Don’t wait to plan your exit, even if it’s years away

Startup founders have a million things to worry about every day.

Finding product-market fit, great talent and and a sustainable plan for constant growth are top of mind, but perhaps most importantly, they need to keep the lights on, whether it’s by raising venture capital or managing cash flows while bootstrapping.

The flip side to thinking about fundraising and growth, however, is skipping ahead to the final chapter — whether that involves M&A, an IPO or perhaps a bankruptcy, eventually all startups come to an end.

Instead of thinking about an exit while in the final throes, founders need to strategically lay the groundwork, even if it is potentially years away. Here’s how.

On the Extra Crunch stage at TechCrunch Disrupt SF, we had a deep conversation on what founders should do to prepare for an exit with Jess Lee of Sequoia, who sold her startup Polyvore to TechCrunch parent company Yahoo; Justin Kan, who sold Twitch to Amazon and now runs legal startup Atrium; and Mike Marquez, the founding managing director of boutique investment bank Code Advisors.

The good news is that the primary requirement for exiting a startup is really the same work that a founder has to focus on: building a great business. “The best way to sell your company is to actually build a good company,” said Kan, since no acquirer is looking to buy damaged goods.

But even if you are building a solid business, that’s not nearly enough to get a transaction done some time down the line. One consistent piece of advice from the group was that founders should be thinking about an exit much more regularly, even if they are steadfastly opposed to one. That means identifying key relationships that will make an M&A possible and working to build and maintain those relationships.

“I thought about it too late,” Lee said about her time running Polyvore . “The same way you build relationships with investors, you should spend at least a little bit of time building relationships with partners who could become potential acquirers.”

Kan elaborated further. “I think that in the beginning, your responsibilities as a founder is just to find product-market fit [and] work on your product,” he said. “And then once you have a product that people want, you want to figure out how to get it in the hands of more people, and that’s when it starts to become really valuable to know everyone in your market and then adjacent markets.”

Far from being a completely separate task from the other duties of being a CEO, connecting with potential acquirers often has benefits for growing a company in the first place.

HuffPost is reportedly on the auction block

Late last night the Financial Times reported that HuffPost, arguably one of the crown jewels of Verizon Media Group’s remaining network of media properties (which includes TechCrunch), is up for sale.

Verizon has been shedding media properties in a retreat from the strategy that it had begun to execute with the acquisition of AOL for $4.4 billion back in 2015. Through the AOL deal, then-chief executive Tim Armstrong became the architect of the telecommunications company’s media and advertising strategy.

Armstrong’s vision was to roll up as much online real estate as he could while creating a high technology advertising architecture on the back-end that could better target consumers based on their media consumption (which the telecom company would also own).

The idea was to provide a broad-based competitor to the reach of ad platforms on Google and Facebook which were also targeting users based on their browsing history and interests. The benefit that Google and Facebook had was that they had a more holistic view of what consumers did online and they positioned themselves as a distribution channel between media companies and users — essentially redistributing their articles and videos and hoovering up the ad dollars that had previously gone to those media companies.

The multi-billion dollar land grab continued when Verizon paid $4.5 billion for Yahoo in 2017.

Now it appears that Verizon has a multi-billion dollar case of buyer’s remorse. Part of the billions that Verizon spent on Yahoo was for the early social network Tumblr, which Yahoo had acquired for $1.1 billion back in 2013.

Earlier this year Verizon unloaded Tumblr for the cost of a luxury Manhattan apartment. That $3 million sale was presaged by the significant fall from grace of other former high-flying media and tech properties.

Vice was once worth $5.7 billion at the height of the media investment bubble, but earlier this year Disney wrote down its stake in the company to virtually nothing.

At least Vice is emerging as a survivor. the company has rolled up Refinery29. Vox Media is also doing well in the new world of media. It bought Recode back in 2015 and recently acquired the publisher behind New York Magazine to expand its purview into paper publications and get its hands on the popular New York websites Intelligencer, The Cut, Vulture, and Grub Street.

Other publications like Hello Giggles, which was founded by the actress Zooey Deschanel, were sold to Time Magazine. High-fliers like Buzzfeed, HuffPost, Vice and Vox have all had to lay off staff in recent months.

It’s been a wild ride for HuffPost, which began in 2005 as a collection of celebrity bloggers brought together under the auspices of Arianna Huffington, from whom the site took its name.

AOL acquired The Huffington Post back in 2011 in a deal that was valued at $315 million less than a year after picking up TechCrunch for $25 million.

Verizon announced layoffs across its media properties at the beginning of the year. It cut roughly 7 percent of its staff — or around 800 jobs — including some at HuffPost.

In a statement to the Financial Times, Verizon said that it would not comment on rumors and speculation.

