A Delicious Eight Months
On April 14th, we closed an investment in Delicious. We wrote about our initial investment here.
Eight months later, Delicious has been sold to Yahoo!. The news is on the Delicious blog.
We are thrilled to see Joshua Schachter, one of the most interesting entrepreneurs we have worked with in a long time, realize a dream. He built Delicious at night and on weekends, left his safe and attractive job to bet everything on it, and came up a winner. Congratulations Joshua.
We have enjoyed working with Joshua. We are pleased to have been part of the team that transformed Delicious from an interesting side project into an important company with strong leadership, a clear vision and a large and growing group of devoted, active users.
We have long felt that, in a world awash in information, navigation and discovery would be increasingly important. Algorithmic search has proven to be invaluable, but it has limits. We invested in Delicious because we believed that its invention of a new form of people powered discovery would address a class of web navigation problems that could not be solved with algorhythmic search.
Many of the users who contribute tags to Delicious do so because they believe they are making the internet more useful for everyone. We believe that Yahoo! understands this. The way they have handled the Flickr acquisition gives us comfort that Yahoo! will pursue Joshua’s vision of an open data architecture which will be the foundation for a whole new ecosystem of innovative web services.
This has been a great ride. Together, we built something of value—for Yahoo! certainly—but hopefully for the web at large. At Union Square Ventures, we will continue to work with talented entrepreneurs to mine the vein of community, peer production, media disaggregation and reaggregation, and discovery to build valuable businesses. We hope to find many more interesting opportunities like this one in the years to come.
December 9, 2005 01:03 PM, By Brad Burnham
Tags: acquisition delicious liquidity
Comments (36)
Congratulations!!
Posted by Charles Smith , December 9, 2005 02:34 PM
That's great news. But I hope del.icio.us/popular remains as rewarding as it is now once mass adoption sets in. Maybe del.icio.us/popular/earlyadopter?
Posted by Marcus , December 9, 2005 02:38 PM
Congratulations. It is awesome to have flickr and del.icio.us under one roof.
Posted by Techcrunch , December 9, 2005 02:49 PM
Congratulations!!! Del.icio.us is my favourite web service...
Posted by Dimitar Vesselinov , December 9, 2005 02:55 PM
Congratulations Fred...that's great stuff!
Posted by Michael Parekh , December 9, 2005 03:00 PM
way to go, guys!
Posted by John Battelle , December 9, 2005 03:06 PM
This is excellent news. Congratulations!
Posted by Brian Benzinger , December 9, 2005 03:10 PM
Truly a home run! Great vision on this, Union Square and Joshua.
Posted by Scott Partee , December 9, 2005 03:40 PM
Congratulations. It just goes to show that investment successes can happen without ticking on every box on the VC checklist. It must have been a real leap of faith to buy into something with no clear business plan. I guess Yahoo! just made the same leap...again, well done.
Posted by McDerment , December 9, 2005 03:51 PM
Congratulations! It's exciting to see smart young companies being acquired so early.
Posted by Cem Sertoglu , December 9, 2005 03:52 PM
Congratulations! It's well deserved. I think Yahoo! is the perfect fit for del.icio.us . I can't wait to see the service expand under Yahoo! once the masses take it in.
-Jason L. Baptiste
Posted by Jason L. Baptiste , December 9, 2005 04:04 PM
I have enjoyed and benefited from Joshua's integrity and curiosity for many years between memepool and del.icio.us, so I am delighted to see such a man have his day.
And hats off to Union Square for sharing this sentiment -- along with that perky new upstart, Yahoo 2.0...
Cheers to all!
Posted by Josh Levine , December 9, 2005 05:29 PM
Is it really worth the money?
Rumors have it at 30-40 million dollars. How much per user is that? What does this mean for other social apps in the space? For wikipedia?
My response to the post is online, if anybody cares.
Posted by Jeff , December 9, 2005 09:39 PM
Congrats guys...eight months ago a lot of folks were second guessing you; I would imagine many of those same "pundits" will be lining up to pat you on the back now. Hopefully you got as good an IRR from this deal as I expect you did...and in the meantime I think we're all thrilled for Josh who got this whole tagging thing started in the first place.
Posted by Jason Wood , December 9, 2005 10:52 PM
Congrats! Great service, great folks and now, great profits.
(more on my site)
Posted by Cortland Coleman , December 9, 2005 11:31 PM
Brad, Fred... it took real insight to see the potential in this early. Congratulations.
Posted by Troy Young , December 9, 2005 11:54 PM
"Together, we built something of value..."
