Tuesday 17 September 2019

The €528m idea

Richard Tyler meets Michael Birch, the chess-playing physics graduate and the man behind the Bebo website

Richard Tyler

Michael Birch had no idea what he wanted to do when he left university with a physics degree from Imperial College London under his belt. So he went into insurance.

His elder brother, Paul, suggested the move and Michael duly applied, only making it into his brother's firm when someone dropped out who had been selected ahead of him.

He began working in the IT department and discovered that he really liked computers but hated insurance.

Last month, Birch and his American-born wife, Xochi, sold the social media company they subsequently co-founded, called Bebo, to online web portal AOL for €528m.

The Birches, and brother Paul, will share around 70pc of the cash when the deal finally closes (it is with the lawyers).

"My brother's advice turned out to be quite a good move really because it led to this," says Birch, 37.

Despite his initial career uncertainty, Birch says he always knew he wanted to work for himself rather than someone else. He says he was influenced by his father, who used to invent new products at the family home, and then take them out and try to find a distributor.

"He had a couple of ideas that had some reasonable success. That entrepreneurial spirit both my brother and I inherited, I guess. So as soon as I started working for the insurance company I wanted to do something different."

He adds: "When I was a kid I really liked playing chess, which is pretty geeky; I just enjoyed it -- thinking, exercising my mind. And I found computers to be like an eight-hour day chess game. It was the same sense of satisfaction of problem solving and thinking. I really got into it."

But it was to be eight years, in 1999, before he took the plunge and set out on his own.

"I was making good money at the time. Xochi and I were both working freelance, getting paid hourly. We had bought a nice flat. We had difficulty giving that up. But I just said if I don't do this now I never will."

Birch had discovered the internet. He had also bought his first computer. Even then, the timing could have been better -- Xochi, who he met at college, was pregnant with the first of their two children, Isabella and Joseph (a third is on the way).

The pair persevered. And, after two failures, in 2001 they developed Birthday Alarm, which says what it does on the tin. It proved enough of a success to enable them to relocate to San Francisco.

"We made a pact when we first got married, because my wife is from the Bay area, that we would live five years in England and five years here, and then we would choose where to live after that, but we should at least experience one another's country.

"And then we stayed in England for eight years, so fair's fair, I had to extend my stay here a bit."

They were earning about $10,000 a month from the site and to make ends meet they first of all stayed at Xochi's parents, before moving to a cockroach-ridden apartment in the suburbs. They only moved to central San Francisco four years ago and now live in a loft apartment.

Birch's journey into online social network platforms -- which are now dominated by the likes of Facebook, MySpace and Bebo (Bebo has 22m members worldwide) began when he came across Friendster, which pioneered the genre.

Within 13 days of seeing the site, he had coded one that he thought was better and called it Ringo. It proved a hit and was subsequently sold for "single digit millions". But Birch had to agree to an 18-month non-compete agreement.

He played around with several other projects but all roads led him back to social networking and Bebo, which he launched in 2005.

He rose from being the only programmer ("Xochi did everything else") to become what he describes as an "anti-traditional" chief executive officer.

He is stumped when asked what it feels like to sell something that he has worked so hard to build. It is because, he says, he is in a state of limbo until the final contracts are exchanged with AOL's lawyers in a month or two and the cash lands in his account.

The Birches have not even had a celebratory flutter yet. "I was going to buy a new car and had signed the agreement and then my wife told me I couldn't buy it until the deal closes."

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