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Microsoft's founding employees gathered in 1978 to take a portrait before the company moved to Washington State from Albuquerque, New Mexico. Front row (left to right): Bill Gates, Andrea Lewis, Marla Wood, and Paul Allen. Middle row: Bob O'Rear, Bob Greenberg, Marc McDonald, and Gordon Letwin. Back row: Steve Wood, Bob Wallace, and Jim Lane. Not pictured is Miriam Lubow. Courtesy of Microsoft
Paul Allen, co-founder of Microsoft in 1975, created a stir this week with
the publication of excerpts of a memoir due to be published next month.
last year, the movie, The Social Network, focused attention on the disputed
birth of Facebook. These are high profile cases but highlight common woes in
startups and young companies.
The bitterness of Paul Allen was a surprise. He left Microsoft in 1983 after
being diagnosed with Hodgkin’s disease, which has recurred in recent times and
he is reported to be worth $13bn from his Microsoft shareholdings. In the case
of Facebook, two twins who were contemporary students of Mark Zuckerberg at
Harvard University, say they asked him to produce a social network site for
them. He says they wanted him to develop a dating site. They claim he stole
Social networking of course wasn't a new idea and it was 'stolen' from
existing online services as for example, Google improved on existing search
engines and succeeded in execution.
Recently, British entrepreneur, Luke Johnson,
wrote in his Financial Times column that "in negotiations over
shareholdings, most partners think they deserve more than they actually get. If
the bartering goes well, everyone is likely to emerge feeling a little
disappointed - - but able to live with the consequences. It is a fine line,
juggling competing interests and keeping the show on the road - - but it
Entrepreneurship and building a startup is seldom easy;
there is a high risk of failure and personal conflict in an environment of
wrote that Twitter co-founder is back at the company after disputes with one
of his co-founders.
Professor Noam Wasserman of Harvard Business School
wrote in a 2008 Harvard
Business Review article : "New ventures are usually labours of love for
entrepreneurs, and they become emotionally attached to them, referring to the
business as 'my baby'." But from the moment founders bring in outside investors,
their jobs are at risk. In an analysis of 212 US start-ups, Professor Wasserman
discovered that by the time the ventures were three years old, 50% of the
founders were no longer chief executive. By the time of the companies' initial
public offerings, only 25% of the founders were still leading them. Most had
been forced out.
Paul Allen is bitter that his share
split with Bill Gates wasn't on a 50/50 basis and a similar dispute arose with
Mark Zuckerberg's Brazilian-born Harvard roommate and friend, Eduardo Saverin,
who was a co-founder of Facebook. The latter was forced out and it's believed
that his percentage stake in Facebook was cut from 34% to a single digit figure.
Vanity Fair, Paul Allen writes that Bill Gates was ambitious to be an
entrepreneur from a young age.
He says from the time they started together in Massachusetts,
he’d assumed that the
partnership would be a 50-50 proposition. But Bill had another idea. “It’s not
right for you to get half,” he said. “You had your salary at MITS while I did
almost everything on BASIC without one back in Boston. I should get more. I
think it should be 60-40.”
Allen said: "Bill’s intensity was nonstop, and when he asked me for a walk-and-talk one
day, I knew something was up. We’d gone a block when he cut to the chase: 'I’ve
done most of the work on BASIC, and I gave up a lot to leave Harvard,' he said.
'I deserve more than 60%.'
'How much more?'
'I was thinking 64-36.'”
“I find the argument that
you were cheated financially difficult to make when you ended up being so
wealthy,” said Vern Raburn, who worked at Microsoft
from 1978 to 1981 and ran its consumer products division, to The New York Times.
Raburn said he was friends with both founders. He added that Allen played an
integral role in the company’s early days, and that
“Bill has gone out of his way to acknowledge that.”
In 1983, Allen would have sold his
stake in Microsoft at $10 per share but Bill Gates was only willing to pay $5.
Allen was lucky and he would have had a much, much bigger chip on his
shoulder if he had cashed-in his stake.
In a statement, a mellower
Bill Gates said: “While my recollection of many of
these events may differ from Paul’s, I value his friendship and the important
contributions he made to the world of technology and at Microsoft.”
Cameron and Tyler Winklevoss who are
now rowers training for the 2012 Olympics got the brush off from then-Harvard President Larry Summers
in 2004, after complaining that their idea for Facebook had been stolen. Dr. Summers,
until last December President Obama's National Economic Council chairman, said
recently that the scene in 'The Social Network' was a pretty fair rendering.
Microsoft's original employees got together to reshoot the famous 1978 photo in April 2008. Front row (left to right): Bill Gates, Andrea Lewis, Miriam Lubow, Marla Wood, and Paul Allen. Back row: Bob O'Rear, Steve Wood, Bob Greenberg, Marc McDonald, Gordon Letwin, and Jim Lane. Not pictured is Bob Wallace, who had died. Courtesy of Microsoft
In 2008, the twins agreed a $65m
settlement with Facebook but they are now looking for more and they insist that
the could have executed the Facebook project as good as Zuckerberg has - -
easy indeed to say.
Harvard law professorLawrence Lessig says:
"any legal system that would allow these kids to extort $65m from the most
successful business this century should be ashamed of itself.
Did Zuckerberg breach his contract? Maybe, for which
the damages are more like $650, not $65m. Did he steal a trade secret?
Absolutely not. Did he steal any other 'property'? Absolutely not - - the code
for Facebook was his, and the 'idea' of a social network is not a patent. It
wasn’t justice that gave the twins $65m; it was the fear of a random and
inefficient system of law. That system is a tax on innovation and creativity.
That tax is the real villain here, not the innovator it burdened."
So, the moral of the stories is that dividing up the cake may trigger
decades-long resentment but in the tech sector in the US, only 25% of firms
reach their seventh birthday. So more often that not, all the human drama comes
for the value of an idea, the world is full of ideas but it's the rare feat of
successfully executing that counts.