Before MySpace was sold this week, there was someone else who really wanted it.  

Yesterday I had lunch with Redpoint Ventures partner Geoff Yang, who had invested in MySpace just months before it was sold to News Corp. Actually, I had lunch and Geoff had iced tea (he had already eaten). Pretty good deal, since it gave him more time to talk and me more time to listen.

For the uninitiated, MySpace used to be the subsidiary of something called Intermix, which had raised VC funding from VantagePoint Venture Partners in 2003 and round from Redpoint in December 2004. Redpoint also invested another $4 million in February 2005 for a specific stake in MySpace. When Intermix chose to sell to News Corp. in July 2005 for $581 million, it meant: A return for VantagePoint of $139 million on $15.3 million invested, and a return of $44.5 million on $15.5 million invested for Redpoint (according to Bill Burnham).

Fast forward to this past week, and News Corp. (NWS) agreed to sell MySpace to a PE-backed online ad network called Specific Media for a paltry $35 million.

From reading press reports this week, one might think Yang and others were geniuses to sell back in 2005. But Yang doesn't see it that way. He sees it as opportunity lost. In fact, he strongly opposed the original sale to News Corp., believing that MySpace was being severely undervalued. Remember, these were in the days when MySpace still had 4x or 5x more users than did Facebook.

"I told people it could be a $1 billion company, which was a lot of money at that time," he says

But Yang lost that battle, and News Corp. took over. In the intervening six years, Yang believes that News Corp. destroyed the asset's value by not making significant changes on either the front or back end. "It still basically looks the same today as it did back then," he says. The only real difference was a more concentrated focus on music.

But Yang still believed there was value in MySpace, and one year ago went to News Corp. with a proposal: Redpoint would help spin MySpace out of News Corp., in a no-cost deal that would allow News Corp. to retain an ownership stake. It would have let News Corp. save some face (still a part-owner, able to capitalize on any upside), while giving a longtime MySpace admirer the opportunity to turn things around. But News Corp. turned him down, hired a banker and one year later got what amounts to an accounting error on the media giant's balance sheet.

Most people would be happy to reminisce about a short-term investment that returned nearly 3x. But Yang still seems to regret that he wasn't able to be in it for the long haul…