Union Square gets 5,000% return on Tumblr

http://www.crainsnewyork.com/article/20130521/TECHNOLOGY/130529969

by npalli • 13 years ago

107 66 13 years ago

crainsnewyork.com

wellboy2• 13 years ago

Mind that that's "only" 50x. Still not bad though.

SatvikBeri2• 13 years ago

50x, unless I'm missing something. They invested ~$5MM and got $253MM back.

wallflower• 13 years ago

Usually, when you have $5m to invest, you have to put it into something large and very real and quite boring like a shopping center. And if you get a IRR of 8-9% a year, you're doing well. USV turning $5m into 50x that is along the lines of Don Valentine and Cisco. It is a rare cosmic event.

wellboy2• 13 years ago

I just wanted to put it in comparison with the 10000x, YC got with AirBnb and Dropbox.

pchristensen• 13 years ago

Power law, big wins. This paid for the entire fund, and more.

dot• 13 years ago

> Tumblr's employees will also do well. The company's first 10 employees will receive an average of $6.2 million in cash; the first 30 will receive an average of $3.3 million in cash, and the rest of the 178 employees will each receive $371,000.

Is it usual to announce these numbers for all employees with acquisitions like this?

gyardley• 13 years ago

No, but note that this information's not coming from Tumblr - it's coming from an analyst who claims it's based on some financing documents he obtained.

Whether you trust it or not is up to you.

SatvikBeri2• 13 years ago

These are all estimates from this article: http://business.time.com/2013/05/21/inside-yahoos-tumblr-dea...

Which in turn got them from a company called PrivCo: http://www.privco.com/

Who knows how accurate they are.

larrys2• 13 years ago

"the rest of the 178 employees will each receive $371,000."

Interesting to keep in mind for anyone working for a startup as a metric.

You work and have a chance, if the idea hits (to the tune of 1 billion) of making low to mid 6 figures.

$371k is certainly nice but considering the amount of startups that not only don't succeed but don't succeed to the extent that Tumblr did ...

krschultz2• 13 years ago

That said, being the 41st person at a startup is not exactly risky and I wouldn't expect you to be taking a below market salary in exchange for shares at that point. So market salary + $371k bonus isn't a bad deal.

bluedino• 13 years ago

Imagine being at Instagram, $1bn and only what, 14 employees?

michaelochurch• 13 years ago

and the rest of the 178 employees will each receive $371,000.

So they get a one-time mid-level banking bonus, and now they work for a completely different company and almost certainly in positions lower than what they used to have.

VCs would quit given year-end bonuses like that.

ry0ohki• 13 years ago

They did get paid a salary, benefits, etc... they took almost none of the risk that would be worth a higher reward

AlexMuir• 13 years ago

USV are such a positive force on the community, it gives me pleasure to see them do well.

This isn't just a 50x return on $5m cash/a good investment/ripe market/competent founder. It's a return on USV's approach to business: being open on their investment strategy and theories, having and voicing an opinion, and appreciating the tech as much as the business metrics.

sgpl• 13 years ago

According to PrivCo [http://goo.gl/AW7GD], here are all the payouts of the 1,100 mn:

$286 mn: USV

$231 mn: Spark Capital

$253 mn: David Karp

$176 mn: Sequoia

$88 mn: Greylock, Insight Ventures, DFJ

$66 mn: Employees (6% of the 1,100 mn)

The math adds up to 71% of Tumblr being owned by VCs. Also Bloomberg reported that David Karp asked for as much stock as Yahoo would give him, because he sees himself working on Tumblr for the next few decades. It also reflects the sentiment that Marco Arment's blogpost yesterday expressed.

“This is something I’ve been building for the last seven years and hope employs me 30 years from now."

jlgreco2• 13 years ago

The notion of 30 year old websites seems incredibly alien to me, but I suppose there is no real reason why that should never happen.

hkmurakami• 13 years ago

speaking of which, what are some of the oldest web services that are still prominent today? iirc Amazon is approaching 20 years.

patio11• 13 years ago

I empathize with that feeling, but would point out that if they were people, Intel would be getting yearly prostate screenings, Accenture would be retired, and Nintendo would be dead.

rdl3• 13 years ago

I'm sure people once felt the same way about the notion of "cars and planes made by companies and not gentlemen-adventurers".

rmc• 13 years ago

30 year tech companies do exist though. Apple & Microsoft for example.

josh2600• 13 years ago

Please note, PrivCo is super scandalous. Remember all the crazy crap they did to LivingSocial? http://pandodaily.com/2013/02/21/privco-may-be-wrong-but-liv...

