As you no doubt heard, the 9th Circuit Court of Appeals ruled yesteday that former Harvard University schoolmates of Facebook founder Mark Zuckerberg can’t undo their settlement over creation of the social networking site. Judge Kozinski said that Tyler and Cameron Winklevoss were “sophisticated parties” and savvy enough to understand what they were agreeing to when they agreed to the settlement during a mediation meeting in 2008.
Putting aside the legal issues, this case presents a lesson for entrepreneurs on what not to do when you are starting a company. (One caveat: I’m basing my comments on the movie version of the story, which has plenty of fiction mixed in with truth. The movie version provides a decent case study, however, regardless of its veracity.)
Here are eight specific and doable things I think the Winklevoss’s could have done to minimize risk of starting a business and maximize the profit on their idea.
- Co-founded the company with one or more strong technical founders who would have had equal equity and control as the other founders.
- Shrunk the founding team and kicked out at least one or two of Cameron, Tyler, or Divya. A four-person startup with three “business guys”? Death.
- Vetted Mark better. What did they know about him? That he knew how to build a website (lots of people do)? That he was involved in some pretty questionable stunts which made him a cocky, notorious campus figure? That he was hard to communicate with and treated them with contempt? Not a guy I’d bet my company on (again, this is the movie version of Mark I’m talking about, which is largely fiction).
- Found a technical founder who was a cultural match with them. It is clear from the beginning the guys had nothing in common with Mark and didn’t respect each other. They should have worked with friends or at least gone out drinking a few times together to see how they mesh. These guys were at Harvard but hadn’t made any geek friends? Get out of the gym, dudes.
- All of the founders (not just Mark) should have signed NDAs and Proprietary Inventions and Agreements docs. This would not have prevented Mark from starting a competitor, but it may have slowed him down and it may have discouraging him from getting involved in the first place and wasting their time.
- Been more dedicated. The movie shows them just “phoning it in,” occasionally calling Mark asking “how is our site coming along?” Can you image Steve Jobs calling his folks at Apple asking “how is that iPad thing coming along?” Roll up your sleeves, guys.
- Set a regular work rhythm and project management framework. At least a weekly meeting where they all sat together, shared what they are working on, demoed to each other, talked about next steps, and spend time in a room together. Mark would have been busted the very first week if they had done that.
- Acted on their instincts. They knew something was fishy with Mark, but they let him string them along for several additional weeks before his cover was blown.
Can you think of other things they should have done?