INSUBCONTINENT EXCLUSIVE:
Who should you sell your startup to Facebook and the founders of its former acquisitions are making a strong case against getting bought by
Mark Zuckerberg and Co.After a half-decade of being seen as one of the most respectful and desired acquirers, a series of scandals has
destroyed the image of Facebook MA division
That could make it tougher to convince entrepreneurs to sell to Facebook, or force it to pay higher prices and put contractual guarantees of
autonomy into the deals.WhatsApp founders left amidst aggressive pushes to monetize
Instagram founders left as their independence was threatened
Oculus& founders were demoted
And over the past few years, Facebook has also shut down acquisitions, including viral teen QA app TBH(though its founder says he
recommended shutting it down), fitness tracker Moves, video advertising system LiveRail, voice control developer toolkit Wit.ai and
still-popular mobile app developer platform Parse.Facebook users might not know or care about much of this
But it could be a sticking point the next time Facebook tries to buy out a burgeoning competitor or complementary service.Broken promises
with WhatsAppThe real trouble started with WhatsApp co-founder Brian Acton departure from Facebook a year ago before he was fully vested
from the $22 billion acquisition in 2014
He&d been adamant that Facebook not stick the targeted ads he hated inside WhatsApp, and Zuckerberg conceded not to
Acton even got a clause added to the deal that the co-founders& remaining stock would vest instantly if Facebook implemented monetization
schemes without their consent
Google was also interested in buying WhatsApp, but Facebook assurances of independence sealed the deal.WhatsApp founder, Brian Acton, says
Facebook used him to get its acquisition past EU regulatorsWhatsApp CEO Jan Koum quits Facebook due to privacy intrusionsWhatsApp other
co-founder, Jan Koum, left Facebook in April following tension about how Facebook would monetize his app and the impact of that on privacy
Acton departure saw him leave $850 million on the table
Captivity must have been pretty rough for freedom to be worth that much
Today in an interview with Forbes Parmy Olson, he detailed how Facebook got him to promise it wouldn&t integrate WhatsApp user data to get
the deal approved by EU regulators
Facebook then broke that promise, paid the $122 million fine that amounted to a tiny speed bump for the money-printing corporation, and kept
on hacking.When Acton tried to enact the instant-vesting clause upon his departure, Facebook claimed it was still exploring, not
&implementing,& monetization
Acton declined a legal fight and walked away, eventually tweeting &Delete Facebook.& Koum stayed to vest a little longer
But soon after they departed, WhatsApp started charging businesses for slow replies, and it will inject ads into the WhatsApp Stories
With user growth slowing, users shifting to Stories, and News Feed out of ad space, Facebook revenue problem became WhatsApp monetization
mandate.The message was that Facebook would eventually break its agreements with acquired founders to prioritize its own needs.Diminished
autonomy for InstagramInstagram co-founders Kevin Systrom and Mike Krieger announced they were resigning this week, which sources tell
TechCrunch wasbecause of mounting tensions with Zuckerberg over product direction
Zuckerberg himself negotiated the 2012 acquisition for $1 billion ($715 million when the deal closed with Facebook share price down, but
later $4 billion as it massively climbed)
That price was stipulated on Instagram remaining independent in both brand and product roadmap.Zuckerberg upheld his end of the bargain for
five years, and the Instagram co-founders stayed on past their original vesting dates — uncommon in Silicon Valley
Facebook pointed to Instagram autonomy when it was trying to secure the WhatsApp acquisition
And with the help of Facebook engineering, sales, recruiting, internationalization and anti-spam teams, Instagram grew into a 1 billion-user
juggernaut.Why Instagram founders are resigning: independence from Facebook weakenedBut again, Facebook growth and financial woes led to a
change of heart for Zuckerberg
Facebook popularity amongst teens was plummeting whileInstagram remained cool
Facebook pushed to show its alerts and links back to the parent company inside of Instagram notifications and settings tabs
Meanwhile, it stripped out the Instagram attribution from cross-posted photos and deleted a shortcut to Instagram from the Facebook
bookmarks menu.Zuckerberg then installed a loyalist, his close friend and former News Feed VP Adam Mosseri, as Instagram new VP of Product
