Ten Years Ago, Evan Spiegel's College Friend Who Claimed He Invented Snapchat Was Paid A Fortune To Go Away Quietly

Snapchat has been a public company for a little under a decade. Its parent company, Snap Inc., has a multibillion-dollar market cap, hundreds of millions of daily users, and one of the most famous apps of the smartphone era. Evan Spiegel is a billionaire. Bobby Murphy is a billionaire. Both men are forever known as the co-founders of Snapchat.

But there was another guy in the room at the very beginning.

His name is Reggie Brown.

Brown was a Stanford student, a fraternity brother of Spiegel's, and, depending on whose version of the story you believe, either one of the true original founders of Snapchat or a hanger-on who wildly exaggerated his role after the company became valuable.

What is not in dispute is this: Reggie Brown sued Snap, claiming he had been cut out of a company he helped create. And Snap eventually paid him a staggering settlement to go away.

Evan and Bobby Murphy (TIMOTHY A. CLARY/AFP/Getty Images)

The Third Founder

The Snapchat origin story begins in 2011 at Stanford University, where Evan Spiegel, Bobby Murphy, and Reggie Brown were students and fraternity brothers. Spiegel was studying product design. Murphy was a coder. Brown was an English major who had been planning to go to law school.

The original idea was not especially glamorous. It was essentially an app that would allow people to send disappearing photos. In other words, a way to make sexting feel less permanent and less risky.

According to Brown, he was the one who first came up with the idea. He said he shared it with Spiegel, and the two quickly realized it could be a very big deal. They then brought in Murphy, who had the technical ability to actually build the app.

The first version was called "Picaboo." It launched in July 2011 before eventually becoming Snapchat.

Brown claimed he was involved in the earliest pieces of the company. He said he helped come up with the name of the corporate entity that would own the app. He claimed he helped write marketing materials, the FAQ, terms of service, privacy policy, and the App Store description. Most famously, he claimed he created the ghost logo, known internally as "Ghostface Chillah."

He also claimed he believed the three men were equal partners.

That turned out to be a very expensive misunderstanding.

The Beach House Startup

In the summer of 2011, the three Stanford students were working out of Spiegel's father's house near the beach in Santa Monica. At the time, they were not billionaires, executives, or public-company founders. They were college kids building an app.

Spiegel acted as CEO. Murphy handled the coding. Brown saw himself as the marketing and business guy. The app launched, and the small team celebrated with a cake decorated with the Snapchat ghost logo. A photo from that celebration, showing Brown, Spiegel, and Murphy standing together behind the cake, would later become an important piece of evidence in Brown's lawsuit.

It was a snapshot of the company before the company was really a company.

Then the relationships started to fall apart.

Brown later claimed he discovered Spiegel and Murphy were discussing ways to push him out. Spiegel and Murphy, for their part, argued that Brown's role was far smaller than he claimed and that he was not actually a founder in the same sense they were.

The core disagreement was simple: Brown thought he owned a third of Snapchat. Spiegel and Murphy did not.

The Patent Filing

One of Brown's most important contributions, according to his lawsuit, involved the patent paperwork. Because Brown was planning to attend law school, he was tasked with helping prepare the patent filing for the disappearing-photo concept.

On August 11, 2011, Brown filed a patent application listing all three men as equal co-creators.

That mattered because Brown had something Spiegel and Murphy needed: documentation connecting him to the intellectual property behind the app. Brown later claimed that when Spiegel and Murphy asked him for copies of the filing, he refused to hand them over unless they first clarified his ownership stake.

The situation exploded in August 2011. Brown wanted to know what percentage of the company he owned. He later said he was even willing to accept less than one-third, suggesting a 20/40/40 split. Spiegel and Murphy did not agree.

Soon after, Brown was locked out of the company's accounts and servers.

Just like that, the alleged third founder of Snapchat was gone.

The Lawsuit

In 2013, Brown sued Snapchat, Spiegel, and Murphy in Los Angeles Superior Court. He alleged that he had helped create the app, contributed to its intellectual property, and was improperly cut out of the company before it became enormously valuable.

Spiegel and Murphy denied that Brown deserved founder-level ownership. Their position was that they built the actual product and company, while Brown overstated his role. That argument is a familiar one in tech: the people who code and operate the product often see themselves as the true builders, while early idea people and business-side contributors can later find themselves treated as expendable.

But Brown had several things working in his favor.

He had been there at the beginning. He had the early story. He had the logo claim. He had the patent filing. He had the cake photo. And he had a credible argument that, at minimum, he was much more than some random college friend hanging around the house.

The case dragged on for more than a year and a half before the sides settled.

The Settlement

In February 2017, one month before it went public, Snap made a subtle SEC filing. Buried in those documents was this little section:

"In February 2013, an individual filed an action against us, our predecessor entity, and two of our officers in Los Angeles Superior Court, alleging that we were using certain intellectual property that the individual jointly owned with our founders.

In September 2014, the parties entered into a settlement agreement that resolved all claims among the parties. Under the agreement, we agreed to pay the individual a total of $157.5 million and such amounts were recorded in 2014. We paid the individual $50.0 million in 2014. As of December 31, 2015, $107.5 million was included in accrued expenses and other current liabilities on the consolidated balance sheet. We paid the individual $107.5 million in the year ended December 31, 2016. There are no further amounts required to be paid in the future."

$157.5 million

The company paid him $50 million in 2014. It then paid the remaining $107.5 million in 2016.

For perspective, Brown's settlement was larger than the famous settlement Facebook paid Cameron and Tyler Winklevoss after their dispute with Mark Zuckerberg over the origins of Facebook.

As part of the settlement, Snapchat also did something it had resisted for years: it publicly acknowledged Brown's contribution. The company said Brown had "originally came up with the idea of creating an application for sending disappearing picture messages." Then, in a very Silicon Valley bit of timing, Snapchat released the statement immediately before Apple's iPhone 6 and Apple Watch launch event, ensuring the tech press had something much bigger to obsess over.

Had he retained a true one-third stake in the company, his paper fortune at the IPO would have been measured in the billions.

Today, Evan Spiegel owns 9.3% of Snapchat. Bobby Murphy owns 10.3%. Snap's market cap today is around $7 billion, so a 10% stake is worth around $700 million. Together, they own about one-fifth of the company. But thanks to Snap's super-voting share structure, they control essentially the entire vote. Snap's latest filings show Spiegel with 53.1% of the voting power and Murphy with 46.4%, for a combined 99.5%.

Evan and Bobby have both received hundreds of millions of dollars in standard compensation over the years while ALSO selling billions of dollars worth of shares. They are both worth around $2 billion today.

After the settlement, Brown largely vanished from the public tech world. Years later, a New York Post investigation found him living in South Carolina, far from Silicon Valley and far from the company whose original idea he claimed as his own.