I don't trust them at all.

pkmehta3• 13 years ago

Writers/editors from major techh publications don't seem to trust Privco's data or practices either it seems - https://twitter.com/MikeIsaac/status/336949975634296833

pkmehta3• 13 years ago

Worth noting that "A spokeswoman for Spark Capital disputed the accuracy of the report"

Privco were the same guys who did the LivingSocial hatchet job a while ago which was proven inaccurate. Privco's MO seems to be wild claims to generate interest in their private company data.

It seems even major publications think Privco's claims and data are not very good. Here's a tweet from TechCrunch and AllThings D editors questioning the integrity of the company and their data - https://twitter.com/MikeIsaac/status/336949975634296833

For those interested, I have found VCExperts data to be better for this type of shareholding info (not affiliated with the company) and definitely less sensationalist.

Unrelated to Privco, a big congrats to USV - disciplined, open and truly thesis driven - not just chasing what is the hot thing of the moment.

SilconValleyVC2• 13 years ago

PKmehta "I dispute the accuracy of your post." Ha. No specifics. I just dispute the accuracy! lol.

larrys2• 13 years ago

""For Tumblr's employees, they will go on to start their own companies and create new jobs; David Karp and his co-founders will likely become active angel investors or VCs; and Union Square Ventures will reinvest much of its returns back into the next generation of New York City startups.""

So essentially the things that made the company "magic" will no longer be fully invested in it's future success. And the new hires won't have the lure of making loads of money either since there won't be any future payday to wish for.

johnrob• 13 years ago

Isn't this always the case with acquisitions though?

vellum• 13 years ago

According to USV's blog, there were other investors in the first round: John Borthwick, Fred Seibert, and Jakob Lodwick

No mention of what they got.

http://www.usv.com/2007/10/tumblr.php

jbredeche• 13 years ago

Congrats to Spark Capital as well. They're our lead investor at Quantopian and their intelligence and helpfulness have been everything we could have hoped for.

fredwilson6• 13 years ago

Total garbage. There is not one fact in this privco thing that is close to right. The numbers are good but nowhere close to that good. This is the same firm that predicted Foursquare would be out of business this year which will also prove to be nonsense.

chewxy• 13 years ago

There you go folks, out from the horse's mouth

SilconValleyVC2• 13 years ago

The Series A USV invested in was only $775,000 and was at $1/share according to privco and confirmed by docs I've seen. So how much did USV invest? Obviously Tumblr sold for over $200/share, so please do the math and show what's off? Is it a few percent, in which case what does that matter when you've made 5,000%? You should be proud of that! As a VC I'm envious Fred.

But I've found the privco data reliable (but I'm a client), so I respectfully disagree with just throwing out ad-hominem attacks. So they called out your bad bed on Foursquare. (Foursquare was just forced to borrow $41 Million and even you blogged it would be massively dilutive. PrivCo said forusquare will be out of business by year's end absent raising "massively dilutive" funding.

So I respect you, I respect PrivCo from my working with their remarkably accurate data. You shouldn't take it personally, congrats on today, and if there's something we should all know and you DIDN'T do that well, well I guess tell us. If you did even better, tell all of us on HN and even more kudos! Just don't throw out attacks though something's "wrong" when it can be wrong by a penny or by alot and either way you're technically not lying...it's beneath you and USV and us VCs, c'mon you're better than that.)

Again hats off if you did even close to what's been reported on your Tumblr preferreds.

fredwilson6• 13 years ago

I take it personally when people write irresponsible garbage about our portfolio companies. I care about them and their teams a lot. Making money is nice but being a supportive and good investor is a lot better

rasca123• 13 years ago

Also where did you get $200 a share from? That is bogus.

pkmehta3• 13 years ago

SiliconValleyVC - this account has to be the worst attempt at astro-turfing I've seen in a while from a company employee or founder. Does anyone talk like this about a vendor (much less a data company) -- "I respect PrivCo from my working with their remarkably accurate data." Right right.

You're a SiliconValleyVC whose submission history is 2 privco articles. And your comment history references PrivCo multiple times and your love of them.

