When Money’s on the Table, Take It

TechCrunch is reporting that Friendster sold not for $100 (the rumor) but something less than $23 million:

The total purchase price paid was $39.5 million. But lots of stuff was deducted, totalling $13 million and change . . . The total to shareholders after the deductions? About $26.4 million. And $3.8 million of that is being put into escrow.

The site raised just over $45 million in four funding rounds. It famously turned down an early $30 million offer from Google and apparently there were some $100 million-plus offers last year that were declined.

This episode should be a lesson to “take the money.”

Spot Runner is another good example. There were/are many rumors and hearsay information about big Internet company X and search engine Y offering very big money for the company, which was declined because of a) too much investor money in and b) inflated expectations about what the company was worth or would eventually sell for.

There’s also Aardvark, which was rumored to be evaluating a sizable offer from Google. Who knows if that’s true but if it is and the company declines, it could later regret the move. I understand the concern about not realizing the startup’s potential or the founder’s original vision. The DodgeBall acquisition by Google is a good example of a startup that languished after an acquisition. There are also many such examples at Yahoo, where the startup was later shuttered and given only minimal attention after the acquisition.

Yet it’s very hard to actually build a business online with real revenues; only a few can. Others have to hope they’re incorporated into a larger entity.

So unless taking the offer represents a breach of fiduciary duty to shareholders, company executives are better off taking the money “on the table.”

One Response to “When Money’s on the Table, Take It”

  1. Google-Yelp Deal Now Off « Screenwerk Says:

    […] over the weekend and Yelp rejected Google’s $500+ million offer. As I wrote last week: When Money’s on the Table, Take It. While many Yelpers — and the rest of the local ecosystem — many not have liked the […]

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