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.

Saw this one earlier by Fogcreek guy - TOMA where his phrase was that they'd use their blogging to "achieve TOMA" -- still have no idea what it is

https://news.ycombinator.com/item?id=5732024

Can someone explain to me why you spend $1.1B on this if the company was running out of cash, had investors skittish about funding a new round and there were no competing bids.

Why didn't Yahoo just let them get desperate and buy them then? With an all-cash deal, it seems they're less interested in the team than the platform so seems they could have picked that up in a few months for significantly less.

What am I missing in this? I hope the answer is not that doing that would create enmity between Yahoo and Tumblr's investors or something like that? That would strike me as a gross violation of their fiduciary duty to their shareholders, no?

If you and Marissa Mayer want the last burger in the world, how much is it worth? What if you're Mark Zuckerberg, and it's really important to her that you don't get a taste of that burger? Maybe she doesn't even like burgers.

Factors like the cost of the burger, or how fresh/tasty it is, become less important.

Also, all-cash doesn't mean what you think it means. The currency used to pay for a company (cash, stock, pork bellies, whatever) is independent of the vesting schedules of the employees/founders acquired. Typically investors receive most stock/cash immediately, while employees receive some up front and the rest over a period of time that is negotiable. 3-4 years is standard. Some deals are front-loaded (more than 50% in the first half) and others are back-loaded (the reverse).

The point about vesting is one I hadn't considered. Thanks.

Re: the burger analogy, that also makes sense in the context of there being competition for this deal. But aside from a puff piece in TC which looks placed by sources (aka Tumblr banker Frank Quattrone), there didn't look like much competition in this case.

But nevertheless, thanks for the informative answer.

There's nothing wrong with horse meat.

There are far fewer controls and standards for horse meat in much of the EU, meaning a lot of the meat which was being passed off as beef could potentially contain dangerous drugs not fit for human consumption.

If it's properly regulated though, you're right that there's no problem with it.

Potentially, there's a problem with any meat if you can't have confidence in where it came from. (British buyers didn't know they were buying food containing horse meat. They were being duped.)

If the beef isn't beef, you can't really count on any of the other food integrity items - like freshness - to be accurate either.

Horse meat's fine, I've had it... but it's unacceptable and potentially dangerous to have it sold as beef.

Who said there was?

unless it is sold as beef , then it is a scam since horse meat is quite cheap ,beef is not.

One must never look at this deal based on the acquired's metrics and dynamics. One must look at this based on the impact of the acquirer. Instagram was worth $1 billion as it was potentially a $10 billion reduction in FB's valuation at IPO with this threat hanging out there. Tumblr is worth a billion because of the strategic value to Yahoo. In this particular case Yahoo can close massive gaps in age demographics and mobile in one fell swoop. Tumblr was discussing ad revenue of $100 mil this year. Yahoo, with much deeper experience and relationships here, can probably do much better than that this year and beyond. So it may "pay for itself" within 3 - 5 years which is nice on top of all the other benefits.

Yahoo could monkey around and try and pick it up in a "fire sale" in 12 months for $500 mil. But maybe that never happens and they still wake up tomorrow well behind in the youth and mobile demographic. I love that Yahoo, after sooo many years of indecisiveness, is being decisive and bold. Not sure if it'll pay off but these seem to be well thought out calculated risks.

>Tumblr was discussing ad revenue of $100 mil this year.

But weren't there other reports that they were going to hit 15M instead? Whoops. If they had 100M revenue, they wouldn't me needing to raise more cash; their burn is far smaller.

Maybe if they let it die, the service slowly dies too, and then the audience leaves -- Assuming that's kind of what Yahoo is after in the first place; but I'm completely guessing here

All cash does not mean there isn't a portion of it restricted to a time or objective based schedule for key employees (or even all employees and shareholders).

If they intend to continue operating it (highly likely) buying while they are still with cash, all of their staff, and vibrant is quite possibly a better outcome than buying a broken company for less even only a few months later.

Disclosure: I am long Yahoo in my personal portfolio and I've led many M&A activities for Rackspace.

Also, the question isn't $1.1B or nothing, it's what amount would Tumblr say yes to?

