There clearly is some kind of earn-out, meaning that the founders get the whole money only if they stay long enough and/or if the business remains healthy.
On stage, Mike Arrington mentioned that he'd stay for sure on board for 3 years, due to "incentives."
So it's possible that the sale price is $25M upfront, with another $25M in 3 years. That would make both sources (one that says the price was only $25M, and one that says it was in the $40 or $50M) correct.
It wasn't Arrington who said that. He was quoting VC's who had said that.
There’s a worry among venture capitalists, [Arrington] said, that angels are training “an entire generation of entrepreneurs who are building dipshit companies” that sell to Google for $25 million. In fact, that criticism might be extended to Y Combinator as well, which could be seen as “the king of the dipshit companies.”
Arrington said he isn’t on-board with all of that criticism, but that it holds a “kernel of truth.”
Point taken; he was quoting an unnamed VC who said that and he believes there's a kernel of truth in it. He's also been characterised as supporting that point of view; on stage yesterday Chris Sacca straight out placed "his" words feet and he didn't take the opportunity to refute it:
MA: No one is talking about the entrepreneurs.
CS: That’s not true. You call some smaller companies “dipshit” companies, but they’re not.
Another quote from VentureBeat:
"TechCrunch Editor Michael Arrington, who moderated the panel, had previously criticized some angels for funding “dipshit companies” that think too small and aim to be acquired by Google for around $20 million"
Arrington has never claimed to be building a company in the vein of those he covers as a journalist. It's more of a "very successful media outlet" than a "dipshit tech company."
50% is quite standard for team acquisitions to my knowledge. However, for TechCrunch earn-out sounds quite high.
I'm also surprised of the price, it seems low compared to many tech acquisitions. TechCrunch has a lot of eyeballs, even if it doesn't have main stream audience.
Midsize Finnish regional newspaper companies have market caps around €180M. TechCrunch, a major international tech publication with millions of readers, is worth of only 10-25% of a local newspaper with audience of 300000 people? WTF? Either newspaper valuations are absurd, or internet advertising and tech events are a failure as a business model.
It's a lot harder to get ads for an international media. I'd guess most of the ads on www.techcrunch.com are payed by US marketing budgets. The people who manage those only care about US viewers. So question N:1 is how many US viewers, without ad blockers the site has. N:2 - for how long is it gone keep them.
A regional Finnish newspaper is very likely to keep it's audience in one form or another for a long time. That audience has high purchase power and is less likely to go online and research cheaper alternatives to advertised products/services.
A regional Finnish newspaper is very likely to keep it's audience in one form or another for a long time
That's the gist I think. TechCrunch is making $10M revenue in a year (http://www.businessinsider.com/aol-is-close-to-buying-techcr...). It's hard to say how much of that remains as a profit, but I would expect that with AOL helping with ad sales and infrastructure, they can bring costs down considerably. Let's say $5M in profits.
It's a competitive market and there is not yet enough experience how long web properties can retain their audience, thus valuation of future revenues drop quickly.
Now, it seems that if AOL doesn't expect significant growth for TechCrunch, $25-50M is in a right ballpark.
However, I still think that $180M for a regional Finnish newspaper with 300K audience is a risky bet. Time to read their financials to understand this.
This is probably not uncommon, and I've always thought that it's a bit of a value theft from shareholders who don't have leverage via large ownership or active employment. It's also a good reason to not exercise startup options unless you think the company will be a hit (medium and low value acquisitions tend to have relatively large payouts to employees staying on board).
Wonder what this'll do for his first-hand reporting on Silicon Valley. If you've moved out of a state for tax reasons, you generally have to be physically absent from the state the majority of the time--- you can't "move" but still live there 11 out of 12 months. (For California, you also have to stay moved for at least 4 years, or else your sub-4-year move might be deemed merely a temporary absence with intent to return.)
He'll be making capital gains money, not income, so this move will not help him. (I had the same thought re: the move but was corrected on Twitter by a friend who sold his startup - Newsvine - and lives in Seattle.)
am I the only one who thinks that IF its really the case, its kinda ... unfair. cmn, MA is good writer and he 100% deserves his money but he made it writing about SV! I think CA certainly deserve its 10,3% back, hey?
People have been arguing about it forever, but I think there's at least a relationship. The UC and Cal State systems have been feeders to many tech companies, and during the Valley's formative period, even the private universities were heavily state-subsidized (California used to have an extremely generous CalGrants scholarship that would pay for any CA high-school student with good grades to go to any CA university, public or private).
There are rules in place to determine what's 'fair' and what's not 'fair.' I'm assuming Mike has played by all the rules, so it's most certainly 'fair.'
