Lore has it that while Mark Zuckerberg was able to turn down Yahoo’s $1 billion offer to buy Facebook in 2006, his board and investors would have forced him to sell if Yahoo CEO Terry Semel had come back with a $1.1 billion offer.
According to a person who was in the room with him when he made the decision, Terry was adamant he would not up the offer.
Today, four short years later, we learned that, with the help of Goldman Sachs, Facebook plans to sell just 4% of the company for twice as much as Yahoo’s highest – a $2 billion raise at a $50 billion valuation. Guess Terry got that one wrong. (But boy did Mark get it right.)
Facebook, then TheFacebook.com, went live in February 2004. Just four months later and prior to any outside investment, a 20-year-old Mark Zuckerberg fielded a $10 million offer from an unnamed New York financier.
'He didn't for a minute think seriously about accepting,' writes David Kirkpatrick in The Facebook Effect.
According to some documents SAI has seen, one early bidder for Facebook was Friendster. But the deal was dependent on Friendster raising another round before Facebook got big on its own. Never happened.
During Spring 2005, Facebook (still TheFacebook) was talking to The Washington Post Company about an investment.
Out of nowhere, Viacom offered $75 million to buy the company.
Mark would have earned $35 million on the spot, reports Kirkpatrick.
Instead, then Facebook president Sean Parker used the offer to haggle better terms out of the Post (which eventually got scooped on the deal by Accel Partners anyway.)
In the spring of 2005, MySpace CEO Chris DeWolfe visited Mark and his team to 'put out feelers about possibly buying TheFacebook,' Kirkpatrick reports.
Mark, his president Sean Parker, and adviser Matt Cohler met with Chris, 'but only because they thought he was an interesting guy and they were curious about MySpace.'
Viacom hadn't given up on Facebook yet in late 2005. Focus groups told them that MTV viewers were spending more and more time on the site.
So that fall, Mark flew to New York to meet with CEO Tom Freston.
Tom pitched all kinds of synergies between MTV and Facebook. Mark wasn't interested. 'It was a no-thank-you meeting,' a source tells Kirkpatrick.
In early 2006, MTV boss Michael Wolf stopped by Facebook one last time. Zuckerberg told him he thought the company was worth $2 billion.
A couple weeks later, Viacom sent Facebook a $1.5 billion offer -- $800 million in cash up front, the rest a payout later.
Facebook almost sold, according to The Facebook Effect, but it wanted a bigger upfront payment. Viacom's CFO was nervous about paying so much for a company with such small revenues. The deal fell apart. Viacom never came back.
In the summer of 2006, Yahoo decided to offer Facebook $1 billion.
Facebook's investors and many of its executives wanted to sell.
But Facebook was about to launch the News Feed, and if it went well, Mark Zuckerberg figured the company would be worth way more than a $1 billion.
AOL CEO Jonathan Miller decided he wanted to buy Facebook in the middle of 2006.
He even convinced Time Inc. CEO Anne Moore to come in on the deal before he took it to AOL's parent company, Time Warner. His plan: AOL would sell MapQuest and Tegic. Time Inc would sell IPC. Together they'd offer $1 billion plus.
Time Warner CEO Jeff Bewkes nixed the idea. Kirkpatrick writes, 'He said if they could live without those properties they should go ahead and sell them, then turn the cash over to the parent company.'
In the fall of 2006, Yahoo came back to Facebook and suggested it would pay $1 billion or more.
But by then, Facebook had opened the site to people beyond college and high school students.
Registrations were up from 20,000 a day to 50,000 a day, Kirkpatrick reports. Even eager-for-an-exit VC and Facebook investor Jim Breyer was OK with passing on the deal.
One guy who wasn't, Facebook COO Owen Van Natta, was also not long for the company.
One reason: Microsoft's $247 million investment, which set Facebook's value at astronomical $15 billion, stipulated that Facebook would have to give Microsoft notice before it ever considered a buyout offer from Google -- just about the only other company in the world that could pay so much for a tech startup with no revenues.
If Facebook ever sells (to anyone besides the public in an IPO), it'll be to Microsoft or to a company that made an offer Microsoft chose not to match.
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