Friendstered: How to Kill a Great Idea!

"In the business and technology media, the fall of Friendster has been widely portrayed as an isolated management failure--with Abrams shouldering most of the blame. Indeed, Friendster now has the dubious honor of being the focus of a Harvard Business School case study on how not to manage a tech company. It ran out of money last year and was recapitalized at a valuation of $3 million, effectively making it a subsidiary of Kleiner Perkins Caufield & Byers, one of its VC investors. The recap stripped Abrams of his board seat and almost all of his equity. The founder, now an outsider, retains roughly 4 percent of the company, which has since received more venture capital but has yet to turn a profit. Most observers agree that while Friendster might still swing a modest sale, a big acquisition or an IPO is out of the question. "Everyone saw this as a no-brainer, as 'How could they screw it up?'" says Russell Siegelman, a general partner at Kleiner Perkins and a current board member at Friendster. "But not all the deals we do work."