Reborn in 2000, starting from the university website

Chapter 151 Sequoia takes advantage of the trap

Doug spent two whole days chewing on the five letters "SheryI" over and over again.

He had Kevin compile a three-page list of all the women named SheryI in the Washington, Wall Street, and Silicon Valley circles.

Most of them can be ruled out at a glance—they are either retired lawyers or mid-level managers at some hedge fund, and have absolutely nothing to do with social networks.

Until Kevin circled the name on the second page.

Sheryl Sandberg.

A top graduate of Harvard's economics department, a recipient of the John Williams Prize in economics, and a protégé and chief of staff of former U.S. Treasury Secretary Summers.

Doug stared at the name, a chill running down his spine.

"Didn't she just leave the Treasury Department?" Doug slammed the report on the table. "A 31-year-old former high-ranking government official going to be the CEO of a college social networking site? Does that make sense?"

"But what if it works?" Kevin stood across the desk. "Doug, think about it. Who has the ability to make a company's equity structure watertight? Who has the connections to hire a top law firm in Delaware for privacy protection? Who can mobilize Ivy League campus resources for on-the-ground promotion without leaving a trace? For someone who has been the Chief of Staff of the Treasury Department in Washington, these things are commonplace."

Doug was silent for more than ten seconds, then suddenly pulled open the drawer and pulled out a thick address book.

He didn't have a direct relationship with Sandberg, but he knew her mentor, U.S. Treasury Secretary Summers.

To be precise, Sequoia had dealings with the Treasury Department a few times in the mid-1990s. His personal relationship with Summers wasn't particularly close, but they had exchanged pleasantries on the golf course a few times.

Doug picked up the phone and dialed Summers' private number.

The phone rang four times, and Summers' slightly sleepy voice came from the other end.

"Doug? Who's going public in the middle of the night?"

"Larry, I need to ask you about someone," Doug said, getting straight to the point. "Your student, Sheryl Sandberg, what's she up to these days?"

There was a two-second silence on the phone.

"Shirley?" Summers' voice was a bit more awake. "After she resigned from the Treasury Department last month, she did accept an offer from a private company. I don't know the specifics, she only told me it's a tech company with very generous compensation."

"Is it called Facebook?"

Another silence followed.

"Doug, how did you know?"

Doug gripped the receiver tighter.

bingo.

"Larry, do me a favor," Doug said in a low voice. "I need Sandberg's contact information, direct contact with her."

"I can give you this," Somersten paused, "but let me warn you first, Shirley is a very meticulous person. Trying to get information out of her will be no less difficult than negotiating interest rates with Greenspan back in the day."

Doug hung up the phone, looked at the number he had just written down in his notebook, and rubbed his fingers together.

The following evening, at 6:00 p.m. Eastern Time, Doug dialed Sheryl Sandberg's number.

The phone rang only once before it was answered.

"Ms. Sandberg, I'm Doug Leon, Senior Managing Partner at Sequoia Capital. May I bother you to talk about Facebook?"

There was a moment of silence on the microphone, then Shirley's unhurried voice came through, polite yet perfectly aloof.

"Hello, Mr. Leon. Professor Summers mentioned you to me."

Upon hearing that there was a chance, Doug immediately sat up straight.

"Ms. Sandberg, I'll cut to the chase. Sequoia Capital is very interested in Facebook's performance data at Ivy League universities in the Eastern United States. I'd like to schedule a time to sit down with your founders and discuss fundraising."

"Funding?" Shirley's tone carried a hint of polite confusion, as if she had heard a somewhat irrelevant word. "Mr. Leon, thank you very much for Sequoia's interest. But I need to be frank with you, our boss is currently on vacation in Hawaii and has no interest in fundraising at the moment."

Doug paused for a moment. A vacation in Hawaii?

The product had just exploded onto the ivy-covered hills when the founder went off to sunbathe?