Would they really have turned down an offer of $700 million? $800 million? Was $1.1B really the least they'd accept?

I bet they would have accepted significantly less, rumors to the contrary.

But the billion dollar headline has its own value, I guess.

Great points.

Perhaps a dumb question but what is TOMA? I google'd and Urban Dictionary'd and I came up with the "Tennessee Osteopathic Medical Association" which my gut tells me is not what you're trying to achieve.

Thanks for clarifying.

BTW, #5 point is great. I've thought about writing posts that I thought might "do well on HN" but in retrospect, I stopped myself because realized our demographic isn't HN and so even if #1, it'd be a waste of traffic (except from a recruitment perspective perhaps).

TOMA: Top Of Mind Awareness[1]

TOMA is what's going on if I ask you to "name an American car company" and you immediately reply "Ford". And chances are you will say "Ford" and not "Buick" or "Chrysler" or whatever. Ford have done a good job of building TOMA. Likewise if I said "name a carbonated cola", it's a lot more likely you're going to say "Coke" than "Mr Pibb".

[1]: http://en.wikipedia.org/wiki/Top-of-mind_awareness

Exactly. What makes it worse is that Tumblr has lots of soft core porn and other unsavory content which brand advertisers don't want to touch with a 10 foot pole.

Plus, the P/S of 10x looks pulled out of ye' olde arse. Google's trailing P/S is 5.6x and Yahoo's is similar. AOL is 1.31x. What media company that might be a "comp" trades for 10x.

HuffPo, and I said it was steep not what people should expect to get.

Huffington Post, a media company, was purchased by AOL for $315M @ $30M rev. That's 10x. Stop trolling.

Not a very professional way to respond, Danielle. Especially being the author of the article in question. Stop accusing people as trolls just because you disagree with them.

You could goto Bloomberg.com or Yahoo Finance and get real P/S ratios but you used the uncontested paragon of financial data - HuffPo.

And you said it's high but still used it in your headline cuz you thought would have a higher chance of getting to the top of HN.

I guess pursuit of provocative > properly researched.

Will you both please stop?

Did the flame war algo catch this one? If so, well done.

Have you earned the right to have this much attitude? Strikes me as odd that as someone building a startup about startups that you'd be so dismissive of others on HN - a startup heavy community.

Interesting PR strategy.

I'm real. There are enough cheerleaders and I love many friends in the Midwest startup scene, but it doesn't help them to blow smoke up their asses. I'm from Seattle, another startup community in denial. It's time for an objective industry voice and it won't all be flattering.

Your conflating two unrelated things here - being objective (or real) and being dismissive.

VCs don't like that type of company. As a result, you should not aim for that goal.

Why do you care what VCs like. Making a mil a year (or run rate of 1 mil) should be the goal, not impressing VCs.

Sorry - sarcasm never translates well in writing. I totally agree with your point. Apologies for confusion.

If you can really do that, become a VC or full-time angel vs. starting some silly startup index SaaS platform.

Nah that path is too obvious, I'm making the new Dow Jone Industrial index. Way less plausible, way more fun.

You're drastically overestimating how many people care about startups (and will pay for a product related to them). This is a small market and VC as an asset class is shrinking (so it's getting smaller). VCs are terribly intuition driven and the good ones already do what you're thinking of and they'e good at it. And even if they bought, it's less than 50.

If you're trying to build one of those shoot for the moon startups (the kinds VCs like), this idea won't be it.

Not being a hater.

Revenue is a vanity metric. That's a new one.

This seems like an interesting way to justify shortcomings of dmor's momentum index. So:

- Mentions in TechCrunch > Revenue - Conference presentations by CEO > Revenue - Klout score > Revenue

This is some combination of naive, farcical or dumb.

Of course, you can throw out Facebook as an example of what over-optimizing for revenue would have done to them but this is survivor bias at its best. You could also look at Pets.com, Webvan and Kozmo from a bygone era to see what a poor monetization plan does. Note: it's not just revenue that is important but revenue > COGs.

(Note: Yes I know. This time is different. I'm an idiot.)

Good point. So far, the midwestern call center folks I've been dealing with have been nice but utterly useless so your point is spot on. Thx.