My Country

There were the Christmas beetles, dirty brown, like bulbous baby cockroaches, that clustered around the holes of the school drinking fountains every summer. When we turned the faucets at recess, after playing tag with Tarik and Ahmed and Hussein and Fatima, we’d spray them right into our mouths and scream.

There were the lady beetles, cartoon-like in their colorful bodies, that the white kids said were a sign of good luck. A blondie named Crystal accidentally squashed one with her butt and spent the afternoon crying.

There were the crickets that looked like aliens, that gave me the shivers, but I wasn’t allowed to stomp on those because Mum said they were friendly, that she used to play with them in Saigon. You’d use chopsticks to tickle their antennae, she said, and they’d jump. It sounded like the most boring thing in the world. Didn’t she have Pokémon or Dragon Ball Z on TV? She had TV, she said. But it was to watch the famous singers belt their tunes. To watch the war around her in fuzzy black and white. But mostly to watch the tunes.

There were the Huntsman spiders, which grew to the size of a hand, a face, a toilet seat and were hairy all over. Those were all bark, no bite, some bloke said. Spiders don’t bark, I said. We were taught in kindergarten to cover them with a glass jar, slide cardboard underneath, and take them outside to be set free. I don’t know anyone who has ever done that. Maybe Crystal.

There were the venomous Redback spiders, which we were allowed to kill because it was them or us.

There were the Funnel-Web spiders, which I only ever saw in pictures. I read about them when I was nine, on the Microsoft Encarta CD-ROM. If you ever saw one in the flesh, it was the end of the world. Or something like that.

There were the Daddy-Long-Legs spiders, which were kind of a joke.

There were so many spiders.

There were the moths that ate our clothes, leaving little holes in our skivvies and undies, making us look like we were poor, because we were, but the moths didn’t help. They weren’t scary, but Dad said to be careful about how you kill them, because they might explode into a plume of powder. He never explained how you’re meant to kill them, though. They kept eating our clothes.

There were the mosquitoes that ate me alive, the ones Mum said were after either my sweet blood or my sticky skin.

There were the earthworms that Mum said were good for our veggie patch. There were the gut worms that Mum said made my brother and I too skinny. There was the time Mum asked me whether I had an itchy butt, and I blushed, because didn’t everyone? There was the candle she held to my exposed butt crack to lure out my maybe-worms, because they supposedly liked heat; like moth to a flame, like gut worm to a birthday candle. There was me yelling, “Too hot! Too hot!” There was the giant white tablet that the doctor made me swallow. If I did have worms squirming through me, that would do the trick. There was Mum’s inability to ever admit she was wrong, about the worms, about the candle, about what was best for me. There was my inability to stop apologizing, to stop compensating for her, for her, always for her.

There were the head lice she caught on Bidong Island, the lice that jumped from refugee to refugee, the refugees who bathed in sea water, shat in the sand, and used blocks of rationed tea as pillows. There were the head lice I caught in Year Five, probably from one of the girls who was stickier than me, probably from touching heads when we were playing Twister, probably from rolling on the carpet as we choreographed our Spice Girls dance. There was Mum threatening to shave my head. There was Mum patiently combing my hair for eggs.

There were the Christmas beetles that I found, years later, in my parent’s home. I was ready to kill, to smite the tiny cockroach-looking bugaboos, until I recognized them and remembered how mean we were to Tarik and Hussein and Ahmed and Fatima after the Twin Towers fell, because it was better them than us. As little kids, as adults, it is always better them than us.

There was the sunburnt country full of bugs that followed me, bit me, burrowed deep into my body. There was the urge to belong in a hostile place, where the mozzies guzzled so much of my blood that they must’ve known how I felt, and so must’ve their babies, and their babies, and their babies.

There were the bugs I combed from my blind dog; the blind dog that navigates my parent’s home from memory, because she has never known another home; the blind dog that I held as I cried and I cried, because this was home, yet how could it possibly be home?

There were the bugs that gathered outside my window when I was grown, when I had three gray hairs, the memory of me suspended in their tiny bodies, who shimmied on the other side of the glass as if to pay tribute. We remember you, girlie, they said as they criss-crossed and crawled all over each other. Guess what, guess what—they ascended into the sky carrying fragments of me, collected over time—we’ll remember you.

First published in The Penn Review, Spring 2019

The Things We Hide

When my Grandpa turned 80 he learned to make piñatas. I don’t know who taught him. He lives in Australia. He doesn’t know any Mexicans. He doesn’t know anyone who isn’t Asian.

Sitting at his dining table, he’d lay the SingTao Daily newspaper flat and slowly tear inch-wide strips from its pulpy pages. He’d put a party balloon between his thin lips and blow, pinching its opening between breaths, taking his time so he wouldn’t get dizzy. When the balloon was plump, he’d knot it. Gently, with the pads of his wrinkle-hugged fingers, he’d spread a thin layer of paste onto its rubbery surface. Then he’d press on the newspaper strips.

Layer by layer, a sticky shell of newspaper and homemade glue would hide the balloon.

The layers dried into a chewy exterior. He’d take a safety pin to the exposed cranium of the piñata and pop the balloon, leaving behind a hole.

Through the hole, he filled the piñata with coins. He hid the coins in festive red envelopes. Other people fill their piñatas with candy, but not Grandpa. Grandpa was a practical man. With money, we could buy all the candy we wanted. If he could afford to, he’d probably have given us the one thing better than money: gold.

My grandma hid gold. She hid gold in paper envelopes, which she hid in my mom’s pencil case, which my mom hid in her backpack, in the basket on the front of her bicycle. Mom didn’t know what the gold was for. She only knew that she had to get it from point A to B, no stops in between, and give it to her aunt. She did this again and again, Grandma hiding more and more gold, Mom pedaling and pedaling, never making eye contact with the North Vietnamese soldiers who now filled the streets of her home town. She was never stopped because no one ever suspects the young Chinese girl.

Grandma had been planning. It was 1975. Saigon had fallen. The gold was used to buy seats on a smuggler’s fishing boat. It cost twelve taels of gold to smuggle one person out of Vietnam.

The night hid my mother and her sisters and her uncle. They climbed onto the crowded fishing boat. They climbed on and drifted out because of the promise of a life they had never seen, the promise of a place where, for a dollar, you could eat apples until you were sick of them. They closed their eyes and climbed on because of the promise of hope.

When pirates climbed aboard their boat, Mom hid a gold ring from Grandma in a capsule of Tiger Balm — the Vick’s Vapor Rub of Asia. The pirates couldn’t find anything on her, so they left her alone. She hid her fear in her stomach. Her stomach hid it in the ocean, along with everything else she threw up.

Dad’s family hid diamonds. The night the soldiers from the north came and took their home, his mom gave his sister a bag of diamonds to hide. If the soldiers found it, they may have raped for it, killed for it. His little sister hid it outside, by throwing it out the window. They were kicked out that night. They never saw their home again.

Dad hides gold, in a safety deposit box, in a vault, in a bank, underground, in Sydney, Australia. There’s not a lot of it, and there’s no end game. Mom likes to make fun of him about it, that he’s hiding it in case the government falls, then at least we’ll have the gold to buy us the seats on the boats, the seats his family bought with the gold they also hid.

When Dad turned 60, I asked Mom what I should get him for his birthday, and she said, Nothing, and then she said, Actually…, so I opened a savings account for myself and named it “Gold for Dad.” I saved $150 before my brain said, Really?, and I closed the account.

