Stanford Technology Ventures Program (STVP) STVP-1998-006 Rev. August 31, 2001 Yahoo 1996: Softbank Asks for a Strategic Stake In early 1996, Yahoo! was at one of the most crucial crossroads in its short history. Their second round of venture financing had closed less than three months before, and the company’s potential Initial Public Offering (IPO) was still at least several months away. Masayoshi Son, the founder and CEO of Japanese media conglomerate Softbank, had participated in the second round of financing, investing $2 million for a 5% share of Yahoo! In addition, to allow for rapid growth, Yahoo! was hoping to drive the sale of advertising on the Yahoo! website through Softbank’s already-established sales force. In February of 1996, Masayoshi Son asked to purchase a strategic stake in Yahoo! – at least another 30% of the company. Masayoshi Son asked for a meeting with Yahoo! to discuss his proposal. Because he missed much of the American food he had gotten used to while attending college at Berkley, he suggested that they hold the meeting at Yahoo!’s offices over pizza. The players included Masayoshi-Son and several of his associates, Yahoo! founders Jerry Yang and David Filo, Yahoo! president and CEO Tom Koogle, and Michael Moritz, a venture capitalist from Sequoia Capital. Moritz recalled the meeting: The meeting was held on Pioneer Way, which was Yahoo!’s first real office, about 3,000 or 4,000 square feet. It was a rainy night, and we had a makeshift conference table, some borrowed chairs and used furniture. Masayoshi Son came in, having flown across the country. He had started the day in Boston. He came in with 3 or 4 other guys from Softbank, all of whom looked pretty exhausted. Masayoshi Son was looking pretty chipper.1 As Masayoshi Son savored his second slice of pizza, he looked around the table and explained his interest in a strategic partnership between Softbank and Yahoo!. 1 Moritz, Michael, Sequoia Capital, personal interview, November 10, 1998. Thanks to Michael Moritz for his thoughtful description of several key events from the early history of Yahoo! This case was prepared by Matthew S. Garman and Michael K. Chang, graduate students at Stanford University’s School of Engineering, and Thomas J. Kosnik, Consulting Professor, Stanford School of Engineering, as the basis for class discussion rather than to illustrate either effective or ineffective handling of an administrative situation. Copyright 1998 by Stanford University. To order copies or request permission to reproduce materials, call 1-650-723-2973, or email Professor Tom Kosnik, Director of Case Development, Stanford Technology Ventures Program, at [email protected]. No part of this publication may be reproduced, stored in a retrieval system, used in a spreadsheet, or transmitted in any form or by any means—electronic, mechanical, photocopying, recording, or otherwise—without the permission of The Stanford Technology Ventures Program. 1 STVP-1998-006 Yahoo! 1996: Softbank Asks for a Strategic Stake As an investor in Yahoo!, I have been pleased with the company’s progress and I see a lot of potential. However, in order for Softbank to consider itself a strategic partner in Yahoo! rather than just a minority investor, we need to own 30% to 50% of the company. What do you think Yahoo! is worth Michael Moritz knew that Yahoo! was going to be on a tight budget until their IPO. Yahoo! could really use this increase in funding as well as the institutional support that Softbank could provide. He also knew that Yahoo!’s value had been continually increasing during the past couple of months. Selling so large a stake in the company so close to the IPO would raise issues of control for Yahoo!’s management, and dilute the ownership of the founders and the early investors like Sequoia Capital. Neither Yahoo’s founders nor Sequoia were eager to sell such a large stake in the company at a time when the public offering seemed imminent. He answered: $500 million. Masayoshi Son was a bit taken aback . I’m speechless! You are not even making any profits yet. How could your valuation be so high Perhaps the real question is whether or not Yahoo! and Sequoia are willing to part with 30-50% of ownership of Yahoo! in order to gain Softbank as a partner… As the meeting broke up, the Yahoo! management team promised Masayoshi Son that they would consider his proposal very seriously, and let him know how much of the company they were willing to offer to Softbank, and in what price range. The issues that faced Jerry Yang, David Filo, and Michael Moritz were clear, but far from easy to resolve: How much was Yahoo! worth How much, if any were Yahoo!’s founders and Sequoia Capital willing to sell to a private investor to insure they had sufficient funds for an IPO How much capital could Yahoo! effectively deploy before the IPO to continue its race for leadership in its category Taking too much money prior to the IPO could actually adversely affect the valuation when Yahoo! goes public. Was Softbank the right strategic partner What steps could Yahoo!’s management take to insure that loss of majority ownership did not mean loss of control over Yahoo!’s destiny Introduction of Yahoo! Yahoo! was an internet site that provided a hierarchically organized list of links to sites on the World Wide Web. It was started in 1993 by Jerry Yang and David Filo, two graduate students at the Stanford School of Engineering. They began categorizing web sites as a hobby, originally calling it “Jerry’s Guide to the World Wide Web”. They soon changed the name to Yahoo!, and opened the site up to the general public. Yahoo! offered a way for internet users to 2 Yahoo! 