Then I looked on all the works that my hands had wrought, and on the labour that I had laboured to do: and, behold, all was vanity and vexation of spirit, and there was no profit under the sun.
—Ecclesiastes 2:11
MONDAY, APRIL 18, 2011, 2:00 P.M.
Back in the office, the boys made a show of going back to work on code, but their minds were elsewhere. I had just pulled a dicey ploy that presented only downside to them, mostly because of my bloody-minded insistence on going to Facebook. The same bloody-mindedness that had raised us money and defended us from legal enemies might now blow up the entire construct we had slaved to save.
Within a half hour, Twitter called back. MRM took the call; I was no longer part of the proceedings. I drank in the moment. Both of them hovering over Matt’s cellphone, which was on speaker, focused on Jess Verrilli’s every word. MRM wrote down the relevant deal numbers, and then repeated them back to Jess to be sure.
Wow. The bid was at $5 million and change. Much, much higher than I had expected. It was the same deal price from just over a week ago, which Sacca and I had to talk the boys out of accepting.
Twitter was playing its monster hand very weakly. They had called back within an hour of my dropping a valuation-killing bomb that reflected debilitating internal strife. If they had any balls, they’d have left AdGrok hanging in radio silence, ignoring all calls and email for a couple of days to let the boys marinate in their fear and anxiety. After the silent treatment, they could have bought all of AdGrok for a twenty-dollar Starbucks gift card, probably. Instead they had come back, within an hour, with an offer just above the original one. Twitter was being what poker pros term a call station, and a weak one at that. The boys were getting more money than they had ever hoped for, and above the price they were already willing to sell at. This deal was getting done, despite both sides’ bungling and incompetence. AdGrok was already dead: the boys and Twitter were merely haggling over the price of the funeral.
Then I felt that tingle.
All I had from Facebook was its offer letter in my inbox, and Gokul’s word that the company would honor the offer. I had just shit on Twitter and then rubbed its biggest shareholder’s face—namely, Chris Sacca’s—in the fresh, warm pile. With the boys champing at the money bit, there’d be no holding them back now; they’d do whatever deal Twitter offered, with or without me (and probably without). I needed to accept Facebook’s offer immediately, but before that, an employment lawyer needed to look it over.
Silicon Valley job offers can be so complex—each a miniacquisition for one person, complete with cash, options, vesting schedules, intellectual property agreements, and so forth—that there was an entire class of lawyer who just helped you negotiate the sale of yourself.
I called every damn lawyer we had ever talked to—Fenwick, Orrick, our cheapie contract lawyer—for a referral.
I had my newly hired employment lawyer on the phone within a half hour. “I’ve got an offer letter I need to know whether to sign or not. The rest of the company is getting bought by a competitor. I’m the CEO and founder. What do you need?”
“The offer letter, your stock purchase agreement with the current employer, and your employment contract,” she replied tersely.
By then, the boys were running around, shuffling company docs, and nervously taking phone calls to work their deal. I was scanning reams of documents in our slow, janky scanner, and occasionally going out for a call of my own.
Things took on a certain preapocalyptic, the-Germans-are-coming tinge to it, or perhaps the atmosphere of the last few minutes inside the safe room of the American embassy in Tehran in 1979. One group transmitting vital information to a concerned party, another group collecting, scanning, and destroying information, while planning how to evacuate.
An hour went by, and finally my lawyer emailed back. “You need to accept the Facebook offer immediately. You also need to resign beforehand, or you’ll break noncompetes in both contracts.”
The clock read 2:45 p.m.
I quickly called Amin’s report inside Facebook corp dev to see how late he’d be there. Valley dealmakers, like small-town bankers, have cushy schedules; he was out at five o’clock.
I had to catch the 3:07 Caltrain to Palo Alto to make it on time. No way I could just let this trade ride overnight.