Mom doesn’t hide gold. She hides her memories in the chewy piñata of her brain. She hides how she felt, climbing onto that boat under the blanket of night when she was a teenager. She hides the fear she carried, a young girl separated from the rest of her family, a foreign language, a place called Oss- straaay-leee-yaa, with cheap apples that she ate until she was sick. She hides how much she misses her mom, who she never saw again, because grandma never made it to Australia — she died on the journey, a refugee. One time I asked her, Mom, do you miss grandma? And she said, Yes. And that was it. She hides it using the lie — or maybe it’s the truth— that she has forgotten everything, because it was so long ago, because maybe she never got to say goodbye to her mom, and maybe she thought they really would see each other again, and maybe she still dreams of ah ma, still perfectly preserved in her late 40s, with big permed hair, the face of a bossy Teochew lady, a Teochew lady who threw the best Chinese New Year parties, still planning, still hiding gold.

My parents hide their hurt. They hide their fear. They hide the versions of themselves that evaporated as they drifted at sea, under the unforgiving sun, so that my brother and I might never find, and never know, what was lost.

But we know. Of course we know. And we want to say, You did great! And we want to say, We’re proud of you! And it’s OK, it’s OK, it’s OK.

We hide these words because we worry they’ll come out mangled. We hide how we feel because we’re afraid the enormity of our love will swallow us whole.

So we find other ways. We try to be good sports. And when Grandpa hangs his piñata on a clothesline, and Mom and Dad and our aunts and uncles gather around wondering, Who taught him to make that?, we shut up and get in line with our cousins. We hide that we think we’re too old, too cool for this. We grip the plastic cricket bat, we spin in circles, we hear our parents laugh, and we swing for the sky.

First published March 25, 2018 in the University of Texas at Austin’s Bat City Review.

 

Remembering Ian Hale, 1950-2017

Mr. Hale in his former printmaking workshop in Dundas, Australia.

Ian Hale died on Monday, Nov. 13. He was 67. He was my teacher, mentor, and friend.

No one, except maybe my parents, has been a bigger influence in my life than Mr. Hale.

Here’s one example: In twelfth grade, when I was deciding what degree to pursue, for a brief moment I’d put art school as my first choice.

“Don’t do that,” Mr. Hale, who was an artist and an art teacher, said. “You need to get journalism out of your system first.”

I took his advice, applied to UTS, got in as a journalism major, and, hey! As of this writing, I’m a Los Angeles Times reporter. Not bad, Sir.

Mr. Hale and I in his printmaking studio in 2006.

Here’s another: In ninth grade, he took me and one of my peers to a student art exhibition held at Pymble Ladies’ College, or PLC. It was the first time I’d stepped foot into a private school. The place looked like Hogwarts. The exhibition was in their auditorium, but tens of thousands of dollars had clearly been spent on the installation of temporary white walls and lighting. Every artwork had at least three lights on it. They had catered hors d’oeuvres. I walked up to the snack table, picked up a large cube of food that I thought was tofu, and put the whole thing in my mouth. Turns out it wasn’t tofu. It was feta cheese. I’d never had feta before.

At Fairfield, our catering was the forty dollars Mr. Hale gave us to go to Woolworths to buy bread rolls and sliced ham. Our exhibition budget was zero. The lighting was always too dim. We mounted our paintings directly onto the auditorium walls and called it a day.

Standing in PLC, surrounded by incredible art and wealth, Mr. Hale, who had once taught at the school, detailed the resources the students had access to. It seemed like a completely different world from Fairfield. Except, Mr. Hale said, it wasn’t.

“These are the students you’re going to be competing against in the HSC,” he said. “These are the students you’ll have to beat.”

I’d already had an inferiority complex from not getting into a selective high school. Now I had to worry about rich kids, too?

I told Mr. Hale that I felt like I was screwed, and that I resented my family for not being able to afford private schooling.

 “No, no,” he said. I’d missed the point. It wasn’t about getting into a private school. It was about knowing the competition, and figuring out a way to compete on your own terms.

“Play to your own strengths,” he said.

If I had an inferiority complex, I should use it to push myself. If I had nothing to lose, I should take the risk. If I was handed a lemon, I should squeeze the lemon dry.

Mr. Hale cutting into the birthday cake my friends and I had gotten him in 2005.

Mr. Hale wasn’t just a well of wisdom, though. He helped us compete. He built canvas frames for us and stretched the canvases himself. He’d supply us with etching plates and show us how to submerge them in tubs of acid and brush away air bubbles using a feather. He let us hang out in the art studio at recess and lunch just so we had a place to go. He encouraged us to enter art competitions such as the Archibald, Wynne, and Sulman Prizes. It didn’t matter if we didn’t stand a chance against established, adult artists. He liked to quote Teddy Roosevelt’s “The Man In The Arena.” I didn’t know who Teddy Roosevelt was, but I liked the quote.

When I entered the Wynne Prize in eighth grade, we didn’t have the budget to ship my painting to the Art Gallery of NSW, so Mr. Hale and I carried the thing to Fairfield Station, rode the hour-long train with it, and delivered the bulky painting from St. James Station to the gallery.

That same year, I told Mr. Hale I didn’t know how to get a foot in the door at Dolly Magazine, which was, at the time, my dream employer. He said, “Why don’t you paint their editor for the Archibald Prize?”

So I wrote a letter to the then- editor, Virginia Knight, asking if she’d sit for me. She said yes. A month later, Mr. Hale accompanied me to ACP where I met Virginia and photographed and sketched her. Two years later, I entered her portrait into the Archibald Prize and got an internship out of it.

Miranda (R) and I with her Archibald entry of Dawn Fraser. My portrait of Virginia Knight is behind me. Mr. Hale built every frame and stretched every canvas for us.

Look, I never won anything in any of the art competitions I entered. I was never even a finalist. I just wasn’t that good a painter. But it was never about the art. At least, not really. It was about ambition, the willingness to give something a go, not doubting yourself, because what did I have to lose?

“Your biggest enemy is self-doubt,” Mr. Hale used to say.

“Never accept mediocrity,” was another thing he used to say.

Oh, and there was also: “He was an idiot when he was alive and he’s an idiot now that he’s dead.” I don’t remember who that was about, but his own dad had said it about someone, and he liked it, so he relayed it to me. I liked it, too.

There were so many things Mr. Hale did for me. There were so many things he did for other students. On days when he wasn’t teaching art, he’d teach kids who had a hard time staying in class how to spar (he was a boxing trainer, too). When a student lacked confidence and said they couldn’t paint, he’d ask them, “Well, can you feel?” When the student inevitable said yes, he’d say, “Then you can paint.” (He got that from a letter John Constable wrote to Rev. John Fisher, in which Constable said, “Painting is but another word for feeling.”)

And that’s not even half of it. He hoisted us up, up, up. We were never too dumb, too poor, unworthy, or hopeless. I felt like the world was mine. Sometimes, I still do.

Mr. Hale and I in 2014.

The last time I saw Mr. Hale, I was back in Australia visiting friends and family. I was just about to start my job at the Los Angeles Times. Mr. Hale had retired. He took me out to dinner in Canley Vale and told me that he was proud of me. And then he told me about how he had just returned from a trip to Cambodia where he was teaching children in villages how to paint so they could sell their art to tourists, because, of course.

Then, like the time we went to PLC, he drove me back to my parents’ house. I thanked him for everything he’d done for me and told him that even though I was no longer his student, he was still my mentor, and I was his friend. He told me he was my friend, too. And then we said goodbye. And then we said see you soon.

First published November 13, 2017

www.latimes.com/business/technology/la-fi-tn-end-of-on-demand-snap-story.html

On-demand business models have put some startups on life support

Last summer, flower delivery start-up BloomThat was in an enviable position.

The 2-year-old San Francisco company had raised more than $5 million in venture capital funding. It had earned a tech world pedigree after graduating from the prestigious incubator Y Combinator. And it had its roots firmly planted in the “on-demand economy” — a business model popularized by Uber that was the hot new category in Silicon Valley.

