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.
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.
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.
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
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.
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.
it is easier to behave properly when you have a big pile of chips in front of you. when you don't have any chips, it is tougher. that's why the best get better and the worst get worse.
Given how much people talk, you'd think that when the pile is small is when you need to be all the more careful about how you treat people if you want that to ever change...
For my part I have an mental list of both vc's I'd love to work with again, and VC's I not only will never, ever take anything from again even if it's just a free pen, and while I won't badmouth them publicly, there are certainly some I like to think I will slide just a little bit quicker into obscurity thanks to the odd situations where their name might have come up in conversation..
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?
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.)
there are many of us in VC who approach things this way. they are the ones we like to work with the most. if you look at who we work with often, you can reverse engineer the list.
Fred,
I can definitely say that you and several others in the VC world deeply care about your teams and your vision for the world. I have been a part of your community @ avc.com for awhile, I started following you and Brad Feld after I met Brad when he came to Oklahoma City. Both you and he are super genuine, open, and I see time and time again how you go to bat for your entrepreneurs. I think what makes a good investor is someone who takes true ownership of an investment, and does what they can to help it succeed. You definitely fit that bill, but there are plenty of others out there as well.
My advice to everyone looking for people like Fred is to reach out to other entrepreneur's and see who has really been helpful, follow them on their blogs or twitter, and try and figure out what they are about. If you like what you see, engage them and the community of people around them. Maybe you will never get to work with them directly, but in the process most likely you will connect with other like minded individuals and will find people who are either in the same position as you or sages who have done it multiple times before. Maybe you will get lucky and find a few life long friends. And that is what makes it all worth it, isn't it?
Fred is probably the most dog-fooding VC I have ever seen. Before the redesign of his blog, the site was crawling with scripts and other stuff from the companies he had invested in.
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.
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.
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.
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?
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?
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).
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."
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.
Google would be entering puberty, Microsoft and Apple would be bowling buddies, Yahoo would be a college student with a major in a dead language, YC would be the guy everyone wants to be friends, eBay would be a flea market sales person, and Craigslist would be one of those 2-for-1 prostitutes. (:
Oh, for sure. The web still feels so young though, but I suppose there is no reason these companies would not be able to move with technology as it dramatically changes, as the companies you mention have (particularly Nintendo).
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.
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.
""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.
> 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?
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.
> 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.
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.
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.
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.
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)
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.
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.
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.
