Facebook CEO Mark Zuckerberg is not wanting for unsolicited advice. Sell now, wait for an IPO, follow your bliss… it’s all out there. However here’s some advice that sounds pretty reasonable: make sure you have good lawyers. That’s basically the message from DealBook’s Deal Professor Steven M. Davidoff in an open letter to Mark Zuckerberg. Basically, Davidoff walks through some scenarios by which Zuckerberg’s vision for the company and that of his VCs (who at some point will be seriously eager for a pay day) could end up diverging, leading to problems. There are provisions in some VC deals, for example, that allow the investors to sell their shares to a third party, potentially requiring Zuckerberg to do the same. And there are also backdoor ways investors could force an IPO, even without full board approval.
Davidoff’s final conclusion: “At least publicly, you and your investors appear to be working well together, and they reportedly value your leadership quite a bit. Nonetheless, the natural forces encouraging a cash-out can work in this bargaining dynamic. It will inevitably force you to find some type of exit for your co-investors. The problem even hit Craigslist. The question is how hard and fast they can push you toward this inevitability.”
Mainly, this makes for some good debate fodder for the legal-minded, and the rest of us can day-dream about having Mark Zuckerberg’s problems, right?
Pic courtesy: Dan Farber.