But to live up to its promise of delivering bouquets within one hour in three markets, BloomThat was hemorrhaging cash. After launching in New York last summer, it was burning through more than $500,000 a month.

“It was not good; we probably had around four to five months of runway left,” said David Bladow, BloomThat’s co-founder and chief executive.

Just in time for Mother’s Day, see how flower delivery services are getting a fresh new twist
Faced with the prospect of going bust, Bladow and his cofounders asked themselves: Do customers really need their service at the press of a button?

It’s a question being asked at a number of startups that promise instant gratification. As the on-demand business model strains companies’ finances and the tech downturn makes investor money harder to come by, companies are realizing that what works for Uber may not work for them.

Some, like BloomThat, have changed course from a model that was, for a time, seen as the easiest way to land funding in Silicon Valley.

“Someone said, ‘grow, grow, grow,’ and someone else parroted it, then everyone else parroted it, and we fell victim to the macro trend,” Bladow said.

Last year alone, venture capital firms invested more than $17 billion across 214 companies that had the on-demand business model, up from $7.3 billion the previous year. These investments represented nearly 13% of all venture funding that year, according to data gathered by CB Insights.

Uber, the pioneer of the on-demand model, also continued to grow, giving the Valley reason to keep throwing money at on-demand businesses.

But offering rides is different from selling flowers.

For Uber to offer on-demand service, all it needs is lots of drivers using their own cars to log onto the app and start driving. For BloomThat to deliver flowers in a one-hour window, it had to set up distribution centers stocked with fresh bouquets that were ready to be deployed at a moment’s notice. That takes real estate, supplies and staff — before even getting into the logistics of one-hour delivery.

Zirx, a venture-funded San Francisco startup that offered on-demand valet parking, found its initial business model undermined by similar costs.

The company was paying a premium to lease parking spots in cities that have notoriously few parking spots. The more popular the company got, the more it cost to secure additional spots. Customers, however, weren’t willing to pay the premium.

“Most consumers have a price point in mind for a service,” said Sean Behr, chief executive of Zirx. “The consumer is unwilling to pay for the true nature of on-demand.”

The idea that we’re an on-demand company — that was part of the problem.
— Matt Schwab, BloomThat co-founder and president
And so the first signs of an on-demand exodus have started to show. Some, like Spoonrocket (on-demand meals), Homejoy (on-demand house cleaning), and Shuddle (Uber for kids), have gone out of business because they couldn’t raise enough money. Sidecar, an Uber competitor, sold its assets to General Motors last year. And Zirx has dropped the on-demand component of its business entirely.

“A company needs to look into their own business and ask themselves what they’re best at,” said Eurie Kim, a partner at venture capital firm Forerunner Ventures, which invested in BloomThat and supported the company’s move away from on-demand delivery. “When you do that, you realize there are probably two or three things your customer really loves about your business, and it’s not necessarily the delivery.”

For BloomThat, the company learned that customers thought on-demand delivery was nice, but it wasn’t a deal breaker. People didn’t mind ordering flowers and getting them in a later window, or even the next day. By extending the delivery window by an hour, the company was able to reduce its number of drivers and distribution centers and cut costs by 25%.

The company now offers on-demand delivery only in city centers, and nationwide next-day delivery. The latter accounts for 50% of its orders, and the company became profitable four months ago.

When Behr looked at Zirx’s model, he realized “it would be a very difficult product to make money.” So he, too, changed the company’s course. Earlier this year Zirx changed its business to offer a service where it moves vehicles for other companies, such as rental car services, mechanics, and car dealers. Behr expects Zirx to be profitable by the end of the year.

“The idea that we’re an on-demand company — that was part of the problem,” said Matt Schwab, BloomThat’s co-founder and president. “We’re not an on-demand company. We’re a company that builds products that has on-demand delivery. It seems trivial, but flipping the thinking changed the focus of the company.”

There are some industries where on-demand delivery is critical, said Ooshma Garg, founder of Gobble, a dinner kit company that delivered on-demand meals back in 2012, before changing to a subscription model. But that only applies to two or three industries, not 100.

“We figured out that on-demand didn’t work for us within three months of trying it,” she said.

During its on-demand period, the quality of Gobble’s food and service suffered. Its target market, which was families, lived in the suburbs — meaning it had to have delivery drivers stationed across the Bay Area with trunks full of food. Any meals that weren’t sold went to waste. It wasn’t profitable.

Gobble quickly changed direction to a subscription model. It is now 20 times larger and is no longer losing money.

It’s not just companies that are waking up to the fact being “on-demand” doesn’t guarantee success — the investor tide has also turned.

As the downturn leads to more cautious investment, on-demand businesses are among the hardest-hit; funding for such companies fell in the first quarter of this year to $1.3 billion, down from $7.3 billion six months ago.

“If you look in venture capital markets, the on-demand sector is definitely out of favor,” said Ajay Chopra, a partner at Trinity Ventures who is an investor in both Gobble and Zirx.

It’s not lost on venture capitalists that the collective fear of missing out on investing in the next Uber is what drove many of the investments in on-demand businesses to begin with.

But as with any boom, there is a shake-out. Here, it’s been the realization that on-demand delivery isn’t as new or groundbreaking as previously thought (e-commerce firms Webvan and Kozmo.com offered delivery in less than an hour in the late ’90s before going out of business during the dot-com crash), and it’s not actually crucial to most companies.

“A lot will go out of business, sell, or merge,” Chopra said. “And I expect a lot of companies will pivot to a different model.”

And while a pivot may be an admission that a company didn’t get it right the first time, that’s just part of running a business, Chopra said.

It’s not easy. Gobble, Zirx and BloomThat all went through awkward transition periods. Gobble spent months educating its customers on the new business. Zirx had to cut the consumer-facing part of its business entirely. BloomThat’s growth flatlined for five months while it figured out its new model.

It’s not the straightforward overnight success story that Silicon Valley likes to sell. But it’s far more sustainable and lucrative than the rush to win at on-demand.

“We’ve come out of this fog,” Bladow said. “It allows me to sleep a lot better at night.”

First published June 15, 2016

Custody Battle

Janine wanted full custody of Reggie, but that was absolutely out of the question. I had bought Reggie. I didn’t have the receipt to prove it, because I never asked for one, because I wanted him to feel like a forever-friend, like a member of the family, and not something bought at a store, like a can of baked beans or a tape measure. So when the store didn’t offer me a receipt for Reggie, I didn’t ask. I’d also paid for most of Reggie’s food, although I wasn’t exactly keeping tabs, because food is a basic right and I didn’t want it to feel like I had control over Reggie’s life, you know? I mean, in a way, I did. I absolutely did. I could kill Reggie — not that I would — but as long as I paid a vet to do it, and it was humane, I wouldn’t get into trouble. It’d be perfectly legal. But again, I’d never do that, of course. I love Reggie. Reggie is my best friend. Reggie never judged me, never gave me the stink eye — except that one time when I tripped over him after one too many drinks and he ran under the sofa and looked at me funny for the rest of the night. Reggie deserved all the friendship accolades, whatever those are. So no, I’d never kill Reggie, not unless I absolutely had to, but what are the chances of that, right?

