The 17-Year-Old Whom Yahoo Paid $30 Million Was Licensing His Startup's Core Technology
Yahoo made big news this week when it bought Summly, a startup with a 17-year-old CEO named Nick D'Aloisio, for $30 million.
The acquisition was led by Yahoo HR boss Jackie Reeses.
Before Yahoo shut it down, Summly was an app that skimmed the world's sources of news, edited it all down to fewer words, and distributed it to readers in a personalized way.
Yesterday, we pointed out that the deal was odd for several reasons:
- Summly never had many users or any revenues. Yahoo is shutting the app down. Yahoo is saying the point of the deal is to have Summly's CEO help lead the company in mobile.
- But Summly's CEO lives in London, where he is staying to finish school
- The CEO has only promised to stay at Yahoo for the next 18 months.
- The CEO is 17-years-old. We don't buy that he's going to be able to lead or inspire adult Yahoo engineers and designers.
Now, Cornell professor Emin Gün Sirer points out another glaring issue with the deal: Summly didn't invent its core technology.
Sirer writes: "Summly licensed its core technology from SRI, which, previously, spun out Siri and sold it to Apple."
"They licensed the core engine from another company. They are the quintessential bolt-on engineers, taking a Japanese bike engine, slapping together a badly constructed frame aligned solely by eyeballs, and laying down a marketing blitz."
There's a Wall Street Journal story that says:
Despite speculation on the Internet that Summly only licensed its summarizing technology from SRI International, an independent research institute, Mr. D’Aloisio said the technology was developed by Summly and that the company owned 100% of the intellectual property behind the service.
But Summly's own Website says:
SRI International, with the help of the Summly team, built the summarisation technology behind Summly. They own a small share in the company and are helping us improve the algorithm.
So let's review: Yahoo bought a startup to acquire its talent.
But that talent lives 10,000 miles away, is still finishing high school, and is not actually responsible for the startup's core technology.
This has us suspicious that they are other reasons Yahoo bought Summly.
Some possible explanations:
- Summly has an impressive list of angel investors, including Brian Chesky, Mark Pincus, Matt Mullenwegg, Li-Kai Shing, and Josh Kushner. These people are influential with lots of startups that Yahoo will want to acquire some day. Maybe Yahoo has decided spending $30 million to give one of their disappointing startups a safe landing is a way to get on their good side. Certainly Yahoo has some rehabilitation to do with Silicon Valley investors and entrepreneurs.
- Yahoo is getting tons of press in the mainstream media for making a teenager a millionaire. The CEO is on the Today Show this morning. $30 million is not a lot of money to spend for so much "earned media," as marketing people call mentions in the press.
Big picture, it's important to remember that $30 million is not that much for Yahoo to spend.
It's less than 0.75 percent of Yahoo's available cash.
Still … $30 million here and $30 million there starts to add up in a way that will eventually make bigger deals less possible.
By the way: None of this is meant to take anything away from what founder Nick D'Aloisio did with Summly. That guy is a pure hustler, and he earned every penny of his millions.