Ben Horowitz to Facebook: No Biggie, I Had a Terrible IPO, Too

Published on September 10, 2012
by Mike Isaac

Since its very public, much-ballyhooed initial public offering in May and the stock’s subsequent swoon, Facebook has been raked over the coals by Wall Street, individual investors and the press alike. But at least one person feels empathy for the social network: High-profile Silicon Valley investor Ben Horowitz.

Horowitz compared Facebook’s recent woes to his own experience with taking a company public, when as CEO he led hosting services company LoudCloud to market 11 years ago.

“We were similar to Facebook,” Horowitz said at the TechCrunch: Disrupt technology conference Monday morning, “in that it wasn’t the most opportune time for the company to take it public.” Because of this (and other factors, no doubt), LoudCloud initially lost 95 percent of its value.

Contrast that to Facebook’s current plight. The company’s shares have been in free fall, its stock price more than halved in the four months since first being listed on the Nasdaq at $38 per share, valuing the company at a massive $104 billion. As it sits this morning, shares of Facebook are hovering around $18.

Also familiar is the blame game, Horowitz said: “Lots of people were calling for me to be fired.” Similarly, there have been some calling for the heads of Facebook CEO Mark Zuckerberg or the oft-blamed David Ebersman, Facebook’s chief financial officer who painstakingly led the company through the long IPO process.

Perhaps the biggest strain, however, isn’t on the management — it’s on the rank-and-file members of the social giant. “It creates a lot of pressure on the employees,” Horowitz said. “A lot of the employees go home at the end of the day, facing others who are saying to them, ‘So I read in the paper that you guys are a bunch of idiots.'” That’s a gnarly morale hit that would wear on any company over time — especially after one of the most-watched public market debuts in tech history.

That’s most likely why Zuckerberg will take the stage at Disrupt on Tuesday, to address the public for the first time since his company went public. No doubt Wall Street, the Valley and Facebook’s employees will all be paying rapt attention (I know I will).

But in the end, Horowitz essentially argued that everything ends up working out — as long as the company leadership stays focused. LoudCloud pulled a pivot (to some degree) and turned into OpsWare, which went on to be acquired by HP for $1.6 billion in 2006.

Horowitz’s message wasn’t, “Don’t worry Mark, one day you’ll be able to sell!” It was to weather the storm, because when you go public, negative attention like this is to be expected.

“In Silicon Valley, when you’re a private company, the entrepreneur can do no wrong,” Horowitz said. But when that IPO comes, “the public reverses, and investors are all incensed that the entrepreneur screwed them” if they aren’t getting expected returns in the market.

In other words — hang in there, Mark.

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