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Summary:

While Tumblr’s sale to Yahoo back in May was generally acknowledged as a needed influx of cash for the company that was struggled to make money through advertising, new documents reveal just how much cash Tumblr had.

paidContent Live 2013 David Karp Tumblr
photo: Albert Chau

When Yahoo acquired Tumblr back in May, it seemed like a natural fit in a lot of ways: It added an influx of younger, cooler customers to Yahoo, and it gave Tumblr the lifeline it needed when advertising revenue wasn’t yet booming.

But how desperate was Tumblr’s financial state at the time?

A new 10-Q form that Yahoo filed with the SEC on Thursday, first noted by AllThingsD, revealed that Tumblr had just $16.6 million in cash left when it was acquired by Yahoo, even though it had raised $125 million since 2007, most recently $85 million in 2011.

Since Tumblr generated just $13 million in advertising revenue last year, as CEO David Karp had said previously, and was still figuring out how to achieve advertising success on mobile, the company would have likely had to start fundraising again if Yahoo hadn’t stepped in. At the time of the acquisition, Tumblr had 178 employees.

But now that he’s with Yahoo, the deal doesn’t look bad for Karp — if he sticks with the company for four year, he could earn up to $80 million in cash and stock over that period of time.

Updated at 5:16 PM to reflect Karp’s retention package as $80 million.

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  1. In fact, his total compensation is more than $80M over the 4 year period.

    From the same 10-Q:

    In connection with the acquisition, the Company is recognizing stock-based compensation expense of $70 million over a period of up to 4 years. This amount is comprised of the assumed unvested stock options and restricted stock units, valued at $29 million, and the Yahoo! common stock, valued at $41 million, issued to Tumblr’s founder but subject to holdback and release over four years provided he remains an employee of the Company. In addition, the transaction resulted in contingent cash consideration of $40 million to be paid to Tumblr’s founder over 4 years provided that Tumblr’s founder remains an employee of the Company. Such cash payments will be recognized as compensation expense over the 4-year service period.

    So that’s $110M in total over 4-years in both cash and stock for Karp.

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  2. Sam Giancanna Friday, August 9, 2013

    Memory really is short: acquisition to gain new users and demographics was Jerry Yang;s original strategy to build Yahoo in the 90s. It was a good idea then, and it’s a good idea still. Is the new Yahoo CEO really doing anything new? Oh yeah, the new logo campaign. In the words of Hannibal Lecter: “Love the suit.”

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