5 ms·

ConnectU Spills Value of Facebook Deal: $65M

35 points by rogercosseboom 18y ago

palish 18y ago
"The $65 million is presumably an estimated value of the settlement, which was paid in a mix of cash and Facebook shares." Because Facebook's valuation is completely stable and accurate.
josefresco 18y ago
$65 million for having an idea taken that they probably would have failed at if executed themselves. That's a nice pay day (for the lawyers too)
- dpeq 18y ago
  Especially for the lawyers ... would be interesting to know what's left.
- old-gregg 18y ago
  First, what makes you think that "they probably would have failed"? Second, he stole not just "an idea", he stole the code, he participated in their in-house discussions and effectively was spying over his future competitors, and most importantly he stole a lot of time - ConnectU founders were lured into believing that their product was moving along for a while. Nobody pays $65M in a settlement for "stealing an idea". The fact that Facebook settled for such amount only means that ConnectU lawyers were able to prove some of these nasty things above. Personally I'm very disgusted by this accident, I regret that jail time wasn't even a question. Something very similar happened to one of the startups I was involved in, but in that case it was an opposite spin: an "idea guy" who contributed nothing but the idea, used cofounding developers to build a prototype and then diluted them to almost zero even prior to A-round. This undermines the entrepreneurial spirit. And the fact that you can get away with it (like Zuk did) in such visible manner is even worse, it's like O.J case for software.
  - ericwan 18y ago
    The fact that we never heard of ConnectU but only facebook if they didn't file a law suit made me also think they probably would have failed.
    - deleted 18y ago
      [deleted]
    - tortilla 18y ago
      There was an article in 02138 magazine a few years back. It's offline now, but I got some of it here: edit: found the mirror: http://www.informationliberation.com/?id=24402 http://www.informationliberation.com/?id=24402 original: http://www.02138mag.com/magazine/article/1724.html http://www.02138mag.com/magazine/article/1724.html
  - breck 18y ago
    You seem like you have pretty strong opinions so I'm not going to try to convince you, I'm just going to state my opinion. The world is a better place for Zuckerberg acting as he did. Facebook has become an incredibly successful company with great products. He obviously made the decision that he could do a much better job running the show than the ConnectU guys, and he went ahead and proved it. I have nothing but respect for that. As for stealing code--I think it's generally pretty trivial for any developer worth his salt to rewrite things from memory without having to steal it(given that I think he only worked for ConnectU parttime for a few weeks--not enough time to build a substantial codebase). I'd be surprised if any ConnectU code was "stolen". I wouldn't be shocked if some lines were reused out of laziness, but in general I think a few weeks of code in most cases is useless. A rewrite will often be better and easier. I would hate it if we ever even considered putting people in jail for branching out because they believe they can do a better job at innovating and leading a business than their current employers. That's the heart of capitalism--creative destruction; upsetting of the status quo. If you're concerned that one of your co-founders may branch off and compete with you, I'd say the problem is probably with you--there's not a lot of confidence in your abilities if that happens. Zuckerberg from what I've read had been coding for a decade--that's a significant investment of time that the ConnectU guys didn't make. I probably would have done the same thing.
jonknee 18y ago
That's $65 million more dollars than Facebook has ever profited. Not a bad deal.
- jorgeortiz85 18y ago
  Eh. It was probably paid mostly in shares of Facebook itself. So it's $65 million if you believe that Facebook is worth $15 billion.
  - vaksel 18y ago
    its not all stock, so regardless of the amount they still made more profit than facebook
  - gravitycop 18y ago
    if you believe that Facebook is worth $15 billion. Facebook is usually valued at $4 billion. http://blogsearch.google.comq=facebook+valuation+%224+billion%22&scoring=d http://blogsearch.google.comq=facebook+valuation+%224+billio...
  - homme 18y ago
    So it's $65 million if you believe that Facebook is worth $15 billion. I don't. Why should anyone?
cellis 18y ago
Note that the stock:cash ratio was not disclosed. Depending on what it is, the payout could be significantly less (in the near future, at least; I am firmly in the camp that facebook is worth billions).
fallentimes 18y ago
I think I rather have $10 million in cash than $65 million in facebook stock.
- whacked_new 18y ago
  Is there any mechanism stopping the sale of stock right now? If they feel like selling, there should be somebody willing to take it, no?
  - aston 18y ago
    In the interest of keeping Facebook private, I'm sure they would have given out the shares with some sort of stipulation against selling them without Facebook approval. Once too many people have shares, the company would be required to IPO.
    - ryanwaggoner 18y ago
      You may be referring to something different, but Facebook was exempted from the SEC rule that requires companies with more than 500 shareholders to report their financials publicly (so a public company, but not publicly traded). http://www.techcrunch.com/2008/11/21/sec-gives-facebook-the-greenlight-to-go-beyond-500-shareholders-without-going-public/ http://www.techcrunch.com/2008/11/21/sec-gives-facebook-the-...
      - aston 18y ago
        That ruling only applies to the RSUs they give out to employees. If you check out the last page, it's quite explicit that normal Facebook shares and options aren't exempt.
  - jacquesm 18y ago
    most likely they have a contract that lists exactly who they can sell those shares to and when, with the 'who' being facebook in a large number of cases. Let's hope for them that blabbing about the deal isn't one of those, but since this is essentially 'damages' they may have had some leverage in the negotiations.
whacked_new 18y ago
I always thought this was a petty/trollish lawsuit, and never bothered to follow it, but does this say that there was merit behind ConnectU's lawsuit? Ok, downmodded, now does that mean yes, or no? A mere click is a bit too abstract.
kwamenum86 18y ago
The title is misleading- ConnectU's former lawyers published the estimated value of the settlement inadvertently.
petercooper 18y ago
This whole thing forgets Aaron Greenspan, another Harvard alumni who has a claim on coming up with the concepts behind Facebook: http://www.nytimes.com/2007/09/01/technology/01facebook.html?pagewanted=print http://www.nytimes.com/2007/09/01/technology/01facebook.html...
- deleted 18y ago
  [deleted]
- aston 18y ago
  AKA thinkcomp, as seen commenting elsewhere on this post.
  - deleted 18y ago
    [deleted]

