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Leaked Airbnb e-mail gives glimpse of Valley money, methods

After backing out of a new funding round for Airbnb, a former Facebook employee and current venture capitalist says he's back in, following an embarrassing leaked e-mail involving the deal.

After backing out of a new funding round for Airbnb, a former Facebook employee and current venture capitalist says he's back in, following an embarrassing leaked e-mail involving the deal.

On Saturday, an e-mail from former Facebooker Chamath Palihapitiya to Airbnb CEO and co-founder Brian Chesky appeared on AllThingsD after being leaked to ATD reporter Kara Swisher.

In the e-mail, Palihapitiya objected to how the $112 million deal, announced in July but not yet finalized, was structured--with the company's founders enjoying a large cash-out (in the form of a $21 million dividend), and other employees getting relatively little:

My basic principle on this stuff is that if you want liquidity, that's fine, but you should make it available to everyone. Otherwise, no one should get it. Your current deal is the farthest away from this principle that I've seen in a while...this strategy has been done once before--at Groupon. We can see how "well" they are doing and how short term the investor community is now viewing their motives. I really think you can do better than this...and that you are better than this.

Palihapitiya continued:

Treat your employees the same as you'd treat yourself. Do things that you will be proud of and can defend to anyone including your Board, employees, prospective hires, etc. In such a competitive hiring market, you are competing with not just your obvious competitors, but also any successful tech company who is also looking for great talent. A principle that treats your employees as well as you'd treat yourself is a huge strategy for differentiation, retention and long term happiness of the exact types of people you will need to be successful. In contrast, if you are viewed as self-dealing and shady, it will only hurt your long term prospects...

Now it seems Palihapitiya is back in. Today he sent ATD's Swisher an e-mail saying he'd received assurances from Chesky. It seems the deal's the same but that a future funding round will reward employees with the opportunity to make some extra green:

Brian and I have spoken at length and based on our discussions, I've learned some new items that have proven to me that everyone is paying serious and thoughtful attention to the needs of all shareholders including employees. Specifically, the company has developed a strategy about their next financing round where all employees who have been with the company for some length of time will participate in a structured liquidity program. While the details haven't been finalized, I know Brian and completely trust that he will execute on his commitment.

The whole affair gives a brief glimpse of the money and methods behind all these unspeakably huge deals we read about so often on the Interwebs. (For an enlightening, plain-English rundown on dividend cash-out deals, check out this column by Reuters' Felix Salmon.)

It also provides a cautionary tale about how to air one's grievances (or, rather, how not to).

"I wanted to confirm, again, that I did write the e-mail that was unfortunately forwarded to you," reads Palihapitiya's Sunday note to Swisher. "Brian and I trust each other and know neither of us wanted this aired out publicly but it definitely made for an interesting Saturday."

Palihapitiya concludes: "I'm really looking forward to helping Brian scale and grow Airbnb into a huge, long-term company and, going forward, intend to spend more time with Brian face to face versus over email! :)"