"Former Yahoo CEO Marissa Meyer is closing the doors on her consumer software startup Sunshine, and is selling the company’s assets to her new AI startup, Dazzle" and "all of Sunshine’s employees will move to the new company".
Under what conditions is it better to buy the assets and hire the employees instead of just change the name and product offering of the company? Is it just to get the investors off the cap table?
Indeed; and when you don't want the brand it's even more ideal. We saw a few months ago an example of the "new company" buying the brand and the assets but not the liabilities, including some suckers who bought "lifetime" subscriptions[1] from the old owners that they allegedly didn't even disclose, and which legally speaking weren't the liability of this random unrelated company which just bought the assets and the brand of the defunct company who made the promises.
In this case though with a new name and product that won't be an issue.
[1] someone else will remember the name of that company - it escapes me
Valuable to new investors. Old investors get hosed. I really struggle with these sorts of situations. She’s presumably doing something similar with the new company so all the old investors who didn’t participate (presuming a pay to play) get hosed. Is that really fair?
It's "valuable" to the company and to new investors. It's quite the opposite to old investors. In the world of public companies, a "liquidate a shell company" trick like this is presumptively fraud. If you want to liquidate the company you have to buy back the stock at market price, not whatever your purchaser is offering.
It's legitimate only if the existing investors are getting enough liquidity back from the sale to make it worth the transaction. The article says that "almost" all the investors are on board, so... maybe.
Clean cap table and she probably provided a decent amount of the funding for the first startup. It's also more than likely a tax thing here. I don't think people ought to get too obsessed with the contractual details on this one.
Liabilities don’t transfer, Corporate structure doesn’t transfer, and as you point out investors don’t either.
Soft liabilities may be significant. For example here we are talking about the move. The headline “Sunshine launches Dazzle” is about a failing company and we wouldn’t be talking about it on the HN front page.
And if you are adequately capitalized (you probably are not), starting a new company is an easy business decision. And if you are a serial entrepreneur, starting new companies is what you do.
When new capital is needed, the old investors (investors in the old company) are given the equivalent of cents on the dollar on the new company, while the new investors do the usual.
Old investors are welcome to put new money into the new venture, of course.
Mayer's track record is good enough that she's able to attract new investors easily enough but I wonder if they actually expect a return or if they see it as a lottery ticket.
From what I have seen in the Bangalore VC scene, a founder doesn't at all have to have a good track record to attract VC money again and again. They just have to have raised before, and they will raise again, no matter how badly and shadily they sunk the last ship(s). Maybe it's different in the OG valley.
First a contacts app that bombed, and now an ai assistant? I fear she’s stuck in the past and now is in a beyond crowded space. Have any of her attempts post google worked?
> Yes. She made a tremendous amount of money for herself while failing miserably at Yahoo!.
I was at Yahoo from 2004-2011, so I've got my opinions, but I think failing miserably at Yahoo is like the default option. It was a great gig to take in 2012 --- if you do well, well then it's clearly your leadership; if you don't do well, it's that Yahoo wasn't salvageable.
She is clearly an amazing negotiator if nothing else. She made a spectacular amount of money running yahoo even faster into the ground. Imagine being paid 100M just to go away. Inspiring in its own way.
It depends on what you think she is attempting. If you consider that she is attempting to maintain a certain standard of living, then yes, it is working. There is a strange reality where you can get other people to pay you millions of dollars a year because somebody else previously paid you millions of dollars a year. You might have to keep shuffling who pays you, though.
According to the article it’s largely self paid. I’d also be surprised anyone for a pre-product startup is being paid millions a year to run it… even her.
A lot of misunderstanding here about "why would you invest in someone who has failed?"
An investor is a gambler. Not just on past success, although I'm sure Marissa has had some successes even if people don't know them.
They gamble on:
1) Has this person got the experience (good or bad) to run a business. A failed business leader is a better gamble than someone with no experience.