Anyway, if Reggie could speak English, he’d say, without doubt, that I was his human. And if we were going to go off how much money I’d spent on Reggie, I had definitely outspent Janine by something like infinity. But Janine had taken him to the vet one time and when she was paying the bill she put down her name as Reggie’s guardian, and now she had that piece of paper from the vet, and her lawyer was arguing that she had grounds for full custody (the bone I have to pick here is that I was there, too, but I had gone to the loo when all this was happening, and who was I to pick a bone then? I’m not petty or anything). My lawyer said we should negotiate, but I said no, we were wrestling this one right out of her spiteful hands. Reggie was 100% mine. My lawyer said we’d have a better shot at joint custody — maybe me on weekends, her the rest of the time — and I was like, “Are you out of your fucking mind?” And my lawyer was expressionless, and I said, “It’s all of nothing, baby!” And he sighed. In court, I asked to testify, and the judge said, “About what?” And I said, “Against her!” and my lawyer looked horrified and was like, “No, no, actually, Your Honor,” and I said, “She’s not a fit parent for Reggie!” And Janine rolled her eyes at me, and I may have called her a name that made my lawyer throw his hands in the air, and the judge hit his wooden mallet thing and told me in legal terms that I needed to sit down and shut the fuck up or I’d be thrown out. Janine’s lawyer snickered, and I dropped my shoulders and pled to Janine, “Jan-Jan,” and her eyes darted away, and I could see that they were red. Then my lawyer loosened his tie and pat me on the back, as if to say: “OK buddy, we’re done here.”

First published May 11, 2017

In Silicon Valley, even mobile homes are getting too pricey for longtime residents


During the last week of March, Apple reached a record market value of $754 billion, Google tweaked a policy to protect its $22-billion-a-quarter advertising business and Yahoo inched toward closing a $4.83-billion sale. Meanwhile, Judy Pavlick drove around her Sunnyvale, Calif., mobile home park collecting plastic bottles and empty drink cans to save her future.

At a recycling rate of 5 to 10 cents a bottle, the 70-year-old’s attempt to raise $10,000 to campaign for a rent control measure seemed like a long shot. But living in the heart of Silicon Valley — where rents keep soaring, outside interests are encroaching and protections for renters are scant — what else was she going to do?

“People are looking for somebody to save them, and they’re not looking to themselves,” said Pavlick, a retiree who has lived in the Plaza del Rey mobile home park since 1989.

The mobile home park sits on more than 65 acres of some of California’s hottest real estate. Its 800 tidy modular homes are less than two miles from the campuses of Apple, Google, Yahoo and LinkedIn. One of the world’s largest private equity firms, the Carlyle Group, bought the land two years ago for $151.1 million. And in its first year owning the park, it increased space rents (the amount that homeowners pay to lease land) by 7.5% — the largest in Plaza del Rey’s 47-year history.

Pavlick knows how this goes. She’s not going to wait to be priced out. She’s rallying her neighbors: Plastics. Cans. Put ‘em out, now.

:::

To live in the Bay Area is to face skyrocketing rents, threats of displacement and evictions. It’s to hear about techies moving in, to hear about even techies being priced out. It’s to watch glistening tech campuses go up as the gulf between those who make the tech and those who just happen to be here widens.

“When people think Silicon Valley, they think ‘pot of gold,’ ” said Dorothy Niblock, 90, a Plaza del Rey resident who lives alone in the two-bedroom mobile home she designed with her late husband 44 years ago. “That doesn’t really apply to us.”

Most of Sunnyvale’s dozen or so mobile home parks started as retirement communities, and nearly half remain that way. Plaza del Rey is now a family park, but its retirement roots linger: Seniors make up the bulk of its population.

Its monthly newsletter includes a calendar of activities such as Mahjong Tuesdays, Bridge Club Wednesdays and exercise groups four days a week. On Valentine’s Day, there was a spaghetti dinner in the main clubhouse. On St. Patrick’s Day, it was corned beef and cabbage. “Please bring your own plates and utensils,” the flier read. “We will be serving water, but feel free to BYOB!”

Many longtime residents have never thought of themselves as part of the Silicon Valley story. But sometimes, you don’t get to choose.

The most recent tech boom created staggering job growth in the region, with real estate brokers estimating that firms such as Google and Apple now occupy around nine times the amount of land they did in 2005. The expansion of companies such as Facebook, LinkedIn and Microsoft — along with the tens of thousands of employees they attract — has also significantly increased demand for real estate in the area.

One-bedroom homes in the Sunnyvale area have gone from a median selling price of $205,000 in 2012 to more than $445,000 in 2017. Apartments have over the last four years seen double-digit rent increases. Teachers have been priced out of the school districts where they teach. Even lawyers have left the region in a huff. And as investors still keen to park their money in Silicon Valley look for ways to squeeze value out of what’s already there, no property is getting a free pass — not even mobile home parks.

:::

On her first day driving around the park, Pavlick collected 10 bags of bottles and cans. Total Value: $40.

“Next Thursday, how about 20 donations?” she wrote to Plaza del Rey’s Nextdoor community forum.

It costs only $200 to file the initial paperwork to get a measure on the ballot in Sunnyvale. But getting a ballot measure passed is more expensive and difficult, said Juliet Brodie, an attorney who represented the Mountain View Tenants Coalition in its successful push for rent control last year.

Proponents have to publish a notice of intent in local newspapers, get the ballot measure written, gather signatures of at least 10% of the city’s eligible voters and win a majority of votes. Printing costs alone can push costs into the thousands of dollars.

“You can’t just take a notepad and get signatures,” Brodie said.

When Pavlick bought her home in 1989, she paid $65,000 plus $356 in monthly space rent, which also included water, garbage, sewage and cable. She was a business systems analyst, working for companies such as Memorex and Genentech. The park was close to her job, and its affordability meant that she could get a two-bedroom, allowing her to care for her late mother, who had Alzheimer’s disease.

The original owners kept Plaza del Rey in the family for more than four decades until granddaughter Shereen Caswell sold it to Carlyle in 2015 (Caswell could not be reached for comment).

Today, Pavlick pays $1,004 for space rent, the result of incremental rent increases over nearly 30 years. Residents now cover the cost of all utilities, in addition to personal property taxes and the cost of maintaining their homes, patios and yards. On top of doubling the space rent increase in 2016 from previous years (residents have long paid increases of 3% to 4% a year, comparable to neighboring parks), Carlyle raised the space rents for new residents to $1,600, nearly 40% more than the park average.

Earlier this year the firm offered residents a five-year lease that would cap rent increases at 4% a year, but only if they also agreed to sign a contract that would give Carlyle the right to make the first bid if a homeowner decided to sell. Carlyle declined to comment on the rent increases or its plans for the park after the five-year period is up. As of May, around 70% of residents have signed the lease. Those who have not signed might see rents increase to market value — Carlyle declined to define what this would be.

Mobile home owners face a “double whammy,” according to housing lawyers, because unlike traditional homeowners, they don’t own the land beneath their houses. That means they can’t expect a windfall when they sell. Newer, larger mobile homes can go for as much as $400,000, according to local Realtors, but older homes in the park can sell for as little as $120,000. Recent space rent increases have hurt homeowners looking to sell because Realtors estimate that for every $100 increase in space rent, a home loses $10,000 in value.

And unlike renters, who can easily up and leave, mobile home owners are saddled with a house that is, despite the name, difficult to move. Some homes exceed 1,800 square feet, with multiple bedrooms and bathrooms. Many are brought into the park in pieces and built on site. Taking apart and transporting a mobile home can cost tens of thousands of dollars. Putting one back together can cost even more. And once a home has been uprooted, homeowners have to find a new space for it.

“Just move, just move,” said Pavlick, mimicking those who believe that the solution to her problem is to leave. “Move where?”

:::

Mobile home parks have traditionally been mom-and-pop operations. But as the value of land in Silicon Valley soars, a growing number of institutional investors have been eyeing its undervalued lots.

That includes private equity firms. Private equity investors typically snatch up struggling or undervalued businesses and find ways to increase their value — either by investing resources to beef up the business or cutting costs to improve the bottom line — then reselling them at a profit.