So perhaps you're just a really really happy VC client of a data tool or more likely you are here at the behest of your employer/are with the company and trying to salvage what must be a very bad day at the office - data company whose data gets called garbage.

On to your points to Fred:

1. If you've seen the docs, share them.

2. There was no ad-hominem attack. Fred called your data b.s. He has the #s so is in a good position to make that claim.

I can understand you're trying to save face for Privco after respected VC's Fred Wilson, Bijan Sabet have called you out. Plus, today, editors of 3 major tech publications called you out -- Jay Yarrow of Biz Insider, Eric Eldon of TechCrunch and Mike Isaac at AllThingsD all said Privco data and claims are incorrect and hyperbolic.

Pls don't insult us here with this very sad attempt at covering for your employer/company.

RockyMcNuts• 13 years ago

RockyMcNuts: good sources tell me SelfDescribedVC got no bonus last year.

SelfDescribedVC: that's false.

PeanutGalleryPaparazzo: those sources have been reliable, if they're wrong, don't throw out ad-hominem attacks, just tell me how much you really made.

b*h please. Professional VCs don't anonymously troll top VCs.

(Account created 42 days ago, 2 submissions, both referencing PrivCo)

arbuge• 13 years ago

It does sound a bit suspect to me... the particulars of the deal and who got what isn't public information afaik, so what exactly is "financing documents it says it obtained" supposed to mean?

ispivey• 13 years ago

That investment amount seemed low, as it suggested you weren't exercising your pro rata rights.

If the initial $400k bought 10% of the company, USV would need to buy 10% of each subsequent round to maintain their ownership, which would be ~$12.5M. That's ignoring varying definitions of pro rata rights, other dilution but probably a good lower bound.

If the initial $400k bought 20% (more likely for Tumblr in 2007), USV invested ~$25M to keep their ownership stake.

Fred seems like the kind of guy who always does his pro rata, so I'd imagine those numbers are closer to reality.

fredwilson6• 13 years ago

i don't want to disclose confidential information publicly but we did the first three rounds with Spark alone so we did way more than pro-rata in those and then we did pro-rata in every round since.

vinaypai• 13 years ago

I don't have access to the original Privco report, but this article on Time http://goo.gl/iu1z3 cites it as saying the 178 employees are dvying up $66 million among themselves and goes on to say a couple of sentences later that the first 30 employees average out to $3.6 million... which adds up to $108 million.

Anyone with a basic understanding of math ought to recognize that their numbers are dubious. It's disappointing to see it echoed all over the web including publications like Time who should be expected to do some simple fact checking.

justinbeaver• 13 years ago

perhaps even worse than privco's non-stop rubbish "research" is the naive reporting on this story without seeking a second source to verify "the facts". would it have pained the writer to at least request the so-called "financial documents"? such is the sad state of affairs in journalism these days (sigh).

kevando• 13 years ago

I'm curious what role Tumblr's investors - like you - play in a deal like this. David Karp, his vision, and his team are a huge part of the tumblr value. Does Yahoo! also benefit from the mentorship and experience that you guys provide?

fredwilson6• 13 years ago

everyone contributed but it was David, Marco, and the entire Tumblr team who should get all the credit for this

danielharan• 13 years ago

Either way, congratulations :)

mrgn• 13 years ago

A cursory Googling reveals PrivCo and CEO Sam Hamadeh will say just about anything for an apropos headline.

robk• 13 years ago

Either way this definitely returned the fund for USV. If this was out of their 2004 fund ($125m) and the follow-ons came from reserves from that fund, getting $281m back on say $30m of paid in capital (upping ispivey's estimate and from his comments assuming Fred took more than pro-rata later) is a smashing success for a VC even if the deal was "just" ~9x overall for all capital. Congrats.

hacker2000• 13 years ago

Looks like VC finally gave actual #s to PrivCo. They honestly don't seem THAT different to me, +/- 5 or 10%. Don't think that calls for scorched earth credibility attack (yeah yeah I must be a shill). But those who claimed it's "all garbage" way over-reached IMO. Don't think anyone here would think their work should be called total garbage when it was that close and even the couple assumptions footnoted. Call me a shill, but I mean that's a low blow and makes you know who vc look like a bully whose bluff was just called dudes. Guess he's still peed about foursquare story from months ago. Win some lose some, don't stoop. http://www.privco.com/tumblr-ownership-and-yahoo-acquisition... (updated)

Union Square gets 5,000% return on Tumblr

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