Hoodie Billionaires: 3 Lessons We Learned from Zuckerberg’s ‘Hoodiegate’
When Mark Zuckerberg showed up to a meeting with potential Wall Street investors wearing a hoodie sweatshirt, just before Facebook’s initial public offering in May, analysts derided the young CEO for his lack of maturity (http://go.bloomberg.com/tech-deals/2012-05-08-zuckerbergs-hoodie-a-mark-of-immaturity-analyst-says-2/).
At the time, the wardrobe decision didn’t do much to slow Facebook’s roll to the third largest IPO of all time, opening with shares valued at $38. Ever since, however, the stock has slid below $27, leaving the general public who bet on the company worried that they’ll never recoup their loss.
Zuckerberg reigns as crown prince of a group of young entrepreneurs with similar ideals and attitudes. Groupon’s Andrew Mason made his first billion before turning 30 last year. He’s faced similar criticism for sipping a beer during a major employee meeting. If his company’s stock weren’t also plummeting, Mason might get a bit more of a break.
The bottom line is that the most buzzed about companies are springing up faster than ever before. Whereas it once took years to build a national market, painstakingly choosing retail locations with a chance of success, today’s entrepreneurs can perfect an app, put it on the market, and watch hundreds of thousands of downloads occur all around the world in less than a week.
It’s a fast-paced business world with new implications on the way Wall Street trades and consumers view the economy. With Zuckerberg as a cornerstone example, here are a few lessons we’ve learned from the minor ‘scandal’ analysts dubbed ‘Hoodiegate.’
In the weeks since Facebook’s IPO, the company is now facing legal challenges from investors who claim that Zuckerberg hid insider information about the stock being overvalued prior to the commencement of trading.
If the investors succeed in court, Zuckerberg may end up having to testify, and chances are he’ll wear a tie when he speaks to the judge. None of that matters, however, in the run-up to the IPO. Although Zuckerberg himself made a bundle of billions, taking his company public may prove to be a poor decision for Facebook. Still, had he shown up and played the Wall Street game like a traditional CEO fronting an oil company or major bank, he’d have seemed out-of-place.
Zuckerberg represents a new breed. They act like the young kids that they are and wear what they want to wear. Anything else would be faking it, and that could bode even worse than meeting with investors in a sweatshirt.
The Young Are The New Rich
Zuckerberg is 28. Mason is 30. Instagram founders Kevin Systrom and Mike Krieger, who just sold their photo-sharing app to Facebook for $1 billion, are just 28 and 27, respectively. Gurbaksh Chahal is just 29, yet he’d founded and sold two advertising firms to the tune of $340 million by the time he was 25 years old.
When we’re young, it can feel like there’s more time to accomplish goals. Some people slack off, while others devote themselves to an idea. The difference between the young entrepreneurs just mentioned and traditional businessmen like Wal-Mart’s late Sam Walton is two-fold:
- It’s easier to forget the profit-motive on a day-to-day basis when you’re young. You may work every day for three years on a project without making a dime and living in a shoebox apartment. But when you’re done, you might sell it and be a billionaire.
- Young business people are more likely to be willing to sell. If you’ve been building a company for decades, it’s more difficult to let go.
That leads us to our third lesson (and one that applies to any business owner looking to get rich):
Sell When the Time is Right
It’s looking more and more like Groupon’s Andrew Mason missed a boat of epic proportions when he passed up Google’s $6 billion offer for the company in December 2010. Seven months after its IPO, Groupon is now valued below that offer, and it will have a hard time recovering.
Just as quickly as new tech and social media companies rise to prominence, they can also fall from the sky. Nobody who makes a billion dollars on a company in their 20s should count on an exponential climb after that.
Instagram’s Systrom and Krieger saw the writing on the wall when Facebook offered to buy their company, which they had yet to monetize. Had they held out, they’d be faced with selling an upgraded product and incorporating advertisements to turn a profit. That’s not to mention the competing product Facebook would have inevitably launched.
Instead, Facebook is left to figure out the monetization puzzle, while Systrom and Krieger have plenty of capital, and plenty of time, to work on their next genius idea.