Carlyle spokesman Randall Whitestone told the Los Angeles Times that the publicly traded Washington, D.C., firm, which has $162 billion in assets under management across industries such as healthcare, aerospace, real estate and financial services, has been buying up mobile home parks because they’re “less volatile than many other asset classes.”

“We like to buy in locations where there are good supply-demand fundamentals and economic strength,” Whitestone said.

Because of zoning rules, there is little chance that Plaza del Rey will one day become a tech campus. But there are other ways to raise the value of the park.

Investors can upgrade a park before they sell it. Although Carlyle declined to comment on its long-term plans for the park, Whitestone said it has “made significant capital investments to materially improve the property for residents.”

Another way is to increase the rent.

Plaza del Rey is, to the dismay of many longtime residents, an ideal investment for Carlyle. In a place like Silicon Valley, where tech salaries are among the highest in the country and the housing market is among the most competitive, it won’t be hard to find someone willing to pay $1,600 or more for space rent. And according to private equity experts, it doesn’t matter to Carlyle who that someone might be.

“They won’t care if it’s seniors or young people,” said Erik Gordon, a professor at the University of Michigan’s Ross School of Business. “Their challenge is to turn something they bought for $100 million into something that’s worth $300 million. That’s the end game for a private equity fund.”

This gives Carlyle reason to fear rent control. Any caps to rent increases would not only limit the park’s near-term profitability but also potentially reduce its future resale value, which is where private equity firms make most of their profit.

And that’s why Carlyle sent its managing director of U.S. real restate, Dave Kingery, to a Sunnyvale City Council meeting in January to argue against rent control.

“We do not believe it furthers the objectives of the city, the residents or the owners in the long term,” Kingery said at the meeting.

The firm’s annual earnings reports spelled it out more plainly: Under the “risks” heading, which details all the things that could hurt Carlyle’s business, the tenth bullet point reads “changes in government regulations (such as rent control).”

:::

Depending on who you talk to, rent control either always works or it never works. It’s the answer to the housing affordability crisis. It’s the reason that homes are so expensive. It will deter developers from creating more housing stock. It will keep people in their homes. It has never solved a city’s problems. It’s the answer to residents’ prayers.

Although Silicon Valley communities have either resisted or been slow to develop new housing to accommodate the influx of workers the region has attracted over the years, Sunnyvale has one of the strongest track records in California when it comes to building affordable housing. About 10% of the units in its development pipeline are affordable housing units.

But it’s also one of the few cities in Silicon Valley that doesn’t have rent control, either citywide or specifically for mobile home parks, and its City Council has shown a reluctance to entertain the thorny issue.

“The problem I have is there are a lot of loopholes in rent control, and we’re going to have a lot of lawsuits the moment it goes through,” council member Michael Goldman said in an interview with The Times.

The neighboring city of Mountain View, which passed a voter-approved measure in November, was slapped with a lawsuit from the California Apartment Assn. seeking to block the measure from being enforced immediately after the election. A Santa Clara County judge in April denied the request for an injunction, clearing the way for the city to go ahead with its rent control rollout.

“This is a free country and anybody with a filing fee can file a lawsuit,” said Brodie, the attorney who helped Mountain View get rent control. “If we allow that to prevent us from making good policy, that’s just not reasonable.”

For housing advocates, rent control is good policy. For opponents, it’s a Band-Aid solution. Rents are high, they argue, not just because landlords can charge whatever they want, but because Silicon Valley became a global tech mecca faster than its cities could handle it. How do you solve that?

“There are no bad guys in all this,” Goldman said of Carlyle and Plaza del Rey. “When I see people saying ‘It’s really expensive for me,’ I say if you’re not working in high tech, which requires you to be here, why are you here? If you’re here, you’re making a decision every minute you’re here that the cost of being here is worth it.”

There are tech industry workers who live in Plaza del Rey — employees of Apple, Google, Oracle and local start-ups. They’re increasingly feeling the squeeze too.

Despite making a six-figure salary working in information technology, a traditional home was out of reach for Bay Area native Ron Van Scherpe, 45. Having a young family, he didn’t want to rent anymore. So he and his wife did what they thought was the next best thing: They bought a three-bedroom home in Plaza del Rey.

When they moved in 12 years ago, their combined mortgage and space rent was only $2,150. Today, it’s $2,600, which is still more affordable than the rent on a one-bedroom Sunnyvale apartment. But if the space rent keeps climbing, at some point they’ll be no different from renters.

“The tech industry is displacing the middle class,” said Van Scherpe, who has signed up to help Pavlick in her rent control effort. “We’re going to give it two years with this rent control issue, and if it doesn’t look promising, we’re going to have to relocate by the end of five years.”

He and his wife are considering Austin, Texas. He worries that it will be hard on his kids, though. Their grandparents live here.

:::

On a recent Thursday morning, Pavlick drove around Plaza del Rey with her neighbors Patrick and Karen Garcia picking up heavy glass bottles of Perrier and empty cans of Coca-Cola.

“Someone must have had a party,” Karen Garcia said.

At the recycling facility, they traded the goods for $46.55.

Pavlick frowned. “I thought we’d get more from those heavy bottles,” she said. “But it’s more than last week.”

“Enough to pay for a third of an hour with an attorney!” Garcia joked.

Pavlick did the math in her head. If Plaza del Rey averaged $40 in recycling a week, and the dozen or so mobile home parks in Sunnyvale also got involved and raised $40 a week, they could collectively raise everything they needed in less than six months.

She currently has around 115 people from Plaza del Rey and neighboring parks working with her. In the coming weeks she hopes that more people will put out their recycling, knock on doors and, eventually, campaign for rent control.

It’s a long shot: a few dozen mobile home park residents trying to stop a private equity firm from upending their lives. But Pavlick likes to say aloud: “Carlyle has the money, but we have the people.”

Now she just needs those people to knock on doors, push for rent control and fight for their future — one plastic bottle at a time.

AS VENTURE CAPITAL DRIES UP, TECH START-UPS DISCOVER FRUGALITY



Tech start-up Appthority’s office has plush conference rooms, soundproof phone booths, an enormous kitchen and a view of San Francisco Bay. It has ping-pong and foosball tables, beer on tap and 11 types of tea.

The cybersecurity company owns none of it. And that’s how the company’s president and co-founder, Domingo Guerra, likes it.

“Any time you have flexibility and you don’t have a liability, it looks good on the books,” Guerra said. Although his 30-person company has raised $20.25 million from venture capital firms such as Venrock and U.S. Venture Partners, it operates out of a WeWork co-working space, where amenities such as Wi-Fi and office furnishings are included in the rent.

As investor sentiment in the tech industry cools, start-ups are facing a new reality: Money doesn’t always come easily. The abundant venture capital funding that convinced companies they could stay private longer is now harder to come by — such funding in Silicon Valley fell 19.5% in the first quarter of 2016 compared with the same period in 2015. And Wall Street has grown so skeptical of Silicon Valley that not a single tech firm has dared to go public so far this year.

In this climate, having good-looking books is now top of mind for start-ups that don’t want to go the way of companies such as Foursquare, which halved its valuation in order to raise money earlier this year, or SpoonRocket and Shuddle, which shut down after running out of money.

To that end, small and midsize start-ups are trying to outlast the downturn by cutting back on one of tech’s trademark innovations: outlandish spending.

There was a time, for example, when Appthority was thinking about getting its own office. But after heightened investor scrutiny stretched the company’s latest fundraising process to seven months — more than its previous rounds — Guerra decided a co-working setup was its smartest bet.

“If we had leased our own office, most landlords wanted us to sign a five- to 10-year lease, and they were asking for a seven-month security deposit, which would have been six figures,” Guerra said. “From an investment perspective, it was a lot of liabilities.”

