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It’s really hard to align the interests of the investors perfectly with the interests of the founders. These investors have likely already made their FU money, so they can afford to gamble with someone else’s bird-in-the-hand. But they took a minority stake, so they agreed not to have that control.

So all in all, no one got screwed. The guys that negotiated the power used it to their advantage. Rock on.

He is an inept leader (which makes the Alexander the Great comparisons especially laughable) who, if you’ve seen him in any public forum, looks like he’s in way over his head. No charisma, no business sense, no real experience.

Of course the biggest fools here are the companies who are considering a stake in the company at an astronomically high valuation (mainly because Zuck&Handlers have been holding out for more money like a star athlete). The problem here is that Facebook is much like Barry Zito: not worth the money.

They’re having a hell of a time with their CPM and with close to $100m in revenue they’re expected to just barely be in the black. How long are advertisers going to pay for ads that nobody clicks on?

As a user from the early days (when there were only 4 colleges in the network), I can honestly say that I’ve clicked on… maybe 4 ads. Of course they were for parties or other events on my campus, so I had a mild interest in them. I am not alone in this regard.

The bottom line is that users actively tune out the advertising on Facebook, making the notion that buying Facebook for access to said users one lacking in foresight.

that’s an Internal Rate of Return of 300%. That’s pretty good. And its hard to see that the Parakey guys promised them higher returns than that in the long-haul. So, instead of the deal going bad, the deal went well.

Naturally, the VC’s may have tried to play hard-ball - but as noted above, making the work-horses unhappy isn’t likely to make the VC’s any wealthier.

We have no doubt the VC’s “don’t want to be known as difficult” because being difficult means they will lose deals and money.

Well-played by the Parakey guys - delivering to their investors, and finding a new opportunity to make their future work product EVEN more rewarding (assuming FaceBook is worth something).

Can anyone explain to me why the VC’s should expect to get money out of the future work product of individuals?

“The only part that is tricky is the perception that the founders might have left the investor high and dry. So, what does this do to their reputations”.

The Parakey folks could quit at any time and join Facebook, leaving the investors with the whole company to do with as they please. However, they don’t have anything that facebook wants, so there’s no $2M.

I have question.
1. What are you plans for Facebook’s future?

2. Are you planning to develop web operating system?

3. How do you feel when people called you the next evil jedi or evil bill gates?

Do your employees a favor and get over yourself. Maybe you were too young to remember the first internet bubble, CDROM bubble etc. but Facebook domination of the internet is far from assured by any means.

In fact this is the new new economy or neo-econs (trademark me) or new economy 2.0 (tradeamark me). The new internet economy died in 2000.

It is true that Alexander the Great was only 24 but he had been part of numerous invasions early in his career that did not work out as well. Only time will tell if you are thinking with your head or your sword.

Everyone needs to be careful what they wish for, lest they get it.  There’s a buzz in the blogosphere over two deals, one that many think is way too big and one that seems to raise the ire as being way too small.  Ironically, both involve Faceb…

I am glad to see some founders do what they want for a change. IMO Facebook probably paid a fair price. And although the return was only 2X for the investors…..at least it was a positive return. How many investments can most VCs say that about?

Everyone is in this game for themselves, including the founders of Parakey. Good on them for structuring a deal that puts most of the value of the transaction into the hands that created the value (i.e. FB buying a project team, not code).

@Jean-Yves - tough liquidation preferences are likely why this deal was structured as it was — the project team was at the back of the cash bus in any liquidity event and that project team is in essence what FB was buying.

That said, it would be interesting to read “100% genuine / not comparing himself to Alexander the Great / Mark Zuckerberg” comment!