"The $65 million is presumably an estimated value of the settlement, which was paid in a mix of cash and Facebook shares." Because Facebook's valuation is completely stable and accurate.

josefresco 18y ago

$65 million for having an idea taken that they probably would have failed at if executed themselves. That's a nice pay day (for the lawyers too)

dpeq 18y ago
Especially for the lawyers ... would be interesting to know what's left.
old-gregg 18y ago
First, what makes you think that "they probably would have failed"? Second, he stole not just "an idea", he stole the code, he participated in their in-house discussions and effectively was spying over his future competitors, and most importantly he stole a lot of time - ConnectU founders were lured into believing that their product was moving along for a while. Nobody pays $65M in a settlement for "stealing an idea". The fact that Facebook settled for such amount only means that ConnectU lawyers were able to prove some of these nasty things above. Personally I'm very disgusted by this accident, I regret that jail time wasn't even a question. Something very similar happened to one of the startups I was involved in, but in that case it was an opposite spin: an "idea guy" who contributed nothing but the idea, used cofounding developers to build a prototype and then diluted them to almost zero even prior to A-round. This undermines the entrepreneurial spirit. And the fact that you can get away with it (like Zuk did) in such visible manner is even worse, it's like O.J case for software.
- ericwan 18y ago
  The fact that we never heard of ConnectU but only facebook if they didn't file a law suit made me also think they probably would have failed.
  - deleted 18y ago
    [deleted]
  - tortilla 18y ago
    There was an article in 02138 magazine a few years back. It's offline now, but I got some of it here: edit: found the mirror: http://www.informationliberation.com/?id=24402 http://www.informationliberation.com/?id=24402 original: http://www.02138mag.com/magazine/article/1724.html http://www.02138mag.com/magazine/article/1724.html
- breck 18y ago
  You seem like you have pretty strong opinions so I'm not going to try to convince you, I'm just going to state my opinion. The world is a better place for Zuckerberg acting as he did. Facebook has become an incredibly successful company with great products. He obviously made the decision that he could do a much better job running the show than the ConnectU guys, and he went ahead and proved it. I have nothing but respect for that. As for stealing code--I think it's generally pretty trivial for any developer worth his salt to rewrite things from memory without having to steal it(given that I think he only worked for ConnectU parttime for a few weeks--not enough time to build a substantial codebase). I'd be surprised if any ConnectU code was "stolen". I wouldn't be shocked if some lines were reused out of laziness, but in general I think a few weeks of code in most cases is useless. A rewrite will often be better and easier. I would hate it if we ever even considered putting people in jail for branching out because they believe they can do a better job at innovating and leading a business than their current employers. That's the heart of capitalism--creative destruction; upsetting of the status quo. If you're concerned that one of your co-founders may branch off and compete with you, I'd say the problem is probably with you--there's not a lot of confidence in your abilities if that happens. Zuckerberg from what I've read had been coding for a decade--that's a significant investment of time that the ConnectU guys didn't make. I probably would have done the same thing.

