Mobile social network and chat application Path has been acquired by Daum Kakao for an undisclosed amount.
It’s safe to assume the exit isn’t exactly what Dave Morin pictured when he first launched the company in November, 2010.
Morin was a former Apple and Facebook employee who set out to create a mobile social network, Path. Three weeks after it launched, Path was downloaded 1.5 million times. And three months later, its momentum was still so strong, Google offered to buy Path for $US100 million. It also offered Morin a $US25 million earn out over four years.
But Morin turned Google down, which shocked a lot of people. How could a young founder walk away from so much money after only spending three months on the product?
There was a rumour that Dustin Moskovitz, Facebook’s cofounder and one of Path’s investors, had something to do with the decision.
At TechCrunch Disrupt in 2011, Moskovitz admitted his role in Morin’s decision to decline Google’s offer. And in 2011, rejecting Google still seemed like the right decision for Path.
“I can’t take full credit,” Moskovitz said, “but we happened to be on vacation together. It was me, him and Brian Singerman of Founders Fund. It just was really clear from Dave’s body language and what he was saying that he didn’t want to do the deal. He was feeling pressured to do it. People were telling him, ‘Take the deal, don’t risk it all.’ The lesson learned is [founders should] set expectations higher [for themselves and their companies].”
Unfortunately, Path lost momentum due in part to changes in Facebook’s algorithm, which had been driving a lot of the downloads. When it lost traction, the company then tried to pivot and launch other applications, but none of them stuck the way Path’s initial app did.
Now, turning down Google’s $US100 million offer seems like it was a mistake. Path isn’t the only startup that probably has regrets. Foursquare, for example, turned down $US100+ million early in its lifecycle, and its exit opportunities now look somewhat grim.
One person who rode his startup’s wave just right is Dan Porter, who was CEO of OMGPOP when its hit game Draw Something was exploding. When Zynga offered to buy the company for hundreds of millions of dollars, Porter did the deal. Draw Something ended up being a fad, but it was a good financial win for Porter and his employees.
You can’t fault a passionate entrepreneur like Morin for turning down a lot of money to see his startup through. And in some cases, turning down big acquisition offers works out.
Snapchat CEO Evan Spiegel recently explained why he turned down a $US3 billion acquisition from Facebook to the 2015 graduates of USC.
“The best thing is that, no matter whether or not you sell, you will learn something very valuable about yourself,” he said. “If you sell, you will know immediately that it wasn’t the right dream anyways. And if you don’t sell you’re probably onto something. Maybe you have the beginning of something meaningful. Don’t feel bad if you sell out. Just don’t stop there.”
He added, “Find something you aren’t willing to sell.”
And don’t feel too badly for Morin. He’s been an extremely successful angel investor these past few years, pouring money into startups such as Slack and ClassPass. His wife is also running a startup that just raised a big round of financing, Brit + Co. And Morin made millions from Facebook stock options.
Path may have been an expensive lesson for Morin, but you can bet he’ll be back to try again.