Only a VC would have the unmitigated hubris to say "we built". I doubt if they borrowed money from, say, Citibank, those guys would preen around with "we built." Oh, it's not just the money? Please.
Posted by Jim Delaney , December 10, 2005 02:19 AM
Jim,
The level of commitment and interaction from USV has been outstanding. They were literally working with us every day. So in this case they are quite justified in saying "we built."
Joshua
Posted by Joshua Schachter , December 10, 2005 03:38 AM
Well, Joshua, how about your ISP? Your bank? Your lawyers? When anyone that has a role claims ownership/leadership (as "we built" suggests to me), where do we stop? How many VCs took direct responsibility of the hundreds of failures that happened during the dotcom? How many came out and said, "we failed"?
I see the intellectual challenge solved by your company as the aggregation of user tagging, in contrast to algorithmic or expert tagging. You take that away, there's not much left. Are you saying that USV had something substantial in this core area to contribute without which you could not have succeeded? Yes, a company is not just an idea, but isn't there an hierarchy of effort vs. claim?
(Didn't mean to force you to appear to be ungracious on a happy day. :-)
Posted by Jim Delaney , December 10, 2005 03:54 AM
Jim
it takes more than a core intellectual challenge being solved to make for a succesful transaction. I have followed the USV people and their interaction with del for a while and their is no doubt they helped make this a success. I also know plenty of VC's who stood up and say we f&*^% up with some of the dot com investments. I think perhaps your own experiences may be clouding your judgement here. Everyone involved here deserves credit for turning this "intellectual challenge" into a winner. Congrats to Josh, USV and everyone else involved!
Posted by Alan Shimel , December 10, 2005 08:54 AM
Jim
it takes more than a core intellectual challenge being solved to make for a succesful transaction. I have followed the USV people and their interaction with del for a while and their is no doubt they helped make this a success. I also know plenty of VC's who stood up and say we f&*^% up with some of the dot com investments. I think perhaps your own experiences may be clouding your judgement here. Everyone involved here deserves credit for turning this "intellectual challenge" into a winner. Congrats to Josh, USV and everyone else involved!
Posted by Alan Shimel , December 10, 2005 09:01 AM
Entrepreneurs can not bring their ideas to life without money. Like it or not, many great ideas would be nothing more than great ideas were it not for the economically incentivized risk taking associated with VC / angel / corporate investments. Moreover, most idea guys I know...need the business savvy and acumen the financial partners bring to the table. It is a symbiotic relationship. There are always exceptions, but as a whole the shared opportunity between Geekerati and Wall Street is a mutually viable relationship.
Posted by Gene McCubbin , December 10, 2005 11:12 AM
Entrepreneurs can not bring their ideas to life without money. Like it or not, many great ideas would be nothing more than great ideas were it not for the economically incentivized risk taking associated with VC / angel / corporate investments. Moreover, most idea guys I know...need the business savvy and acumen the financial partners bring to the table. It is a symbiotic relationship. There are always exceptions, but as a whole the shared opportunity between Geekerati and Wall Street is a mutually viable relationship.
Posted by Gene McCubbin , December 10, 2005 11:16 AM
"Entrepreneurs can not bring their ideas to life without money."
That's exactly right, it's all about the money. And I see nothing wrong with a VC saying "we risked" money on this deal. However, that's not the same as claiming, "we built."
It must be so threatening to VCs to see a new generation of entrepreneurs do precisely that: bootstrap their companies without VC money because the economics and dynamics of company formation are in the process of a major change. Come Web 3.0, we may see VCs disintermediated out of their self-importance. I can live with the usual tombstone listing a VC's recent investments and a boasting of multiples in returns in a Red Herring article, but "we built"? C'mon.
Posted by Jim Delaney , December 10, 2005 03:21 PM
Jim, I don't know the VC's you have dealt with but I personally have been involved with Brad Feld over at Mobius VC on a few companies. I will tell you that Brad rolls up his sleeves and gets down and dirty with everything we do that we call him in on. He takes calls from customers, meets with partners, helps with strategies, does introductions, whatever it takes. He would code if he knew how ;-) From what I hear about Fred it is a similar "what do we have to do to make this succesful attitude". I think the VC's who "put in the money and say they do more, but don't" are relics of the bubble. In today's economy, founders are I think more demanding of what they want from a VC and succesful VC's realize they have to work harder to make their investments pay off.
Posted by Alan Shimel , December 10, 2005 10:41 PM
"He takes calls from customers, meets with partners, helps with strategies, does introductions, whatever it takes."
