17 years ago in the month of February 2004, the World’s biggest social networking website ‘Facebook’ was co-founded by Mark Zuckerberg, and his Harvard mates Eduardo Saverin, Andrew McCollum, Dustin Moskovitz and Chris Hughes.
From a Harvard-only website in February 2004, the website opened up to other universities in March 2004 and grew rapidly.
It’s during this time, Facebook moved to Palo Alto and setup their first office. They wanted to paint the walls of the office with murals, for which artist David Choe was hired.
He had just come out prison, didn’t have money with him.. and got a call from Sean Parker, who had previously liked his work.
David was offered $60,000 (₹ 44 lakhs) or stocks of Facebook.
David hated websites like Friendster and MySpace – social websites which were popular back in those days. He disliked Facebook too and preferred to take the $60k in cash.
Sean Parker, the first president of Facebook, convinced him to take the shares instead.
When Facebook was listed at the stock exchange in May 2012, the value of his shares was close to $200 million (₹ 1450 crore).
On the Howard Stern show, David reveals that he does not exactly know how many shares he holds – but the shares have been split many times after he got them.
You can read the full interview where he speaks about a lot of things, including the Facebook shares he owns. Click Here.
There is very little info on whether David continues to hold some or all of those Facebook stocks, but today the value of his shares would be over ₹1.3 billion (₹ 9500 crore)!
That right there shows the power of holding a stake in a company. Investing in startups is risky, but private equity investors take the risk because one hugely successful company can cover the losses of several failures.
Investing in the stock market is pretty much the same. In the small cap space, there could be a few companies that go on to be large companies. It’s difficult to predict which those companies will be.
When a small company fails, the prices of the shares can fall pretty rapidly too. On the flip side, the gains can be phenomenal. Even if 2 out of 10 investments go right, huge money can be made.
The large cap or ‘blue chip’ space is different. Here you would have large, well-established companies. Sure, these companies can fail too. But the chances are very low.
These big companies will not give the kind of ‘multi-bagger’ returns that a successful small-cap can, but these are considered to be compounders. They increase the value of your investment at a steady pace, with far lesser risk.
There are plenty of lessons to take from the David Choe story.
- Luck can be a big factor in investing.
- David held on to his Facebook shares for more than 10 years.
- He believed in the ability of the Facebook president Sean Parker, who was the young guy behind Napster – the peer-to-peer music revolution back in the early 2000s.
- It took only one investment to make David wealthy for life. Luck, quite obviously, played a huge role.