

Google Tried To Buy Path For $100+ Million. Path Said No. - thankuz
http://techcrunch.com/2011/02/02/google-tried-to-buy-path-for-100-million-path-said-no/

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portman
_"eventually offering $100 million for the company plus an earnout of $25
million to be paid over four years"_

Terms, terms, TERMS people. I can't believe that with 40+ comments there isn't
more discussion of the terms.

It could have been $100M in Google stock on a 4-year vest, plus $25M cash on a
4-year earn-out. At those terms, it's really only a $25M deal if the founding
team doesn't think they're going to sit around at Google for 4+ years.

Basically, the one sentence above tells us _very little_ about this purported
offer and the reasoning for turning it down. I would wait a week for more
details to emerge before jumping to any conclusions about bubbles, co-founder
betrayal, or anything else.

~~~
sfphotoarts
why would the founding team leave with $75m worth of Google stock on the
table, all they have to do is show up for three more years.

Given a choice between a nice job at Google with a multi-million dollar salary
doing the thing you love with the resources and infrastructure of Google
behind you vs going it alone, the choice seems (no matter what the terms) like
a poor one. It's not like Path have any really ground breaking technology. How
defensible really is the idea?

~~~
Timothee
Keep in mind that two of the co-founders are Dave Morin and Shawn Fanning. The
former likely made many millions (real and paper money I'd think) as manager
for the Facebook platform/Facebook Connect, the latter made many millions from
Napster.

So, even though this offer and this decision both leave me a bit shocked, they
already have the nice job and the resources they want. (office close to the
bay, downtown San Francisco/SoMA is also nicer than the drive down to Mountain
View)

~~~
robryan
It does seem that the cofounders, as well as the simple domain name are a big
part of the reason they can get an offer like this. It does seem though there
are a heap of services out there doing basically the same thing and tweaking
the parameters a bit, like the friends list size, sure they could end up quiet
successful but it's a big gamble I guess only those already financially secure
could afford to take.

It does matter a bit about the terms to, who knows, maybe Google wanted to
roll it into their upcoming offering instead of having it as a standalone
which would be a deal break for those heavily invested in their concept.

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pjhyett
Given the app isn't particularly popular or compelling, I'm a bit incredulous
over the fact that you only need a couple of internet-famous co-founders to
warrant a $100MM offer.

~~~
johnrob
I won't conclude that there wasn't more to offer than just internet fame, but
I will say that brand is something that companies will pay a big premium for.

~~~
rst
Perhaps, but Google hasn't been one of those companies, Google Earth and
Google Analytics are both things they acquired --- and immediately rebranded.
(Originally Keyhole and Urchin respectively.)

In any case, I'm not sure Path has yet established enough of a brand to be
worth that kind of premium.

~~~
ryanglasgow
They acquired and kept the names for Android, Dodgeball, and Picasa.

Google Path has a nice ring to it and would integrate well within their
current product lineup.

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jasontan
Time for a new startup: Path-on. Social sharing of pictures of coupons. Mobile
x realtime x commerce. Already valued at $2B. Who's with me?

~~~
thankuz
I'm in! But, it wouldn't be complete w/o social Q&A - maybe Quopath-on?

~~~
jasontan
Path-on-ura

~~~
thankuz
Sounds like a bad infection

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jewgonewild
100M for path? Talk about highly inflated valuations. We are clearly in Tulip
Mania times.

~~~
whakojacko
To be fair, they raised funding at more modest (but still crazy, depending on
perspective) 25m pre according to the article. Seems like Google is just
looking for ways to spend their cash.

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defen
I wonder if Google is worried (or should be worried) about these recent high-
profile rejections of its very generous acquisition offers? Yelp, Groupon,
Path, etc.

~~~
lotusleaf1987
Are there any companies who also turned down offers from Google? The three you
mentioned are the only ones I can think of.

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btmorex
Wow. He screwed over his cofounder(s).

~~~
bmcmanus
As easy as that is to say, this isn't a get-bought-and-get-paid company; it's
a shake-up-the-world company. I'm sure he and his co-founders discussed that
at length and understand it.

