
Automattic Raises $160 Million, Valued at $1.16 Billion - dkasper
http://recode.net/2014/05/05/wordpress-parent-automattic-has-raised-160-million-now-valued-at-1-16-billion-post-money/
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Jgrubb
I don't know if you still come slumming around HN anymore, but congrats,
photomatt. I'm a Drupal developer and I always think it's funny when I hear
the Drupal war cry about how much more flexible or capable or whatever Drupal
is than Wordpress. Seems to me that you had a much clearer idea of what you
wanted your product to do from the get go, and I admire that a lot. Way to go.

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photomatt
Thanks!

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yawz
Well done! Congratulations.

Funny enough, I'm nearing the end of Scott Berkun's "The Year Without Pants:
WordPress.com and the Future of Work"[1]. It is a great read. Highly
recommended for a behind-the-scene view of WordPress and their company
culture.

_[1][http://www.amazon.com/gp/product/1118660633?ie=UTF8&camp=178...](http://www.amazon.com/gp/product/1118660633?ie=UTF8&camp=1789&creativeASIN=1118660633&linkCode=xm2&tag=booksebooks-20*)

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hayksaakian
Not sure why the HN title, as of 10:15 PT doesn't include the full title
"WordPress.com parent Automattic..."

Adds a lot of context

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spada
Likely because if you have any interest in tech valuations you know what
Automattic is.

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jes5199
I don't know, Automattic seems much more obscure than a lot of the companies
we usually talk about.

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rokhayakebe
Two questions.

Where the funding goes for these web or mobile app companies?

Why so many tech companies have a high employee count when others (seemingly
larger) do away with little people (Instagram, Craigslist, Whatsapp...)?

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lifeofanalysis
I want to help clarify this valuation.

I think it is not clear from the article why Mullenweg (CEO) suddenly thinks
they are capital constrained. Let's do some back-of-the-envelope numbers.

Their Enterprise VIP service (managed hosting basically) is useful, no doubt.
And @ $5-10K a month, it is chump change for enterprises. But how many massive
blog clients like New York Post, NYT, or CNN, would you need to make back $160
million. If you had 100 such clients, you would be grossing $10-20MM, and,
probably netting $2-4MM profit. You would need a lot of clients to make back
that $160MM but it does not matter.

Let us say you hire a sales team of 20 to do full time enterprise sales.
That's $5MM investment per year. Let's say they bring in 50 new enterprise
customer every year. That's $5MM/year recurring revenue. So the money spent on
Enterprise sales is well invested.

But you can't spend $160MM on marketing/infrastructure for managed hosting.

Did they just take advantage of frothiness in the market? I wouldn't blame
them; I mean if investors want to give them the money, then great.

Make no mistake. Wordpress is a useful platform. They could a lot to keep
improving blogging for a long time. And there is lot of value in being the CMS
host for enterprises. But $1.16 billion?

Can they IPO at this valuation? I think they can; money goes from small
investors pockets to big investors pockets in the unending cycle.

I think that's what this is about; this will unfold over the next 2-3 years,
as the new investors want their returns.

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krogsgard
I think you are short-changing the thoughtfulness of their long term
investment partners (especially True Ventures - of which former Automattic CEO
Toni is a partner). I also think you are thinking of Matt Mullenweg in the
same light as many other startup founders, but he is quite different,
especially in regard to his commitment to open source and publicly stated
desire for Automattic to be a very long-term company, not reach a high
valuation and have a big sale.

Now to your notes:

First, they don't have 20 sales people for VIP. They have less than ten for
sure. Probably closer to five.

Second, VIP has more than a 100 customers, by far. And VIP business has grown
ever since it was introduced, but simultaneously has become a smaller and
smaller part of their overall revenues (I know this to be true). Which means
other aspects of their business are growing faster than VIP.

I've followed Automattic closely for a long time. I don't at all see them as
the type of company to just grab money in frothy markets. I think we'll see
this money equip them to make some much bigger investments in the next couple
years. They are certainly in better shape than any other CMS or blogging
platform ever has been.

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lifeofanalysis
I did not say that they have 20 sales people for VIP. I said they could hire
20. I also did not say how many customers they have for VIP. I was doing a
what-if analysis of sales expenses.

What is your analysis? Are they worth $1B? If so, why?

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wehadfun
Is Facebook and Automattic the main companies keeping php around

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paulgb
Wikipedia and Yahoo are high-profile PHP users as well.

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drgath
While I'd still consider FB a PHP-company, it's important to note that their
use of it has evolved into a PHP derivative language ("Hack"). Also, Yahoo is
years into a project to move everything away from PHP to JavaScript (Node.js)
and Java.

So, those companies abandoning stock PHP isn't much of an endorsement of the
language & ecosystem.

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leorocky
Are they in that valuation trap Fred Wilson wrote about? High valuation, too
much burn, tight IPO market?

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krogsgard
They've been running with positive cash-flow even without the investments. Few
employees and relatively low costs. Matt notes in his personal post that they
are capital constrained for faster growth but not for operations, so it's not
about running out of money but having more money now for current
opportunities. [http://ma.tt/2014/05/new-funding-for-
automattic/](http://ma.tt/2014/05/new-funding-for-automattic/)

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lifeofanalysis
Could be. But unlikely. See my detailed comment below.

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antidaily
The CMS arms race. I just saw a commercial for Wix.

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majani
FOSS companies by design have no sustainable competitive advantages, and
therefore shouldn't command high valuations. This Bubbly valuation is only
being driven by comparisons with the equally silly Tumblr sale.

