Here’s an interesting question…

Is there a right time to sell your business?

I’ve been reading the inside story about Mark Zuckerberg and Facebook this week, and it’s thrown up this interesting question.

Throughout Facebook’s business life, Zuckerberg has been adamant that he would never sell Facebook (although I’ll caveat that slightly). He would never give up control of Facebook.

You see, it wasn’t about the money for Zuckerberg (although he knew it would come), it was about realising a vision to make Facebook the chosen social networking platform globally.

In fact, he had an inner belief that Facebook could have a positive effect on society through accountability and the transparency Facebook provide direct into people’s lives.

But on a couple of occasions they came pretty darn close to selling!

Viacom (MTV)

First when MTV’s parent company Viacom offered $800 million cash with a further $700 million to be paid over-time based on Facebook’s performance.

It was an amazing offer for a 2-year-old company that was losing a massive amount of money.

It was serious stuff, but Zuckerberg didn’t really want to sell, saying in he’s opinion the company is worth $2 billion with no strings attached.

Zuckerberg made things difficult and the two sides couldn’t agree on how the remaining $700 million should be paid, and eventually the deal petered out.

This made the board at Facebook think that selling might be the right option, and later in that same year, Zuckerberg reluctantly agreed to sell if a bid came in for $1 billion cash.

Microsoft

Then just a year later, Microsoft CEO Steve Ballmer, came to the table with a mind-boggling bid of $15 billion cash, for a 3-year-old company that was still losing money.

Zuckerberg said. “I don’t want to sell the company unless I can keep control.” Which he thought would end the conversation.

But Ballmer had other ideas. Coming back with a plan that would allow Zuckerberg to keep control for up to 7 years. Ballmer thought this would address Zuckerberg’s key concern.

At which point Zuckerberg made it clear he didn’t want to sell, and if he did, he would have to remain at the helm indefinitely with Facebook given all the autonomy it required.

This killed the deal, but not the relationship. In the end Microsoft agreed to buy a 1.6% stake in Facebook for $240 million, which still valued the company at $15 billion.

Conclusion

Mark Zuckerberg stuck to his guns throughout, but still required serious investment to help Facebook grow to the point where they became self-funding (through global advert placements).

They achieved this by selling small amounts of stock at hyper-inflated valuations at key points in their journey. These valuations were usually calculated on number of users and page views.

Like Zuckerberg we have a vision to make ‘office solutions affordable to all’ through guaranteed fixed prices in monthly subscriptions, with no strings attached.

But to create a model like this, it takes investment in technology, people, and systems. Which to date, we’ve managed to self-fund.

Although, as business accelerates, the need to buy more office technology, employ more people and build more systems will increase too, much like has happened at Facebook.

We’re with Mark and want to realise our vision and don’t want to sell. So, I’m sure sometime in the future we’ll be looking at the stock investment route too.

…but what would you do, if offered $15 billion for a 3-year-old company that’s losing money?