Yelp investment: Trying to avoid the IPO?
For those of you thinking the IPO market is going to come roaring back this year, think again.
I just saw the post from Techcrunch yesterday that Yelp was on the verge of taking a $50 million investment from Elevation Partners. This comes after the failed acquisition talks with Google. Here’s what’s interesting:
“The size of the round is in the $50 million range, but includes both a primary investment component as well as a secondary offering for long time employees. These deals are now being referred to as ‘DST deals,’ since DST first invested in Facebook in May 2009 at a $10 billion valuation and later funded employee buyouts at a $6.5 billion valuation. They did a similar deal with Zynga.”
In other words, part of the investment will allow long-time employees to cash out options. Same deal with Facebook and Zynga. But why?This is what a company does to release some of the pressure to go public or sell. I can’t blame anyone for wanting to avoid an IPO. But it’s a sign of just how much the world has changed since the dot-com bubble a decade ago.
But companies should avoid finding themselves in this spot. And that’s why last fall I suggested it was time for the valley to stop using options as a compensation tool and figure out a new way to provide incentives for entrepreneurs and long-time employees.