1996: Softbank Asks for a Strategic Stake STVP-1998-006 easily navigate and explore the Web. Users could click through multiple topic and category headings until they found a list of direct links to web sites related to their interest. In addition, Yahoo! offered a central place where people could go to just to see what was out there. By the fall of 1994, Yahoo! was receiving more than 2 million hits per day. Yahoo!’s First Round of Financing It soon become apparent that if Yahoo! was to continue to grow, they would have to look for some outside funding. After countless presentations in front of possible corporate partners, angel investors and venture capitalists, Yahoo! accepted an offer for venture financing from Sequoia Capital, one of Silicon Valley’s oldest and most respected venture capital firms. Sequoia had previously invested in companies such as Apple Computer, Oracle, Electronic Arts, Cisco Systems, and Arbor Software, so they were very knowledgeable and well connected in the technology industry. They offered approximately $1,000,000 to Yahoo! at an assessed valuation of $4,000,000, giving Sequoia a corresponding 25% ownership stake in Yahoo!. Choosing venture capital financing over corporate sponsorship allowed Yang and Filo to not only keep a substantial portion of ownership in their creation, but also allowed them to tap into Sequoia’s network of contacts, including possible management candidates. This proved to be a particularly valuable asset as they tried to mold a successful company. Using the Money Once the venture deal was finalized, the money was quickly put to work. The first order of business was to develop the Yahoo! management and staff so that the company was positioned to take full advantage of its enormous growth potential. Tim Brady was quickly hired as Yahoo!’s third employee. Brady was a graduate of the Harvard Business School, and was the author of Yahoo!’s original business plan. Brady soon became responsible for overseeing the marketing, operation and business development that was necessary to successfully launch Yahoo! into the commercial market. The next two new hires were David Lobo and Sriniji Srinivasan. Lobo was a talented engineer who quickly began contributing to the development of the web site. Srinivasan was hired as Yahoo!’s first official “surfer”. She was the first employee dedicated to categorizing web sites into the Yahoo! hierarchy. As the surfer division grew, Srinivasan was put in charge of the cataloguer division and was given responsibility for the design and maintenance of Yahoo!’s overall organization and classification scheme. Hiring a New CEO and The Changing Role of the Founders With so many new employees joining Yahoo!, it quickly became apparent that a new and experienced CEO was becoming a top priority. From May 1995 to July 1995, Yahoo! hired an interim President and CEO, Philip Monego, to manage the company while Yahoo!’s founders and Michael Moritz, the partner leading Sequoia’s investment in Yahoo!, searched for a permanent CEO. In August 1995, after interviewing a half-dozen candidates, Moritz, Yang, and Filo hired Timothy Koogle to be Yahoo!’s sixth employee. Koogle possessed over twelve years of experience in technology management, along with a B.S. in mechanical engineering from the University of Virginia and a M.S. and Engr.D. in mechanical engineering from Stanford. In addition to his impressive qualifications, Yang was particularly impressed with Koogle because 3 STVP-1998-006 Yahoo! 1996: Softbank Asks for a Strategic Stake he sensed that, “he was willing to put up with a lot of change,” which had been a constant force throughout Yahoo! development. They also felt that Koogle had the necessary skills to lead Yahoo! through multiple stages of growth, capable of guiding the company for many years to come. 2 Hiring Koogle marked a shift in the role of Yahoo! founders, as Koogle took over the management of the company. Filo began to concentrate his efforts on working with the engineering team, while Yang was free to focus on the vision, partnering and the development of Yahoo!, and its future role in the computing world. Growing the Business and Establishing the Brand With the management team starting to materialize and with a new CEO firmly in place, Yahoo! started focusing its full force toward growing the business. One of the concepts that Yahoo! was able to recognize early on was the importance of branding. It was the company’s mission to have the name Yahoo! be synonymous with the internet. As Yang put it, “The success of this company is built on our brand recognition.” Yahoo! reinforced it’s emphasis on branding in January of 1996, when they hired Karen Edwards as their Director of Brand Management. Toward the end of 1995 to the outside observer, it appeared that Yahoo was settling into a fairly comfortable role as the predominant