Yahoo’s $US1.1 billion purchase of Tumblr may have saved its founder, David Karp, from having to go out and raise a lot of money.
Back in April, Business Insider heard Tumblr was trying to do just that.
(Startups are frequently acquired while in the process of fundraising. Instagram, for example, was purchased just days after it closed a $US50 million round of financing.)
Tumblr’s last fundraise was an $US85 million round in September 2011.That means, regardless of the revenue it generated, Tumblr lost $US68.4 million over the course of 20 months. That also means at some point, Tumblr was burning multiple millions per month, although it’s unclear if that burn rate was curbed by the time Yahoo acquired it.
That sounds high, but when you have billions of monthly pageviews it gets expensive to keep servers up and running. Tumblr had 300 million monthly uniques, 60 billion U.S. pageviews and 175 employees when it sold. Tumblr was said to spend $US25 million last year and was expected to spend $US40 million this year. It raised a total of $US125 million since its founding in 2007.
We don’t know how much revenue and expenses were at the time of the sale, but it’s safe to assume the company was burning a healthy amount of cash. Without Mayer, Karp had to raise another big fund, or figure out how to make money in a short period of time.