The Yahoo founder made the most lucrative bet in Silicon Valley history. And then he got fired. Here's the inside story of how the original internet super-nerd turned $1 billion into $50 billion with Alibaba—and has become the US tech scene's bridge to China
Jerry Yang is giving a quick tour of the conference room at his private investment firm in Palo Alto, California. It’s dotted with gifts and photos from his 20 years in Silicon Valley. Yahoo’s 45-year-old billionaire co-founder stops before a glass deal toy on a low table.
“Um, I have no idea what that is.” He peers more closely, checks the date: September 2012. “That is… that was after I’d gone. I think that was the last deal I worked on at Yahoo.”
The plaque commemorates one of the dumbest business decisions of all time. Yahoo’s board agreed to sell 523 million Alibaba shares, half of its stake, back to Alibaba at $13 apiece. Yang wasn’t keen to sell. They did anyway. He quit the board soon after. Sure enough, Alibaba’s IPO last month rocked global markets. Shares of the Chinese ecommerce giant are now worth $90. Yahoo still has a 16 percent stake worth $36 billion, but it left almost as much money on the table—some $35.5 billion—as its entire current market capitalisation. Changing the subject, Yang spots a nearby photo: “Stanford! You know, I’m a Stanford kid through and through.”
Where’s all the Yahoo memorabilia? Yang smiles. “We come here to go to work. It’s not a museum. I feel like this is a place to look forward and not look back too much.”
Typical Jerry Yang: Self-effacing and as cool as an engineering super-nerd can be. When the official history of Silicon Valley is (re)written, it will be hard to judge which of Yang’s achievements is bigger: Starting Yahoo or betting early on Jack Ma, chairman and CEO of Alibaba. Nine years ago, before Yang was CEO of Yahoo, he paid $1 billion for 30 percent of Ma’s company. He knew the asset would be hugely valuable someday and refused to sell Yahoo to Microsoft when Steve Ballmer came calling in 2008, a decision that cost him his CEO job. Yahoo’s current CEO, Marissa Mayer, can do whatever she wants to put a better face on things, but Wall Street has marked her business down to zero. It’s now a proxy for Alibaba, and that was all Yang’s doing.
“It’s not like I did anything,” he says, shrugging and tossing all the credit to Ma and his deputy, Joe Tsai. “They built the company. I didn’t.”
But guess who’s getting a seat on Alibaba’s board post-IPO: Nobody affiliated with Yahoo except Yang. His clear-eyed and early confidence in Alibaba has brought a whole new appreciation to his role as Silicon Valley’s new East-West power broker. Alibaba and a passel of Chinese, Korean and Japanese firms such as Baidu, Tencent, LINE, Naver and Rakuten are cranking up US acquisition plans in commerce, messaging, gaming and search. Yang has deep ties in Asian tech circles and will be there to point Jack Ma and the others in the right direction. Earlier this year Tango, a messaging-app firm in Mountain View, California, took on $215 million from Alibaba at a $1 billion valuation, a deal that Yang helped along through his connections to Jack Ma’s deputy.
Since leaving Yahoo, Yang has bankrolled more than 50 startups, including Evernote, Wattpad and Tango, through his investing firm, AME Cloud Ventures. (AME means “rain” in Japanese, signifying Yang’s initial interest in cloud computing startups.) His new role of superangel offers a chance to shed his reputation as a bounced-out business mogul. Under his watch Yahoo steadily lost search and advertising share to Google. It also let Facebook slip through its fingers in 2006 by dithering over a $1 billion price tag.
The only signs of his chapter with Yahoo today are a smattering of grey in his hair, the $2 billion in his bank account (he ranks 324th on The Forbes 400) and that neglected glass tombstone. “I wanted to get back to being close to entrepreneurs,” says Yang. “I wanted to be able to do things at my own pace, make mistakes and nobody would care. People who observe me say I’m so much happier.”
Born in Taipei, Taiwan, Yang was two when his father died from a pulmonary disease, leaving his mother, a professor of English and drama, to raise Yang and his brother. When it looked like Taiwan could be unified with mainland China in the late 1970s, she moved with her boys to San Jose when Yang was 10. Yang changed his first name from Chih- Yuan to Jerry. His grandmother and extended family around San Jose took care of him while his mother taught English to other immigrants.
Son and Yahoo survived the crash, if a bit dinged up. Out went Yahoo CEO Tim Koogle, replaced with Hollywood mogul Terry Semel, who led a strong growth period, but finally ran out of momentum in the face of Google’s search ad machine. Yahoo tried to tap Asia fairly early, building a Chinese portal that translated US content and then buying local Chinese browser 3721 to gain a foothold on the Chinese web. Both strategies failed to attract local users.
Yang’s AME investment fund has become something of a tourist stop for Asian startups looking to enter the US, though Yang won’t back any of them unless they plan to move to the Bay Area. There’s enough money flowing in from Asia that he can stay close to home in Palo Alto. AME’s managing director Nick Adams helps run the China side of things. He spent five years building startups in China and India and is fluent in Mandarin. Among his myriad connections: He also runs business development for Cloud Valley, a massive incubator for cloud startups outside Beijing run by web mogul Edward Tian. It was Tian who introduced Adams and Yang to productivity app Evernote, before they both took part in a $70 million investment round in spring 2012, right after Yang left Yahoo.
(This story appears in the 31 October, 2014 issue of Forbes India. To visit our Archives, click here.)