The person who does these things doesn't have to be a VC. We need to uncouple the source of investment money from strategic/operational services a startup ought to be able to get from a competitive menu of providers, thereby eliminating likely (and empirically demonstrated) conflicts of interest.
Posted by Jim Delaney , December 11, 2005 12:32 AM
No Jim you are right, the person who does these things does not have to be a VC, but what a statement it makes when it is a VC. Sounds a little of damned if you do, damned if you don't to me. You obviously have an axe to grind here, so grind away.
Posted by Alan Shimel , December 11, 2005 09:28 PM
When a VC is simply a source of money (as with many large VC funds), then Jim is most certainly right. The money helps build the company, but the Partners might not be so involved. But with smaller outfits (like USV) that are leading the way in the new investment landscape, it's much different. Of course, they are so much more than moneybags. They are true team-builders. It's much more about who your dealing with. I am not an entrepreneur, but my experiences with the business have made that much clear.
Posted by blinkwave , December 11, 2005 11:12 PM
"...they are so much more than moneybags"
Yes, the question I'm raising here is, should they be?
This is not unlike the movie business. All sorts of individuals and organizations invest money to make a film happen, but it's not customary at all that the money lenders go around claiming the equivalent of "we built" this movie. (Lest they be ridiculed.)
Do some of them contribute beyond a simple financial transaction? Of course. But to the extent that a money lender gets to dictate who the director or special effects studio or foreign distributor has to be, or how a movie should be edited or who should star in it, I call it detrimental. An example or two of some success in this area should not constitute an invitation for imitation.
As someone mentioned above, that some VCs said "we effed up" after the dotbomb doesn't change the fact at all that the *system* in place as a whole (whereby VCs ran the show) was and still is broken.
To sum up, I am against VCs meddling in the internal affairs of startups and taking primary credit for non-financial outcomes when collecting on exit.
Posted by Jim Delaney , December 12, 2005 12:03 AM
Nice... How involved were you with the decision to sell to Yahoo? What made you decide to go that route instead of internal development of the concept?
Posted by Alexander Muse , December 12, 2005 10:16 AM
Congrats on a very savvy investment and (I’m guessing here) a fairly significant return.
A great idea like this one is only as good as the management and advisory team. This deal helps to prove several Web 2.0 concepts while at the same time shows the true value of an active investor – much to the chagrin of some disgruntled entrepreneurs.
I believe that Yahoo! was a particularly good choice considering their original mission of cataloging the web. Their renewed interest in making excellent acquisitions like this one bolsters their already formidable presence in the daily lives of their users. I've been a del.icio.us user for a while (and a Yahoo! member for ten years) and I'm pleased to see that this meme (sorry for the Web 1.0 reference, but I think it's appropriate here considering Joshua's other company) will now be released to the masses, who can now refine it and make the web a better place.
Posted by Marc Nathan , December 12, 2005 01:16 PM
Anyone know what the actual number was? I've seen anywhere from $5m to $40m.
Posted by pwb , December 12, 2005 04:41 PM
Jim,
You've got to be kidding, right? So you think that VCs should just invest money and "look at them grow"?
Posted by AC , December 16, 2005 02:10 PM
We all have our own skills. The skills to be a strategic visionary, a fund raiser, a management expert, a sales expert, a PR expert, a staffing and recruiting expert, etc...simply rarely lie in the same individual. Bill Gates, Steve Jobs and Michael Dell aside, the other million or so technology entrepreneurs over the years have been forced to build teams of competent people at an early stage (and I bet those three hired well early on too). Guess what Jim...those teams take money; or more specifically the children and mortgage lien holders of those teams require money for food and rent.
The money is the seed that creates opporutunity during a crucial time period that must be capitalized upon. Most solid business ideas dont have the luxury of time to grow on the entrepreneurs credit-card based funding or allow for so many mistakes to be made.
Without the money (not just of the VCs but also of the pension funds, the super-wealthy individuals and familes, etc) the entrepreneur's dreams, goals and future wealth is usually wasted.
If a VC wants credit because their money, and advise, and access to larger companies and professional management is what took a goofy little idea and made it worth +/- $40 million...who cares. Fact is, I dont know of one VC in this country now, or or in the 90s, that doesn't "meddle" in the affairs of the entrepreneur.
If I were to invest millions in a company, I would meddle as well. I would expect the best from the entrepreneur, but I would be inspecting the results frequently. If a VC doesnt do that, he has breached his fiduciary responsability to the people who fund his coffers.
Posted by Gene McCubbin , January 8, 2006 01:05 PM
congratulations!
Posted by Charlie Crystle , December 9, 2005 02:32 PM