Since the moment he dropped out of Harvard University, Mark Zuckerberg has stayed remarkably focused on two things: Facebook, and being the boss of Facebook.
Early on he was convinced of the vast potential of the social network he built in his dorm room, say friends, investors and detractors. He pushed his team to be fast and take risks. He resisted efforts to change the way Facebook looked and worked, even if, in the beginning, it meant giving up revenue.
Most important, he arranged the ownership of Facebook so as to give himself extraordinary power to steer the company. By the time Facebook filed for a $US5 billion public offering Wednesday, Zuckerberg had managed to hold on to more than a quarter of the shares in the company, and his agreements with other investors enhanced his voting power to almost 60 per cent of total shares.
That’s a greater measure of control than Bill Gates had at Microsoft when it went public in 1986 (49 per cent), and far greater than the co-founders of Google had in 2004 (16 per cent each). Typically, say Silicon Valley veterans, a first-time entrepreneur gets to the public market with a far smaller stake in his or her creation. Zuckerberg’s arrangement leaves little room for investors to have much input on the company’s direction.
Zuckerberg’s success is an object lesson in what works in the crowded, competitive Silicon Valley: remain in charge, stave off potential predators and expand the company so quickly that no one can challenge the boss.
“He always knew before the rest of us what Facebook could be,” said Paul Madera, managing director at Meritech Capital Partners, who invested in the company in 2005. “Mark’s vision on the purity of the product really did benefit from his control and ownership. It wasn’t subject to committee decisions. It was all Mark.”
The power that Zuckerberg wields over the company has already drawn scrutiny. “You’re willing to take someone’s money but not willing to invite their participation,” said Charles M. Elson, a professor of corporate governance at the University of Delaware. “It makes meaningless the notion of investor democracy.”
Elsen added that Zuckerberg’s arrangement is similar to moves by founders of other technology companies, including Google, to create special classes of stock that grant them extra voting power.
Facebook declined to make executives available for interviews before the offering.
The focus on staying in charge began early. Sean Parker, one of Zuckerberg’s first and most important advisers, helped him with that. Parker had learnt a hard lesson himself about losing control: he was ousted by the backers of a company he founded, an online address book called Plaxo. Parker helped ensure that would never happen to Zuckerberg.
In 2005, when Facebook got an early injection of capital from Silicon Valley venture capitalists, Parker insisted that he control one board seat and Zuckerberg control two, Parker said in an interview last year. When he left the company not long after, Parker insisted that Zuckerberg inherit his board seat, giving him three out of five seats.
“The only way I will resign,” Parker recalled telling the board, “is if ‘Zuck’ receives control of the board seat, because he’s the only one I trust to steer the company.”
Zuckerberg’s early backers included many technically skilled company founders, including Peter Thiel, a co-founder of PayPal; Reid Hoffman, who helped build PayPal and founded LinkedIn; and Marc Andreessen, who founded Netscape. Through them and others, Zuckerberg sought out the most successful technology bosses: Gates, Steve Jobs, and Larry Page and Sergey Brin, co-founders of what would become his biggest rival, Google.
“There is no problem he doesn’t think he can solve, but he constantly tries to find the smartest people he can to give him advice,” said one of his early advisers and a Facebook investor, who asked not to be identified. “Nearly universally, he asks them, ‘Who are the smartest people for me to talk to about this?’ “
In 2008, Zuckerberg brought in Sheryl Sandberg, a veteran executive from Google with expertise in online advertising, to be chief operating officer. She has become a prominent public face for Facebook, but it is always clear who is in charge.
Zuckerberg has always kept a direct hand in controlling the way the Facebook site works, his associates and advisers say, refusing early on to clutter the news feed with advertising. He tweaked the site constantly, sometimes even earning the ire of users, as when it suddenly made some information that people had made visible only to friends available for all to see. That ultimately prompted the Federal Trade Commission to cite Facebook for engaging in deceptive business practices. Zuckerberg issued a personal apology, admitting to mistakes.
“Better done than perfect” was how Zuckerberg described his philosophy on products in Facebook’s filing with the Securities and Exchange Commission. The motto is inscribed on the walls of Facebook’s offices in Menlo Park, California.
One former Facebook engineer described Zuckerberg as having taken on a role similar to the one Jobs held at Apple. Everyone understood that Facebook was his creation, and that he would have the final say over what it would become.
To Zuckerberg’s advantage, Facebook grew fast and became so valuable that its chief executive’s influence could not be challenged.
“Mark has retained nearly absolute control over his board of directors,” said Joe Green, a former roommate at Harvard who now runs Causes, which has a popular Facebook application. “Facebook would have been sold a zillion times over if not for Mark. Especially as you hire older people with direct financial needs, you get a lot of pressure to get liquidity. But you need Zen-like self-confidence to turn down a billion-dollar acquisition offer.”
New York Times
Article source: http://www.smh.com.au/technology/technology-news/mark-of-one-man-on-public-facebook-20120203-1qx1h.html
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