Blog Post

Memo To Zuckerberg: Hope You Have Good Lawyers

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.

3 Responses to “Memo To Zuckerberg: Hope You Have Good Lawyers”

  1. kimbo

    ^^ and YOU have a clue?

    Let's get this straight, the guy's raised hundreds of millions of dollars. There's not many entrepreneurs in the valley that can say they've done that.

    This entire article is such garbage and innuendo. MEMO TO AUTHOR: come up with some tangible evidence, instead of hand waving fabricated 'problems' that come up.

    Any venture backed company that has multiple people on it's board will have shareholders pulling in different directions. The 'kid' has proven himself pretty shrewd to put some big and important deals together…. give him the benefit of the doubt to be able to handle a board meeting, and unruly shareholders.

    After all – none of us know what terms he raised his money on. IF there are liquidation prefs, if there are drag along closes related to forcing a sale etc.
    So unless you have this data (we'd rather read this raw data than your editorial), then hook the audience up!!