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Finally, Here’s What YouTube’s Investors Made In Sale To Google
In: IT news
20 Mar 2010From Venture Capital Dispatch:
We always knew that Sequoia Capital and other shareholders of YouTube made out like bandits when Google bought the video site for $1.65 billion in stock in November 2006. But we had always estimated their profits from the deal – until today, thanks to a newly unsealed court document in Viacom’s longstanding copyright infringement suit against Google and YouTube.
- Reuters
- Chad Hurley, chief executive and co-founder of YouTube, received $334 million worth of Google stock in 2006.
According to this filing from Viacom’s lawsuit, which alleges that YouTube had knowledge of copyright infringement, Sequoia Capital received $516 million worth of Google stock on Nov. 16, 2006, representing 31% of the total price. (We estimated $495 million and a 30% stake at the time of the sale). Sequoia invested $9 million in the company in late 2005 and early 2006 (not $11.5 million as previously reported), meaning the firm made about 57 times its investment at the time of the sale.
That’s not Sequoia’s best payday ever – it ranks far below the 162x return Sequoia reaped at the time of Google’s IPO pricing – but it’s still extraordinary considering the YouTube sale happened so quickly. (Note that venture firms don’t sell or distribute all of their stock at once, so the actual cash received fluctuates.)
Another firm, hedge fund Artis Capital Management, received $85 million in Google stock on top of a $3 million investment, for a 28x return.
Perhaps more startling is how wealthy YouTube’s co-founders became, at least on paper. Chad Hurley received $334 million worth of Google stock, while Steve Chen got $301 million and Jawed Karim received $66 million. Not too shabby for three twenty-somethings who started YouTube a year and a half earlier.
In the end, the purchase price was about $1 billion more than what Google CEO Eric Schmidt thought YouTube was worth. As CNET reported last year, Schmidt gave a deposition in May as part of the Viacom case and testified that he believed YouTube was worth $600 million to $700 million, but “ultimately concluded that $1.65 billion included a premium for moving quickly and making sure that we could participate in the user success in YouTube.”
Or perhaps Sequoia Capital’s Michael Moritz, an investor in both YouTube and Google and known as a master negotiator, worked his magic.
Viacom Lawsuit Vs. Google/YouTube
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2 Responses to Finally, Here’s What YouTube’s Investors Made In Sale To Google
Chefbear
March 26th, 2010 at 11:36 am
So you like blue huh? Ok, we'll take Alaska and Texas. We will actually drill for oil and become self sufficient. We'l let you continue to beg and plead with the middle east. Let us know how that works out. We'll be out of Iraq, since oil of course is the only reason we are there according to you. We'll let you negotiate with all of them instead, we know you can do it.
So not only will you eventually have to buy oil from us…we'll all be laughing at your windmill car when you figure out that it won't run without some gasoline to start it. You push your environmentally stupid car over to Texas from "New California" (I'm sure you'll have lots of labor help too to push it), we can sell you some gas, then lock you up for bragging about your good weed which we did find in the back seat next to that Al Gore magazine "Going Green". We'll ship you over to a Georgia prison and make you watch televangelists shows all day while we give you a diet of cheese, pineapple and lettuce (since this is what you like). Also, whenever a good college football game comes on like Florida vs. Alabama…you get to watch Harvard vs. Yale (since again this is what you like). We aim to please.
We won't forget to turn the lights out as you go to sleep with your cell mates from Clemson, Georgia and Bobby Jones University. Just a warning, the Clemson guy really likes fresh fruit and we're all out. So be careful. That's right, one big happy family. Me and the guys will be going out with some of the single moms so holler if you need anything.
Peace out.
In Science we trust
May 13th, 2010 at 2:17 am
Getting VC financing is very difficult particularly in the current economic environment. They are looking for the combination of a compelling product/technology and the technical and managerial talent to make it a reality. It is often more about the team and your ability to build a business around either a new technology, product(s) or a powerful business model that it is a specific idea.
Its important to understand that VCs primarily invest in great management teams and/or exceptional technologists. So, if you don't have the background, I strongly recommend you get it before pitching your idea. Generally, you need to have either several years of senior corporate experience in the right area for your venture or be a technical expert in the field of your products/business model. If you don't want to wait until you acquire the knowledge yourself, you need to recruit it into your team.
If you've got the goods, research the vc firms to find those that invest in your product/business area. Then, network to get a referral if possible. It is much better to get a referral than mailing your plan in. VCs get hundreds of busines plans & pitches and it is very hard to standout if you mail it in. Make sure you are really prepared with a well-thought presentation and be prepared to answer questions about your market and competition. Good luck.