"Ms. Sandberg, I understand you may not lack cash flow, but Sequoia can offer more than just funding."

“Mr. Leon,” Shirley interrupted him politely, “I’m not being polite. We certainly don’t lack cash flow. The company is already expanding into the West Coast college market. Our outreach teams at Stanford, UC Berkeley, and Berkeley are complete and will be launched this week. Perhaps soon, we’ll set up a West Coast office in Silicon Valley, and maybe then we can have a coffee together.”

Doug's lips twitched.

This woman spoke so calmly, every word she uttered sending a signal—we're not in a hurry, you're the one who's in a hurry.

"What if we insist on talking?" Doug softened his voice slightly. "Ms. Sandberg, Sequoia has been operating in Silicon Valley for twenty years, and we've never had a project we wanted to invest in but couldn't. I just need one number: what is your expected valuation?"

There was a few seconds of silence on the phone, and Doug could almost picture Shirley on the other end, subtly flipping her wrist and glancing at the time.

"Mr. Leon, since you're being so direct, I won't waste your time." Shirley's voice remained calm, as if she were reading a pre-prepared memo. "If the investors insist on negotiating, the starting valuation is two hundred million US dollars. Furthermore, no investor will receive voting rights. This is our boss's bottom line, and there's no room for negotiation."

Doug's grip on the receiver tightened suddenly.

"Two hundred million?" His voice rose involuntarily. "Your product has only been online for a few weeks! You don't even have a million users! Ms. Sandberg, are you serious about that number?"

“Very serious.” Shirley’s tone remained unchanged. “Mr. Leon, as I just said, we are not currently interested in fundraising. This valuation is the threshold at which we are willing to sit down and discuss with serious investors, assuming we have no need for funding. If Sequoia feels it is not appropriate, I completely understand. We have already achieved a penetration rate of over 80% in the eight Ivy League universities in the Eastern United States, and although the promotion in the western United States has not yet started, we are very confident. As for how much this data is worth, I think Mr. Leon is better at doing the math than I am.”

Doug's temples throbbed.

"Also," Shirley added, "please don't bring up the voting rights issue again. Our boss once said that the company is the ship he built, and capital can buy tickets, but the steering wheel can only be in the captain's hands. Please convey this to Sequoia's investment committee."

Doug was hung up on. He slammed the receiver on the table, stood up, and paced back and forth in his office three times.

"Bullshit! What an idiot!" he cursed, kicking over the wastebasket at his feet.

A $200 million valuation, zero voting rights. Is this a fundraising attempt or a robbery?

Sequoia has invested in hundreds of companies over the past twenty years, and they have always been the ones setting the rules for entrepreneurs. When did it become the turn of a social networking site CEO to set conditions for him?

But after he finished yelling, Doug sat back down in his chair, staring at the research report on the table, feeling suffocated.

Penetration rate of 83%. Average daily online time per user is 90 minutes. Day 2 retention rate is 87%.

He'd been watching this data for a week, and the more he looked, the more something seemed off. It wasn't that the data itself was wrong, but rather that it was abnormally good—so good that even a seasoned veteran like him felt an instinctive sense of dread.

If Facebook really manages to acquire top universities on the West Coast, it's only a matter of time before it reaches a million users.

At that point, a valuation of 200 million might not even be enough to get through the door.

Doug picked up the phone on the table and dialed Kevin's extension.

"Set a time," he said through gritted teeth. "No matter what Sandberg's terms are, even if it's a valuation of $200 million, we have to sit down at the negotiating table first. I want to meet the founder of Facebook who's hiding behind the scenes in person."

Over the phone, Kevin cautiously asked, "With a valuation of 200 million, will the investment committee approve it?"

Doug closed his eyes, took a deep breath, and exhaled with a sense of resignation.

"Let's secure this project first. If Acce or Greylock snatch it away, our combined year-end bonuses wouldn't be enough to cover the losses."

""