guide to the Internet. They had successfully raised capital through venture financing, and were at the time one of the most visible, most recognized sites on the net with no direct competitors. However, Yahoo! was not a company that felt it could rest on its laurels. Said Yang: As of today, there is no one out there competing with us directly, but there are a lot of people working on it. We talked to AOL in March. They tried to buy us, and we said no, and they said, “We will crush you in two months.” They haven’t yet, but they certainly own the browsers and you have to be aware of that…. We are a zero-revenue company right now, so I don’t think we’re in a position to be comfortable about anything.3 Yahoo! was receiving a significant portion of its traffic due to an alliance they held with Netscape. In 1995, Netscape agreed to make Yahoo the default link from the “Internet Directory” button on their Navigator web browser. Yahoo! then made it their mission to transform these new customers into loyal users. To do this, Yahoo! decided that it was time to unveil some new features to their site. Additionally, Tim Koogle decided that is was time for Yahoo! to start generating some revenue. Yahoo!’s New Look in August 1995 In August 1995, Yahoo! debuted several new features on their site. The most obvious change was the introduction of advertising. Yahoo! placed small banner ads along the top portion or their search pages. Many people at Yahoo! worried about the adverse reaction that some of their users would have to the presence of advertising, however the backlash was fairly 2 Reid, Architects of the Web 1997 3 Red Herring October 1995 Found You on Yahoo 4 Yahoo! 1996: Softbank Asks for a Strategic Stake STVP-1998-006 minimal. Several users sent them email, claiming that the company had “sold out”. However most users realized that Yahoo! was a business, and thus did not blame them for trying to make some money. According to Tim Brady, Yahoo!, “put a lot of time into making the ads unobtrusive and interesting, trying to intelligently integrate them.”4 Yahoo had been in talks with the British news service Reuters since October of 1994. Reuters had wanted to partner with Yahoo!, both to provide current news stories on Yahoo!’s site and to help build Reuters’ online presence. After almost a year of discussion, this service was finally introduced on the new Yahoo! site in August. This too was a major step in the evolution of the site. The Reuters news service was the first time that Yahoo! offered more functionality than that of a web site cataloguer. Now people could come to Yahoo!, not only as a place to find other sites, but as a place to read the up to the minute news. Yahoo! began to unveil more and more features in rapid succession. They introduced features such as local weather reports and national yellow and white pages. All of these features were introduced with the idea of trying to continue to build viewership and increase advertising revenue. Yahoo! had become not just a site through which people traveled to other sites, it had become a destination in and of itself. Also on the minds of the management team was the possibility that Yahoo! would be filing its IPO soon. “When Yahoo! prepared to go public, the (public relations) strategy had to change. Yahoo had to present itself as a grown-up, serious company,” says Karen Edwards. “We needed to convince the press that advertising on the Internet was a viable business… We started placing more emphasis on the capable and experienced financial management team that Yahoo had acquired.”5 Second Round Financing With the addition of these new services and with several more projects waiting in the wings, Yahoo! needed more venture financing if they were going to continue to grow. They decided to try and raise a second round of venture financing, and in November 1995, Sequoia Capital, Open Text Corporation, Reuters New Media, Softbank Corporation, Ziff-Davis Publishing and The Capital Group participated in Yahoo!’s second round of financing, acquiring a combined twelve percent of the company. Reuters New Media purchased 2.5% of the company in the second round, while Sequoia and the Japanese media conglomerate Softbank provided an additional $1,000,000 and $2,000,000 respectively. Yahoo!’s market valuation at this point had increased to $40,000,000, giving Softbank a 5% stake in Yahoo!. This gave Yahoo! approximately $5 million dollars in additional funding, which they used to continue to introduce new features on their site and build up their brand recognition through intense marketing campaigns. However after the second round was completed, many people inside the company wondered if $5 million would be enough money to allow Yahoo! to accomplish everything that it wanted to before their impending IPO. 4 Red Herring October 1995 Found You on Yahoo 5 Red Herring The Evolution of an Internet Startup’s PR Strategy 5 STVP-1998-006 Yahoo! 1996: Softbank Asks for a Strategic Stake Potential Competitors in the Marketplace Time was of the essence, as competition was really starting to heat up. Yahoo! was essentially filling two roles in the internet market space. One