And ultimately, if you have a remarkable team with strong financial backing,
isn't that the type of company you really want to work for?

~~~
jaredmck
how exactly is it going to shake up the world? I see the best case as more of
a mild rattling of the world- a more human social networking, which will
either softly nudge people in this direction, move other networking players
closer to the real-world social model, or be a sort of nice subtle tool in the
mobile social web.

In no way is it something that as currently formed has a really big dollar
exit potential- i mean, ideally, the product will never become very valuable
to advertisers. If they monetize some other way which can scale big, then
they're way smarter than I can imagine, but i don't see the data aggregation
model or traditional ad model working with this product...it's a very techie-
oriented app at this point in time. The benefits are not visible at all to
"normals", and there is no business use case like twitter/FB have to
accelerate adoption as a platform.

The world has no idea Path exists yet, so there is a while to go before
anything is going to be shaken up at least outside of the bay area.

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benologist
"they loved the team"

That's a _lot_ of love.

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sfphotoarts
what a bad name, it's hard to even search for them. Turning down $100m was
insanity, and the friction between co-founders will very likely fester and be
terminal for them.

~~~
johnrob
There are very few examples of companies turning down large offers and
subsequently regretting it. There has to be something pretty good going on to
get an offer like that.

~~~
sfphotoarts
I worked for one, Pointcast

~~~
portman
I can think of no other Internet company that was so far (a decade?) ahead of
its time.

I loved that damn product so much. This has nothing to do with the thread, but
I just want you to know that you had at least one rabid fan from 1994 - 1998.

~~~
sfphotoarts
thank you - it was a good product, but sadly the company melted down, took
something that worked and decided to spend a year re-writing it in COM;
meanwhile portal sits like Yahoo! came along and eat their lunch. A disastrous
CEO that turned down a huge exit opportunity was replaced with an equally
disastrous one that spent most of his time worrying about what particular rain
forest he wanted chopped down to have this desk made from.

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samwise
That's an insane offer for such a young company.

I guess the team turned it down in the hopes Path will be many times the
offer. I just don't see how an iPhone app can worth more than $120 million. I
think the most successful app would be angry birds, but i doubt even the most
optimistic valuation would put them over one billion.

~~~
olivercameron
Angry Birds, in a sane world, should be worth no where near one billion. They
have sold less than 100 million copies, and I doubt they can keep on repeating
their success year after year. It's a fad that will soon be replaced, just
like Doodle Jump and Flight Control before it.

~~~
kmfrk
I don't know. I don't think Angry Birds is an interesting game, but it's
obviously blowing up like mad, so I don't pretend that any rational dictum
will predict that it dies down.

You don't see plushies and fan art for the other games - and you shouldn't
ignore all the ways the creators profit from the franchise. They also make a
bunch of themed releases like Halloween. They may also have hit a tweenage
demographic susceptible to crap like Silly Bandz, Bratz, and other inane
ztuff.

They even have an ad ready for Superbowl(!).

~~~
imajes
You've missed the point. Sure, it's 'blowing up like mad' but the important
thing is that Roxio have been able to turn the Angry Birds game into a brand:
selling movie rights (!) something even EA struggle with, so quickly, getting
a deal with FOX for marketing and developing a range of real-world merch to go
along.

All on the back of one simple little app that looks and feels like a flash
game. (i love it, don't get me wrong, but it is not anything special)

Did Harbor Master or Flight Control do this? No.

