What the right hand giveth the left hand shall taketh away
I was surprised after reading about Google lending YouTube $15M to get them through the month before they closed the deal that there wasn’t more of a fuss.
If YouTube were hurting that badly, they may not have been able to make payroll. They could perhaps have tried going to the bank for the money, on the strength of the presumed Google deal and a letter of intent. Getting a loan from your acquirer seems rather odd, at least in an arm’s length transaction.
Given that it sounds like YouTube were about to hit the wall, it’s incredible that the price was still so high. How come Google didn’t beat them down? It’s not like they didn’t know YouTube were desperate – they lent them the $15M after all.
So how did the deal still get done at the massive valuation? The obvious answer is that Sequoia was on both ends of the deal.
I bet Sequoia must have been tempted to provide YouTube with the $15M of capital themselves (= more stock), while simultaneously getting YouTube acquired by Google. I guess there are only so many ways you can have your cake and eat it though before things start to really stink. Plausible deniability is important; that would have been a step too far, with their thumb directly in the pie. Plus they’d have been putting the screws on the YouTube founders that way, perhaps thereby jeopardizing the bigger deal.
You’d think Google shareholders would be making a fuss about this.
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