The great hope of the Valley, the startup everyone thought was the next Google, the company whose IPO might restart the stock-market gold rush for everyone, is not well. Why? Look to its founder. Mark Zuckerberg is mismanaging his creation's transition to greatness. In Facebook's own parlance, the company's plight is "complicated." It will take in $300 million to $350 million in revenue this year, thanks in part to a lucrative ad deal with Microsoft. But its $15 billion valuation is premised on a far brighter future — a future that may never materialize. The biggest symptom of Facebook's ailment is the flight of technical talent. In the Valley, success attracts smart people, who attract other smart people. Yes, they're after money, too, but having brilliant coworkers counts for a lot. These great minds bond and form, yes, a sort of social network of their own. When they leave, the network frays, weakening the company's ability to attract new talent.That's why, for days before it was announced, top executives at Facebook desperately hid technical lead Dustin Moskovitz's plans to leave. They dithered as Mark Zuckerberg tried to persuade his cofounder and college roommate to stay, and others, led by COO Sheryl Sandberg, concocted a plan to spin his departure. That spin has now been dutifully printed in the pages of the Wall Street Journal: Facebook's changes are the "type of evolution you see among young growing companies and specifically young growing companies in Silicon Valley," company flack Larry Yu told the paper. Sandberg, who closely directs the company's PR, would have us think that the uproar that has taken place at the social network since her arrival is a healthy evolution. It is not. The internal politicking she has introduced to the company is destructive, and has sent many of the company's best and brightest fleeing. The list of the departed includes data guru Jeff Hammerbacher, product VP Matt Cohler, platform director Ben Ling, and most recently, Justin Rosenstein, a top engineer who's leaving with Moskovitz. Operations VP Jonathan Heiliger may be next. The defections all hurt. But most of the blame lies with Zuckerberg himself. Zuckerberg has always styled himself as the company's "founder," relegating the likes of Moskovitz and Chris Hughes, now Barack Obama's Web campaign director, to "cofounder" status. Never mind that this distinction doesn't exist in English; those who start a company are all equally founders. Zuckerberg clearly considers himself first among equals; he once referred to Moskovitz as "disposable" and a "soldier." The former Harvard roommates patched over those insults, and Zuckerberg said he will rely on Moskovitz's counsel even after his departure. If Moskovitz really thought he could guide Facebook's evolution, he would have stayed at the company, right? Zuckerberg has a history of churning through confidants. Napster cofounder Sean Parker helped establish Facebook in Silicon Valley as its president, only to be disappeared from the company. Former COO Owen Van Natta was in favor, then out. Sandberg had his ear for a while, but may be losing it. Lately, I hear he favors Christopher Cox, the twentysomething recent Stanford grad he recently tapped as the company's director of product. We'll see how long he stays by Zuckerberg's side. This fickleness may be predictable from a 24-year-old. But it's fundamentally bad for the company. Yahoo thrived, in its early days, on the partnership between CEO Tim Koogle and founders Jerry Yang and Dave Filo. Google's triumvirate of its cofounders and CEO Eric Schmidt improved on that management form; the troika lends the company some stability by making sure decisions at the top are never unilateral. Zuckerberg's insistence on the "founder" title suggests that he always planned to rule the company alone. It's a bad plan. His instincts on what kind of website will attract a 100 million users have been spot-on. But he has no business sense. At one point during the Facebook redesign process, he suggested getting rid of advertising altogether, having grown disillusioned with both old-style banner ads and the company's experiments with targeting ads to users' behavior. Will Zuck ever find an equal partner, a sounding board who can help him turn Facebook into the large, ongoing concern he envisions? Dustin Moskovitz may not have been the right person. Nor, it seems, is Sheryl Sandberg. Yet to staunch the bleeding of Facebook's technical talent, Zuckerberg will have to find someone to ground him — someone for whom he has enduring respect, who can moderate his worst impulses. Without it, there will be one word describing what's going to happen to Facebook: "founder."
The best thing Valleywag ever did for Facebook COO Sheryl Sandberg was to call her a liar. That's just not done in the genteel office parks of Silicon Valley. It garnered the embattled executive a much-needed wave of sympathy within her company, on which she's now planning to capitalize.Valleywag's coverage last week of Sandberg's spinning in response to the departure of a key employee was deemed, in some quarters, a "character attack." Yet Sandberg's character is the very issue here. Her response is very telling: First, she wrangled a long followup story from her frequent dinner guest Kara Swisher that called our story sexist, over-the-top — and factually correct. Swisher's report is damning for Sandberg. It acknowledges that Facebook executive Matt Cohler, who left to join Benchmark Capital, was unhappy with Sandberg's leadership. It reports that Jonathan Heiliger, the company's infrastructure chief, has also been unhappy with Sandberg — Swisher errs only in saying that the two have patched things up. Swisher's new report also means that the version of Ben Ling's departure fed to her by the company last week was false. Facebook executives have acknowledged all these facts. But characteristically, Sandberg has steered the discussion away from the real problem — the bad decisions she's made, the poor judgment she's demonstrated — and toward massaging reality. She is, even now, planning a new PR campaign to buff her image. Did it ever occur to Sandberg to figure out why she rubs so many of Facebook's technical leaders the wrong way? Could it have anything to do with her meddling in matters that CEO Mark Zuckerberg has said aren't her job? Facebook has real problems in Sandberg's area of responsibility. Billing, customer service, and other mundane-but-critical aspects of the social network's advertising operations are chaotic, and require fixing. Sandberg's moves to shore up her image suggest the real reason for her unpopularity within Facebook: Her overwhelming concern for style over substance. How ironic that that pointing that out has sent Sandberg spinning.
