ConnectU Spills Value of Facebook Deal: $65M(law.com)
law.com
ConnectU Spills Value of Facebook Deal: $65M
http://www.law.com/jsp/ca/PubArticleCA.jsp?id=1202428139731
29 comments
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.
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.
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.
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.
Good points, but the most damage has been made by him faking the development process: telling your cofounders that you're moving along, while secretly preparing to launch a competitor isn't what I call "branching" in my book.
You're right, I may come across as strongly opinionated on this matter, as someone who worked his ass off only to learn some day that our partner has had prepared a brand new corporate entity where he's been pumping our IP for stock, leaving us with stock of an empty "shell". Lawyers helped, sure, most of what we got back went straight to their own pockets. Having two guys work for $400/hour isn't going to help you much.
So... I wouldn't call it branching when you're essentially paying (with your time and effort) for someone else's product launch. If I remember the story correctly, Zuk launched Facebook within weeks (!) after finally admitting to them that they're screwed.
You're right, I may come across as strongly opinionated on this matter, as someone who worked his ass off only to learn some day that our partner has had prepared a brand new corporate entity where he's been pumping our IP for stock, leaving us with stock of an empty "shell". Lawyers helped, sure, most of what we got back went straight to their own pockets. Having two guys work for $400/hour isn't going to help you much.
So... I wouldn't call it branching when you're essentially paying (with your time and effort) for someone else's product launch. If I remember the story correctly, Zuk launched Facebook within weeks (!) after finally admitting to them that they're screwed.
Yeah I don't know the details. I'm definitely not in favor of going behind anyone's back to start a company. But if I was working on something with a few other people and they turned out to not be contributing much, I'd fork. But would certainly be open and upfront about it.
Not all of the people Mark hurt were co-founders.
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.
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
original: http://www.02138mag.com/magazine/article/1724.html
original: http://www.02138mag.com/magazine/article/1724.html
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Especially for the lawyers ... would be interesting to know what's left.
I think I rather have $10 million in cash than $65 million in facebook stock.
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?
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.
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-...
http://www.techcrunch.com/2008/11/21/sec-gives-facebook-the-...
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.
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.
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.
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...
http://www.nytimes.com/2007/09/01/technology/01facebook.html...
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That's $65 million more dollars than Facebook has ever profited. Not a bad deal.
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.
So it's $65 million if you believe that Facebook is worth $15 billion.
I don't. Why should anyone?
I don't. Why should anyone?
if you believe that Facebook is worth $15 billion.
Facebook is usually valued at $4 billion. http://blogsearch.google.comq=facebook+valuation+%224+billio...
Facebook is usually valued at $4 billion. http://blogsearch.google.comq=facebook+valuation+%224+billio...
its not all stock, so regardless of the amount they still made more profit than facebook
The title is misleading- ConnectU's former lawyers published the estimated value of the settlement inadvertently.
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.
Ok, downmodded, now does that mean yes, or no? A mere click is a bit too abstract.
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).
"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.
Because Facebook's valuation is completely stable and accurate.
That's a nice pay day (for the lawyers too)