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Fits and Starts for Startup Flipboard

What's it like to be one of the hottest startups in Silicon Valley? Last month, Flipboard found out. The Palo Alto (Calif.) company makes a free application for Apple's (AAPL) iPad tablet that it calls a "social magazine." The app automatically pulls in articles, photos, and video from online publications you select—or that your friends link to on Twitter and Facebook—and presents them in a format resembling a printed magazine.

The team rang a gong to celebrate its launch at 9 p.m. on Tuesday, July 20. Glowing reviews poured in from around the world. Technology blogger Robert Scoble called it "remarkable." Actor (and Flipboard investor) Ashton Kutcher touted the app to his 5.3 million Twitter followers. It became the top iPad download. Venture capitalist John Doerr, whose firm is also an investor, took a celebratory photo of the team.

Trouble began that very night. "Our servers were getting completely inundated," says Chief Executive Officer Mike McCue. The traffic jam rendered the app useless for many who had downloaded it. Frustrated users vented on Twitter and left one-star reviews. "Don't waste your time," wrote one iTunes user identified as GeekZoom. "Always says it's over capacity. Useless app."

The team members began pulling all-nighters. To hold back the flood of users, they limited full access to the app and started letting in invitees at a slower pace. By Friday the launch party was cancelled. "I didn't feel it was appropriate to be celebrating while we still had lots of users waiting to get in," says McCue. Four days later employees were still working through the 350 red velvet cupcakes that had been ordered. "We'll have the party eventually," says McCue.

The Bottom Line: After rave reviews by tech blogs, Flipboard was overwhelmed by demand for its popular iPad app, a "social magazine."

Sheridan is a senior editor for Bloomberg Businessweek in New York.

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