[paulsutter]

The 30/70 split is a nice structure that takes into account the uncertainty of the values involved. Seems like a good deal for Instagram and a sane way for Facebook to do it. Imagine if the stock had shot up to 70, or if it falls to 10. Seems like a great structure to me.

It's hard to imagine that the two sides weren't fully aware of the uncertainties involved during the discussion. These are smart folks. This article seems like it's just an opportunity for the author to show off his knowledge of alternative structures.

[refurb]

These types of structures are actually very common in the biotech industry where uncertainty is everywhere.

The deals are typically upfront payments of several hundred million dollars in combination with milestone payments that often comprise of 50-90% of the total deal's value.

It's a smart move on Facebook's part since it shifts a great deal of risk to the Instagram owners. Facebook does well? Instagram does well. Facebook flounders? So does Instagram.

[catilac]

I agree. However, I definitely did not know about those alternative structures.