2) Does this person have a strong network so they can realistically pull in some really good people?
3) Has this person raised capital before?
4) Do they have a convincing narrative about why they have failed and what they might do differently?
5) Is the potential ROI high?
6) Do I have anything else I could invest in instead with better odds?
If I think as an Investor and not as an Engineer, I am not surprised that she has succeeded and I wish her all the best.
e.g. VCs invest in startups commercializing open-source foundational/infrastructure projects not only for the financial RoI, but also because it helps their portfolio companies succeed faster while maintaining a smaller headcount or spending less on non-core R&D.
How did Sunshine operate for so long? I remember when it was announced and nobody understood what it was for. It never gained adoption. Presumably never had much, if any, revenue. Was it pure vanity?
A history of failures period. She surfed google's wave of success before proving conclusively at yahoo that it couldnt have had anything to do with her.
This is a description of the entire SaaS startup ecosystem; surfed on ZIRP but so so many AWS configurators are 100% convinced their deep memorization of syntax structures and git pull <all the deps> were real value creation
I often do that frequently. I should do it, but forget to not fully proof read after a quick edit. I also regularly leave out n't a lot when changing where a negation happens (see above).
"In hindsight, the ad slogan 'Sunshine on your privacy' was a little too obvious, even for modern consumers. Let's Dazzle them with the next shiny thing instead."
Readit News
Under what conditions is it better to buy the assets and hire the employees instead of just change the name and product offering of the company? Is it just to get the investors off the cap table?
Obviously, getting some people off of obligation lists is one of them. There could be others?
In this case though with a new name and product that won't be an issue.
[1] someone else will remember the name of that company - it escapes me
It's legitimate only if the existing investors are getting enough liquidity back from the sale to make it worth the transaction. The article says that "almost" all the investors are on board, so... maybe.
Soft liabilities may be significant. For example here we are talking about the move. The headline “Sunshine launches Dazzle” is about a failing company and we wouldn’t be talking about it on the HN front page.
And if you are adequately capitalized (you probably are not), starting a new company is an easy business decision. And if you are a serial entrepreneur, starting new companies is what you do.
Old investors are welcome to put new money into the new venture, of course.
Deleted Comment
Mayer's track record is good enough that she's able to attract new investors easily enough but I wonder if they actually expect a return or if they see it as a lottery ticket.
I mean it is a hard to make people give you other peoples money which is worth investing in.
Yes. She made a tremendous amount of money for herself while failing miserably at Yahoo!.
Oh, you mean attempts at getting workable, groundbreaking new products out into the market with success? No.
I was at Yahoo from 2004-2011, so I've got my opinions, but I think failing miserably at Yahoo is like the default option. It was a great gig to take in 2012 --- if you do well, well then it's clearly your leadership; if you don't do well, it's that Yahoo wasn't salvageable.
An investor is a gambler. Not just on past success, although I'm sure Marissa has had some successes even if people don't know them.
They gamble on: 1) Has this person got the experience (good or bad) to run a business. A failed business leader is a better gamble than someone with no experience. 2) Does this person have a strong network so they can realistically pull in some really good people? 3) Has this person raised capital before? 4) Do they have a convincing narrative about why they have failed and what they might do differently? 5) Is the potential ROI high? 6) Do I have anything else I could invest in instead with better odds?
If I think as an Investor and not as an Engineer, I am not surprised that she has succeeded and I wish her all the best.
e.g. VCs invest in startups commercializing open-source foundational/infrastructure projects not only for the financial RoI, but also because it helps their portfolio companies succeed faster while maintaining a smaller headcount or spending less on non-core R&D.
The company had raised about $20 million in 2020.
$20K per free app download?
I think these 2 apps were experiments.
They probably wanted organic downloads only, in order to identify real user needs / find PM/F.
Otherwise, it's hard to explain why they wouldn't spend money on marketing/advertising.
This strikes me as a particularly funny typo
Many such cases.