
Union Square gets 5,000% return on Tumblr - npalli
http://www.crainsnewyork.com/article/20130521/TECHNOLOGY/130529969
======
fredwilson
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.

~~~
SilconValleyVC
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.

~~~
fredwilson
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

~~~
orangethirty
To me, you are the first actual investor that has said something like this. My
image of investors in general is tarnished from past dealings. Yet, I want to
believe. I want to believe that there are investors out there who simply care
about the people, about the goals. Who do not see an investment as merely a
financial transaction, but as an addition to their own team. If this is really
you, then congratulations. Its good to have people like you in the mess that
is tech and SV.

Disclaimer: I don't need, nor am I looking for any kind of funding. These are
sincere words.

~~~
rdl
Most of the top tier investors are pretty consistent with this message.
Ironically, they're also the ones who get approximately all the returns,
probably as much because the best entrepreneurs would prefer to work with them
vs. mediocre investors, as much as because of the direct value these investors
add.

~~~
orangethirty
I generally don't design or build with outside investment in mind. Given how
I've seen how bad investors make good teams crumble in short periods of time.
But, I would actually consider working with people who see value in me and my
team, rather than only focus on the bottom line. May you mention other
investors who share this same attitude?

~~~
rdl
It's easiest at the seed stage; Y Combinator for sure, and from what I've
heard, a lot of people like 500 Startups and some well-known individual angels
(but differ by sector).

Probably non-existent at the PE stage.

It also varies within firms -- it's down to the individual partner -- but the
overall firm matters too (or else "your" partner gets blocked on doing helpful
things).

The best strategy, IMO, is to get an early investor on your side who shares a
lot of the same goals (e.g. YC), and then work with the early investor to find
later stage investors who are compatible.

(There's one specific firm and one specific partner I really like, but I
haven't taken investment from them, so I'm reluctant to name. I get better
advice from him/them already than I'd expect from an actual investor, though.)

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sgpl
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."_

~~~
jlgreco
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.

~~~
patio11
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.

~~~
jbooth
Accenture would be in the witness protection program or jail.

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pkmehta
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.

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

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AlexMuir
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.

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larrys
""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
Isn't this always the case with acquisitions though?

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vellum
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>

------
dot
> 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?

~~~
larrys
"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 ...

~~~
krschultz
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.

~~~
7Figures2Commas
> So market salary + $371k bonus isn't a bad deal.

It isn't necessarily a great deal either though. Somebody making market salary
at a startup in one of the most expensive cities in the world may very well be
saving less than somebody grossing a considerable amount less in a less
expensive area, and after taxes that $371,000 bonus isn't a whole lot more
than the base salary for a first year associate attorney at a major law firm
in New York.

So while I wouldn't call the outcome here disappointing for anybody involved,
I think it does highlight the generally poor economics of equity for startup
employees: even when your company hits a grand slam, the windfall is rarely a
short cut to the type of wealth that is frequently achieved by starting a
successful small business or going into a lucrative profession.

~~~
krschultz
That's neither here nor there.

For one thing, software engineering is a lucrative profession. It pays more
than most other white collar jobs in New York, except some law, some finance,
and some consultants. But it is certainly better than the large swaths of
people in marketing, HR, PR, accounting, etc.

The choice of city vs not city is completely independent of the startup vs
non-startup thing.

If you are intent solely on maximizing cash in your pocket, then I doubt
startups are the best path. If you want that, just go work on wall street. I
grew up around that, and I've known for a long time that no matter how much
money there is in it, it's not a great life.

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

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

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hacker2000
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...](http://www.privco.com/tumblr-ownership-and-yahoo-acquisition-
proceeds) (updated)

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

~~~
wallflower
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.

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

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robk
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.

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jbredeche
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.

