You won’t find virtual reality gaming developer Oculus VR Inc. on this week’s list of the biggest private companies based in Orange County—and the maker of virtual reality headsets didn’t make the rankings last year, either.
That’s because its whirlwind ride as a private company lasted only 18 months before ending in the early morning hours of March 24 at Facebook Inc.’s headquarters in Menlo Park.
Attorneys and executives at both companies had pulled a weekend of all-nighters, sifting line by line through phone-book-sized stacks of documents before the $2 billion marriage was consummated with a final signature.
Oculus’ internal legal team and outside counsel at Bingham McCutchen LLP, led by Silicon Valley corporate attorney Andrew Orr and Andrew Ray out of Washington, D.C., camped out for three sleepless days and nights in Facebook’s legal department, cycling through several throw-away toothbrushes courtesy of company toiletry dispensaries.
Facebook’s legal team, no strangers to the night shift, did the same, swapping out casual business attire for branded hoodies and shirts from the company’s retail shop. Many stayed there the entire weekend.
“It was really fun to work with their team and see that energy,” said Oculus Chief Executive and cofounder Brendan Iribe. “They’re brilliant guys and kept a positive attitude all the way.”
The news of Facebook’s second priciest buy in its 10-year history, which included $400 million in cash and 23.1 million shares of common stock valued at $1.6 billion, wasn’t announced until a day later, giving Oculus executives time to decompress and tell their employees.
“Almost all of us were totally delirious,” Iribe said of the night’s end.
The announcement sparked a celebration at the startup’s Irvine headquarters, where Facebook founder Mark Zuckerberg welcomed his new team, donning an Oculus hoodie.
Many of the company’s 100 or so employees became millionaires overnight, capping one of the most successful technology stories in Orange County history.
“We were high-fiving, we were hugging each other. We were running around the office,” Iribe said. “The world didn’t know what to think of this.”
The speedy courtship accelerated in February after an introductory phone call, when Iribe flew out to Facebook headquarters to show Zuckerberg a demo of the company’s Crystal Cove prototype, which had won over industry insiders and critics a month earlier at the International Consumer Electronics Show in Las Vegas.
The virtual reality headset was a vast improvement over the first crude model, which was essentially a dangling circuit board taped to a head strap.
Another Version
Another version, made of plastic and fused together with hot glue, had shipped about 60,000 units at $300 each.
The Crystal Cove model, which featured high-definition resolution, was a huge leap forward in innovation but still caused motion sickness among some users, including Iribe, who couldn’t wear the headset for more than two minutes at a time.
Still, Zuckerberg, along with Facebook Vice President of Product Chris Cox and Chief Technology Officer Mike Schroepfer, left the meeting impressed with the technology.
“He liked it and said it was a pretty cool experience,” Iribe said.
In early March, Iribe convinced Zuckerberg to fly to Irvine and test the company’s newest prototype, which was developed with Bellevue, Wash.-based Valve Corp. and eliminated motion sickness.
Zuckerberg brought Facebook’s mergers and acquisitions guru Amin Zoufonoun to the meeting. After another demo, Iribe laid out Oculus’ vision for virtual reality and the infrastructure and financial muscle needed to support the technology.
It would require one of the biggest networks on the planet and hundreds of millions of dollars in research and development.
Valuation
The two sides couldn’t come to an agreement on a valuation for Oculus, and an offer wasn’t made at the time.
Many days later, Zuckerberg invited Iribe and Oculus Chief Technology Officer John Carmack to dinner at his home in Palo Alto. Carmack, whose hits include the “Doom” and “Quake” video games, is considered the godfather of 3-D graphics in gaming.
Carmack laid out his vision for virtual reality, arguing that the technology will displace many computing applications and disrupt several industries in the next few decades.
“I think that resonated with Mark,” he said.
Carmack left the meeting, and Iribe and Zuckerberg settled on a $2 billion price tag.
The duo shook hands and agreed to talk again after the deal was discussed with the founding team at Oculus.
The marriage was met with some trepidation in Oculus’ executive ranks. But Palmer Luckey, the 21-year-old company founder and virtual reality trailblazer, was eager to seal the deal, especially with a Facebook commitment to invest billions in the technology over the next decade.
“It meant that VR was really going to work,” Iribe said.
Oculus management, which includes Chief Software Architect Michael Antonov, agreed to the deal on March 16, a few days before the company launched its second headset at the Gaming Developers Conference in San Francisco.
The headset has been a hit, selling more than 14,000 units on the day the latest version was released. A daily digital counter on a wall at Oculus headquarters couldn’t keep up, forcing staffers to tape a 1 next to the rolling four-digit readout.
Celebration
That same night, Zuckerberg threw a celebratory dinner at his home with Oculus founders and a few top Facebook executives, including Cox and Cory Ondrejka, a vice president of engineering.
The group around the dining room table signed off on the deal.
Zuckerberg, in typical Facebook fashion, told his guests he wanted the deal done by that coming Sunday to prevent leaks to the press and to keep competitors at bay. Its $19 billion purchase of Mountain View-based text messaging service WhatsApp in February reportedly closed within four days.
Six days after the dining room agreement, Facebook and Oculus publicly announced the purchase.
The deal culminated a wild ride for the Irvine startup, from its $2.4 million Kickstarter campaign in August 2012 to two venture capital funding rounds totaling $91 million last year to its sale to the world’s largest social network.
“It was really an incredible run,” Iribe said.