A few blocks away from Appthority in San Francisco’s Financial District, Wonolo — an on-demand staffing start-up that has raised $8.9 million from investors such as Coca-Cola Founders and CrunchFund — has slowed down hiring.

“We’re not rushing to make a hire just because a position has opened up,” said AJ Brustein, Wonolo’s co-founder and chief operating officer. “We’re being smarter about who we hire, and that might mean we’re taking longer than we’d want.”

Waits of up to two months, Brustein said, ensure the company finds the right person and reduces the chances of hiring someone who might be a poor fit, which would ultimately be costly.

The company has also opted for a modest office, choosing to take out a yearlong sublease on a 7,000-square-foot space to accommodate its 27 employees.

The decision came after a fundraising push that started in October dragged into January. By then, “it was very clear every single VC in the Valley was writing about doom and gloom,” Brustein said. “We kept that in consideration when we moved into an office — it’s not necessarily the type of office we would have gotten six months ago, but it was one that we could pay for.”

Commercial real estate firms have noticed the shift. Cushman & Wakefield’s San Francisco market leader J.D. Lumpkin said that tech start-ups are starting to make “scrappier, more responsible real estate decisions” to avoid spending huge amounts of money on a lease.

Subleasing is on the rise — even larger tech companies such as Twitter and Dropbox are renting parts of their offices to start-ups — and a growing number of deals on ambitious office spaces have been put on hold.

“Some start-ups are doing well, like Lyft and Fitbit,” said Robert Sammons, Cushman & Wakefield’s director of research in San Francisco, who noted that those firms are still expanding into bigger offices and snapping up long-term leases. “But for some start-ups, their growth patterns haven’t panned out.”

It’s a reality check, Sammons said. Tech has traditionally spent more on leasing and renovating real estate than other industries.

Payments company Square, for example, built an atrium into its office. Github has a full wet bar.

Numerous start-ups have spent millions making their offices workplace wonderlands. And, Sammons said, “board members are now saying, ‘What are you doing? You’re not even profitable.'”

Real estate is only one of many considerations for start-ups navigating the downturn, said Dale Chang, vice president of portfolio operations at venture capital firm Scale Venture Partners, which has invested in companies such as Box and DocuSign.

“I advise our companies to be smart at all times about growth,” Chang said. “Even in frothy times, I don’t think going out there and spending a lot of money is the right strategy.”

Instead, Chang advises his portfolio companies to focus on the core set of activities that the company was set up to do. Making an app? Hit the ball out of the park with it. Offering software as a service? Make it best in class. Anything that isn’t integral to that — marketing, hiring, office expansions — can be slowed down.

Start-ups that have raised funds in recent months have had to alter their investor presentations to address that too.

Invoca, a 160-person Santa Barbara company that makes analytics tools for marketers, closed a $30-million round in March after a seven-month fundraising process that stretched out like bubble gum.

Its previous rounds took half the time. Going into it, the company’s chief executive, Mark Woodward, said investors were “way, way, way more conservative compared to prior months,” and were no longer just interested in companies with high growth. They wanted to know the quality of Invoca’s technology, the market opportunity, the business model, its competitive position, and how defensible that position was.

“They wanted to know if Facebook or Google decided to enter our market, would they wipe us out tomorrow?” Woodward said.

When the company raised funds two years ago, the money went toward aggressive hiring of sales and marketing teams and research and development. The latest round, Woodward said, will get the company to self-sustainability, at which point it won’t need to raise funds again.

“We’re not increasing spending by a dime on marketing,” Woodward said. “We’re not chasing Uber-sized top-line growth — that’s expensive and risky. Just because we have money in the bank doesn’t mean we’re going to spend it.”

Back in San Francisco, Jeff Burkland, the founder of Burkland Associates, a firm that offers chief financial officer services to start-ups, said that over the years he’s seen companies try different strategies to extend their runway.

Slowing down hiring is one. Finding shorter, more flexible leases is another. In extreme cases, founders might decide to not take a salary, or move some of their work to offshore contractors.

Building a war chest before a downturn hits is also an option; a move that rewards those who take advantage of frothy times by accepting funding well before they need it.

If a company had plans to raise funds within the next two years, Burkland advised them last year to get it over with.

Which is why Segment, a data hub start-up where Burkland is the CFO, raised funds last fall even though the company didn’t need the extra cash yet.

“We felt like the market was too warm to stay that way,” said Peter Reinhardt, Segment’s chief executive. “We had all this investor interest, and we felt like it wasn’t going to be that great in six months.”

The fundraising process — emailing investors, setting up meetings, signing a term sheet — took only 11 days.

Ultimately, Burkland said, it’s about staying nimble and being adaptive. Trimming excess, finding flexibility and, sometimes, being scrappy. You know, like a start-up.

THINK YOU HAVE TOO MANY ROOMMATES? PEOPLE WITH 16 ARE PAYING EXTRA FOR THE PRICILEGE


Jay Standish showed off a three-story house in the leafy neighborhood of Adams Point, pausing at the home’s top-floor kitchen.

“That’s the second kitchen,” he said, motioning toward the refrigerator, stove-top, sink and toaster ovens. “It’s good for when there’s high traffic in the downstairs kitchen, or, you know,” he shrugged, “if you’re not in a mood to be social.”

Standish, 31, lives here with 10 other people. The house, called Euclid Manor, isn’t a college dorm. It’s not a hostel-style “hacker house” either. According to Standish, this isn’t a tech thing, or a hippie thing, or a rent-is-too-expensive-and-I’m-desperate thing.

It’s called co-living, and it’s a lifestyle choice emerging among young people who favor Airbnb over hotels and Lyft rides over car ownership. Rather than seeking out housemates on Craigslist, city-dwellers in high-cost markets such as the Bay Area and New York City are now paying companies — some small and others, like WeWork, backed by millions in venture capital — a premium to live in a building with a curated roster of housemates, stocked kitchens and planned get-togethers.

It’s about building a community, Standish said. And for him, it’s also about building a business.

Standish and Ben Provan, 32, run OpenDoor, which manages Euclid Manor and two other properties: the Canopy, also in Oakland, where 12 people live, and the Farmhouse in Berkeley, which 16 call home.

The pair see themselves as more than landlords. Though they handle house repairs and rent collection, they also vet tenants to make sure that there’s a balanced mix of personality types in the house, maintain the culture of the houses, help run activities and act as mediators when needed.

“Humans are very social beings and pre-Industrial Revolution we lived in large groups,” Standish said while showing off Euclid Manor’s dining room, which has a long, banquet-length table used for house meetings and dinner parties. “I mean, this house is an interesting example of that. It was built in 1910, and back then you’d have these huge estates where there were 20 people living in a house together,” though many were live-in servants. (A “totally different dynamic,” he said).

But Standish thinks that many people, particularly millennials, are eschewing the American dream of owning a house in favor of finding a second family of like-minded people.

Research from real estate site Trulia found that homeownership in the millennial age group is the lowest it has ever been. Around 70% of people age 18-34 in the U.S. rent. Trulia’s chief economist, Ralph McLaughlin, said that is in part because in places such as the Bay Area, New York and Southern California, the median buyer would have to spend upward of 60% to 70% of his or her monthly income to buy a house.

The rise of co-living is a response to both escalating real estate costs and growing demand from people actively seeking such housing and willing to pay for it, McLaughlin said.

Research conducted in 2015 by British life insurance firm Beagle Street found that more adults than ever are waiting to move out of their parents’ house, get married and have children. It’s not just because it’s economically harder, the research showed. Survey respondents also indicated that they don’t value living alone as much as earlier generations.

