The Social Network

The Social Network

The Facebook case study is a cautionary tale for entrepreneurs. There are many lessons and learnings from this story. The biggest takeaway I have found from watching, The Social Network and reading articles on the creation of Facebook is the importance of being prepared for what could happen. The importance of setting goals and understanding what the potential in your business could be is crucial. In an article written by Dundas lawyers, they quantified Eduardo Saverin’s error as being a $6.5 billion mistake. That is a substantial amount that could have been avoided if he had prepared himself for the future. Nothing was in writing for the first stages of the development of facebook and that resulted in a lot of ambiguity.

When Eduardo Saverin signed his term agreement, he believed that the lawyers of the company had his best interest in mind. This was his first mistake. The lawyers did not have his best interest in mind, they had the interest of the company in mind and Eduardo Saverin was not in that vision. You cannot trust others with your business decisions. As a student in the entrepreneurship program at the University of Houston, one of the leanings stressed in the program is accounting. You will hire an accountant but you have to know enough about accounting to be able to manage and look over their work. This is the same thing with legal issues and business structure. Eduardo did not know enough about this to make an informed decision. He did not do his due diligence and trusted someone else with his business.

Eduardo had many chances to preserve the value of his equity. If Eduardo would have read the signing term sheets in its entirety it could have saved him billions. In Eduardo’s position he should have negotiated for non-dilutable shares similar to the other co-founders of Facebook. As CFO of the company, Eduardo Saverin should have been aware of the types of financing was happening to the company. He was not aware of the...