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Yahoo's billion was a formality
Yahoo's offer
Peter Thiel thought Facebook should at least consider the offer. Zuckerberg told the board it was just a formality, because they were obviously not going to sell. He saw where he could take the company, and Yahoo didn't.
Why founders sell
Founders sell when they have no more concrete visions for the company, and founders with robust plans don't. That is why private companies are hard to value: a big company offering to acquire a successful startup almost always offers too much or too little. A business with a definite plan gets underrated in a world where people see the future as random.
Apple's iPod
The same thing happened with Apple's first iPod in October 2001. Industry analysts saw a nice feature for Macintosh users that wouldn't make any difference to the rest of the world. Steve Jobs had planned it as the first of a new generation of portable post-PC devices, and the company's stock chart since then shows the harvest of that multi-year plan.
Why is valuing a private company so hard?
A public company has a share price set every second by thousands of buyers and sellers. A private company has no such price, so its value rests on forecasts and on comparisons with a few similar deals. Those forecasts swing widely with small changes in assumed growth. Public companies in the United States must file quarterly reports with the Securities and Exchange Commission, while private ones generally do not.
How did the iPod change Apple's business?
Apple introduced the iPod in October 2001 with a 5-gigabyte drive and a click wheel, pitched as 1,000 songs in a pocket. The iTunes Store opened in April 2003 and sold songs for 99 cents each. By 2008 the market research firm NPD Group ranked Apple as the largest music retailer in the United States, ahead of Walmart.
How did Facebook's value grow after the offer?
Facebook kept raising money privately for years after turning down the 2006 offer. Microsoft bought a 1.6 percent stake in 2007 at a valuation of about 15 billion dollars. The company went public in May 2012 at 38 dollars a share, which valued it at roughly 104 billion dollars. It was the largest technology IPO in American history up to that point.
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