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Facebook, TipJoy, the Deal that Didn’t Happen and the Hire that Did
- il 17y agoSo basically Facebook got the same benefit as if they had acquired the company(the talent) for less money and the investors got screwed.
- GavinB 17y agoPresumably they don't get the brand, domain name, existing code base, and access to registered users. There's probably a lot more to this story than we know--there's no need to jump to conclusions.
- jonknee 17y agoI don't think Facebook needs the domain, code or registered users. They liked the idea and obviously the people behind it. But to launch it on a Facebook like scale it would need a rewrite, tons of legal power and probably a new name anyway (even TipJoy learned to not like their name).
- scorpion032 17y ago> brand name The founders have themselves said that they have little traction, and 3rd party payment services will not add much value. > domain name Doesn't matter, when brand name isn't useful > Existing code base Its takes significantly less time to build it the next time. > Registered users Facebook has 250 million users! <1% cant matter anyway.
- GavinB 17y agoRight, and that's why no one was interested in buying the company. Investors own the company, not the employees--even if they are founders.
- tipjoy 17y agoDebatably, they got less than half the talent, thank you very much!
- scorpion032 17y agoAt less than a tenth of the price?
- webwright 17y agoAbby > Ivan? :-)
- jharrison 17y agoI sense strife intra-marital strife.
- _pius 17y agoWell, that thickens the plot considerably.
- medianama 17y agoThis is clearly a conflict of interest. The founder should have disclosed the terms of employment offer to the investors (if not general public)
- gruseom 17y agoOn what basis are you saying that they didn't? Edit: Well, now we know. "No basis" actually turned out to be an understatement. http://news.ycombinator.com/item?id=779693 http://news.ycombinator.com/item?id=779693 Edit 2: just noticed that it was you who asked the question. Credit where credit's due.
- johnnyg 17y agoIsn't a startup's founder obligated to act in the best interest of the inventors whose money and risk made the venture possible?
- nostrademons 17y agoThere's no evidence that they didn't. FaceBook held all the cards here - all they had to do was wait until TipJoy ran out of money, then snatch up one of the founders when he goes looking for a job. Which is what they did. What else would you have the founders do? Just highlights the importance of bargaining position. Make deals when you don't need them, because you won't be able to when you do.
- plainspace 17y agoJust highlights the importance of bargaining position. Make deals when you don't need them, because you won't be able to when you do. I think this is the real take home here.
- ivankirigin 17y agoThis completely doesn't tell the whole story, and those of you commenting should realize that.
- _pius 17y agoIt's the most difficult kind of article to rebut: the kind that "raises questions" without drawing any conclusions. But they sure made the situation look pretty shady.
- gruseom 17y agoBut they sure made the situation look pretty shady. Really? I read it twice and while I agree that the author was trying to make it look shady, all he actually comes up with are "undisputed facts". It's like trying to make a horror movie by adding scary music to paint drying. I know nothing about the details here, but when an attempt at innuendo refutes itself, that's pretty weak.
- davidw 17y agoComes across as "there's more to it", but it did tell a side of the story that your earlier announcement didn't mention at all, which is why I guess people are interested in it. Hope you both come through it all ok in any case, and good luck at your new job, and at some point in the future, your next stab at a company.
- jsankey 17y agoI think most people probably do realise that. I understand you're probably not in a position to tell it all just yet either. Seems like it would be in Facebook's and your own best interest to clarify the already-public information (if not more), though? Kill the speculation before it starts to echo.
- gehant 17y agoSpeculation of what exactly? You're telling me a sentence like this would cause legitimate speculation: "Supposedly there is no proof that PG is a cold blooded killer but there are no facts to prove otherwise." Most of that article was stretched assumption & hyperbole, at best. The only shady thing in all of this is that site forces a pop-up.
- medianama 17y agoI would like to hear PG's (or other investors) views on this.
