STARTUPS: Blogging platform Tumblr's decision to sell to Yahoo for a cool $1.1 billion is probably one of the most fascinating and lucrative startup exits of the last few years. But while the deal will fill startups the world over with joy that the "big ones" do exist, is it such a great deal after all? READ MORE on Forbes.
Yahoo's decision to buy Tumblr is bad news for Marissa Meyer's shareholders, because the deal fails the four tests of a successful acquisition.
Tumblr — founded by high school dropout, David Karp, in 2007 and now employing 175 – has done well for a seller in trouble. The company apparently burned through $25 million in 2012 and Facebook, Microsoft and Google, all turned down Karp’s offer to sell after he had trouble adding to Tumblr’s $125 million in cumulative venture capital.
But the deal will enrich Tumblr’s biggest shareholders. Karp owns nearly 25% of the company and will get about $250 million from the deal, while Boston-based, Spark Capital, participated in five Tumblr financing rounds and Spark is expected to make tens of millions of dollars from the deal.
But will Yahoo shareholders make money from this deal? Perhaps not, as the deal fails tests of a successful acquisition.
Here’s why...
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