Yahoo recently acquired the huge blogging platform Tumblr for 1 Billion in cold hard cash. This move is great for the New York City tech scene (aka Silicon Alley) and gets investors and entrepreneurs motivated. Over the past few days as news leaked out about this deal, I had a chance to see critics and praises all over the internet and Twitter. The praises mostly consisted of people who admired Tumblr founder David Karp for how paid he is now. Nothing wrong with that. Criticism went towards Yahoo CEO Marissa Mayer, and what people call a dumb decision to buy the popular site. Tumblr as it stands now doesn’t make enough revenue to justify the price some say. But with over 100 million unique users a month, i’m sure Yahoo is foaming at the mouth to throw advertisements up.
Unless they have some other ideas.
My goodness, what @wordpress must be worth now. That is, unless business models and making it rain have gone out of style.
— Chris Sacca (@sacca) May 19, 2013
So how does this affect startup founders? It literally muddies the water even more than it is today. Seeing a deal like this go down, is convincing enough to have founders strictly focus on getting users and not revenue. The whole attitude of create something cool, get 100,000 users, and find a way to get paid later; is a thought process many subscribe to. Even me. Here is the catch though, many entrepreneurs fail to see the gorilla in the room…
Your idea is dope, you got some great traction, but times is hard. Especially if your a woman or African American. Startups have to prove themselves a bit more now. Since most early funded social consumer startups have failed to manage cash flow correctly and hire good talent. Its been reported that winter was coming all 2012, and it may well be here now. To sum it up you can’t really be sure that you’ll have funding to help you grow your company until you figure it all out.
My opinion is to sort out what your goals are first, then stay in the middle. If your goal is to build a $100 startup like Chris Guillebeau, so be it. If you want to build something larger, then a sure way to grow with outside support, is to make sure there is a balance between getting users and making money. There is no standard for success, but i’m pretty sure having some thought out plan to make money gives you way more leverage these days.
If you have a big hit on your hands however, you’ll be ok. There is power in people. Congrats Tumblr.