Peter Kafka

Recent Posts by Peter Kafka

Mark Zuckerberg Really, Really Wanted to Work With Sam Lessin

Facebook’s acquisition of online storage start-up last week looks like the standard-issue “acqhire”: Big company buys a small company because it wants its employees, but doesn’t really care about the business they’ve built.

The difference here? Apparently, Mark Zuckerberg really, really wanted to work with founder Sam Lessin. That’s why Facebook not only gave Lessin’s investors a return on their money, but paid for the deal with Facebook stock instead of cash.

People familiar with the transaction tell me that’s investors–primarily DFJ Gotham and RRE Ventures–ended up with something close to double the $10 million they put into the company over the past two years, and that they were paid out in common stock.

At one point in Facebook’s history, that wouldn’t have been remarkable. But as Facebook has shot up in usage, employee size and valuation, its managers have become loath to hand out shares in advance of an IPO.

For instance, after the company bought Hot Potato and founder Justin Shaffer this summer, there was some sotto voce grumbling from investors that only Shaffer received Facebook equity, while his backers got cash.

With the exception of the payment, the deal looks very similar. Like Shaffer, Lessin will move from Brooklyn to Palo Alto to work at Facebook headquarters. And like Hot Potato, will be shut down.

So what makes Lessin worth precious Facebook shares?

We know that Lessin and Zuckerberg have been tight since they met at Harvard ( Caroline McCarthy has more on that here). Perhaps as important: I’m told that prior to the deal had begun work on a new product that was meant to supplant its consumer-facing storage service. (UPDATE: Samuel Clay, via Twitter, suggests that was working on a “a wrapper for [content delivery networks]. Auction-style bidding for lowest cost delivery of content.”. That synchs up with what I’ve heard. But if true, not sure it explains Zuckerberg’s interest.)

Love to know more, but Facebook and Lessin are staying mum for now.

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There was a worry before I started this that I was going to burn every bridge I had. But I realize now that there are some bridges that are worth burning.

— Valleywag editor Sam Biddle