This content was created by GHION.AI . This content was uploaded by GHION.AI . This is a YouTube video titled "Geoff Donaker: Reasons Not to Sell" (recorded 2014-05-19) featuring Geoff Donaker giving a talk about Yelp's early growth and the company's decisions around potential acquisitions. He describes inbound acquisition interest (near-sale opportunities at roughly $100M and $600M), the board and investors' rationale for remaining independent, the trade-offs between selling now versus pursuing a longer-term outcome (IPO and continued growth), and the factors needed to avoid selling (investors with deep pockets and belief in future value). The content is a first-person talk on startup exit strategy, investor dynamics, and long-term company vision.
Chapters
We were really lucky at Yelp. From a relatively early time in the first year or so, there started to be signs of life. We started to have hundreds of thousands of people and then millions of people coming to the site. It looked really interesting. We got started in a second city and then a third city and a fourth city and it started to spread. And we thought, hey, we might have something going here. And so not only were we able to attract venture investment, which allowed us to raise more money to pay the bills and keep going and expand to new cities and whatnot. But we also attracted acquisition interest. So we did have interest, and we would often maintain these dialogues with larger companies who had larger war chests. And we got close to selling a couple times. Once when we were about 2 years in, we got close to selling for about $100 million. Another time when we were about 5 years in, we got close to selling for about $600 million. And we didn't sell either time. The short version of why we didn't is that the founding team and the investors and board of directors actually thought the company was best served by staying independent and seeing it through. There's pros and cons. There's oftentimes— I mean, you're making an expected value calculation at that point in time from a purely financial perspective. The short version at both of those exit points was if we had taken the money and sold out, that would have been best— at that time anyway, it would have been a good outcome for the founders and the early investors. They would have done really well. The rest of the employee base, and the entire Yelp community and the site we had built, it wasn't really clear that that was going to be better for Yelp, the product, and yet the company and the community. And so it puts you in a little bit of a bind if you're on the board or in a position to help make that decision. Is this actually in everybody's best interest? In many situations, what happens to companies when they are so lucky to have that inbound acquisition opportunity is they end up selling. And there's really two ingredients that it would take to enable you to not sell in that situation and to keep going. And those two ingredients are, one, your investors and board have to have deep enough pockets that they don't actually need the money right now. And two, they have to see enough in the story to believe it's actually going to be worth more 1, 2, 5 years from now than that payout is worth today. Both of those ingredients are really critical to kind of get through that acquisition point and kind of keep moving on. At the end of the day, I guess what I would tell you is what really motivated us and what kept us going is that in some ways, a lot of ways, an acquisition is kind of the end of the company, whereas the IPO is really just the end of the beginning. Of a company. And good, bad, or otherwise, those of us involved have pretty big eyes and think that what we're working on has the potential to change the world for the better and be a lot bigger 5 and 10 and 20 years from now than it is today. And that keeps us motivated and coming to work every day.
