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Exit Tumblr followed by $1.1 billion

Monday, 20 May, 2013

“The exit, one of the biggest New York has seen shows that with content becoming important, New York is finding its footing on the startup stage.” That’s Om Malik writing about “What Tumblr’s sale means for New York startup ecosystem.” Later, he adds: “It would be one of the biggest exits for a New York-based startup. Sure there have been other exits — Google paid $3.1 billion for DoubleClick, but that was a company that belonged to a different Internet era.” Those not used to seeing “exit” used in this context need to brush up on their venture capitalist (VC) vocabulary because the “exit strategy” is how a VC intends to get out of an investment, profitably. The exit is a way of “cashing out” an investment via an initial public offering (IPO) or being bought out by a bigger player, such as Yahoo. It’s also referred to as a “harvest strategy” or a “liquidity event”.

One of the early investors in Tumblr was Union Square Ventures of which Fred Wilson is a managing partner. Along with being a famous VC, Fred is a famous Bob Dylan fan and those in the know knew that a deal was almost done when he posted “Don’t Fall Apart On Me Tonight” by Dylan on his Tumblr blog yesterday. And it didn’t.

So why is Fred Wilson cashing out and David Karp cashing in so handsomely? “The world is atwitter about Tumblr’s big exit to Yahoo!” says John Battelle, who claims it’s all about advertising, especially “native” advertising and the “activity stream”.


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