Thinking about Facebook’s S-1 and lessons for entrepreneurs

Today we all read a lot of information about the Facebook S-1 registration

The execution and performance of the company is simply stunning.

There are plenty of folks that have written great insights about the key metrics of the business that were disclosed in the filing.

I’m not going to talk about that. 

Instead, I’d like to talk about how Facebook’s success will hopefully impact entrepreneurs all over the world. 

1. Independence.

There were times were Facebook could have sold their company. It would have created a successful return for founders, employees and investors. But the company turned down those offers and committed to an independent strategy. I’m sure they had plenty of critics that thought they were crazy to turn them down. 

It reminds me of the situation we had at Twitter back in 2008. Our firm had invested earlier that year when there were less than 20 employees in the company. Maybe less than 15.

In the fall of that year, we had an offer to sell the company. It was a very signficant multiple to the price of our investment. When we got the offer, I relayed it to Ev and the board. Ev said he wanted to sleep on it. The next day, Ev sent us one of the most thoughtful and insightful emails I have ever received. For a variety of reasons, he recommended that we stay independent. It was obvious that it was the right answer but I’m sure others outside of the company would have considered us nuts for turning it down. Ev’s leadership and conviction put Twitter on it’s path for independence. And I’m so thankful for that. 

Lesson: ultimately selling might be the best option depending on the situation, but that shouldn’t be the goal. Build your company to last. 

2. A better team and a superior product

Much has been written about the value of being a first mover in a given market. Or the importance of market timing. Or whatever some bullshit business school has to say on the matter.

But the reality is that it wasn’t that long ago where MySpace was massive and Facebook had a tiny fraction of their users. If memory serves, in 2006, MySpace had 7x the user base of Facebook.

Think about that. 

It wasn’t market timing. It was execution. Facebook had a better team and a better product and they were able to keep pushing, and pushing with bold initiatives. 

Lesson: there is a big opportunity when the market leader has a bad product

3. Patience

Going public isn’t the destination.

Building a company that can succeed, grow and become self sufficient is much more important.

Some companies choose to stay private. Others go public. It’s not boilerplate stuff. 

It’s not easy to be a public company under any circumstances. Take a look at Amazon’s history. Jeff Bezos has been able to convince the market to believe in the long term business even when profits haven’t always been there every quarter. But not every CEO can convince public investors of the mission. Focusing the company on long term goals and not optimizing for each quarter can be tough. 

I know a successful private company that is raising a large round right now to buy out an existing early investor. The company is private and the early stage VC wants them to go public so they can get liquidity. The founder/CEO doesn’t want to go public because he doesn’t want the market to tell him how much to invest in engineering. That’s impressive and I’m happy to see the company take control over their destiny. 

Lesson: The very best companies don’t need to go public. They choose to go public when and if they want

4. Ignore the haters

I can’t tell  you how many people have said to me over the years that Facebook will never be able to generate meaningful profits. There is no money in photos. You can’t monetize email and messaging. There is no money in user generated content. You can’t rely on ads. Facebook can’t monteize like Google can.

Can’t, can’t, can’t, can’t. 

Lesson: Yes you can. 

Congrats to the team at Facebook. Not because of the upcoming IPO. But congrats on building a great company.