jonknee 18y ago

That's $65 million more dollars than Facebook has ever profited. Not a bad deal.

jorgeortiz85 18y ago
Eh. It was probably paid mostly in shares of Facebook itself. So it's $65 million if you believe that Facebook is worth $15 billion.
- vaksel 18y ago
  its not all stock, so regardless of the amount they still made more profit than facebook
- gravitycop 18y ago
  if you believe that Facebook is worth $15 billion. Facebook is usually valued at $4 billion. http://blogsearch.google.comq=facebook+valuation+%224+billion%22&scoring=d http://blogsearch.google.comq=facebook+valuation+%224+billio...
- homme 18y ago
  So it's $65 million if you believe that Facebook is worth $15 billion. I don't. Why should anyone?

cellis 18y ago

Note that the stock:cash ratio was not disclosed. Depending on what it is, the payout could be significantly less (in the near future, at least; I am firmly in the camp that facebook is worth billions).

fallentimes 18y ago

I think I rather have $10 million in cash than $65 million in facebook stock.

whacked_new 18y ago
Is there any mechanism stopping the sale of stock right now? If they feel like selling, there should be somebody willing to take it, no?
- aston 18y ago
  In the interest of keeping Facebook private, I'm sure they would have given out the shares with some sort of stipulation against selling them without Facebook approval. Once too many people have shares, the company would be required to IPO.
  - ryanwaggoner 18y ago
    You may be referring to something different, but Facebook was exempted from the SEC rule that requires companies with more than 500 shareholders to report their financials publicly (so a public company, but not publicly traded). http://www.techcrunch.com/2008/11/21/sec-gives-facebook-the-greenlight-to-go-beyond-500-shareholders-without-going-public/ http://www.techcrunch.com/2008/11/21/sec-gives-facebook-the-...
    - aston 18y ago
      That ruling only applies to the RSUs they give out to employees. If you check out the last page, it's quite explicit that normal Facebook shares and options aren't exempt.
- jacquesm 18y ago
  most likely they have a contract that lists exactly who they can sell those shares to and when, with the 'who' being facebook in a large number of cases. Let's hope for them that blabbing about the deal isn't one of those, but since this is essentially 'damages' they may have had some leverage in the negotiations.

whacked_new 18y ago

I always thought this was a petty/trollish lawsuit, and never bothered to follow it, but does this say that there was merit behind ConnectU's lawsuit? Ok, downmodded, now does that mean yes, or no? A mere click is a bit too abstract.

kwamenum86 18y ago

The title is misleading- ConnectU's former lawyers published the estimated value of the settlement inadvertently.

petercooper 18y ago

This whole thing forgets Aaron Greenspan, another Harvard alumni who has a claim on coming up with the concepts behind Facebook: http://www.nytimes.com/2007/09/01/technology/01facebook.html?pagewanted=print http://www.nytimes.com/2007/09/01/technology/01facebook.html...

deleted 18y ago
[deleted]
aston 18y ago
AKA thinkcomp, as seen commenting elsewhere on this post.
- deleted 18y ago
  [deleted]