“The best way to describe the mentality that encapsulates where we’re at is the ‘modern nomad,'” said Benja Juster, 28, an interactive experience designer who lives in the Canopy, whose residents are all in their mid-20s to mid-30s. “It’s a desire to not be locked down to one physical location … to go with the wind and find where life may take you.”

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Ariana Campellone, 24, a nutrition and herbalism practitioner who also lives in the Canopy, said “traditional” adult responsibilities such as family planning aren’t a priority for her right now, and she much prefers to live with others who can help her grow.

“Our values here are creative empowerment and skill-share,” she said.

OpenDoor vets tenants beyond the usual credit history checks. Applicants have to answer questions such as what they could contribute to the house, what kind of environment they’re looking for, and if they were a non-human animal, what kind would they be.

“I said I was a raccoon,” Juster said. “I make do with scraps. I’m very resourceful and nimble.”

OpenDoor is testing a different ownership structure for each of its houses to see what works best. It rents the Farmhouse, its first business venture, and subleases it to tenants. It bought its second house, the Canopy, outright. OpenDoor operates the investor-owned Euclid Manor.

The company’s revenue comes from the rent it collects from tenants, usually $1,000 to $1,200 a month, depending on the room and house. Standish and Provan declined to reveal OpenDoor’s margins, but said the properties are profitable, and co-living provides better returns than traditional housing. For tenants, the rent is more expensive than sharing a home with 10 or so roommates, but comparable to living with fewer housemates in the same neighborhood.

Aside from the food program, which lowers the cost of groceries, Standish and Provan said residents also get access to appliances and facilities uncommon in shared apartments — at Euclid Manor those include West Elm furnishings, a grand piano, a Vitamix and a cafe-grade coffee machine. The Canopy has a soundstage, a woodworking studio, and large living rooms with projectors and musical instruments.

But what tenants are really paying for is the “community,” Standish said. “Living as family, basically.”

In New York City, a co-living business called Common has raised $7.35 million in venture capital funding to open two buildings in Brooklyn, with a third planned for this spring. Founded by serial entrepreneur Brad Hargreaves, the start-up holds master leases on its buildings and also plays a property management role.

Its apartments are fully furnished and stocked with items such as toilet paper and paper towels. Tenants share apartments within the building and have access to common areas. They communicate using the group messaging app Slack, and Common organizes building-wide activities like movie nights, yoga, breakfasts and dinners.

WeWork, the $16-billion start-up that has raised more than $1 billion in venture capital funding and leases co-working spaces in Los Angeles, San Francisco and New York, is also dipping its toes into co-living. Its building in New York City has 45 units, a mix of studios and one- and two-bedrooms, with communal events such as potluck dinners and fitness classes. It doesn’t own any real estate, opting instead to lease entire buildings.

Despite soaring rents in places where co-living companies have set up shop, these ventures can still be risky, according to real estate experts, especially if they try to expand too fast.

The best-known co-living failure is the venture capital-backed Campus, a San Francisco start-up that launched in 2013. Within two years it had 30 houses on master leases. But the company shut down last August because it was “unable to find a way to make Campus into an economically viable business,” founder Tom Currier said in an email to tenants. Currier could not be reached for comment.

It’s a mistake to think that the speediness that works for tech start-ups will also work for a real estate start-up, said Michael Yarne, a partner at San Francisco development firm Build Inc.

“The venture capital world is obsessed with speed and scale, but the world we’re in goes really damn slow,” Yarne said.

The slow return on real estate properties hasn’t put off investors with cash, though. Venture capital firm Maveron Ventures invested in Common because it believes that companies like Common fill a need.

“What we’re looking for are big industries where consumers, and especially millennial consumers, feel disconnected from the brands that exist,” said Jason Stoffer, a partner at the firm.

Millennials “expect a level of authenticity,” he said, “and the reality is an Avalon Bay apartment building is sterile. It’s not authentic. You don’t know your neighbors. People want a level of responsibility and a brand which has a soul.”

For Standish and Provan, co-living houses are the first step. But why stop there? The pair have a long-term vision of creating sustainable communities in different formats — maybe one for families too.

But first, they’re focusing on the three houses they have. And answering age-old questions of communal living, like who’s going to do the dishes.

“Well, if we can’t figure that one out, how are we going to solve climate change and economic inequality?” Standish laughs. “So let’s start with the dishes.”

VERIZON BUYS YAHOO FOR $4.8 BILLION, AND IT’S GIVING YAHOO’S BRAND ANOTHER CHANCE



Verizon Communications Inc. built its business on pipes and antennae. Now the nation’s biggest telecommunications company is assembling a different kind of network — one centered around eyeballs and advertisements.

With its $4.83-billion acquisition of Yahoo Inc.’s core business on Monday, Verizon continues its expansion beyond wireless and broadband by taking on a struggling tech giant far removed from its glory days.

Under Verizon, Yahoo will join its longtime rival, AOL, which the telecom snatched up last year for $4.4 billion. Both companies offer a cautionary tale of how an Internet titan can quickly turn into an also-ran. But together, analysts said, they provide Verizon a key foothold in digital advertising — a potentially lucrative revenue stream as the pool of new mobile and broadband customers dwindles.

“Yahoo is a company that changed the world,” Yahoo Chief Executive Marissa Mayer said in a note to employees. “Now we will continue to, with even greater scale, in combination with Verizon and AOL.”

The deal — which includes Yahoo’s email service; websites dedicated to news, finance and sports; advertising tools; real estate; and some patents — is expected to close in the first quarter of 2017. The Sunnyvale, Calif., company will continue to operate independently until then.

The sale does not include Yahoo’s cash or its shares in Alibaba Group and Yahoo Japan. After the deal closes, these assets will become a publicly traded investment company with a new name.

Yahoo’s Web business will be integrated with AOL, but AOL spokeswoman Caroline Campbell said “Yahoo brands [such as Yahoo Finance and Yahoo Sports] will not go away.” Instead, they will exist alongside AOL properties, such as the Huffington Post, TechCrunch and Engadget, and firms in which Verizon invests, such as AwesomenessTV.

The sale gives the New York telecom “high-quality Web content” and the advertising dollars that come with it, said Laura Martin, Internet analyst at Needham & Co.

The deal also includes Yahoo’s sizable and sophisticated digital advertising business — one that can be merged with AOL’s to cut costs and secure Verizon’s place behind industry leaders Google and Facebook.

The final price is a far cry from the $45 billion Microsoft offered in 2008 — an offer Yahoo famously rejected. But Yahoo’s brand has taken a beating in recent years, with some analysts saying the company should be happy to fetch anywhere near $5 billion.

“The state [of Yahoo] is troubled, clearly,” former interim Chief Executive Ross Levinsohn told CNBC last week, predicting a sale between $3.5 billion and $4 billion. “We can look back over the past four years and say the strategy did not pay off.”

The deal had been expected to end Mayer’s four-year tenure, but she said Monday that she intends to stay with the firm.

“I love Yahoo, and I believe in all of you,” Mayer said. “It’s important to me to see Yahoo into its next chapter.”

Yahoo’s troubles began well before Mayer took the reins.

The company churned through five CEOs in six years, unable to decide if it was a media company or a technology company — indecision that resulted in it doing neither particularly well. It largely missed the mobile revolution, catching only the tail end once Mayer joined.

As “Google” became the default verb for search, Facebook laid claim to all things social and everyone else snapped up what was left of photo sharing, video streaming and instant messaging, Yahoo was left out of the conversation.

“The old-fashioned definition for a ‘dying brand’ was when a company went out of business,” said Marlene Towns, a professor at Georgetown’s McDonough School of Business. “The more recent definition is we stop talking about them. That is the first sign of imminent death in this connected age.”

