Recently Facebook filed their S-1, starting the wheels in motion on their journey to become a public company.
There are inherent dangers in making the leap from a private to a public enterprise.
When Google went public in 2004, one of their main concerns was that their competition would find out just how successful they had become. This would have inevitably led to a re-doubling of efforts from competitors such as Yahoo and Microsoft.
This, however, was a few years ago when the scope of search wasn’t entirely clear, and Facebook has less of an issue with competitors with deep pockets (except, ironically, Google with Google+)
Facebook do, however, still face one of the big problems faced by Google in 2004 – a post-IPO brain-drain.
It was revealed that the Facebook IPO would make at least 1000 millionaires, many of them employees. One reason for this was that, as Google and many others have done, Facebook had been liberal with using stock incentives with early employees.
In fact, one extraordinary story to come out of the S-1 filing tells how local artist David Choe was paid in shares for painting the office walls. He’ll soon be worth around $200m.
This sort of story highlights issues which will need to be dealt with if the company is to continue being as successful as it has been.
If you got given millions, would you go to work the next day?
If hard working, cash-strapped employees become multi-millionaires overnight, you wonder if many of them will come to work the next day. If they do, will they work as hard as they did the month before?
How many will leave their jobs to create their own enterprises funded with their new found wealth. We know that many of the original Google employees have since gone on to launch their own companies.
What about the employees who didn’t arrive when stock was being handed out? How will they feel parking their half-paid-for Toyota next to the Maserati Gran-Turismo owned by the engineer who was hired 2 weeks before them?
How will the company fare if the brains that built it don’t support its growth in the same way and with the same vigor as they did when they were still ‘hungry’?
Time will tell, and it’ll be interesting to see how it unfolds.
It’s worth noting that Google shares opened at $85 and are now worth around $600, so resisting the urge to cash in early would have been prudent for Google employees with share options. Whether or not Facebook is worth its initial valuation and will experience this sort of growth is another issue.
Jon
Oolone.com
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