mid-way through this year
The reorganization also saw Systrom start reporting to Facebook CPO Chris Cox
Previously the Instagram CEO had more direct contact with Zuckerberg despite technically reporting to CTO Mike Schroepfer, and the insertion
of a layer of management between them frayed their connection
Six years after being acquired, Facebook started breaking its promises, Instagram felt less autonomous and the founders exited.The message
again was that Facebook expected to be able to exploit its acquisitions regardless of their previous agreements.Reduced visibility for
OculusZuckerberg declared Oculus was the next great computing platform when Facebook acquired the virtual reality company in 2014
Adoption ended up slower than many expected, forcing Oculus to fund VR content creators since it still an unsustainable business
Oculus has likely been a major cash sink for Facebook it will have to hope pays off later.But in the meantime, the co-founders of Oculus
have faded into the background
Brendan Iribe and Nate Mitchell have gone from leading the company to focusing on the nerdiestpart of its growing product lineup as VPs
running the PC VR and Rift hardware teams, respectively
Former Xiaomi hardware leader Hugo Barra was brought in as VP of VR to oversee Oculus, and he reports to former Facebook VP of Ads Andrew
&Boz& Bosworth — a longtime Zuckerberg confidant who TA&d one of his classes at Harvard who now runs all of Facebook hardware
efforts.Oculus CEO Brendan Iribe steps down, will now lead PC-based VR division within companyOculus& original visionary inventor Palmer
Luckey left Facebook last year following a schism with the company over him funding anti-Hillary Clinton memes and &sh*tposters.& He was
pressed to apologize, saying &I am deeply sorry that my actions are negatively impacting the perception of Oculus and its
partners.&Lesser-known co-founder Jack McCauley left Facebook just a year after the acquisition to start his own VR lab
Sadly, Oculus co-founderAndrew Reisse died in 2013 when he was struck by a vehicle in a police chase just two months after the acquisition
The final co-founder Michael Antonov was the chief software architect, but Facebook just confirmed to me he recently left the division to
work on artificial intelligence infrastructure at Facebook.Today for the first time, none of the Oculus co-founders appeared onstage at its
annual Connect conference
Obviously the skills needed to scale and monetize a product are different from those needed to create
Still, going from running the company to being stuck in the audience doesn&t send a great signal about how Facebook treats acquired
founders.Course correctionFacebook needs to take action if it wants to reassure prospective acquisitions that it can be a good home for
I think Zuckerberg or Mosseri (likely to be named Instagram new leader) should issue a statement that they understand people fears about
what will happen to Instagram and WhatsApp since they&re such important parts of users& lives, and establishing core tenets of the product
identity they don&t want to change
Again, 15-year-old Instagrammersand WhatsAppers probably won&t care, but potential acquisitions would.So far, Facebook has only managed to
further inflame the founders versus Facebook divide
Today former VP of Messenger and now head of Facebook blockchain team David Marcus wrote a scathing note criticizing Acton for his Forbes
interview and claiming that Zuckerberg tried to protect WhatsApp autonomy
But I find attacking the people and company that made you a billionaire, and went to an unprecedented extent to shield and accommodate you
It actually a whole new standard of low-class,& he wrote.Posted by David Marcus onWednesday, September 26, 2018But this was a wasted
opportunity for Facebook to discuss all the advantages it brings to its acquisitions
Marcus wrote, &As far as I&m concerned, and as a former lifelong entrepreneur and founder, there no other large company I&d work at, and no
other leader I&d work for,& and noted the opportunity for impact and the relatively long amount of time acquired founders have stayed in the
Still, it would have been more productive to focus on why it where he wants to work, how founders actually get to touch the lives of
billions and how other acquirers like Twitter and Google frequently dissolve the companies they buy and often see their founders leave even
sooner.Acquisitions have protected Facebook from disruption
Now that strategy is in danger if it can&t change this narrative
Lots of zeros on a check might not be enough to convince the next great entrepreneur to sell Facebook their startup if they suspect they or
their project will be steamrolled.
