

ConnectU Spills Value of Facebook Deal: $65M - rogercosseboom
http://www.law.com/jsp/ca/PubArticleCA.jsp?id=1202428139731

======
josefresco
$65 million for having an idea taken that they probably would have failed at
if executed themselves.

That's a nice pay day (for the lawyers too)

~~~
old-gregg
First, what makes you think that "they probably would have failed"?

Second, he stole not just "an idea", he stole the code, he participated in
their in-house discussions and effectively was spying over his future
competitors, and most importantly he stole a lot of _time_ \- ConnectU
founders were lured into believing that their product was moving along for a
while.

Nobody pays $65M in a settlement for "stealing an idea". The fact that
Facebook settled for such amount only means that ConnectU lawyers were able to
prove some of these nasty things above.

Personally I'm very disgusted by this accident, I regret that jail time wasn't
even a question. Something very similar happened to one of the startups I was
involved in, but in that case it was an opposite spin: an "idea guy" who
contributed nothing but the idea, used cofounding developers to build a
prototype and then diluted them to almost zero even _prior_ to A-round.

This undermines the entrepreneurial spirit. And the fact that you can get away
with it (like Zuk did) in such visible manner is even worse, it's like O.J
case for software.

~~~
breck
You seem like you have pretty strong opinions so I'm not going to try to
convince you, I'm just going to state my opinion.

The world is a better place for Zuckerberg acting as he did. Facebook has
become an incredibly successful company with great products. He obviously made
the decision that he could do a much better job running the show than the
ConnectU guys, and he went ahead and proved it. I have nothing but respect for
that.

As for stealing code--I think it's generally pretty trivial for any developer
worth his salt to rewrite things from memory without having to steal it(given
that I think he only worked for ConnectU parttime for a few weeks--not enough
time to build a substantial codebase). I'd be surprised if any ConnectU code
was "stolen". I wouldn't be shocked if some lines were reused out of laziness,
but in general I think a few weeks of code in most cases is useless. A rewrite
will often be better and easier.

I would hate it if we ever even considered putting people in jail for
branching out because they believe they can do a better job at innovating and
leading a business than their current employers. That's the heart of
capitalism--creative destruction; upsetting of the status quo.

If you're concerned that one of your co-founders may branch off and compete
with you, I'd say the problem is probably with you--there's not a lot of
confidence in your abilities if that happens. Zuckerberg from what I've read
had been coding for a decade--that's a significant investment of time that the
ConnectU guys didn't make. I probably would have done the same thing.

~~~
old-gregg
Good points, but the most damage has been made by him faking the development
process: telling your cofounders that you're moving along, while secretly
preparing to launch a competitor isn't what I call "branching" in my book.

You're right, I may come across as strongly opinionated on this matter, as
someone who worked his ass off only to learn some day that our partner has had
prepared a brand new corporate entity where he's been pumping our IP for
stock, leaving us with stock of an empty "shell". Lawyers helped, sure, most
of what we got back went straight to their own pockets. Having two guys work
for $400/hour isn't going to help you much.

So... I wouldn't call it branching when you're essentially paying (with your
time and effort) for someone else's product launch. If I remember the story
correctly, Zuk launched Facebook within _weeks (!)_ after finally admitting to
them that they're screwed.

~~~
breck
Yeah I don't know the details. I'm definitely not in favor of going behind
anyone's back to start a company. But if I was working on something with a few
other people and they turned out to not be contributing much, I'd fork. But
would certainly be open and upfront about it.

------
fallentimes
I think I rather have $10 million in cash than $65 million in facebook stock.

~~~
whacked_new
Is there any mechanism stopping the sale of stock right now? If they feel like
selling, there should be _somebody_ willing to take it, no?

~~~
aston
In the interest of keeping Facebook private, I'm sure they would have given
out the shares with some sort of stipulation against selling them without
Facebook approval. Once too many people have shares, the company would be
required to IPO.

~~~
ryanwaggoner
You may be referring to something different, but Facebook was exempted from
the SEC rule that requires companies with more than 500 shareholders to report
their financials publicly (so a public company, but not publicly traded).

[http://www.techcrunch.com/2008/11/21/sec-gives-facebook-
the-...](http://www.techcrunch.com/2008/11/21/sec-gives-facebook-the-
greenlight-to-go-beyond-500-shareholders-without-going-public/)

~~~
aston
That ruling only applies to the RSUs they give out to employees. If you check
out the last page, it's quite explicit that normal Facebook shares and options
aren't exempt.

------
petercooper
This whole thing forgets Aaron Greenspan, another Harvard alumni who has a
claim on coming up with the concepts behind Facebook:

[http://www.nytimes.com/2007/09/01/technology/01facebook.html...](http://www.nytimes.com/2007/09/01/technology/01facebook.html?pagewanted=print)

~~~
aston
AKA thinkcomp, as seen commenting elsewhere on this post.

------
jonknee
That's $65 million more dollars than Facebook has ever profited. Not a bad
deal.

~~~
jorgeortiz85
Eh. It was probably paid mostly in shares of Facebook itself. So it's $65
million if you believe that Facebook is worth $15 billion.

~~~
homme
_So it's $65 million if you believe that Facebook is worth $15 billion._

I don't. Why should anyone?

------
kwamenum86
The title is misleading- ConnectU's former lawyers published the estimated
value of the settlement inadvertently.

------
whacked_new
I always thought this was a petty/trollish lawsuit, and never bothered to
follow it, but does this say that there was merit behind ConnectU's lawsuit?

Ok, downmodded, now does that mean yes, or no? A mere click is a bit too
abstract.

------
cellis
Note that the stock:cash ratio was not disclosed. Depending on what it is, the
payout could be significantly less (in the near future, at least; I am firmly
in the camp that facebook is worth billions).

------
palish
"The $65 million is presumably an estimated value of the settlement, which was
paid in a mix of cash and Facebook shares."

Because Facebook's valuation is completely stable and accurate.

