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Union Square gets 5,000% return on Tumblr

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Re: Union Square gets 5,000% return on Tumblr

#61

Post by fredwilson »

ispivey wrote: post #38
fredwilson wrote: post #27

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.

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), US…

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.

Re: Union Square gets 5,000% return on Tumblr

#62

Post by fredwilson »

kevando wrote: post #48
fredwilson wrote: post #27

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.

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?

everyone contributed but it was David, Marco, and the entire Tumblr team who should get all the credit for this

Re: Union Square gets 5,000% return on Tumblr

#63

Post by wellboy »

wallflower wrote: post #30
wellboy wrote: post #2

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

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.

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

Re: Union Square gets 5,000% return on Tumblr

#64

Post by 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.

Re: Union Square gets 5,000% return on Tumblr

#65

Post by jhartmann »

fredwilson wrote: post #60
orangethirty wrote: post #50

Earlier quoted context omitted.

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…

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?

Re: Union Square gets 5,000% return on Tumblr

#66

Post by orangethirty »

jhartmann wrote: post #65
fredwilson wrote: post #60

Earlier quoted context omitted.

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 inves…

Thanks for the suggestion. I'll look into the community at avc.com.

Re: Union Square gets 5,000% return on Tumblr

#67

Post by rdl »

orangethirty wrote: post #55
rdl wrote: post #53

Earlier quoted context omitted.

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.

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.)

Re: Union Square gets 5,000% return on Tumblr

#68

Post by btrautsc »

fredwilson wrote: post #36
SilconValleyVC wrote: post #32

Earlier quoted context omitted.

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…

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

Making me feel even more strongly about that Fred Wilson's "got soul" comment. +1 Fred.

Re: Union Square gets 5,000% return on Tumblr

#69

Post by krschultz »

7Figures2Commas wrote: post #56
krschultz wrote: post #19

Earlier quoted context omitted.

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 ma…

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.

Re: Union Square gets 5,000% return on Tumblr

#70

Post by kmfrk »

orangethirty wrote: post #50
fredwilson wrote: post #36

Earlier quoted context omitted.

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…

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.

He's like the Scoble of VCs (in a good way!). :)

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