During the weeks leading up to Mark Zuckerberg’s decision to buy Oculus for $2 billion, he received a concerning message from then-Oculus CEO Brendan Iribe. Google was also interested in buying the VR startup.
A similar situation occurred during Facebook’s two-week negotiation process to acquire WhatsApp for $19 billion in 2014. A rival tech giant that’s believed to have also been Google offered WhatsApp more money to steal the messaging app out from underneath Zuckerberg.
Facebook ended up successfully closing deals on Oculus and WhatsApp within a period of just a few weeks, beating out Google twice. Zuckerberg gave rare insight into how he approaches acquiring other companies during a public testimony in a Dallas courtroom on Tuesday. He was there to testify in a lawsuit against Oculus by video game publisher Zenim
- Build relationships first
While Facebook ended up conducting its legal due diligence on Oculus over just one weekend, Zuckerberg explained that he usually approaches big acquisitions by first establishing friendships with the founders of the companies he’s looking to scoop up.
“In reality what is happening with all of these, in Instagram and WhatsApp and Oculus, they are kind of things that we’ve been thinking about for a long time,” he explained.
“And I’ve been building relationships, at least in Instagram and the WhatsApp cases, for years with the founders and the people that are involved in these companies, which made is so that when it became time or when we thought it was the right time to move, we felt like we had a good amount of context and had good relationships so that we could move quickly, which was competitively important and why a lot of these acquisitions, I think, came to us instead of our competitors and ended up being very good acquisitions over time that a lot of competitors wished they had gotten instead.”
- Have a shared vision
Zuckerberg said that the main reason he was able to acquire Oculus for less than the $4 billion its team originally wanted was because he pitched a collaborative vision between the two companies that everyone bought into.
“The most important thing was aligning and getting excited about a shared vision
“The most important thing was aligning and getting excited about a shared vision and about how we’re going to work together. Or if they built the hardware and we built the experiences, how that could be better than either of us working separately,” he said.
“If this deal is going to happen, it’s not going to be because we offer a lot of money, although we’re going to have to offer a fair price for the company that is more than what they felt like they could do on their own. But they also need to feel like this was actually going to help their mission, right?”
FB motto, “move fast and break things.”
The shared vision has to go both ways too, Zuckerberg explained.
“There’s a lot of anxiety in these deals, right?” he said. ” I mean, if you’re going to pay $19 billion for a company or $2 billion for a company, you clearly have to really believe in it.”
- Sometimes use scare tactics
While he prefers to sell a company founder on a shared vision, Zuckerberg admitted to sometimes scaring small startups by making them imagine how difficult it will be to run their business alone.
“That’s less my thing, but I think if you are trying to help convince people that they want to join you, helping them understand all the pain that they would have to go through to build it out independently is a valuable tactic,” he said.
It’s unclear whether he used that tactic on Evan Spiegel, who famously turned down on Zuckerberg’s $3 billion offer to buy Snapchat a few years ago.
Read more: Facebook vs Real Life
- Move fast and buy things
When Zuckerberg’s top dealmaker, Amin Zoufonoun, warned him that doing legal due diligence on Oculus over just one weekend carried “some risk,” Zuckerberg told him to keep “pushing forward until we have something we can sign on a moment’s notice.”
“When you’re making deals and it is a competitive situation, you often don’t have a lot of time,” he said.
That line of thinking is consistent with Facebook’s old company motto, “move fast and break things.” It’s also a key strategy to keep competitors from beating Facebook to signing the bottom line.
“Some of the bigger acquisitions that we have done, like Instagram and WhatsApp, which were each more than a billion dollars, we had to move quickly because other companies — whether it was Google, or you know, Twitter or Apple, or whatever the companies were — were also trying to talk to these companies and buy them,” Zuckerberg explained.
“And often, if a company knows we’re offering something, they will offer more,” he continued. “So being able to move quickly not only increases our chance of being able to get a deal done if we want to, but it makes it so we don’t have end up having to pay a lot more because the process drags out.”
“I think some companies might just take many weeks or months to review some stuff, and I think one of the things we’ve always prided ourselves on and one of the things that has always worked well for Facebook is that we’ve just been able to be flexible and move quickly on important things. And that’s served us very well.”
The original article was posted on Business Insider.