The weight of the world is now on Zuckerberg’s shoulders. As co-founder of Lastminute.com, I can, in a small way, empathise
I can’t claim to have had anything like the success of Mark Zuckerberg, but as Facebook floated on the Nasdaq stock exchange today, I could empathise in a very small way with what its founder must be feeling. In March 2000, following a period if intense media interest, my own company, Lastminute.com, went public, and was priced the day Nasdaq peaked, at £571m. It increased its price during an accelerated road show by more than any other European initial public offering (IPO). The thinking then was technology IPOs were like Giffin goods – the more expensive, the more demand.
Facebook is at a different stage. Back then, the internet had very few profitable giants. We were loss-making and had the revenues, as one analyst wisely pointed out, of a small pub. Facebook is very profitable, making $1bn last year, and has jaw-dropping reach. Its execution has been almost flawless (excluding the occasional privacy lapse and mobile) and it is now valued at more than $100bn – 100 times greater than our business.
Yet there are superficial similarities. Both had young founder chief executives. I was 31 when Lastminute.com went public (old by today’s standards: my co-founder Martha Lane Fox was 28). I had very little real idea of what to expect from investors and of managing large teams and crazy growth. Zuckerberg has had eight years to build a world-class, experienced team around him. Facebook has the benefit of the pioneers that have gone before it, they have lowered the costs of web technology dramatically and given a new generation digital management experience.
Zuckerberg is in the mould of Jeff Bezos of Amazon, Steve Jobs of Apple, and Google’s Larry Page – an idealistic, passionate, driven, impatient, obstinate, obsessive CEO, who can drive a team to long-term rather than short-term goals. He will have 57% voting control – Martha and I had no control, and were never advised about the possibilities of such things as “dual-class voting stock“.
But, like Facebook, our business was a hot stock that was chased up by retail investors. We saw how this creates real stress. People bought into our business at a high valuation and believed it could only go one way. Investors see this as free money, and if it isn’t (in our case the bubble burst and the stock went down 95%, until we recovered) then sentiment changes fast. In such situations, motivation has to come from the team around you, from growth and the love of customers for your product – you cannot depend on support from critical investors and an increasingly cynical media.
Despite the massive boost to his personal wealth, which is now valued at $25bn, there are things Zuckerberg will hate about going public: the results, saying the same thing over and over again to investors when he would rather be driving the business; the market sentiment that will make his stock a hedge fund plaything. He will hate being asked about the share price, as if he controlled that too. He will hate people who want him to focus on short-term profits as opposed to his long-term mission. He will probably hate having to worry about how to invest his money, as that doesn’t seem to drive him except as a way of keeping the score.
Investors, in turn, should look for Zuckerberg to keep his confidence – not arrogance. For the valuation to double over five years (the sort of return investors need to believe in) they will want him focused. He will need to demonstrate that with his fantastic war chest and user base he can take the business into mobile phones, payments, identity, big data analytics, social commerce … In a similar way the lastminute.com IPO valuation was based on a belief that the business was not about selling low-margin cheap flights but would continue its expansion into a greater share of customers’ leisure spend across different devices and into different nations.
The night we went public and raised £120m, Martha and I were very subdued. It felt as if we had the weight of the world, and our employees, on our shoulders, and that the company was priced for perfection. That was massive pressure. However, now I look at Zuckerberg and see someone who really does have the weight of the world on his shoulders, is only 28, and doesn’t have a proper business partner.
I had hoped Facebook would resist the temptation that we also felt, to raise the price too much. In our case I’m not sure the added pressure was worth it, and in theirs they really don’t need the extra money. I suspect Zuckerberg will feel that pressure, that his world is surreal. But he will be happy that he has been given this chance to continue to change the world – and follow his passion. And that his creation’s future is assured for some time to come.