The Kid Who Laughed Off a Cool $ Billion Dollars

Good morning. This is a very special edition for me. Something very special happened. On Saturday, our baby boy Maximilian was born. Baby and mommy are very well. Maximilian is a big one. He arrived at 4430g (9lbs 12oz). This is a very happy time for my family, and I wanted to share this with you all.

Fear not; we will keep this newsletter going while Maximilian is napping.

For this episode, it’s not a deep dive but more of a tale I had in my back pocket for when lack of sleep kicks in. What this tale teaches still has strategic significance. We’ll dive into the mind of a grand visionary while they make (hard) decisions. I hope you enjoy it.

4-minute-read

Do you know the story about the Silicon Valley kid who laughed off a cool billion dollars?

In 2006, Mark Zuckerberg was 22, and Yahoo wanted to buy Facebook for ONE BILLION DOLLARS. This deal never happened, but the behind-the-scenes events are a great example of just how much conviction visionary CEOs have, what’s going on in their heads, and what we can learn from that.

One of the early-stage investors (Peter Thiel) remembers how the board meeting where they wanted to make the decision went down with Mark:

Thiel and two other board members sat in the board room, waiting for the Facebook board meeting to start. This is the meeting to discuss the deal. As Mark leisurely walked in, he said, “That’s just kind of a formality, right? We’re obviously not going to sell here.”

Thiel tried to appeal to him: “We should probably talk about this. A billion dollars is a lot of money.” The other board member, VC Jim Breyer, mentioned: “Mark, you own 25 percent. There’s so much you could do with the money.”

Thiel recalls Zuckerberg replying: “I don’t know what I could do with the money. I’d just start another social networking site. I kind of like the one I already have.”

I mean, come on. How does he have the guts to make a decision like this?

Look at the numbers:

At that time, Facebook made about $30 million in revenue, had 10 million users, and had NO PROFIT. But Mark knew only one truth: He could grow this site into a giant that would change the world.

What gave him this conviction?

At that time, Facebook was only active on college campuses. He saw the product's impact while bootstrapping on college campuses and he understood the huge potential for expansion into other markets. They were launching in new schools regularly, launched more photo-related features, and even started to launch beyond schools.

He also knew they were about to launch Newsfeed, a gigantic product change that he was convinced would boost the company’s growth.

But overall, he just had a grand vision—other features and plans that he wanted to bring to the world. In his view, Yahoo did not understand Facebook's actual value. They didn’t look into what it could be. Yahoo had no plan for Facebook's future, which bothered Mark the most.

At that point, Yahoo’s offer was way too much of a discount for him.

The Backlash

This decision did not go down well with the rest of the Facebook employees. Years later, in a Y Combinator interview with Sam Altman, Mark said that almost all his managers left after this decision. He also admits that this was one of his hardest times running Facebook.

It wasn’t obvious that Facebook could succeed far beyond its 10 million active users.

Luckily, within a few months of that decision, they launched the newsfeed and opened sign-ups for everyone else beyond the closed community. This massively boosted growth and showed that it was the right decision not to sell prematurely.

The Outcome

In 2012, they went public at 100 times the price Yahoo offered. Mark executed a vision he always knew was worth a lot more, and a few years later, he was proven right.

What can we take away from this?

It seems unfathomable from the outside. Statistics, economics, and classic financial modeling should be able to evaluate a deal, but we can throw them all out the window for a deal like this.

Entrepreneurs like Mark have a different worldview. In an interview, Thiel pointed out that Mark had a definitive view of Facebook's future.

Entrepreneurs like Mark operate differently. They have a grand vision, which is their definitive view of the future. They don’t “willy-nilly” chase luck by using a-b tests or throwing things against the wall and "seeing what sticks.”

This is not the iterative, every feature-tested, lean startup framework until you run out of money. You might even find an idea that can be successful. But can you find an idea that changes the world?

People like Mark are certainly outliers, and successful companies have been built on top of the lean framework. There are probably more failures where the “grand vision” didn’t work out.

The biggest successes, though, often have a future that looks very different from the present. It is not that because of small, iterative step changes, we suddenly have the next Facebook or SpaceX. It takes this belief in a definitive future, and people like Mark stop at nothing to make that vision a reality.

Just know this: When you join a startup with visionary founders, you might see the deal of your lifetime, but they could have a different script for its future.

Facebook Nostalgia

Here are some cool facts from the past (found in a local SF Blog) - when Facebook was still a not so well known phenomenon:

• In 2007, Facebook paid employees a $600 subsidy if they would live within 1 mile of the radius of the office in Palo Alto - smart!

• Facebook members heavily protested the launch of Newsfeed in 2006. Their personal data of what they “liked” and who they connected with would suddenly show up much more prominently. Facebook listened to its users and introduced privacy controls.

• Remember Beacon? - a Facebook tool that would announce if users for example buy movie tickets on Fandango. Members were outraged. Again, Zuckerberg apologized and introduced more privacy controls (after the fact). Source SFGATE

• In one of the interviews, Mark stated his interests as follows: openness, breaking things, revolutions, information flow, minimalism, making things, and eliminating desire for all that really doesn’t matter. I love the last one.

Full Mark Zuckerberg interview from 2017 with Sam Altman

I hope you liked this episode. Would you have sold?

I’ll go back to perfecting my swaddle technique.

Have a great rest of the week,