role was to act like an internet portal site. The idea behind the portal is that a person would come to a single site like Yahoo! that would then conveniently lead them to everything else that they would need. Yahoo! was the pioneer in this space and had built quite a following, however there were several big companies that were interested in taking over this space. These competitors included Netscape, AOL and Microsoft. (See Exhibits 5-10) Netscape was one of the most visited sites on the web, and with the proliferation of their popular browser, they had an advantage in this market. All Netscape browsers were automatically configured to open to the Netscape home page when they loaded. This gave Netscape a huge advantage. Yahoo! had to convince people to switch away from using the Netscape portal site while Netscape only had to convince customers to stay. In addition, Netscape had another advantage that soon became apparent. Netscape originally had granted Yahoo! the rights to link to the Internet Directory button on the Netscape browser. In December of 1995 however, Netscape decided that they would rather have the button link to their own site and left Yahoo! on their own. In addition, Netscape had a lot of money to work with. They went through a very successful IPO in August on 1996 that had brought a great increase in cash flow to the company. They could afford to keep up with their high levels of spending to improve their site, and Yahoo! had to find a way to keep up. Another potential portal competitor was AOL. AOL had become a leading service provider for the home markets. They launched a widespread and very expensive marketing campaign in which they distributed free AOL CD-ROM discs to potential customers all across the country. AOL distributed their own browser with their internet service that was configured to open to the AOL home site. This gave AOL an advantage over Yahoo! as well, because while a person had to physically switch to the Yahoo! site, and AOL user was automatically taken to the AOL page. AOL had also gone through a successful IPO in 1995 and had extensive capital available to build their installed base and improve their portal site as well. The final competitor that Yahoo! had to look at in this space was Microsoft. Microsoft was in the process of developing and launching their own portal site. They also had a built in advantage, much like Netscape and AOL. They have developed the Internet Explorer browser that could be distributed with all new Windows systems. Much like Netscape’s browser, Internet Explorer was configured to open to the Microsoft home page. Microsoft also had the resources to become a major player. Microsoft had a huge cash base to work from, and thus also was considered a major competitor with Yahoo!. Search Engine Competitors The second set of competitors that Yahoo! faced came in the form of the start-up search engine companies such as Excite, Lycos and Infoseek. (See Exhibits 11-16) These were all start-up companies that had developed complex search algorithms to efficiently search the internet based on key words or phrases. Many of these companies were very well funded from top-tier venture capital firms, much like Yahoo!. In fact, several of these companies had already gone public and were enjoying the increased cash flow that came from their successful IPOs. These companies 6 Yahoo! 1996: Softbank Asks for a Strategic Stake STVP-1998-006 were increasing their efforts to build brand awareness and capture market share in the search market. Yahoo! offered a much different method of searching with their hierarchical file structure, however these companies still represented a threat. Many of the early web users had used Yahoo! to search for something if they sort of knew what they were looking for, but did not know the exact address. Now Yahoo! was loosing market share to these well-funded start-ups that allowed users to search the entire web using just keywords. Softbank and Masayoshi Son Softbank Corporation was a large Japanese holding company formed in 1981 by Masayoshi Son. The son of Korean immigrants, he moved to the United States in 1973 to study English. Son graduated from the University of California at Berkley in 1980 with a B.A. in Economics. After graduation, Son decided to move back to Japan where he started Softbank. Softbank started out selling various computer products, and soon became the largest distributor of packaged software and personal computer peripherals in Japan. Son quickly expanded his holdings, and in 1988 Softbank formed its first non-Japanese subsidiary, Softbank America. In 1990, Softbank formed a joint venture with Novell Inc, forming Novell Japan. This led to subsequent investments with companies such as Canon, Fujitsu, NEC, Sony and Toshiba. In 1994, Softbank embarked on a joint venture with Cisco along with 12 other Japanese firms, to form Nihon Cisco Systems. Later that year Softbank went public, listing on the Tokyo Stock Exchange. By 1996, Softbank had made significant investments into the world of multimedia, purchasing a majority share in the Ziff-Davis Publishing Company and by acquiring COMDEX and several other companies. Softbank reported worldwide revenues of over 171 trillion yen for FY 1995.6 (See Exhibit 4) Softbank and Their Interest in Yahoo! Softbank Corporation first started to show an interest