Back in 2001 when Themestream, the Internet content company I was running, hit the wall, the board was talking through different alternatives.
One idea was to engineer an aqui-hire — we had good technology and a great engineering team. “A good engineer is worth $1 million in the Valley,” someone said.
Inflation has hit in a big way since then — Yahoo’s price for Tumblr puts the value of each of the nascent company’s 175 employees at better than $6 million.
Admist all of the speculation, theorizing, punditizing and otherwise all-out -izing that has accompanied the news of the deal, there’s a stark truth about the Tumblr deal.
Yahoo has spent 20% of its cash hoard for a group of employees that will make up 1.5% of its total employee base. (Not to mention that Tumblr’s $13 million of revenue would have made up 0.2% of Yahoo!’s total 2012 revenue.)
Consumer-generated content, platform technology, younger demos, hot company, Silicon Alley vs. Silicon Valley are all interesting but ultimately irrelevant.
The real question is how a team of 175 people focused singularly on user experience will survive against the gravitational force of more than 11,000 colleagues.
Big companies exert a unique pressure on smaller companies.
Big companies have mid-level employees who spend their whole day working on administrative issues — HR, finance, infrastructure, resourcing, communications, culture — that grease the operating wheels. They are essential to the smooth functioning of the big organization. Their jobs have purpose.
Small companies don’t many people who derive their purpose that way.
Yahoo!’s entire bet on Tumblr is built around changing the smaller company’s core business model by leveraging Yahoo!’s existing ad resources….tech, people and relationships.
That is going to mean a change to the culture.
No matter what the press release says.
“Per the agreement and our promise not to screw it up, Tumblr will be independently operated as a separate business,” Yahoo said in a statement.
A force of 175, no matter how valiant, is powerless against a cohort 10,000+ strong.
Makes you think of the Battle of Thermopylae….