Although Mayer helped create revenue with mobile products, her own leadership was marred with foibles. Her acquisitions — including the $1.1 billion paid for Tumblr — have been a bust. Her turnaround strategies haven’t improved the company’s revenue decline. And her big spending on media personalities such as Katie Couric and David Pogue hasn’t drawn viewers as hoped.

This year, activist investor Starboard Value LP grew so impatient with Mayer that it wrote to shareholders, calling for an overhaul of the board of directors and a sale of the core business.

When Yahoo launched in 1994, it was the definitive guide to the Internet. But over the years, the company became complacent, said Kraig Swenrud, chief marketing officer of Campaign Monitor, who has spent nearly 20 years doing marketing for high-tech companies.

“You either embrace the constant, never-ending change as a brand, or you perish,” Swenrud said. “And that’s what’s happened to Yahoo.”

As Yahoo ping-ponged from a Web portal to a media company to a mishmash of both, it lost direction, said Nicole Ferry, a partner and executive director of strategy at branding firm Sullivan.

“If you look at a company like Facebook, their mission is to connect the world, so all its new products and acquisitions speak to that,” said Ferry. “Or Google’s mission to organize the world’s information — many of its products and acquisitions serve that mission.”

At Yahoo, there was no clear mission.

“What are they trying to do?” Ferry said. “What is their reason for being?”

Yahoo properties still attract about 1 billion users a month. Millions rely on Yahoo Mail, and Yahoo Finance is a stalwart for financial news. These products alone aren’t enough to return the brand to its peak, business analysts said, but in the right hands, people might care about Yahoo again.

“Look at Apple,” said Towns, referring to the hardware company’s reinvention under Steve Jobs.

“Or Microsoft,” said Swenrud, pointing to the company’s ongoing transformation under Chief Executive Satya Nadella.

“Or Hostess’ Twinkies,” said Towns. “They were going to go out of business, and news of that woke consumers up, and people started to remember the nostalgia of Twinkies, and the publicity helped them find a buyer and reinvent themselves.”

The Verizon deal could lead to a Twinkies-like revival. Or it could be a dud.

Telecoms such as AT&T and Comcast were rumored to have checked out Yahoo but opted against bidding. Maybe they were onto something, according to John Colley, a professor of Warwick Business School, who said wedding two unrelated businesses rarely works.

“The telecoms industry is maturing, and this acquisition appears to be more about finding future growth in unrelated diversification,” which, he said, is “always a high-risk path.”

WHERE YAHOO’S ENTERTAINMENT MEDIA PLAY WENT WRONG



When Yahoo announced last year that it had lost $42 million reviving NBC’s TV series “Community” and launching two other original shows, the company framed it as a failed experiment. It didn’t work, so Yahoo was cutting its losses.

But those in the entertainment industry were scratching their heads: How could the company call it quits without spending more?

Netflix, after all, had spent $100 million on its first attempt at original programming — two seasons of “House of Cards.” Amazon spent $3 billion last year on content for its Prime video and music streaming service, double what it spent in 2014.

“This is a go big or go home business,” said Brian Wieser, an analyst with Pivotal Research Group. “Call me when you’ve invested $4.2 billion in content, then it gets interesting.”

Yahoo’s comparably small expenditure differs from the strategy embraced by the companies that dominate streaming entertainment. But those familiar with the Sunnyvale, Calif., firm say it illustrates a recurring stumbling block.

The firm has long struggled with its identity, flip-flopping between its roots as a technology company and its ambitions of becoming a media giant.

With the company now up for sale — Yahoo is reportedly looking at a second round of bids sometime this month — it’s still unclear, after all these years, what Yahoo really is.

Yahoo started as a guide to the Internet, steering early explorers of the World Wide Web to the most interesting sites around. As the Internet matured, Yahoo grew into a portal, offering search, email, news, entertainment and anything else around which it could sell advertising. But when the portal model fell out of favor, firms like Yahoo struggled to adapt.

Newcomers have since eclipsed nearly every facet of Yahoo’s tech business. Google long ago won search. For nearly a decade, Facebook has owned social. Everyone else won mobile.

Media has been the place where Yahoo has staked, and then retracted, its claim.

The company has Yahoo Finance and News — long-running websites that for years have drawn huge amounts of traffic (the company’s collective websites drew 205 million visitors in March this year, according to Comscore, putting Yahoo behind only Google’s sites and Facebook). But each of Yahoo’s attempts to grow beyond that — to be a hub for original scripted entertainment — have ended with it pulling back and pivoting elsewhere.

“Yahoo had the ability to be a transformational media company,” said Peter Csathy, chief executive of consulting firm Manatt Digital. “It has all the assets you’d need to be successful — massive reach, globally known brand, some high-quality content, and a sales team that has been effective — but it was never able to tie those pieces together.”

In 2004, the company hired former ABC executive Lloyd Braun to head up its Santa Monica media group, which was tasked with creating original programming that could give Hollywood a run for its money.

Braun, who had green-lighted shows such as “Lost,” “Desperate Housewives” and “Grey’s Anatomy” at ABC, helped Yahoo launch original programming such as the daily video compilation show “The 9” and the multimedia website “Kevin Sites in the Hot Zone.”

But within two years, the company changed course. Its foray into television-style programming was now described by Braun in an interview with the New York Times as being “salt and pepper on the meal” as opposed to Yahoo’s main attraction. Instead of creating its own content, it would lean on other media companies and content generated by users.

Shortly after that, Braun left the company. He declined to be interviewed for this story.

Yahoo’s most recent attempt at entertainment media came after Chief Executive Marissa Mayer joined the company in 2012.

With revenue declining and mounting pressure from Wall Street to show financial and user growth, Mayer implemented a multi-pronged turn-around strategy that has included workforce cuts; product launches; a revamped email app; investments in mobile, social and advertising; and a $1.1-billion acquisition of Tumblr.

A key part of her strategy was a return to entertainment media.

She hired news anchor Katie Couric on a $10-million-a-year contract, secured an exclusive live-streaming deal with the NFL and committed funding to original programming: the revival of “Community” and two new series,” Sin City Saints” and “Other Space.”

On an earnings call with investors in 2014, Mayer said that “premium content draws premium advertisers” and, to that end, Yahoo was experimenting with original scripted shows. “We are thrilled by the positive response from ‘Community’s’ passionate following, and we are excited to welcome those fans to Yahoo,” she said.

A year later, all three shows were canceled.

“We couldn’t see our way to make money over time,” Kenneth Goldman, Yahoo’s chief financial officer, said during a 2015 earnings call, when he revealed the company had lost $42 million on those shows. “We’re not saying we’re not going to do these at all in the future, but in [these] three cases at least, it didn’t work the way we had hoped it to work, and we decided to move on and basically write off those assets.”

In January, Yahoo shut down its video portal, Yahoo Screen, and Mayer announced that the company was shifting away from original scripted content.

“While some investments have become essential to Yahoo’s transformation, others have not,” she said earlier this year. “We’ve taken an honest look at those bets, and have chosen to re-prioritize many sources towards more proven areas of growth.”

But Yahoo kept Couric, now on a $15-million contract, even though its news website remained a hodgepodge of links to other news providers. And it kept four digital magazines – with a focus on news, sports, finance and lifestyle — while shutting down the rest. It launched an e-sports portal this year.

“Again,” Csathy said, “a head scratcher.”

Yahoo insiders can point to a handful of smart bets the company has made — an exclusive licensing deal with “Saturday Night Live,” NFL streaming, live music streaming for instance. But its aversion to risk, they say, meant it always pulled back before it could see results.

“Ultimately, Yahoo had this opportunity,” Csathy said. “And the world passed it by.”