in Yahoo! when, “Masayoshi Son learned of Yahoo! through Sequoia-he sat on the Board of Cisco Systems with Don Valentine, a Sequoia partner-and became intrigued with Yahoo!’s business.”7 Masayoshi Son was very interested in the possibilities the internet provided, and was intrigued by the unique position that was held by Yahoo! at the time. Softbank was “quietly and in some cases, not so quietly, building a portfolio of internet investments intended to guarantee the company a role of internet power broker. The strategy (was) based on three firm rules: invest early and often; don’t invest in two companies that compete with each other; and look for synergies between different investments.”8 Softbank felt that Yahoo! could be a key component to their internet portfolio, and thus was eager to participate in Yahoo!’s second round of financing. 6 In 1996 $1:140 Yen 7 Reid, Architects of the Web 261 8 CNET News.com Tim Clark August 17, 1996 7 STVP-1998-006 Yahoo! 1996: Softbank Asks for a Strategic Stake As for Yahoo!, Softbank offered them much more than money. It was very difficult for US firms at the time to penetrate the Japanese market. Japan presented a very enticing market for Yahoo!, as Japan was very well connected to the internet and thus made it a strong candidate for Yahoo! expansion. However, David Filo was quick to point out that Yahoo! was a very personalized hierarchy system. They would need people that really knew the country and the culture well if they were going to make Yahoo! Japan a reality. Fortunately, Softbank was very well connected in Japan, and had the ability to significantly help Yahoo! in getting the project off the ground. Softbank also offered Yahoo! advantages outside Japan. The leverage of Softbank’s established worldwide sales force, which was already calling on advertisers for Softbank’s magazines and other internet holdings, meant Yahoo would get exposure to potential advertisers much more quickly that was possible if Yahoo! had to build its sales force from scratch. In addition, there could be increased exposure in Softbank’s family of computer-related publications and trade shows around the world. Softbank also had an established reputation that could lend credibility and bargaining power to Yahoo!’s position as a young company when dealing with advertisers and other internet partners. Masayoshi Son’s Request for Greater Ownership Like all deals that appear too good to be true, this one had a catch. Masayoshi Son said that he considered Softbank’s 5% stake in Yahoo! to be nothing more than an investment. If Softbank was going to help Yahoo! penetrate Japanese markets, Softbank and Yahoo! would have to become partners. This required that Softbank hold at least a 30% stake in Yahoo!. Son said that this was the minimum level at which he could consider Yahoo! a partner. This deal provided several benefits to Yahoo!. This would give them more than enough operating money until the upcoming IPO. They would be able to complete all of the projects that were planned and continue their aggressive marketing to build the Yahoo! brand. It also provided them the vehicle by which they could expand into Japan. Japan represented a giant potential market, and Softbank could give Yahoo! the opportunity to take advantage of it. Unfortunately there were also some big negatives, especially for the current majority stakeholders. The IPO was only a few months away, and Yahoo! was facing increased competition from competitors. While IPOs provided operating cash to the company and cash liquidity to present stockholders of the private company by allowing stock to be traded on public markets, it also provided a greater public awareness of the company. Yahoo’s biggest competitors such as Excite, Lycos, Infoseek and AOL had all gone public or were planning to do so in the coming months. Going public was a way for the company to legitimize itself in the eyes of the public, and Yahoo! could not afford to lose any ground to its competitors in name recognition or market share. In order to prepare for the IPO though, Yahoo! had to float at least 10% of its stock for the filing. This held important ramifications for the current Yahoo stakeholders regarding Softbanks’s bid for 30% ownership. Softbank’s share, combined with the 10% that needed to be floated, left 60% to be divided among the founders, VCs, current employees, and options for future employees. In order to accommodate Softbank’s request to increase its percentage ownership in Yahoo! and satisfy an initial public offerings general requirement for a float of at least 10%, Yang, 8 Yahoo! 