"eventually offering $100 million for the company plus an earnout of $25 million to be paid over four years"
Terms, terms, TERMS people. I can't believe that with 40+ comments there isn't more discussion of the terms.
It could have been $100M in Google stock on a 4-year vest, plus $25M cash on a 4-year earn-out. At those terms, it's really only a $25M deal if the founding team doesn't think they're going to sit around at Google for 4+ years.
Basically, the one sentence above tells us very little about this purported offer and the reasoning for turning it down. I would wait a week for more details to emerge before jumping to any conclusions about bubbles, co-founder betrayal, or anything else.
why would the founding team leave with $75m worth of Google stock on the table, all they have to do is show up for three more years.
Given a choice between a nice job at Google with a multi-million dollar salary doing the thing you love with the resources and infrastructure of Google behind you vs going it alone, the choice seems (no matter what the terms) like a poor one. It's not like Path have any really ground breaking technology. How defensible really is the idea?
"all they have to do is show up for three more years"
That's a lot harder than you're making it sound. (Or maybe my sample is skewed.) I personally know one person who has walked away from millions and know of another half-dozen. "Phoning it in" for three years at a company you don't care about just to collect a big paycheck can be absolutely soul-crushing.
Keep in mind that two of the co-founders are Dave Morin and Shawn Fanning. The former likely made many millions (real and paper money I'd think) as manager for the Facebook platform/Facebook Connect, the latter made many millions from Napster.
So, even though this offer and this decision both leave me a bit shocked, they already have the nice job and the resources they want. (office close to the bay, downtown San Francisco/SoMA is also nicer than the drive down to Mountain View)
It does seem that the cofounders, as well as the simple domain name are a big part of the reason they can get an offer like this. It does seem though there are a heap of services out there doing basically the same thing and tweaking the parameters a bit, like the friends list size, sure they could end up quiet successful but it's a big gamble I guess only those already financially secure could afford to take.
It does matter a bit about the terms to, who knows, maybe Google wanted to roll it into their upcoming offering instead of having it as a standalone which would be a deal break for those heavily invested in their concept.
That is a very good point. The article gives no detailed term information other than the big looking number, $100 million. A sum that could come in any number of terms with most being worth significantly less then were it cash.
I will say Dave Morin seems to have made some good calls in his day.
Given the app isn't particularly popular or compelling, I'm a bit incredulous over the fact that you only need a couple of internet-famous co-founders to warrant a $100MM offer.
I won't conclude that there wasn't more to offer than just internet fame, but I will say that brand is something that companies will pay a big premium for.
Perhaps, but Google hasn't been one of those companies, Google Earth and Google Analytics are both things they acquired --- and immediately rebranded. (Originally Keyhole and Urchin respectively.)
In any case, I'm not sure Path has yet established enough of a brand to be worth that kind of premium.
How about this one : Faceless. Social sharing of pictures of your possessions and favorite things that are guaranteed by face recognition not to contain people in them. Find and meet new people by interest, taste.
To be fair, they raised funding at more modest (but still crazy, depending on perspective) 25m pre according to the article. Seems like Google is just looking for ways to spend their cash.
I wonder if Google is worried (or should be worried) about these recent high-profile rejections of its very generous acquisition offers? Yelp, Groupon, Path, etc.
As easy as that is to say, this isn't a get-bought-and-get-paid company; it's a shake-up-the-world company. I'm sure he and his co-founders discussed that at length and understand it.
And ultimately, if you have a remarkable team with strong financial backing, isn't that the type of company you really want to work for?
how exactly is it going to shake up the world?
I see the best case as more of a mild rattling of the world- a more human social networking, which will either softly nudge people in this direction, move other networking players closer to the real-world social model, or be a sort of nice subtle tool in the mobile social web.
In no way is it something that as currently formed has a really big dollar exit potential- i mean, ideally, the product will never become very valuable to advertisers. If they monetize some other way which can scale big, then they're way smarter than I can imagine, but i don't see the data aggregation model or traditional ad model working with this product...it's a very techie-oriented app at this point in time. The benefits are not visible at all to "normals", and there is no business use case like twitter/FB have to accelerate adoption as a platform.
The world has no idea Path exists yet, so there is a while to go before anything is going to be shaken up at least outside of the bay area.
I'm sure he and his co-founders discussed that at length and understand it.
Well, from the article:
The decision to turn Google down was not unanimous, according to sources, and may have become what some people are describing as "extremely contentious."
So what is your speculation about what they discussed or agreed on based on?
what a bad name, it's hard to even search for them. Turning down $100m was insanity, and the friction between co-founders will very likely fester and be terminal for them.
There are very few examples of companies turning down large offers and subsequently regretting it. There has to be something pretty good going on to get an offer like that.
I can think of no other Internet company that was so far (a decade?) ahead of its time.
I loved that damn product so much. This has nothing to do with the thread, but I just want you to know that you had at least one rabid fan from 1994 - 1998.
thank you - it was a good product, but sadly the company melted down, took something that worked and decided to spend a year re-writing it in COM; meanwhile portal sits like Yahoo! came along and eat their lunch. A disastrous CEO that turned down a huge exit opportunity was replaced with an equally disastrous one that spent most of his time worrying about what particular rain forest he wanted chopped down to have this desk made from.
for a much larger example, see Microsoft flirting with Yahoo before they bought out bing. It will be rather a long time before Yahoo is again worth as much as Microsoft was willing to pay.
