Can’t raise a Series A? Just sell yourself to Yahoo

If only someone had predicted this exact possibility 3 years ago...

"[2] In theory you could beat the death spiral by buying good programmers instead of hiring them. You can get programmers who would never have come to you as employees by buying their startups. But so far the only companies smart enough to do this are companies smart enough not to need to."

-Paul Graham, What Happened to Yahoo http://paulgraham.com/yahoo.html

Edit: giving this another 30 seconds thought, it wouldn't surprise me at all if a friend of Mayer's sent her PG's essay when she first agreed to take the job. If she hadn't realized it already, she almost certainly would have seen this strategy as the correct one (use Yahoo's war chest to get more A-players into the company through acquisitions), and she's been executing on it ever since.

This is a masterpiece of a backhanded compliment. Never have I seen such elegant transitions between briefly masked contempt and half-hearted admiration. It's really stunning.

I think analyzing these acquisitions from a raw dollars-to-dollars perspective is a mistake. When doing a turnaround with a company so fundamentally troubled as Yahoo, you need more than just a few patch-in acquisitions, so that's clearly not what they are about. These moves are part of a long term investment in motivating employees, building relationships with the valley, and regaining footing in the markets that they can win.

The key for Yahoo would be using those acquihires well.

1) Assume these people still want to do startups. Make sure there are concrete things they can achieve in 1-2 years; you probably have no chance of retaining most of them for 4 years, or longer.

2) Revolving door (like Cisco has) is probably worthwhile to establish. As long as you're buying at decent prices, there's nothing wrong with this. Buying someone 2-3 times in a decade is still a win.

3) Optimize for reducing the negatives of joining Yahoo. Yahoo used to split up productive teams; maybe let people remain as startup teams but then put them on existing products/lines of business, rather than splitting up great teams. I think this would make Yahoo more attractive (and maybe reduce the premium Yahoo has to offer over Facebook/Google for the more competitive acquihire deals)

This article reads like a crazy person wrote it.

I'm not crazy. YES I AM.

Seriously. Are they in favor or against? I'm confused.

Sadly, this is the kind of stuff that people will talk about. But it's factually incorrect in many places.

As for "VC's playing defense" and being afraid to back consumer startups, that's a broad mischaracterization. George and I backed two Series A companies this month and we're looking for more - heck, our whole team has plenty of capital. For backing great companies, no great firms are sitting back - it's competitive in consumer and in enterprise. If anything, VC's are playing offense.

I'd rather be acquired by Yahoo than by Google or MS. They are the underdogs.

Another PandoDaily article criticizing the startup ecosystem. The author needs to realize not every startup will become the next Facebook, and social products that only achieve moderate success cannot turn a profit through third-party advertising networks. The only possible exit for such startups is a small exit and join a larger tech firm that can take both the ideas learned and the talent and incorporate them into their larger goal. These startups likely had high ambitions, but when growth peaked, they exited while they still had a chance.

I smell a turnover strategy here:

1) Buy talent in the form of companies while they are still cheap because of both the startup glut and the booming stock market (and thus yahoo stock price).

2) When the inevitable downturn/crash happens, seize the moment to clean house. Many other companies will doing the same so it won't be particularly newsworthy.

3) The alternatives for the remaining employees will be much more grim at this point, so they'll get to keep most of them for a good number of years in order to build something revolutionary.

Seems like a logical move. Since there is supposedly a dearth of A* developers at Yahoo, since it appears many left in the previous years. This has made it a less desirable place for great developers to work for. To change this image and negative spiral, acquire good development teams. The products are secondary. Yahoo becomes a more attractive place to work again. Looks like its the early stage of rebuilding the team, before kicking it on to develop products into growth mode.

Interesting strategy to reinvent Yahoo!

Perhaps MM does not believe in the ability of Yahoo's existing human capital to make the change. But is it enough, to "buy" (supposedly) good people and bring them on-board? What about the big vision? More generally, I'm not even sure if there's still room for a content company in the magnitude of Yahoo.

I'm not bullish on Yahoo's movements of late, but people are getting catty.

Who is this article meant to help? Yahoo investors that aren't aware of how SV works?

The whole article reeks of jealousy and hatefulness. Good to see that our industry merits TMZ-esque content, albeit not to the same circus-esque depths.

Dear Marissa:

The next logical step for Yahoo! is to move into the enterprise. I know a great startup you could acquire that would accelerate your move into that space. I expect it could be had for a very reasonable price. Call me.

Mindcrime