It takes a lot to think big and that's where the big players are-- and worth a
good chunk of money too.

~~~
olivercameron
I don't think real-world merchandise will save them when the next hit game
storms the charts.

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vnchr
Any thoughtful speculation about why they said no? It seems to me more like a
personal vendetta response from a Facebook-faithful (i.e. anti-Google) than
justified by economical reason.

A niche social network platform acquired for $100MM? That's outlandish enough.
I can't imagine their value exceeding that later on.

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daveambrose
Open question: is there any material valuation to the business (and
operations) besides the team in a story like this?

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vhackish
Wow. And I thought groupon turning down 6bil was crazy ...

Back in the mid 80s companies would have killed for money like this!

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brown9-2
Offers like this really reinforce the conventional wisdom that your best bet
to make it big is to strike out on your own, build something that a big
company would like to get into and then sell it to them.

No employee pushing a social network idea or design proposals within Google is
going to get compensation anything like this.

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marknadal
Path's name itself reveals the nature of their choice. Getting bought out is
the end of their startup story, the conclusion of their "path". While the
choice is apparently absurd, it at least stays true to their company's core
values. The sad observation is that Path simply isn't a valuable enough
product to create a great story unless they undergo massive pivots. So it begs
the question as to the motive, is this anything more than a silicon valley ego
contest? Parker was fictionalized in The Social Network, Fanning wasn't.
Perhaps the purpose of the choice is to put themselves on a path to fame by
creating not a groundbreaking product but a breath taking story, the path they
blaze.

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staunch
Why wait to see if it's worth a billion when you can hedge it at 10% today?

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CoachRufus87
Hey Google, take that 100+ Million and start your own YC of sorts.

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danielayele
How did they burn through $2.5mm that quickly?

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yumraj
I think they're waiting for an offer from the mothership, AKA Facebook.

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melvinram
This is Madness! THIS IS SILICON VALLEYYY!!!

<http://www.youtube.com/watch?v=-qR0Uke2XNI>

I find it interesting that Google would be willing to pay $100M for "the
team’s “design skills,” and were very enthusiastic to get a prominent ex-
Facebooker, Morin, at Google. They hoped it might help Google recruit more
Facebook employees over time."

They've taken a big gamble by not selling at $100mil, which seems very
generous. It'll be interesting to see where they end up in 5 years.

------
thankuz
Maybe going the Groupon route? Or, trying to. It's hard to know whether or not
they know things that the general public and Google doesn't, or that Google
knows something we don't.

Interested to see how this pans out on both sides and the industry's reactions
along the way! Thanks for all the comments.

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geoffc
Interesting metrics on the growth and engagement rate. FWIW, I am seeing
similar metrics at my group texting site (groupflier.com), a 15% engagement
rate and linear group growth. I wonder if that is the natural growth rate of
closed groups?

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Supermighty
I wonder how well the suited to each other the founders thought they were when
they started out.

I'm willing to bet they didn't talk about, or at least see eye to eye on the
endgame.

~~~
Supermighty
Sidebar: The only way to update your own path is with an iOS4 only app? It
can't even be done through the website? This just seems wrong to me.

I know they must be working on an Android version as they are hiring for that
position, but still not being able to update through the web interface seems
silly.

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reynolds
It's interesting to me that they turned down a $100M+ offer and raised at only
a $25M pre-money valuation. Wouldn't it make more sense to raise at close to
$100M pre-money?

~~~
kareemm
Not if they anticipated raising more money later. Raising at $100M means they
were setting themselves up for a down-round when they next raised (i.e.
raising at less than $100M).

Unless they're _extremely_ confident that they'd be valued at more than $100M
in their next financing round, raising at less than $100M sounds like the
smart, um, path.

~~~
kmfrk
But isn't this problematic, since they would have to raise more money later
on, considering that they'll be diluting their shares a lot.

Doing a $5M seed round at a $25M valuation _after_ Google's offer is, what, a
dilution of 20% total shares?

I get that they can't do an evaluation that is higher than the next one, but
they must really have recented taking the offer - perhaps for reasons of
working at Google for four years for the $25M bonus.

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jgervin
Why would you turn down $100+ million? I honestly am not sure where Path is
headed. I am at loss for words on this one...

Google must see something?

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xtacy
Are they looking to be bought by Facebook instead?

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rokhayakebe
Great decision, Path. $100M is not cool. You know what is cool? $1 Billion.

~~~
kmfrk
Must be Aaron Sorkin's compelling writing that influenced the decision.

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bpeters
Money flows like wine in the valley.

~~~
phlux
And as we all know, wine eventually turns to piss - and a bunch of stupid
stupid txting decisions.

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zackattack
This discussion is lame because it has no context. Here's what I know. Dave's
already independently wealthy. His girlfriend is something of a big deal at
Google. He killed it for Facebook spearheading the Facebook Platform. Google
is losing at social and it really cares about it.

~~~
brown9-2
I think that's what most of the discussion is actually centering on, but
without really saying it - "losing at social and it really cares about it" is
starting to translate into moves that seem quite extreme and seem to have less
to do with rationality than M&A fever.