If the state of California didn't think what Arrington did was right, there'd be a law. We've built up a system of rules, we all have to follow them, Mike did, so he's in the clear.
"Law" is [theoretically] a consensus on "fairness". If we all went around killing each other based on our personal views, well that just wouldn't be very fair, now would it?
Agreed, but it's your job as a citizen to try and pay exactly what you owe by law. If what Arrington did was legal, it wasn't wrong of him. No one should be paying more taxes than what's legally required. If there are any loopholes (so to speak), it's the role of the citizens to "exploit" them and the role of law makers to close them if necessary.
If there are any loopholes (so to speak), it's the role of the citizens to "exploit" them and the role of law makers to close them if necessary.
That's a pretty bad attitude to have, that citizens should be trying to exploit as many loopholes as possible. That sets up citizenry vs. govt. as a competitive game, which is a great recipe for making something that's supposed to be cooperative become dysfunctional and complex.
It's an impossibly complex task to make a perfect airtight literal codex of laws in a system, and it's not reasonable to assume that humans can create such without introducing a huge number of contradictions, etc. We need to keep in mind the spirit of the law in order to keep our system from devolving into a morass.
I'd argue that complexity is what causes loopholes, rather than the other way around.
Things like tax credits aren't 'loopholes' - they're specifically codified in the law for people to utilize, in an attempt to encourage certain behaviors.
It's not gamesmanship, although there is some competitiveness between state tax laws (such as this WA vs CA capital gains thing).
That's WA's incentive to get people with lots of money to come live (and hopefully spend) it in WA. CA has enough people with lots of money that it can afford to take a different stance.
"Conformity with rules or standards" is an established meaning of "fairness"; to make any other judgement, as the poster a few levels above did, requires one to take a position on Arrington.
There are two places where one might take a position: "are the laws being fairly applied in this case?" and "are the laws themselves fair?".
Clearly it would be unfair to treat Arrington differently than the law requires. I think the charitable interpretation of the above poster is that he thinks the laws themselves are unfair. You may disagree, but arguing that what Arrington did is legal is beside the point.
I've already pointed out that if Arrington's complied with the tax rules and standards, his action have met one definition of fairness, which is not at all beside the point. To argue fairness or unfairness by other definitions, you have to take a position on those laws. Otherwise, you rule out such judgments, which leads us back to the question "did he play by the rules?"
Fellow Washingtonians, let's consider not discouraging profitable business from moving to the state and stop encouraging profitable businesses that are already here, e.g., Boeing, to move more of its operations out of state.
Arrington handed Armstrong his laptop on stage and had Tim press the "publish" button. Armstrong didn't write the post, let alone even read it before he hit publish, it seems. I think it was done by Techcrunch. Watch the video and you'll see.
You probably don't realize how many AOL sites you interact with regularly. They don't do a lot of 'hey this is an AOL site', so I suspect just like TC, you won't be aware of any major changes.
Sure AOL is not what is was before, but even when you put aside it's dying internet subscription model, it's media branch(es) still do well over a billion in revenue per year.
I had a college-bound relative bring up some random web startup he heard about from Engadget's comment section. I'm sure he has no idea that Techcrunch even exists.
This is epic. For all the crap we give AOL, they really did a nice job with the Weblogs acquisition. A lot of those blogs are still around and the leaders in the field.
I wonder a) what's happening to the amazing conferences b) and where Mike's future will be like.
I have heard that Arrington is the majority owner (by a large scale). I think the CEO and a third person own a small share. I will look for the source I am remembering...
I don't think you understand what the phrase means if you think that. Having the "problem" of dealing with capital gains means you made money that is capital gains taxable. The alternative is to not make that money. Get it?
Oh I understand it perfectly and I think you misunderstood me.
Whether you say "scaling is a good problem to have" or "paying CGT is a good problem to have", it just means you never experienced how hard it really is to scale, and how hard it is to deal with taxes/accountants/lawyers and lose money. They're still problems and when you're in the thick of them, they're not good.
Of course they are. If you have scaling problems that means you have a ton of users. A hard problem but I'd rather have it than not have it. Same with capital gains tax. I'd rather make enough that I have to pay attention to this stuff then not ever have to think about it because I've never been financially successful enough for it to matter (and with taxes you're not "losing money", you're paying for the services that helped you get there. Of course that's not as clearly the case in the US tax system but that's the idea anyway).
If everything were effortless then anyone could do it.
I think we're both looking at the same coin from different sides and disagreeing. As I understand my and your argument, we're arguing cup is half empty vs half full. My "half empty" argument is centred on the how stressful it is for people to go through these "good problems".