Neither Verizon Media nor HuffPost responded to a request for comment by the time of publication.

How you shouldn’t handle your data breach

So you’ve had a data breach. Don’t worry, it’s not just you. These days it happens to everyone, no matter how large or small your company is. It’s almost inevitable, some might say, and not a case of if but when.

A lot is already out of your control. Whether a hacker broke in and stole customer data or someone on staff left a cloud server exposed without a password, the incident alone is bad enough. But then you’ll also face a stream of headlines, flack from your customers, and endless tweets and social media posts. Trust will invariably suffer, your brand will hurt, and recovery seems like a million miles away.

But as breaches become more commonplace, few companies remember the actual incident itself — or even the number of users or customers affected. No matter what kind of security incident you’re thrown into, what happens afterward is how you will be remembered.

Get it right, you can save face. Get it wrong, and you’ll never live it down. Here’s what not to do when you have a data breach.

Don’t try to cover it up

The latest version of Yahoo Mail helps users find attachments and deals

Yahoo Mail is getting a mobile update, with new versions of the iOS and Android app launching today.

Many of you probably haven’t tried out Yahoo Mail in years, but Senior Director of Product Management Josh Jacobson noted that it’s one of the top productivity apps in the Apple App Store, where it has been rated 2.1 million times, with an average rating of 4.6 stars.

Jacobson also said that Yahoo Mail is trying to do something very different from the Superhumans of the world, because it’s not one of the many apps that “solve for essentially corporate use cases.” Instead, it’s “completely focused on the consumer email use case, solving the business of your life.”

For example, Jacobson said he joined Yahoo after the company acquired his previous employer, the smart inbox service Xobni. (Yahoo, like TechCrunch, is owned by Verizon Media.) At the time, everyone assumed that when it came to helping users find things in email, “search is the way to go.”

Instead, he said it turns out “people just don’t know or want to have to figure out what to type into that imposing white box to find the thing that they’re looking for.”

Yahoo Mail

So Yahoo Mail now offers a number of different views that should help you find stuff without searching, by focusing on specific types of content from your inbox.

If you’re looking for a photo or a file that someone sent you, there’s a view that just brings up all your attachments. Or if you’re looking for deals, there are three different views that you use — the overall Deals View, the currently iOS-only Location View (which shows you nearby deals on a map) and Grocery View (which shows you grocery discounts based on your loyalty cards).

Director of Product Management Shiv Shankar noted that while the app is sorting and prioritizing these offers, the deals themselves come from your inbox, not from Yahoo.

The new Yahoo Mail also includes a view for checking all your email subscriptions, and a button that allows you to unsubscribe from any of them with a single tap. And there’s an additional view (also iOS-only for now) focusing “active updates,” namely pressing and time-sensitive emails, such as package tracking and travel updates.

The Yahoo Mail team has also refreshed the app’s overall look. That includes adding a navigation bar at the bottom of the screen, which Shankar said will make “single-hand usage” possible again despite the fact that phone screens are getting bigger. The navigation bar is customizable — each user can decide which views to include.

And by the way, if you’re a little leery of sending email from a Yahoo address, Jacobson pointed out that you can use the Yahoo Mail app to access non-Yahoo email accounts, including Gmail and Outlook.

How Zhihu’s become one of China’s biggest hubs for experts

Zhihu may not be as well known outside of China as WeChat or ByteDance’s Douyin, but over the past eight years, it has cultivated a reputation for being one of the country’s most trustworthy social media platforms. Originally launched as a question-and-answer site similar to Quora, Zhihu has grown to be a central hub for professional knowledge, allowing users to interact with experts and companies in a wide range of industries.

Headquartered in Beijing, Zhihu recently raised a $434 million Series F, its biggest round since 2011. The funding also brought Zhihu two important new partners: video and live-streaming app Beijing Kuaishou, which led the round, and Baidu, owner of China’s largest search engine (other participants in the round included Tencent and CapitalToday).

Launched in 2011, Zhihu (the name means “do you know”) is most frequently compared to Quora and Yahoo Answers. While it resembled those Q&A platforms at first, it has grown in scope. Now it would be more accurate to say that the platform is like a combination of Quora, LinkedIn and Medium’s subscription program.

For example, Zhihu has an invitation-only blogging platform for verified experts and since launching official accounts, it has become a channel for companies and organizations to communicate with users. A representative for Zhihu told TechCrunch that the platform had 220 million users and 30,000 official accounts as of January 2019 (for context, there are currently about 800 million Internet users in China), who have posted a total of 130 million answers so far.

The company’s growth will be closely watched since Zhihu is reportedly preparing for an initial public offering. Last November, the company hired its first chief financial officer, Sun Wei, heightening speculation. A representative for the company told TechCrunch the position was created because of Zhihu’s business development needs and that there is currently no timeline for a public listing.

