Zuckerberg Cancels Early Stock Sale for Facebook Employees

"Through the golden heart of every world-changing startup pulses an avaricious get-rich-quick scheme." Valleywag's statement is certainly true to some degree; by nature, entrepreneurs have the risk-reward dichotomy hard wired into their souls. Their employees do too, and are also along for the ride with high hopes of bloated returns in exchange for their long days, hard work, and life in an uncertain environment.

Mark Zuckerberg originally announced a reward program that would let his employees sell $900,000 or 10% of their shares, which ever is less, due to no immediate plan for an IPO or buyout. The plan suggested a new way for a start-up to reward and appease (without going through an IPO) its 800 employees who are slowly growing restless and eager to make some money off of their shares. Unfortunately, they'll have to sit a bit longer as Mark just announced yesterday afternoon that their will be no sale. (Or, at least there is no plan for one.) A certain blow to morale, especially since employees were probably in the process of finding potential buyers. Now, they'll be growing even more nervous with the economy, Facebook's ludicrously high burnrate, and Google's stock spiraling downward indicating that Facebook will likely have trouble in the ad marketplace, too.

Facebook gave VentureBeat (1 of our recommended startup blogs) a note explaining why:

The global economy is in the midst of an incredibly difficult period, and all companies have been affected in some way. After carefully considering the current environment, we’ve decided to establish an open-ended timetable for an employee stock sale program. Despite the turbulence in the financial markets and resulting challenges, we believe the company is very well positioned to handle this economic downturn. We have the means to go after big opportunities that will help solidify our position as the platform that everyone uses to share while building a fundamentally strong business.

However, Valleywag couldn't have put it any better: "Zuckerberg's back to the original startup business plan: Make a big bet, and hope it pays off years later with an IPO or a sale. Facebookers will have to make the same bet, too. It's not as exciting as overturning Silicon Valley's financial order. But right now, just drawing a paycheck seems like a lucky thing."

Mark isn't fooling anyone though. I suspect that he's simply hiding from any new, (lower) valuation that the free market would serve him. But, who knows...you can't always judge a start-up's value off quantitative revenue analysis. There are simply too many qualitative factors and valuable intangible assets such as his incredibly large, growing audience and the brand that he has created. The company serves one of human's most basic needs - an urge to connect and stay connected to others. On top of that, they have definitely reached a critical mass in the US, which will be hard to touch. None-the-less, it doesn't matter since financial analysts will likely weigh revenue as their top variable in the valuation.