Facebook's COO is tearing down the temple. That's the only conclusion I can reach after witnessing the Sheryl Sandberg's management of the Palo Alto-based social network. What I hear from inside Facebook: She demands total loyalty, and brooks no dissent — even the healthy, boisterous debate that's common to startups. You're either with Sheryl, or you're against Sheryl. And if you're against Sheryl, you're not long for Facebook. What's really frightening is how she effortlessly cajoles lies from her underlings. Note how Matt Cohler and Ben Ling exited the company singing her praises — despite what the talented executives were telling confidants in private about Sandberg. There's a simple explanation for that: She bought them off, with still-valuable Facebook stock.Do the math: Ling joined Facebook in October 2007. He's leaving Facebook in a few weeks, months before his one-year anniversary — and it normally takes one year of employment for stock options or restricted stock to vest. However miserable Ling was under Elliot Schrage — Sandberg's personal flack and de facto chief of staff, whom she put in charge of Facebook's development platform, to the utter shock of the entire Valley — can you imagine he walked away from that much money? Far more likely: Sandberg and Schrage asked him to resign in exchange for getting to keep his shares. Ling, who was well-regarded at both Google and Facebook, now gets to walk away from Sandberg's mess. Cohler, formerly Facebook's product chief, has also made nice noises about Sandberg — and he, too, needed the cash. He's now a general partner at Benchmark Capital, where Sandberg's husband, Dave Goldberg, is employed as an entrepreneur-in-residence. (None of this is coincidence.) General partners at VC firms normally buy into the funds they invest; Benchmark Capital's most recent fund, raised in February, is an eye-popping $500 million.The amount Cohler would have to invest personally comes to roughly $500,000, by my estimates. Selling his Facebook shares seems like the most likely way he'll come up with that money. Isn't it likely that in exchange for making nice noises about Sandberg on the way out, Cohler got an assurance that Facebook won't make trouble about his share sales? The fundamental problem with Sandberg's take-no-prisoners management style: It's exquisitely tuned for the zero-sum world of Washington, where you're either in power or out. She's treating her appointment as Facebook's COO like a new administration coming into the White House. Her years at Google, which was the only tech-startup game in town for the long years of the bust, reinforced the wrong lesson. Washington's bitter internal rivalries thrive on a scarcity of opportunity. Today's Valley has an abundance. Her employees have options, and not just the kind she can grant. Which leaves the question: Why is Sandberg so determined to drive talent out of Facebook? My working theory: She wants to remake the company in her image. Here comes the Sandberg Administration! But to do so, she'll need to find skilled accomplices, not servile yes-men like Schrage (who wouldn't know an API if it extended his subclasses). And she'll need to articulate what, exactly, her new vision is. For all of Mark Zuckerberg's flaws, he's created a website which will soon have 100 million users, and is worth billions of dollars according to a long line of Silicon Valley moneymen who are slavering to buy his employees' shares. What, exactly, has Sheryl Sandberg done, besides buy a lottery ticket by joining Google when it was still private? Sometimes you have to tear down before you build. But no one knows what, if anything, Sandberg is building — besides fear and doubt. That's hardly the mark of a Silicon Valley leader. It's a tactic that may have worked in Washington, D.C., where Sandberg worked for the viciously political Clinton administration. But she's killing the company's morale with her Beltway tactics. If she has a bright idea, she'd better start talking about it. It will take far more than three days to rebuild this temple — and it's not clear she has time to spare.
We know Zuck was close to Adam D'Angelo. They went to High School together and even built the digital music software that first igniting Zuckerberg's entrepreneurial imagination back in his teens. Cohler was employee number five at Facebook — there when the company was one room big. Zuck recruited Hammerbacher, whom he knew from Harvard, to join the company from a presumably well-paying gig at Bear Stearns. With all his friends leaving, oon Zuckerberg won't have any Woz- or Allen-like buddy at the company.
Shall we all pretend to be shocked by a new study that shows that the venture-capital industry is overwhelmingly — no, disgustingly white and male? A National Venture Capital Association survey found that 88 percent of general partners — the people who can actually greenlight an investment at a firm — are white, and 86 percent are male. On the VC blog Private Equity Hub, Alex Haislip takes hope, noting that the junior ranks of VC firms are more diverse — and that some less lily-white firms have delivered good returns lately. Greed and the relentless herd-following instinct should take care of the industry's inequities, he seems to argue. Good luck with that!
Facebook's vice president of product management, is reportedly leaving the company to join Benchmark Capital. Two possible interpretations leap to mind: Sheryl Sandberg, the Facebook COO recently hired away from Google, is pushing out, one by one, the executives closest to Zuckerberg, leaving him increasingly isolated. Or Zuckerberg, loathe to give up control over Facebook as a product, is doing it himself. Update: Cohler is joining the VC firm as a general partner, not an entrepreneur-in-residence, as we'd first reported — a considerably more prestigious role, where he'll be investing money in startups himself, rather than waiting to get funded. He'll stay tied to Facebook a "special advisor" to Zuckerberg — which suggests that any falling-out was not with the Facebook CEO. Cohler, for his part, tells Swisher he got along well with Sandberg, and helped recruit her to the firm.
Founders never share power willingly, gracefully, or for very long. That's a lesson that Facebook's Owen Van Natta should have learned at the knee of Jeff Bezos, when Van Natta was an executive at Amazon.com. Instead, though, he's been schooled in it by Facebook CEO Mark Zuckerberg, who just demoted Van Natta from COO to chief revenue officer and VP of operations, Kara Swisher reports on AllThingsD. Zuckerberg's former No. 2, once trusted to attend the Sun Valley media-mogul conference in his stead, now shares key duties with a host of other executives. Here's a rundown on Van Natta's new rivals.