejected GREE's offer in 2011. Would Discord even exist today?

Citron clearly possesses confidence in his enterprise, envisioning its continual growth. He has successfully widened the client base and established Discord as a mainstream platform. An initial public offering (IPO) may be on the horizon.

Recently, he might have received an unexpected boost from Elon Musk. Following Musk's $44 billion acquisition of Twitter, Discord began trending on the platform, with many users expressing intentions to migrate from Twitter to Discord. This surge of interest served as an unintentional advertising campaign, targeting the ideal demographic.

Musk's takeover could validate Citron's choice to turn down Microsoft's offer, marking him as not only a skilled entrepreneur but also a savvy negotiator. While he has successfully sold one business, only time will tell if he has made another astute decision by holding onto Discord.

Perhaps I should visit the Nostradamus server on Discord to find out if Citron's choice was indeed the right one.

As seen in the video "Faker Turns Down $10 Million and a Blank Check from Tencent and NA," the high stakes of lucrative offers in the gaming industry can lead to significant decisions for entrepreneurs.

In the video "Wait, My Intern Became a 21-Year-Old Millionaire?? (#510)," the narrative of young entrepreneurs and their unexpected success aligns with Citron's journey in the tech world.