Love thy founder

More Yahoo noise.

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Six months ago, Bart Schachter, VC, Blueprint Ventures had said only an illegal immigrant from Mars wouldn’t notice the growing irrelevance of Yahoo. He has strong words how the Terry Semel tenure at Yahoo is a lesson for VCs, who tend to want to bring in professional CEOs and jettison passionate founders.

Here’s from this superb post of his -

“Perhaps there’s a lesson to be learned by entrepreneurs and venture capitalists. The habit of venture capitalists is to insert professional managers as CEOs of their start-ups. However, the impulse of these professional CEOs is to excise the highest compensation they possibly can (plus a healthy severance package). The alignment may or may not exist, but the passion always rests with the founder. That’s where the story starts, and that’s often where it ends.

The Yahoo story has is a classic Founder Odyssey. Like Ulysees (ok, maybe more like Steve Jobs), Jerry returns to reclaim his home and land. This has the making of a great story, one played out at Apple, Microsoft (how many Presidents paraded through Bellevue in the last 20 years?), and more recently Dell. True, Jerry’s odds are against him. As a college graduate he lacks the college-dropout credentials of other Founder Odysseys. But perhaps he has the passion and alignment needed to bring the company home. Who is next? Vive Le Founder.”

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Happens only at Yahoo

Yahoo recently bought sports content website Rivals.com for $100 million.

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Interestingly way back in 2001, Yahoo had offered to buy the then-loss making Rivals for $25 million. The company was on its last legs. The deal fell through as Yahoo insisted on "a incredibly complex structure" in order to keep the losses low on books. VCs liquidated their holdings. The founder bought out all the assets and rejuvenated the company with a "non-bubble cost and mentality". Six years hence, the site was sold for $100 million to Yahoo itself.

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Happens only at Yahoo...?

The real problem at Yahoo !

Compared with most companies, Yahoo is in good shape.

But Yahoo's problem is that it's compared with Google, one of the fastest-growing and most profitable companies in the world.

Google now makes more money in a single quarter than Yahoo does in an entire year. The contrast represents a harsh comedown for Yahoo, which was the larger of the two companies when Google went public in August 2004.

Despite having more popular products that keep people on its site longer than any other property on the Web, Yahoo found itself a distant second to the awesome moneymaking machine that Google had become. That Google moxie ultimately led to the dramatic management shakeup, with Terry Semel replaced as chief executive by co-founder Jerry Yang.

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Alright, now what ?

Competing with Google in search is costly, and there are no guarantees that Yahoo will ever match Google’s ever-improving algorithms. Even it if it succeeds in narrowing the gap somewhat, Yahoo could make more money by simply outsourcing search to Google :-)

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