Media Watch: A cautionary tale
It's every Silicon Valley school kid's dream: start a company, get rich from an IPO, drive a Lamborghini. That's not how it worked for the founders of Epinions, however.
Gary Rivlin lays out the sad story in a New York Times article today, "The I.P.O. Succeeded. Who Was Rewarded?"
"Their story should have had a happy ending last week when Shopping.com - the company formed in April 2003 by the merger of Epinions and a comparison-pricing site called DealTime - went public," Rivlin writes.
Unfortunately, while "August Capital and Benchmark Capital, two venture capital firms that invested $4 million each to help start Epinions in April 1999, profited handsomely in the public offering," four of five Epinions founders - Nirav Tolia, Naval Ravikant, Ramanathan Guha, Dion Lim and Mike Speiser - "did not see a dime."
Tolia's shares in the company were worth $20 million when the market closed last Friday. Shares owned by the other co-founders, and by many other former Epinions employees, were judged worthless at the time of the 2003 merger with DealTime.
Tolia's tale of corporate in-fighting and survival will warm the heart of the coldest Silicon Valley wolf-entrepreneur and his venture capitalist pack. And it's not over yet. Tolia resigned from Shopping.com under a cloud in June, Rivlin reports, and some 70 former Epinions employees are suing the company.
Rivlin captures the key lesson to be learned, to be tattooed on the forehead of every person who joins a Silicon Valley start-up:
"What the Epinions story demonstrates," said Paul Saffo, a research fellow at the Institute for the Future, a Silicon Valley research group, "is that the golden rule applies even in Silicon Valley: the people who have the gold, rule."
Links:
The I.P.O. Succeeded. Who Was Rewarded? by Gary Rivlin, New York Times, 1 November 2004
Lamborghini corporate web site.
