Inside Yahoo!’s Tumblr Deal: Here’s Who Hit the Billion Dollar Jackpot

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Tumblr founder David Karp watches at a news conference with Yahoo CEO Marissa Mayer about the company's acquisition of Tumblr in Times Square in New York City, on May 20, 2013.

It will likely be years before we know if Yahoo!’s blockbuster $1.1 billion deal to buy social blogging platform Tumblr was a success. But 24-hours after the deal was officially announced, a few things are certain: The deal represents a landmark event for New York City‘s tech startup scene, and a handful of Tumblr employees and investors are now extremely wealthy.

Here’s a quick breakdown of the big winners and how much they made on the deal:

Founder David Karp: $253 million
Karp, the 26-year-old high school dropout who founded the company six years ago, owns approximately 25% of Tumblr and is set to reap $253 million in cash as a result, according to data compiled by PrivCo, a New York-based research firm that tracks private companies and the venture capital industry. Karp’s net worth had already been estimated at $200 million after Tumblr’s most recent venture capital round, but by tech mogul standards, he leads a relatively frugal lifestyle. (His Brooklyn loft is worth $1.6 million, but it’s only a one-bedroom.) At least now Karp can afford to go to college, he quipped to The New York Times.

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Investors: $750 million
Tumblr’s investors, of course, hit paydirt. New York-based Union Square Ventures and Boston-based Spark Capital led an initial Tumblr investment of $775,000 in 2007, and then added $4.5 million one year later, according to Bloomberg. Together, the firms owned nearly half of Tumblr, and are walking away with a 50-fold return on their investment, making the deal a once-in-a-decade grand slam. Union Square, which is run by Fred Wilson, arguably New York’s most prominent venture capitalist, is making $253 million on the deal, while Spark (including partner Bijan Sabet) is making $231 million, according to PrivCo.

Meanwhile, Silicon Valley venture capital titan Sequoia Capital is walking away with $176 million, while four other late stage investors, Greylock Partners, Insight Venture Partners, CrunchFund, and Draper Fisher Jurvetson, are making a combined $88 million, according to PrivCo.

Tumblr employees: $66 million, or $371,000 each
Thanks to stock options, Tumblr’s employees are about to see a few additional zeros on their bank accounts balances. In total, Tumblr’s 178 employees (not including Karp) will divvy up $66 million, according to PrivCo, for an average of $371,000 each. But the company’s earliest employers will reap much more than that: Tumblr’s first 10 employees will see an average payout of $6.2 million each, while the company first 30 employees will make an average of $3.6 million each, according to PrivCo.

“I won’t make yacht-and-helicopter money from the acquisition, and I won’t be switching to dedicated day and night iPhones,” Marco Arment, Tumblr’s first lead developer, wrote in a blog post. “But as long as I manage investments properly and don’t spend recklessly, Tumblr has given my family a strong safety net and given me the freedom to work on whatever I want. And that’s exactly what I plan to do.”

The Tumblr deal is also a major milestone for New York’s booming tech scene, because the acquisition represents the first billion-dollar buyout of a venture-backed, Big Apple tech startup, according to venture capital research firm CB Insights. (DoubleClick, the online ad company bought by Google for $3.1 billion, doesn’t count because it had already gone public and was then taken private by private equity firms before the Google sale.) The Tumblr deal beats out Yahoo!’s $850 million acquisition of Right Media in 2007 and Salesforce’s $745 million purchase of Buddy Media in 2012.

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Tumblr’s windfall will only fuel further growth for New York’s tech scene, according to PrivCo CEO Sam Hamadeh. “Most of this money — from the co-founders, to top New York venture capital firm Union Square Ventures, to Tumblr’s 178 employees — will be recycled in the coming months and years into the New York tech startup ecosystem,” Hamadeh said in a blog post. “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.”

Most high-profile U.S. tech startup activity and venture capital investing still happens in Silicon Valley, and probably will for some time. But the Tumblr deal represents a major victory for New York’s tech scene, so it’s no surprise that a beaming Mayor Michael Bloomberg was on hand to lavish praise on Karp and his company at Yahoo!’s press event on Monday. Bloomberg has made boosting New York’s tech profile a central part of his legacy, so he was no doubt doubly pleased at Yahoo!’s announcement that it plans to consolidate its New York headquarters in the former New York Times building right off Times Square.

1 comments
hummingbird
hummingbird

This is just more proof that geniuses don't need years of schooling to go out and do great things. For Steve Jobs, Bill Gates and Mark Zuckerberg college was just a waste of time (and money) and they had better things to do with their time. Whatever they missed out on in college I'm sure they've learned it  by being rich enough to buy any book and travel anywhere. Chances are they have honorary doctorates now.