At the same time, the company has also dealt with reports that its growth has slowed.

Tumblr’s next step forward with Automattic CEO Matt Mullenweg

After months of rumors, Verizon finally sold off Tumblr for a reported $3 million — a fraction of what Yahoo paid for the once might blogging service back in 2013.

The media conglomerate (which also owns TechCrunch) was clearly never quite sure what to do with the property after gobbling it up as part of its 2016 Yahoo acquisition. All parties has since come to the conclusion that Tumblr simply wasn’t a good fit under either the Verizon or Yahoo umbrella, amounting to a $1.1 billion mistake.

For Tumblr, however, the story may still have a happy ending. By all accounts, its new home at Automattic is far better fit. The service joins a portfolio that includes popular blogging service WordPress.com, spam filtering service Akismet and long-form storytelling platform, Longreads.

In an interview, this week, Automattic founder and CEO Matt Mullenweg discussed Tumblr’s history and the impact of the poorly received adult content restrictions. He also shed some light on where Tumblr goes from here, including a potential increased focused on multimedia such as podcasting.

Brian Heater: I’m curious how [your meetings with Tumblr staff] went. What’s the feeling on the team right now? What are the concerns? How are people feeling about the transition?

Fresh out of Y Combinator, Tandem lands millions from Andreessen Horowitz

Tandem, one of the most sought after companies to graduate from Y Combinator’s summer batch, will emerge from the accelerator program with a supersized seed round and an uncharacteristically high valuation.

The months-old business, which is developing communication software for remote teams after pivoting from crypto, is raising a $7.5 million seed financing at a valuation north of $30 million, sources tell TechCrunch. Airbnb investor Andreessen Horowitz is leading the round.

Tandem and a16z declined to comment for this story. The round has yet to close, which means the deal size is subject to change. Y Combinator startups raise capital using SAFE agreements, or simple agreements for future equity, which allow investors to buy shares in a future priced round at a previously agreed-upon valuation.

We’re told several top venture capital firms were vying for a stake in Tandem. One firm even gifted the founders a tandem bike, sources tell TechCrunch, resorting to amusing measures to sway the Tandem team. But it was a16z — which has an established interest in the growing future of work sector, evidenced by its recent investment in the popular email app Superhuman — that ultimately won the coveted lead investor spot.

Tandem provides a virtual office for remote teams, complete with video-chatting and messaging capabilities, as well as integrations with top enterprise tools including Notion, GitHub and Trello. The service launched one month ago and has signed contracts with Airbnb, Dropbox and others. The company claims to be growing 50% week-over-week.

“Every company is a remote company,” Tandem chief executive officer Rajiv Ayyangar said during his pitch to investors on day two of Y Combinator Demo Days this week. “You have salespeople in the field, [companies with] multiple offices, people working from home. Tandem isn’t just building the future of remote work, it’s building the future of work.”

Ayyangar was previously a data scientist at Yahoo before joining Yakit, a startup seeking to simplify ecommerce delivery, as the director of product. Co-founders Bernat Fortet Unanue and Tim Su are also Yahoo alums.

We’re told Tandem’s fundraise was nearly complete before it pitched to investors Tuesday afternoon. Startups that participate in YC are often flooded with offers from VCs throughout the three-month program. Firms are hungry for the batch’s Airbnb, Dropbox or Stripe — graduates of the program — and will pay premiums on startup equity for their chance to invest in a future ‘unicorn.’

As a result, the median seed deal for U.S. startups in 2018 was roughly $2 million — a record high — with typical pre-money valuations hovering north of $10 million. Tandem’s seed financing represents both a trend of swelling seed deals and valuations, as well as a tendency for VCs to dole out more cash to fresh-from-YC companies amid heightened competition amongst their peers.

The previous YC batch, which wrapped up in March, included ZeroDown, Overview.AI and Catch, a trio of companies that pocketed venture capital ahead of demo day. ZeroDown, a financing solution for real estate purchases in the Bay Area, raised upwards of $10 million at a $75 million valuation before demo day, sources told TechCrunch at the time (months after demo day, Zero Down announced a whopping $30 million financing). ZeroDown was an outlier, of course, as the company’s founders had previously co-founded the billion-dollar HR software company Zenefits.

As for the summer batch, we’re told Actiondesk, Taskade and Tandem are amongst the startups to garner the most hype from investors. Some even forwent the demo day pitch altogether. BraveCare, which is creating urgent care clinics intended just for kids, raised $4.1 million ahead of demo day, we’re told. The company opted not to pitch to additional investors this week.

You can read about all the company’s that pitched during demo day one here and demo day two here.

What will Tumblr become under the ownership of tech’s only Goldilocks founder?

