Hacker. Dropout. CEO.

By: Ellen McGirtWed Dec 19, 2007 at 8:20 AM

When Mark Zuckerberg showed up in Palo Alto three years ago, he had no car, no house, and no job. Today, he's at the helm of a smokin'-hot social-networking site, Facebook, and turning down billion-dollar offers. Can this kid be for real?

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Youth Patrol: Zuckerberg’s brain trust is populated mostly by twentysomethings. Here, he shares a moment with Moskovitz, 22, and Cohler—an old hand at 30.

One clue to the company's future plans comes from early investor Thiel, who has mentored Zuckerberg through the last year's swirl of acquisition talks and rumors. Bottom line, Thiel asserts, "it's much more valuable than anybody on the outside thinks." He points to the growing user base and page views as evidence. "The people who understand the power are the users. The people who wanted the company don't understand the power and don't want to pay enough for it. So we're not going to sell." He adds, "I think the MySpace sale was a giant mistake. The Flickr sale to Yahoo--a giant mistake." A better idea, he believes, is to focus on the technology, which he says is the Facebook team's great strength, and continue to grow the company. He points to a laundry list of benchmarks that they'd all like to see. "Can we get to 35 million users this year?" Dominating another sector beyond the college crowd would be key. "If we were to see that in the high school space, that would be very significant."

But Thiel is aware of a ticking clock of sorts, determined by a Securities and Exchange Commission rule. "Once we get to 500 shareholders, we'll be forced into a situation where you have to give full financial disclosure," he says. (Facebook employees have shares as part of their compensation packages.) Most companies go public at that point. "But our current bias is not to do it any sooner."

What seems most likely is some version of a publicly traded Facebook, one that might emulate the quirky Dutch-auction IPO that Google filed in 2004. It seems like a natural fit; Facebook admires the minimalist sensibilities of Google's design, its focus on engineering, and the "do no evil" philosophy that, theoretically, at least, informs its business. Best of all, if handled properly, an IPO keeps the founders firmly at the helm, just like Sergey Brin and Larry Page at Google.

And an IPO would seem to be a good fit for Meritech Capital Partners, which participated in the last round of financing for Facebook a year ago. "Certainly most of our companies go through liquidity in the public markets," says Meritech founder Paul Madera. "Public markets seem to want to pay more than acquirers these days." If Facebook got a very large offer, they'd have to consider it, he says. "But today, any offer around a billion would be way low."

But Zuckerberg maintains that nothing is happening quickly. "It's a really big change if you go public--all the regulations and stuff, so it's not something that you do lightly."

"Okay," Zuckerberg says, "you have a Viacom, News Corp., and Yahoo. So you compare and think, This is social, but we're a technology company. What's in it for us? How will it work?"

For now, the company is on track to double its engineering team of 50 this year (check out the first step in the application process at facebook.com/jobs_puzzles) as well as its 50-person customer-service group, headed by Tom LeNoble, who ran global service operations for Palm and customer service for walmart.com and MCI. His reps are mostly from top-shelf universities. (By my estimate, there's $5 million worth of tuition handling customer service at Facebook.)

New users keep flooding on board--100,000 signed on in a single day this past February. The college markets in Canada and the UK have been growing almost 30% a month (Prince Harry and his girlfriend are Facebook users, according to breathless reports in the British tabloids), and nearly 28% of all users are now outside the United States. And slowly but surely, the site is adding older folks: 3 million users are age 25 to 34, 380,000 are 35 to 44, and a pioneering 100,000 users are currently eligible for Medicare. With stats like that, you can certainly see public-market investors getting excited.

Thirty-six months ago, Zuckerberg was a college sophomore cruising out to California on summer break. Now he approves everything from new hires to the activities of every advertising partner and runs the board meetings of a very-much-established company. Zuckerberg was even invited to speak at Davos this year. How did it go? "It was great," he says, leaning forward conspiratorially. "I wore shoes."

Feedback: mcgirt@fastcompany.com