Possibly. Your messages read like "it would be better to not have that problem at all than to have it". I'm trying to say "it would be better to have it because you've succeeded than to not have because you haven't. Of course (and I haven't focused on this part or even mentioned it because I assumed it obvious), it would be best to have the success and no problems".
That post is such a canned press release it's untrue. [insert name] CEO, commented: blah blah natural complement... Blah excited ... Blah great future together.
"Tim Armstrong and his team have an exciting vision for the future of AOL as a global leader in creating and delivering world-class content to consumers"
I've been privy to some secret acquisition terms in the past, and in most cases the speculation on the web had no connection to reality. When you make up numbers, they can get repeated until they gain credibility and drown out any genuine information about the deal, a disservice to the community.
Perhaps he's just had enough. In the Inc interview [1] he gave the impression that he lived for TechCrunch. After four years of that, he must be exhausted.
It's interesting that with AOL trying to assemble a collection of new media websites/blogs they probably would have been better off spinning off another company that doesn't have such a bad reputation in media.
This bums me out. A TC that can't call AOL a pile of dung isn't TC to me. I really enjoyed TC, and have a lot of respect for Michael Arrington. I don't blame him at all for cashing in. But this will decrease the quality of TC.
Not that those are bad blogs, but they are very different from TC, IMO. Arrington infused TC with a 'devil-may-care' personality that made for a dramatic read. I don't think AOL (their PR dept) will be able to stomach such behavior.
I am worried about the long term of this deal as well. Can techcrunch post AOL leaks anymore (Not that AOL really has leaks anymore)? Will the upper echalon corporation politics effect the writings? Will the Disrupt and TC50 events still happen? I would assume they would, who knows. I am also curious about the crunchpad/jojo lawsuits going on. Will the added aol resources help? Not effect it? Hopefully techcrunch stays roughly the same, or I will need a new main news source.
Interesting follow-up to the talk of companies being acquired yesterday at disrupt. Arrington was surprised that Conway et al seemed to not have a problem with companies who were content with being acquired at less than billion dollar valuations and dramatic "change the world" dreams.
I agree. The major difference between Weblogs Inc/TC and many of the other acquisitions is that they serve audience-relevant content (to use Armstrong's words). It makes sense that AOL would focus more on high-quality content than on vehicles for content delivery in light of the Weblogs Inc success.
AFAIK, Patch http://www.patch.com/ has been growing by leaps and bounds — but they may have more autonomy than some (all) of the advertising/services acquisitions. (I guess most of which eventually folded into AOL?)
So, content-based sites can make money after all. TC apparently made decent profits off of their events business, and the site was basically a large marketing spend.
Arrington's legendary workaholism paid off nicely.
I was at Netscape 8 years ago when AOL spent $4.2B on it so that TC deal seems like peanuts and AOL might be on the up and up but it sure isn't as grand as it once was! AOL and Web were never friends.
So who's going to be the next TechCrunch now that they've been bought out? For that matter, seems like this leaves GigaOm as one of the largest independent blogs right now...
I wonder how many more Armstrongs can show up on HN's front page? Maybe get something about Hellcat Records on here and we can have two Tim Armstrongs!
Let's hope Arrington will continue to be loud even after the acquisition and not have to worry about pissing off some advertiser with AOL or something.
To clarify: I am leading to whether or not AOL would represent the interests of Michael Arrington's Crunchpad v. joojoo d/b/a Fusion Garage Pte Ltd in their current legal battle.
I just hope AOL starts paying all TC writers the ridiculously low monkey writer rate that it pays Weblogs writers. Ooh, and TC posts now get entered into the digg voting ring too!
Its not, wordpress.com has a habit of doing this with techcrunch posts.. I guess something to do with caching... happens everytime they tweet something for me.
Edit : parent comment deleted makes me sound like an arse, parent comment said "its on your end"
From a business perspective, this is a successful exit, though I seem to recall $100m valuation about a year ago.
From a hacker perspective, I don't really think much about TC. They aren't a technology company, though they've done a really nice job with open data on the crunchbase.
The consensus is of six successful and pretty popular serial entrepreneurs/hackers and five of my high up tech hacks contacts that's been reading TechCrunch even before '05, when Arrington published on his first site.
The hackers thought he was a startup hero but this is a sellout move to give it up like this. The hacks think the flacks must be effing elated. Now the process to get their bullshit published is streamlined when there's shareholders to account for.
What a troll. And no I don't mean you bearwithclaws I mean 37 Signals. Cherry picking two failed acquisitions to support your knee-jerk reaction to this deal is just lazy. I don't think I need to point out that AOL has done just this before (bought popular blogs) with great success. The shot at AOL's 'age' is just icing on this lame attempt at getting some free press cake.