I guess the team turned it down in the hopes Path will be many times the offer. I just don't see how an iPhone app can worth more than $120 million. I think the most successful app would be angry birds, but i doubt even the most optimistic valuation would put them over one billion.
Angry Birds, in a sane world, should be worth no where near one billion. They have sold less than 100 million copies, and I doubt they can keep on repeating their success year after year. It's a fad that will soon be replaced, just like Doodle Jump and Flight Control before it.
I don't know. I don't think Angry Birds is an interesting game, but it's obviously blowing up like mad, so I don't pretend that any rational dictum will predict that it dies down.
You don't see plushies and fan art for the other games - and you shouldn't ignore all the ways the creators profit from the franchise. They also make a bunch of themed releases like Halloween. They may also have hit a tweenage demographic susceptible to crap like Silly Bandz, Bratz, and other inane ztuff.
You've missed the point. Sure, it's 'blowing up like mad' but the important thing is that Roxio have been able to turn the Angry Birds game into a brand: selling movie rights (!) something even EA struggle with, so quickly, getting a deal with FOX for marketing and developing a range of real-world merch to go along.
All on the back of one simple little app that looks and feels like a flash game. (i love it, don't get me wrong, but it is not anything special)
Did Harbor Master or Flight Control do this? No.
It takes a lot to think big and that's where the big players are-- and worth a good chunk of money too.
Any thoughtful speculation about why they said no? It seems to me more like a personal vendetta response from a Facebook-faithful (i.e. anti-Google) than justified by economical reason.
A niche social network platform acquired for $100MM? That's outlandish enough. I can't imagine their value exceeding that later on.
Offers like this really reinforce the conventional wisdom that your best bet to make it big is to strike out on your own, build something that a big company would like to get into and then sell it to them.
No employee pushing a social network idea or design proposals within Google is going to get compensation anything like this.
I find it interesting that Google would be willing to pay $100M for "the team’s “design skills,” and were very enthusiastic to get a prominent ex-Facebooker, Morin, at Google. They hoped it might help Google recruit more Facebook employees over time."
They've taken a big gamble by not selling at $100mil, which seems very generous. It'll be interesting to see where they end up in 5 years.
Maybe going the Groupon route? Or, trying to. It's hard to know whether or not they know things that the general public and Google doesn't, or that Google knows something we don't.
Interested to see how this pans out on both sides and the industry's reactions along the way! Thanks for all the comments.
Interesting metrics on the growth and engagement rate. FWIW, I am seeing similar metrics at my group texting site (groupflier.com), a 15% engagement rate and linear group growth. I wonder if that is the natural growth rate of closed groups?
It's interesting to me that they turned down a $100M+ offer and raised at only a $25M pre-money valuation. Wouldn't it make more sense to raise at close to $100M pre-money?
Not if they anticipated raising more money later. Raising at $100M means they were setting themselves up for a down-round when they next raised (i.e. raising at less than $100M).
Unless they're extremely confident that they'd be valued at more than $100M in their next financing round, raising at less than $100M sounds like the smart, um, path.
But isn't this problematic, since they would have to raise more money later on, considering that they'll be diluting their shares a lot.
Doing a $5M seed round at a $25M valuation after Google's offer is, what, a dilution of 20% total shares?
I get that they can't do an evaluation that is higher than the next one, but they must really have recented taking the offer - perhaps for reasons of working at Google for four years for the $25M bonus.
Sidebar: The only way to update your own path is with an iOS4 only app? It can't even be done through the website? This just seems wrong to me.
I know they must be working on an Android version as they are hiring for that position, but still not being able to update through the web interface seems silly.
Path's name itself reveals the nature of their choice. Getting bought out is the end of their startup story, the conclusion of their "path". While the choice is apparently absurd, it at least stays true to their company's core values.
The sad observation is that Path simply isn't a valuable enough product to create a great story unless they undergo massive pivots. So it begs the question as to the motive, is this anything more than a silicon valley ego contest? Parker was fictionalized in The Social Network, Fanning wasn't.
Perhaps the purpose of the choice is to put themselves on a path to fame by creating not a groundbreaking product but a breath taking story, the path they blaze.
This discussion is lame because it has no context. Here's what I know. Dave's already independently wealthy. His girlfriend is something of a big deal at Google. He killed it for Facebook spearheading the Facebook Platform. Google is losing at social and it really cares about it.
I think that's what most of the discussion is actually centering on, but without really saying it - "losing at social and it really cares about it" is starting to translate into moves that seem quite extreme and seem to have less to do with rationality than M&A fever.
Terms, terms, TERMS people. I can't believe that with 40+ comments there isn't more discussion of the terms.
It could have been $100M in Google stock on a 4-year vest, plus $25M cash on a 4-year earn-out. At those terms, it's really only a $25M deal if the founding team doesn't think they're going to sit around at Google for 4+ years.
Basically, the one sentence above tells us very little about this purported offer and the reasoning for turning it down. I would wait a week for more details to emerge before jumping to any conclusions about bubbles, co-founder betrayal, or anything else.