- pg 17y agoFacebook didn't do anything wrong. Tipjoy was out of money. They'd been talking to several potential acquirers, including Facebook, but those deals all fell through. So the Tipjoys were going to have to get jobs somewhere. Since they were worried about money and Ivan admired the hackers at Facebook, I asked FB if they'd offer him a job, and they did. It doesn't portend anything for the future of startups, as this story seems to imply. If your startup tanks, you have to get a job somewhere, and lots of hackers get jobs at Facebook. There are several other YC alumni working there.
- amichail 17y agoComparing this to voting, most people vote because they want to be seen in a good light by their friends and family (and some vote because they don't understand probability). Perhaps some sort of similar social pressure could have been employed with TipJoy.
- cyunker 17y agoMy contribution voting makes as much difference as it should: 1 person = 1 vote. By your logic, I guess I shouldn't worry about my carbon footprint.
- amichail 17y agoWhether you should worry about your carbon footprint depends a lot on what your friends and/or family think of the issue. On a practical individual level, it's all about looking good in front of your friends and/or family.
- mhartl 17y agoYou've reductio'd to something that isn't absurdum.
- startingup 17y agoBasically it appears like Facebook made the rational calculation that hiring the developer at retail is a lot cheaper than buying the company wholesale. That is consistent with what I have argued in HN comments: with the glut of start-ups (50 from YC alone this year?) prices will drop towards replacement value. The replacement value of a start-up amounts to a hiring bonus for its developers. This is likely true even with substantial user traction. We saw much the same thing in the implied valuation of iLike - after liquidation preference, developers basically get a hiring bonus, if they stick around. And iLike had 10 million monthly users on Facebook. So unless a start-up has a plausible path to independent profitability, it is going to be subject to the brutal laws of a buyer's market. In other sectors this effect has been well observed: take enterprise software for example. There are public companies with $100+ million revenue that trade for basically not much more than cash on hand.
- byrneseyeview 17y agoYeah, if the startup's sole value is that it looks good on a résumé, that's true. But many startups have added brand value -- if Microsoft wanted to get into micropayments, for example, I think Microsoft TipJoy would have more initial traction than Microsoft Micropayment using the same developer. FB already has a great brand name.
- randallsquared 17y agoIn this particular case, Ivan's already mentioned that the brand was a net drawback, in the previous thread about TipJoy this week.
- startingup 17y agoIn my mind, brand value equates to user traction. User traction alone isn't enough for valuation (particularly in sober times), particularly when the acquirers have massive user-bases themselves. Microsoft's historical acquisitions were of that kind (starting with DOS!): technology/development teams, with little or no premium paid. As an acquirer this is perfectly rational behavior. Why make a VC rich? That is the logic that is increasingly being applied and the proliferation of start-ups makes that logic very compelling. Let's say FB next needs a real time video service. Do they really need someone else's brand or audience? They would likely scout for a hot development team with good technology, and there are many to choose from.
- byrneseyeview 17y agoIt's like the Zeno's Arrow of stories: we get half the remaining story every time.
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- khangtoh 17y agoThis is an really interesting situation. What I'm really curious about is how/where IP of Tipjoy would eventually end up? Ivan doesn't own those IP, TipJoy does. Assuming Facebook had initiated the acquisition, I can only imagine they're after 1) The technology/IP behind Tipjoy 2) The talents I find it hard to believe that Facebook would fork out $5M just for the "talent", so I think that was more of a technology buy for Facebook. So if that's the case, Ivan would be threading into an unfavorable situation since their investors technically own parts of TipJoy and would want to protect TipJoy's technologu and IP. I do think there's a potential that those investors could file claims against Facebook and Ivan if he does end up working on Facebook's payment system. Again, I'm not pointing out anything against Ivan but I do want to know as entrepreneurs, if we do get into such a situation, what sort of risks/factors could arise from this?
- sanj 17y agoIvan & Abby, are you both heading west? I'll miss having another startup here in Arlington.
- far33d 17y agoSad to see another entrepreneur leave Boston.
- sown 17y agoWow. What a ride it must have been. I wish to be part of such a ride someday. :)
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