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Funny thing is that when I was negotiating the FB Series C, we had insisted that we had to come in as lead w/ $260m @ $10b as MSFT’s valuation was anchored on an ‘acq offer’ which had a control premium in our view. Looking back now, it would have made DST’s D round a flat round. https://twitter.com/drose007/status/1265114363511201792">https://twitter.com/drose007/...
So there was an interesting side story to Facebook’s Series C process that was never told.
I was negotiating the terms primarily with Gideon Yu, the then CFO. We had alignment on almost everything but the valuation. As I mentioned, we had no interest in coming in at MSFT& #39;s price.
I was negotiating the terms primarily with Gideon Yu, the then CFO. We had alignment on almost everything but the valuation. As I mentioned, we had no interest in coming in at MSFT& #39;s price.
MarkZ wanted us to have a majority of the round ($260m) so we could control the voting of the Series C. The FB team felt they could trust us to be truly strategic as we wouldn’t be natural buyers.
Now the deal process was codenamed internally and we had a very small x-functional
Now the deal process was codenamed internally and we had a very small x-functional
team I was running. We had run it up the flagpole a few times & things were lining up nicely. As an aside, one of the things I& #39;m most proud of was that it didn’t leak internally. We ran a disciplined ship.
Concurrent w/ this process was FB was negotiating a big exclusive ad deal.
Concurrent w/ this process was FB was negotiating a big exclusive ad deal.
MSFT and GOOG were bidding for it. We were being kept apprised, at least of the existence and its potential impact on revenues, but had no influence on the outcome. We suspected that MSFT would win simply because they had set a valuation and frankly, seemed a lot more motivated
to drive ad revenues FB& #39;s way. My personal view was that GOOG was somewhat arrogant about the process. Anyway, I get an update call that FB had selected MSFT as their ad partner and I was happy for them. So we wanted to get final internal approval for our investment.
For that check size, even though it was below the $500m threshold that required BoD approval, we would want to get a BoD committee tee& #39;d up. So we ping Paul (the Intel CEO) to line up that approval meeting and we are told we couldn& #39;t do the deal. i am like, WTF?!?!
I was totally aghast. One, for all the work and effort that had gone into the transaction till that point and, more importantly, what that would mean for my reputation as well as Intel& #39;s. I pushed back (yes, imagine the aggressive brother w/ the weird accent that didnt quite know
how to play politics) & i was told to back down or else. Eventually i got to know that he nixed the deal because he sat on the GOOG BoD (mind you, in his personal capacity) & apparently said it would be embarrassing for him to have us invest. I still remember walking up and down
the corridor begging to at least put in $75m. No dice. So i had to go back to the FB team & let them know. Gideon was incensed. And rightly so. I think he had assured Mark that our deal was as good as done & it left him hanging out on a plank. I just told him our folks had
declined final approval & i was truly sorry. I never shared any more details about the internal process. I wasn& #39;t going to throw anyone under the bus, particularly with outsiders. I bled Intel blue. Gideon and his team had to essentially go raise bits and pieces of the round
from a variety of smaller investors. I would hear snippets of how he never forgave me & blamed me for the position he was put in. So apparently i discovered he kept a grudge. He tried to bury me later by directly/indirectly complaining to folks on the Intel BoD that Intel had
breached an understanding and that I was to blame for misrepresenting Intel. That was passed down until it got to my boss who laughed and told me never to worry about Gideon because he had no influence and didn& #39;t need to know how everything went down.
Regrettably, Gideon left FB under less than ideal circumstances later & I always felt bad about the fact that our decision may have had something to do w/ it. I& #39;m deeply sorry that i could not tell him the real reason but our culture was about closing ranks & staying disciplined.
