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:
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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.