The very first conversation I ever had with Mark Zuckerberg was in 2006. He’d just raised his round from Accel Partners. I called the Facebook offices, and he answered the phone. He came across as a mix of arrogant and naive but utterly earnest in his belief that his company would not be the next Friendster. More than that, that he would actually change the world.
I baited him, “So if you’re not the next Friendster, how long until the grown-up CEO comes in?”
He assured me it wasn’t going to happen. That he’d made sure of it.
“People say that all the time here, you can’t trust investors,” I said.
He assured me this wasn’t a matter of trusting anyone; that he’d negotiated the terms to ensure it. It was a deal I’d never heard of a CEO that young having the stones– or aptitude– to achieve. But Zuckerberg wanted to ensure this was his company for the long term.
As has been widely reported, that deal is one of many reasons Facebook has filed to go public today. One of the small forks in the road an inexperienced entrepreneur made that made a massive difference in the trajectory of his company. It gave Zuckerberg the freedom to turn down insane amounts of money and stay independent.
Zuckerberg’s insistence on staying the CEO was a topic that would come up over and over again as the company experienced early growing pains around that time. Management teams were coming and going, acquisitions were being turned down infuriating some employees, MySpace was still bigger and there were plenty of reasons to doubt Zuckerberg was up to the job.
One person who was always just as insistent that Zuckerberg stay CEO was investor and board member Peter Thiel. In 2007, I asked him about what the company would do when it wanted to go public. Surely Wall Street wasn’t going to accept a CEO in his early 20s. “Well, we’ll wait until he’s over 25 to file,” Thiel said nonchalantly.
Zuckerberg didn’t just wait. He obsessively learned what being a CEO was about. He surrounded himself by people who had strengths he didn’t and absorbed from them like a sponge. Unlike nearly every other Internet wunderkind who came before him, he didn’t hire the grown-up to run the company. He became the grown-up to run the company.
There are a lot of reasons Larry Page envies Mark Zuckerberg these days. But the pre-IPO Page would most definitely envy his ability to hold onto the reins, experience and age be damned.
Since 2006, I’ve argued that Facebook is not the prototypical Web 2.0 company: It’s an outlier. It’s one of those companies that comes along every decade or so and does more than just create wealth and jobs and a product we can’t live without. It changes the very nature of what it means to be a startup. It innovates not only on whatever product it is taking to market– it innovates the idea of what a startup is.
There’ve been several of these throughout Valley history: Shockley Labs, Fairchild Semiconductor, HP, Intel, Silicon Graphics, Oracle, Netscape, eBay, Cisco, Google are some of the major ones. Each has in its own way changed the game.
Sometimes the contribution has been in terms of company culture. The Valley owes things we take for granted about stock options, decentralized management and casual work environments to Fairchild, HP and Intel.
Sometimes the contribution has been the idea of what a company could be: eBay built one of the largest retail companies in the world without ever touching any product or opening a single warehouse, and Google built one of the biggest media companies on the planet by sending you away as quickly as possible. (If you consider anything that makes the majority of its business through ads a media company.) Cisco was the master of hiring people quickly by just buying companies full of talented engineers– or “acqui-hiring” as we call it today. Netscape changed the idea of how you used the markets for marketing and business development, unleashing the insanity of the dot com bubble.
But here’s what people always get wrong about Facebook and will during the next few months as we await the pricing: They want to paint it as the story of an out-of-nowhere, over-night-success. When really, it’s the opposite.
Facebook’s success has been a master class in gradual day-to-day execution, setting a long-term goal and working everyday bit-by-bit to get there. (LinkedIn may be a close second, although the ride for LinkedIn was nowhere near as smooth or as fast and involved many CEOs.) Zuckerberg’s plan in 2006 is what he’s finally showing the world he’s achieved today with he S1. And just as he said he would confidently back then, he’s done it on his own terms.
Facebook is one of the most methodical, patient companies I’ve ever seen. It’s been almost surreal to watch in fast-moving Silicon Valley. Consider how its product has gradually extended its walled garden from college to the world to the entire Internet over the past six years.
The same patience has teed up this IPO that is driving the Web wild today. Google changed the game for startups by waiting what felt like an extraordinarily long time to go public. So long, it could go public on its own terms. But Facebook has waited even longer — long enough that, as MG notes, the company has more profit at IPO than Google had revenue.
To do that, it had to embrace the secondary markets and make the risky move to allow employees to cash out before an IPO. There were a lot of critics of this plan — including me– who said it would lead to a more mercenary, short-term culture and give the company a quicker brain-drain. It may have, in parts, but that certainly hasn’t hurt the company.
The upside has been tremendous, as I wrote at length on TechCrunch last year, calling his 2009 deal with Yuri Millner the Web 2.0 generation’s equivalent of “The Netscape Moment.”
From that post:
“In our obsessive zeal to witness the next Netscape Moment, I submit we missed it.
As a business reporter, the Netscape moment wasn’t so pivotal because it was an initial public offering; it was pivotal because of what it represented. It was pivotal because of the impact that it had on entrepreneurs– allowing them to build companies based on a set of new rules, not the old rules that had been defined for them. It was about a company not only disrupting an industry, but disrupting the laws of gravity associated with being a startup itself.
Just as Netscape proved you didn’t have to be profitable or fully-baked to go public, Facebook has proved the inverse: That you don’t have to go public to get liquidity for investors, a huge marketing event, and cash to acquire competitors and keep growing. That you don’t have to go public just because the playbook says so. One was about pushing a wave of companies to surge towards an IPO faster; the other has been about giving permission to a wave of companies to put off the IPO as long as possible– but the two have been equally dramatic changes that have impacted the broader economy. Netscape gave Wall Street and investors a new high growth industry to pour money into; Facebook– starting with that first DST deal– has deprived the market of it. But because we were so conditioned to view the next pivotal moment in startup economics as an IPO, we continually saw these secondary deals as something leading up to that pivotal moment– not as the pivotal moment that changed everything itself.”
This approach to liquidity has allowed Zuckerberg to put off the IPO until the business was ready, not just people were ready to cash out. That in turn has allowed him to stay the CEO permanently if he wants. It has allowed him to get all of Facebook’s skeletons and scandals out before it went into a harshly scrutinized quiet period. (Again, another way this IPO is the anti-Groupon.)
Facebook had the best possible reaction to its S1 today: It just put details around a picture we pretty much knew was already there.