Company blog Twitter's Democratic IPO

Twitter says in its prospectus that "...(it has) democratized content creation and distribution, enabling any voice to echo around the world instantly and unfiltered." In keeping with its power to the people spirit, Twitter appears to be setting itself up for a more democratic form of post-ipo governance than other publicly traded technology companies. For example, I couldn't find any reference to super voting stock in this offering. If that's true, and the founders and senior management will be able to exercise only one vote per share, then Twitter will be forgoing the founder control that companies from Ford to Google to Facebook maintain.

Last year, I wrote about Facebook founder Mark Zuckerberg's post-IPO control. By designating Facebook as a "controlled company," he not only maintained 57.1 percent of the vote, but also held on to the legal right to name 100 percent of the board of directors. Thus, he can also designate whomever he chooses as his successor as chief executive.

Taking a company from idea to IPO is no easy task. If it was, more would do it because of the enormous rewards. As the founder of a company, Rocket Lawyer, that helps entrepreneurs incorporate thousands of new businesses every month (and also counts Twitter as a customer), it's impossible not to admire what Twitter has achieved.

I was a skeptic of Twitter at first. The platform that Jack Dorsey, Biz Stone and Evan Williams created seemed to be too simplistic. How could anything important happen in 140 characters? The moment that humbled my crystal ball (not the first time and I'm sure it won't be the last) was the failed Iranian uprising. Before the morning of Saturday, June 20, 2009, my perception of Twitter was as a vehicle for people to tell the world what they had for breakfast. Then came the tragedy of Neda.

Malcolm Gladwell got this wrong. Twitter is the best source of real-time information on the planet. Sure, there may be misinformation, in individual tweets. But, taken together as a pattern, tweets are an almost perfect source of information about what is going on just about everywhere right now. Reading the prospectus, Twitter understands its growing role as a democratizing media force. Its very simplicity and mobility makes it so.

As such, I've been telling anyone who will listen that the Twitter IPO documents reflect the democratizing nature of the service itself. In addition to corporate governance, the company also references its Innovator's Patent Agreement and the fact that, while it will avail itself of some of the regulatory exclusions under the JOBS Act, it will voluntarily comply with accounting rules that it could otherwise avoid.

Twitter is still losing money, of course. The company includes many risk factors in its IPO disclosures. One of the most interesting risk factors centers around the company's definition of engaged users that they measure as "Monthly Active Users." I think that this metric will be closely followed and perhaps mimicked by other social / mobile / advertising supported businesses. Twitter says that it has 215 Million such monthly active users.

Since Twitter has taken a more democratic approach to governance, with less founder control, we will have a chance to compare its approach to others. Spectacularly successful companies like Google and long-term survivors like Ford, demonstrate the virtues of having a strong hand on the wheel that cannot be removed on the whims of short-term investors. Since I argued that Mark Zuckerberg's control of Facebook might be a good thing, the company has rebounded from its own post-IPO skepticism and posted both strong business growth and stock market gains. In fact, after an absence, when Jack Dorsey returned to Twitter as its executive chairman, board member Peter Fenton said: "getting Jack back kind of completes the picture of getting us focused on the next phase of the company's growth." Given the IPO, it looks like that's right.

The question for Twitter, as it seeks to continue to deliver and manage torrid growth, without the same management control as its peers, will be whether its senior team, staff and users stay engaged for the long term. As an admitted Twitter fan, I hope so. Ultimately, what is democracy, without participation?

Originally posted on LinkedIn Pulse: Twitter's Democratic IPO

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