With the board of Twitter agreeing to sell the company to Elon Musk, a chapter in the history of social media has reached a new milestone.
It is not the first time that Twitter has received takeover offers. In 2008, Facebook’s Mark Zuckerberg had also made an offer to take over the company.
Following the meeting with Zuckerberg, Ev Williams, co-founder and then CEO of Twitter , wrote a letter to the board, which he later posted on the publishing platform ‘Medium’.
The three reasons cited by him to decline the offer were based on whether ‘The offer captures the upside’, ‘imminent threat’, and ‘personal choice’.
On the first reason of ‘the offer captures the upside’, he said every business has natural growth limits. If someone offered you $10 million for your coffee shop that does $250,000 a year in sales, it’s pretty clear you should sell — from a purely financial perspective. Finances are only one perspective, but if you have many shareholders, it’s one you are obligated to take seriously.
“At the time, the offer we had on the table for Twitter — though a heck of a lot of money and a huge win for investors and anyone else involved — didn’t seem like it captured the upside. Even though we weren’t huge, and there were still a lot of doubters, I believed our potential was unbounded,” he wrote in his letter to the board.
On the reason of ‘imminent threat’, he said there’s potential, and then there’s risk. And there’s always risk, even in the best situations. But there are cases in which your chances of reaching your potential are slimmer than normal and maybe even totally out of your control. Sometimes the threat is internal — an inability to execute on one’s opportunity.
Twitter also had an internal threat. In his letter, he said: “There was a while where our technical issues made us quite vulnerable. But by the time of this email, we felt we had moved past that. (We hadn’t quite, but this was eventually true.) We had competitors who were larger and paying increasing amounts of attention to us, but it didn’t feel like we were in real trouble.”
On the reason of ‘personal choice’, he said in the letter that sometimes the founders or other key people may just be done. This is actually quite common and drives a lot of small acquisitions. It doesn’t apply as much as companies get larger, because everyone is (eventually) replaceable — especially if the company is doing well.
“Back in 2003, I struggled a lot about the decision to sell Blogger to Google. The financial win wasn’t clear (it was for a small amount of private stock — again, before their IPO). We had tonnes of room to grow and didn’t have any real threats. And I even had a term sheet for more funding on the table. But I was compelled, ultimately, because I felt like Google was the best home for this thing I’d built to reach its potential. I also knew I wanted to start another company and thought I’d come out of a couple years at Google smarter and better. I also knew the team was going to be happy to join Silicon Valley’s most esteemed company,” he had stated in his letter.
But in Twitter’s case, the founders had no desire to sell. “I had actually just become CEO and was raring to go — as was the team. Additionally, the company we were having the discussion with didn’t seem like one in which we’d fit particularly well or the team would be stoked about,” he wrote in the letter.
What was Facebook’s offer?
Coming back to Facebook’s interest to buy Twitter way back in 2008, it is worthwhile to mention how Twitter came out with a figure to negotiate the deal (which eventually did not happen).
In his book Things a Little Bird Told Me, Biz Stone, Twitter co-founder, says that Zuckerberg had offered $500 million to take over Twitter in 2008 in a cash and stock deal.
Biz says he had suggested $500 million as the takeover price to Ev Williams as it was the biggest number he could imagine then.
According to Biz Stone, the three reasons for an entrepreneur to sell a company are: First, the company is about to be crushed by competition or sued into oblivion. Second, the founders are tired and done and just want the money already. Third is the company’s potential, when paired with another company, isof a magnitude bigger than you can possibly imagine attaining alone.
He says in the book that none of the reasons applied to Twitter then.
Published on
April 26, 2022