The boys were heads down, discussing some aspect of the deal—their deal now—and I didn’t interrupt as I collected my bicycle helmet and walked out the door of the office I had worked, worried, and occasionally slept in.
On the train, which I made with a minute to spare, I started typing out a resignation email on my iPhone. An hour later, I was flying up California Avenue in Palo Alto on my creaky bicycle, back to the Facebook HACK sign. I had the email ready to go on my phone, and the moment Facebook’s corporate-development person poked his head out of the glass door, I hit Send.
I was an unemployed loafer for all of five minutes. Dale Dwelle, Amin Zoufonoun’s subordinate, made small talk, while internally I was thinking Come on already, give me the damn forms! Contracts signed, he escorted me back out again.
AdGrok, our startup baby, was effectively dead, and for the first time in a very long year, I walked out into the sunny California afternoon with nothing to do.
This deal became a minor Silicon Valley oddity that confused the tech journalists who covered it; I still get questions about it to this day. The short version is that I was a complete idiot, and the deal was a badly played hand, muddled through on bravado and blissful ignorance rather than savvy calculation.
Master play would have been this:
Continue negotiating both deals in secret to squeeze out the last of the leverage, and heavily front-load the Twitter offer to include either single-trigger acceleration or lots of upfront cash.* Then accept the Twitter deal, quit the first day of work, and walk away with the up-front part of the deal right on out to Facebook. I could even have done true arbitrage and signed both Twitter and Facebook employment agreements at once, and asked Facebook for unpaid leave while Twitter got settled. This would have been in flagrant violation of noncompete clauses in both employment contracts, of course. Only Twitter would have cared, but like the mark in a successful con, they’d have been too embarrassed at having been played to sue, and would simply have covered it up with employees.*
That plan, however, would have required including my cofounders in the deception, as they would not have collaborated to score me a better deal, worried as they were about their own piece of the pie. Running game on your investors or your acquirers is just life in the big city, but bluffing out your cofounders, those same guys who sweated through the lows and the highs with you, is a step too far out on the prick spectrum.
Why the need for the deception right up to the brink of being a Twitter employee, dissembling my intent to eventually join Facebook? Keep this singular fact in mind: we were only ten months into AdGrok officially, and all the founders were on a vesting clock. That’s right, despite carrying the weighty title of founder, nobody at AdGrok actually owned anything yet.
Why is that? Ponder for a moment. Every founder owns something like 20 to 40 percent of the company. That’s as much as or more than what would be sold in a fund-raising round. If every founder owned that stake from day one, they would all essentially hold a gun to the company’s temple. If any founder decided to leave following an argument (or was forced by his cofounders to resign), he’d kill the company, as no investor would fund a company in which an equivalent stake to his or hers was held by some disgruntled outsider. And so even founders in a well-established company are on a vesting schedule, and get only a quarter of their fat equity slice after a year, just as a big-company employee does.
The fact was that even as the wheeler-dealer CEO, I owned no part of AdGrok. Nothing. Not one share. Neither did the boys. As is the case for every early-stage entrepreneur. So to actually see any proceeds from the AdGrok side of the deal, I’d have to have been there at least another couple of months as the deal got finished up.
At the end of the day, AdGrok was simply a long, stressful job interview for Facebook (and ditto for the boys at Twitter). We all claim we “sold” AdGrok, but in reality, AdGrok was merely leverage to score the job offers that actually made us the real financial upside, job offers we would not have been able to score otherwise. The corporate-development teams of large companies, insofar as their small-company deals are concerned, are really glorified HR recruiters with fatter checkbooks. That’s another little detail the self-glorifying founders of acquired companies often fail to mention.
Had I executed the optimal strategy, my return on AdGrok would likely have been hundreds of thousands or perhaps millions of dollars more than it eventually was. Plus, the additional cash or Twitter stock would have served as a hedge to my all-in position in Facebook.
Morality, such as it exists in the tech whorehouse, is an expensive hobby indeed.