This week, Automattic revealed it has signed all the paperwork to acquire Tumblr from Verizon, including its full staff of 200. Tumblr has undergone quite a journey since its headline-grabbing acquisition by Marissa Mayer’s Yahoo in 2013 for $1.1 billion, but after six years of neglect, its latest move is its first real start since it stopped being an independent company. Now, it’s in the hands of Matt Mullenweg, the only founder of a major tech company who has repeatedly demonstrated a talent for measured responses, moderation and a willingness to forego reckless explosive growth in favor of getting things ‘just right.’

There’s never been a better acquisition for all parties involved, or at least one in which every party should walk away feeling they got exactly what they needed out of the deal. Yes, that’s in spite of the reported $3 million-ish asking price.

Verizon Media acquired Tumblr through a deal made to buy Yahoo, under a previous media unit strategy and leadership team. Verizon Media has no stake in the company, and so headlines talking about the bath it apparently took relative to the original $1.1 billion acquisition price are either willfully ignorant or just plain dumb.

Six years after another company made that bad deal for a company it clearly didn’t have the right business focus to correctly operate, Verizon made a good one to recoup some money.

Aligned leadership and complementary offerings drive a win-win

Axios’ Dan Primack on ‘the most polarizing startup that exists’

Hello and welcome back to Equity, TechCrunch’s venture capital-focused podcast, where we unpack the numbers behind the headlines.

This week was a bit special. Instead of meeting up at the TechCrunch HQ to record the episode, Kate and Alex met up in muggy Boston at Drift’s office, where we linked up with Axios’s Dan Primack. And since we were feeling chatty, we went a bit long.

After checking in with Primack (he has a newsletter and a podcast), we first dealt with the latest from Tumblr. In short, Verizon Media is selling Tumblr to Automattic for a few dollars. How did Verizon wind up owning Tumblr? Ah. Well, Yahoo bought it. Later, after Verizon bought AOL, it bought Yahoo. Then it smushed them together and called it Oath. Then Verizon decided that it didn’t like that much and renamed the group Verizon Media. But Verizon doesn’t want to own media (besides TechCrunch, of course), so it sold Tumblr to Automattic, a venture-backed company best known for operating WordPress.

That’s a lot, I know. What matters is that Yahoo bought Tumblr for more than $1 billion. Verizon sold it for around $3 million. Now, Automattic now has a few hundred new employees and a shot at juicing its userbase before it goes public.

After that, we lamented that the WeWork S-1 had yet to appear. This was a tragedy, frankly. We had expected to spend half the show riffing on WeWork’s financials, alas…

So we turned to some normal material, like Ramp’s recent $7 million raise to take on Brex, and, SmartNews’s recent round, which gave it an eye-popping $1.1 billion valuation.

We ran a bit long because we were having fun, fitting in some conversation surrounding the notes from the SEC regarding the now-dead and then-fraudulent Rothenberg Ventures. More on that here if you want to get angry.

And finally, Vision Fund 2. It’s been a big source of interest for everyone on the show, and we expect whatever the second-act Vision Fund winds up becoming to be a big damn deal. The fund will invest in more than just consumer marketplaces, in fact, it’s eyeing more AI businesses and even biotech. That should be interesting.

All that and we have a lot more good stuff coming. Thanks for listening to the show, and we’ll be right back.

Equity drops every Friday at 6:00 am PT, so subscribe to us on Apple PodcastsOvercast, Pocket Casts, Downcast and all the casts.

Verizon is selling Tumblr to WordPress parent, Automattic

Six years after Yahoo purchased Tumblr for north of $1 billion, its parent corporation is selling the once dominant blogging platform. WordPress owner Automattic Inc. has agreed to take the service off of Verizon’s hands. Terms of the deal are undisclosed, but the number is “nominal,” compared to its original asking price, per an article in The Wall Street Journal.

Once the hottest game in town, the intervening half-decade has been tough on Tumblr, as sites like Facebook, Instagram, Reddit and the like have since left the platform in the dust. More recently, a decision to barn porn from the platform has had a marked negative impact on the service’s traffic.

The news certainly isn’t surprising. In May, it was reported that Verizon was looking for a new owner for the site it inherited through its acquisition of Yahoo. Tumblr was Yahoo’s largest acquisition at the time, as then-CEO Marissa Mayer “promise[d] not to screw it up” in a statement made at the time.

Tumblr proved not to be a great fit for Yahoo — and even less so Verizon, which rolled the platform into its short-lived Oath business and later the Verizon Media Group (also TechCrunch’s umbrella company). On the face of it, at least, Automattic seems a much better match. The company runs WordPress, one of the internet’s most popular publishing tools. As part of the deal, the company will take on 200 Tumblr staffers.

Developing…