1996: Softbank Asks for a Strategic Stake STVP-1998-006 Filo, and Sequoia Capital would have to sell their own shares in Yahoo! to Softbank. This was particularly difficult, since it meant giving up ownership, and potentially huge profits, as the IPO was only a few months away, and thus a chance to finally cash in on all of their hard work. In an October 1995 Red Herring interview, Yang said that, “I like to leverage strategic relationships for future financing, rather than raising money. Dave and I still have control of the company and that’s important.” If the Softbank deal were to go through, Jerry, Dave and Sequoia Capital would each be left with approximately a 17% share of the company. Pressure to Make Initial Public Offering While Yahoo! had received first round funding from Sequoia, a second-round from assorted partners, and had offers for substantially more funding from Softbank, the public markets offered the possibility of even greater capital with which to grow the business. Working with Goldman, Sachs & Co., Yahoo! was preparing an IPO prospectus that it planned to file in March or April of 1996. An initial public offering would provide Yahoo! a number of benefits. First it would increase the equity capital available. Second, it would create a common market for the company’s common stock, allowing the company to access the resources of the public equity market. The public market would also provide liquidity for Yahoo!’s existing shareholders, by creating a way for them to trade their shares for cash Additionally, an IPO would provide Yahoo! with publicity, visibility and credibility, which would be important for Yahoo! to compete effectively against competitors who were already public or planning to file their own IPOs. Finally, Yahoo! was trying to improve its market position relative to the other internet search and internet media companies with which it competed. Yahoo! planned to use the capital generated from an IPO to fund a number of strategic initiatives. First, money would be used to fund Yahoo!’s participation in Netscape’s “Premier Provider” program. Second, in order to increase its revenues and grow its brand, Yahoo! had to expand sales and marketing operations. Third, in order to provide competitive and innovative services to its users, Yahoo! had to continue new product development. Yahoo!’s business also required hardware to operate, which entailed developing an improved networking and computer infrastructure. Yahoo! was also considering entry into the e-commerce market. They had had preliminary talks with Visa about developing a joint venture for a Yahoo! marketplace where they could sell a wide variety of products on-line. While these things all took lots of money to develop, they were essential to Yahoo!’s continued growth. The Softbank Proposal Masayoshi Son had returned to California to watch a golf tournament that was being held at the nearby Pebble Beach golf club. While in town, he engaged in several negotiation sessions with Yahoo!, during which both sides agreed that a fair price for a 30% share in Yahoo! was $63.75 million. However, the majority shareholders in Yahoo! had yet to decide whether they wanted to sell or not. Michael Moritz took this proposal back to Yang and Filo to try to convince them to sell some of their shares to Softbank. He did not really want to sell any of Sequoia’s shares in Yahoo!, and thought it would be better for Jerry and Dave to sell some of theirs. He reasoned: 9 STVP-1998-006 Yahoo! 1996: Softbank Asks for a Strategic Stake I thought Yahoo! was a good investment. However, it didn’t really matter to me financially if Yahoo! succeeded or failed. I wasn’t as dependent, in the grand scheme of things, as I had lots of other stuff to fall back on if Yahoo! didn’t work out. Jerry and David didn’t have anything to fall back on, so why not have them take some money off the table. They would still keep most of the ownership that that they had, but take something off the table, so that you can continue to afford to take great risks with the company, rather than having 100% of your net worth tied up in Yahoo!. Moritz then cited several examples of entrepreneurs had had become too cautious in their business because everything they had was tied up in the company. I gave them this example of this guy who thought he was on to the next great thing, a guy early in the history of the video game business. Someone offered to buy some of his shares but he refused. He was sure that his company was on the eve of an IPO and he didn’t want to lose any more equity. Unfortunately the IPO never happened and the company went bankrupt and the founder lost everything. I told Jerry and Dave, ‘Don’t let that happen to you.’ The second example I gave them was of Scott Cook from Intuit. He took some money off the table just before an IPO because he felt that he was getting too cautious in the way that he was running Intuit. He found that he had 100% of his net worth was wrapped up in the company and that it was making him too risk averse to make the best decisions.9 Yang and Filo were not convinced. They had never founded Yahoo! just to make money, so they were not really worried about losing everything. The them, the experience alone made the whole business worthwhile. Yang and Filo were also extremely concerned with ensuring that their interests remained in line with Sequoia’s interests. They wanted to make sure that everyone was working toward the same goals. With that in mind, Jerry and Dave told Moritz that they would not sell any of their shares unless Sequoia also sold some of theirs. Decision Time As the time neared for Yahoo! to decide on whether to file an IPO, several decisions needed to be made. Masayoshi Son was anxious to hear an answer to his proposal, and in the fast paced world of internet development, it was important that Yahoo! not lose any time. The first decision was: should Yahoo! accept an offer