Subscribe to Inc. magazine
WIRE

Facebook IPO Could Spawn 1,000 Start-ups

As Facebook becomes a public company, it's making thousands of employees wealthy enough to bolt. The upside: They're ambitious, entrepreneurial, and ready to start their own companies.
 Next Steps : Facebook is a great incubator for start-ups. Will the IPO accelerate the amount of entrepreneurs to come out of the company?

Next Steps: Facebook is a great incubator for start-ups. Will the IPO accelerate the amount of entrepreneurs to come out of the company?

When Facebook goes public this week, more than 1,000 employees will become instant millionaires. Some are reportedly planning trips to the Amazon. Others plan on excavating Mayan ruins in Mexico, and at least one is apparently signing up for a $200,000 trip into outer space.  

But beyond adventures overseas (and out of the atmosphere), a substantial risk looms for Facebook's management: With their newfound wealth (one Quora user crunched a few public numbers and speculated that the average Facebook employee could pocket about $2.04 million from the IPO), plenty of employees may strike out and quit their jobs.

And we suspect quite a few will launch companies of their own.

There's certainly a precedent to do so. Consider Asana, Quora, Path, Storm8, Cloudera, TrialPay, MemSQL, DailyStregnth, Jumo, i2we, Artillery, and Cove. All were started by former Facebook employees.

"There is some inevitability that some of the early folks that still want to work hard and continue to find roles inside the company will stay, but others will go off and leave and start their own companies," says Brad Silverberg, a venture capitalist based in Bellevue, Washington. "You see that happen at any start-up. It's sort of the natural process of this thing."

He added: "The Valley is incredibly competitive for talent now. If you have the experience and confidence and vision, maybe you want to start your own company."

Ready to Bolt

Om Malik, founder of Gigaom, recently noted that he has "spoken to multiple people, and there is a general sense in the Valley that there is a large contingent of Facebookers who are ready to bolt."

One who has already left, Ankur Pansari, had started at Facebook in October 2007, where he became the company's first partner engineer. In October, Pansari left the company, spent six months traveling the globe, and came back to the states to launch Artillery, an HTML5 game-development company. 

"In general, a lot of the stuff that you see coming out of ex-Facebookers is really, really interesting stuff," Pansari says. "Quora, Asana, and Path—they're leading the charge for guys like me. These guys are there for financial suport and emotional support, and the network that we built is pretty amazing."

Other former Facebook-employees-turned-entrepreneurs agree that the Facebook culture—one of industriousness and constant hacking—has both educated and inspired a new set of entrepreneurs to go out and make it on their own.

"Facebook mainly hired entrepreneurs in the early days, and so a lot of those entrepreneurs are going to be starting their own companies in the next 12 months," said one employee who left Facebook last year to start his own venture, but preferred not to be mentioned by name.

Perks: Signing Bonus ... & a Barber

Still, Facebook has been able to recruit and retain some of the top tech talent in the country. Starting engineers are also handsomely compensated; fresh out of college, selected engineers are reportedly offered $100,000 in salary, plus a significant signing bonus. There are less obvious perks as well: Several employees seem oddly fond of Facebook's barber.

Ultimately, the IPO will bring riches to plenty of employees, many of whom will be emboldened to leave and start their own companies. But for plenty of employees who can essentially afford to "retire on the job," the IPO has the potential to create a corrosive effect on employee culture.

If management doesn't keep the company's mission in focus, Brad Silverberg believes Facebook may develop a "have-and-have-not" mentality among its workers—those early employees who are now millionaires (at least on paper), and later hires who are working paycheck to paycheck.

Silverberg says he has seen this happen firsthand at Microsoft, where he was a senior vice president from 1990 to 1999. Silverberg says he recalls seeing employees strutting around the office wearing buttons that said "FYIFV," an acronym for "F--- You; I'm Fully Vested"--a reference to Microsoft's then-lucrative stock incentives.

"There is the danger that you've got the early folks that are quite wealthy, and you've got folks who have joined later, who aren't—and it can create a challenging dynamic," he says.

Lessons From Google?

Two years ago, Dilip Venkatachari left his job at Google as head of mobile to start a social media advertising technology company called Compass Labs. Like Facebook, Google's IPO made plenty of employees instantly wealthy, but Venkatachari says Google executives were able to keep the company's share price out of daily conversation.

"Certainly, folks who came on later did not have the same upside in liquidity," he says. "But the company did everything possible to keep the internal culture focused on performance—and not focusing on the economics. At Google, there was never any discussion of stock price. It was almost a forbidden topic to talk about."

Silverberg is a bit more skeptical. In order for Facebook to retain its top talent, and prevent its employees from leaving to start their own ventures, it will need to prove to employees that Facebook is still a meritocracy.

"Facebook has shown they've got really strong management," he says. "The key is to provide an exciting vision for the company that people believe in. When it all becomes about the money, then things get bad."

More:



Register on Inc.com today to get full access to:
All articles  |  Magazine archives | Livestream events | Comments
EMAIL
PASSWORD
EMAIL
FIRST NAME
LAST NAME
EMAIL
PASSWORD

Or sign up using: