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Two questions: - How is GitHub worth less than Pintrest? - What could GitHub possibly gain from raising money? It's clearly not about money. Is this a liquidi
by SeoxyS 14y ago
Two questions:
- How is GitHub worth less than Pintrest?
- What could GitHub possibly gain from raising money? It's clearly not about money. Is this a liquidity event? Couldn't they just issue a dividend for that, they've clearly got plenty of cash… Or is this about the credibility of having a valuation. In that case, couldn't they have gone public? Amazon went public at a sub-$500M valuation, and look at them now!
Edit: come to think of it, I can see the possibility of wanting to acquire other companies, and not currently having the capital to do so. That's about it.
- dave1619 14y agoMy guess is that Github wants to expand more aggressively (probably into enterprise) and extra cash will speed that up.
- benackles 14y agoWhat does "[going] into enterprise" mean? Almost every fortune 500 company is using GitHub in some capacity. Isn't "[going] into enterprise" simply marketing jargon when you're talking about SaaS products like GitHub.
- nowarninglabel 14y agoWell, there is a vast difference between "every fortune 500 company is using Github in some capacity" and "every fortune 500 company is paying for the Enterprise version of Github." I think it'd be an easy sell on a lot of companies, since, as you say, many of the developers are already using it. Heck, I even want to convince my company to get the Enterprise version of GitHub, but we're a non-profit and too small for it.
- benackles 14y agoThat still doesn't answer why you need to raise VC money. How does VC money add value to a company which already has an "enterprise" solution and is a known brand to almost all Fortune 500 companies? GitHub is already making a lot of money via cash flow and VC money will only make them beholden to outside interests. Stack Overflow tried to spin why they were raising money after spending years railing against VC-backed ventures. This seems to be a similar scenario. [1] https://enterprise.github.com https://enterprise.github.com
- Soliah 14y agoLast week, I deployed the GitHub Enterprise product in the company I work for (SME, 500+ employees but only 20~ developers). Though the setup process was rather painless, any time I wanted support the only point of contact was an email address[1]. To make things more difficult, because I'm located in Australia the time difference meant most of the time I'd have to wait until the next day to get a reply. I'd imagine VC would help them create much better support options for the enterprise (the company I'm at usually don't even consider products without commercial support), such as 24/7 local support, support contracts etc. [1] enterprise@github.com
- benackles 14y agoI should clarify, I'm speaking as it relates to raising capital; not on the existence of 24/7 support at a premium price point. It still seems to be a common theme where companies raise venture capital for the sake of "going into enterprise". There is a big difference between using cash flows to add 24/7 support and raising VC money. The downside of bringing in outside money seems to outweigh the quick cash infusion. My suspicion is the founders are taking money off the table in a similar manner as 37signals did when they took money from Bezos Expeditions [Jeff Bezos]. Considering the fact that they're bootstrapped, profitable and growing like a weed it seems reasonable to sell a portion of the company to the greatest advisor [Marc Andreessen].
- nowarninglabel 14y agoI've been to their offices just a couple months ago. Github is pretty small, there was literally just 7 people there when we went over (granted most work from home). If they want to expand, they need to hire people for sales and support. VC money seems reasonable for that.
- bitops 14y ago> What does "[going] into enterprise" mean? Going into enterprise means more than having just a behind-the-firewall solution. Deploying code behind the firewall means that you are at the mercy of the customer's environment and have to be much more forgiving than running in an "opinionated" SaaS environment. To wit, here is a laundry list of things you have to deal with for enterprise customers, and they all require time, money, and support. + Slower release cycle than SaaS - you may not be able to push updates to customer environments at will. They may require that they decide when to take updates, which means their codebase could be several months behind. (Not always, but it can happen). + Data & privacy laws, particularly for European customers. Do you love S3? A lot of companies don't, and governments especially don't. This means potentially rolling your own elastic file storage which must also be deployed behind the firewall. + You get into managing a cluster for the customer, not just a single instance. + Your software must fit the security scheme of the customer. In a SaaS environment, you typically have a great deal of control over the network topology. Behind the firewall, company policy may require that only certain ports be open. This might mean re-writing code to either serve a lot of protocols over port 80 or being on long support calls while people file tickets and wait for IT to punch open holes for you. (And then sometimes close them right back up, requiring you to repeat the cycle every time you deploy). + It's also not uncommon to have a dedicated team just for the enterprise customers, or even a dedicated team just for one enterprise customer. This requires hiring people who must be trained and brought up to speed. As I'm sure you're aware, engineer salaries are a big cost factor. + If time differences are too large or too inconvenient, you may need to hire people in other parts of the world. This means needing to comply with local laws and regulations. Which usually means hiring lawyers, additional HR people, etc. The list goes on and on. Deploying for the enterprise can be much more involved than what you might think.
- petercooper 14y agoTo #1, why does a paramedic earn less than a relatively unknown football player? There are lots of variables to take into account, many of them soft or cultural ones.
- jmonegro 14y agoPinterest's potential market is much, much bigger than Github's will ever be.
- te_chris 14y agoSo? If I create a product that gives everyone in the world free power my market would be huge, problem is, this product would be founded on the premise that one day I'll work out how to cover the huge cost of generating enough power to satisfy the world's desires. A much more reputable way to start a power company would be to charge for one's services at a point where MR > MC, but that's just me.
- nl 14y agoClearly free-to-air TV must be worthless too. And I guess you think Newspaper profits (used to) come from the price people pay for them.
- mryan 14y agoUnderneath your sarcasm, I believe your point is that these models were sustained by paid advertising, thus Pinterest could become profitable by following the same model. The cost of ads has plummeted in the last few years, and I seriously doubt Pinterest would remain profitable if its primary revenue stream is ads.
- nl 14y agoUntargetted advertising has always been cheap to buy, and worth roughly the same amount. Google's search advertising has shown targeted advertising is one of the most profitable business models ever. In some ways Pinterest is even more targeted than search.
- dlokshin 14y agoI remember reading an interview with Pierre Omidyar (founder of Ebay) raised $5M from Benchmark, opened a separate bank account, and placed the $5M in there, untouched to this day because eBay was profitable from the very beginning. He raised the money from Benchmark because he needed help recruiting executives to help run and expand the company. His recruitment efforts before that had been largely unsuccessful, and he openly admitted that no one took him seriously before he raised money. Yes, the internet was a new and unproven phenomenon at the time, but there are other reasons to hitch up with a VC other than money.
- vm 14y agore: #1 - Pinterest has dramatically more users and potential users. Will it be able to monetize them as well as GitHub? Hard to say without knowing the details. The other factor is hype. Pinterest is the next hot social company and their comps are Facebook, Twitter, LinkedIn, and Instagram. Easy to let your imagination go wild if you're an investor. re: #2 - they would raise money to a) grow faster, b) acquire companies, and/or c) provide shareholder liquidity. b & c are self explanatory, so let's focus on a): The wad of cash lets them hire faster. Let's say they have 70 employees today and they want to grow to 200 by year end (for enterprise support, for example). Hard to triple your salary expense that quickly if you're operating off cash flows. GitHub have a network-effect business, so why not lock-in every company on the planet as quickly as possible? It'll lead to a much, much greater profits in the long-run. It's only worth the dilution if you expect your equity to be worth more than 1/(1 - n) [See PG's essay: http://paulgraham.com/equity.html http://paulgraham.com/equity.html]
- chii 14y ago> The other factor is hype ... Easy to let your imagination go wild if you're an investor. hype investment is a poor investment, unless you are looking to cheat the late comers to the 'hype', instead of looking to create value (in which case, the investor is a blood sucker, and should be hated). Poor investments looses society wealth. In other words, it should not be that a hyped up fad of the month company garners more investment monies than a real, profitable company.
- fusiongyro 14y ago> How is GitHub worth less than Pinterest? I'll speculate. Github's fighting a losing game. They are trying to charge for something they are also giving away for free, and their target market is people who are uniquely qualified to replace them. There are plenty of quality Github alternatives around right now. To stay on top they have to continue to be at the forefront development-wise and they have to continue to have the majority of developer attention to reap the network effects. It's precarious. Compare to Pinterest. They make money, ostensibly, from every product someone pins. People pin lots of products, and the people doing the pinning and the browsing have higher conversion rates than people browsing Google or other sites looking for things to spend money on. Pinterest is also a brand; it will be hard to get everyone using Pinterest to switch just because a better version exists somewhere else. People can collaborate with Git without using Github; the only tangible loss is the pull request feature. It takes Pinterest less work to convert a byte of bandwidth into profit. Not only do they need less development effort moving forward, they also stand better odds of making money on some random user.
- patio11 14y agoIf Github is losing sign me up for some of that please.
- drx 14y agoExactly what pops into my mind when people say things like that.
- fusiongyro 14y agoI'm not saying they're losing, I'm saying they're fighting a losing game.
- cracell 14y agoHow is Pinterest not also fighting a losing game? I can see how it's harder for Github to stay up with competitors because their target market is more savvy and often tries out new tools. But doesn't Pinterest also suffer the risk of some new social sharing site appearing that appeals to users in a better or just different way?
- drusenko 14y ago> - How is GitHub worth less than Pinterest? The fact that the top two comments are saying this is a sure sign we are progressing into a full-fledged bubble. See George Zachary's interview: http://techcrunch.com/2012/05/17/in-the-studio-crvs-george-zachary-discusses-bubbles-on-the-eve-of-facebooks-ipo/ http://techcrunch.com/2012/05/17/in-the-studio-crvs-george-z... -- it sure seems like we are entering "Stage 2" (check out the video, not the article) When we start discussing what we feel one company is worth based entirely off of the valuation of another, unrelated, presumably inflated valuation, it's the beginning of the end.
- tikhon 14y agoIt's not a bubble 'til my mom owns pinterest stock. Then the end is near.
- erikpukinskis 14y agoMy mom is a software engineer, so you're saying if she buys a tech stock the end is near?
- ericflo 14y agoNo, he referred specifically to his own mother.
- koide 14y agoPlease write a post about it when that happens and link it from HN.
- Aethaeryn 14y agoIf there's a bubble, and it's related to the Facebook IPO, then why did Facebook lose 11% of its value on Monday?
- adventureful 14y agoBecause the bubble is already over. The Facebook IPO marks the zenith of this relatively modest bubble period. Ditto for Groupon, Zynga, Pandora and the like having the insane valuations that they did, while generating zero profit - their valuations have imploded massively. Or a company like HomeAway, that was sporting a $4 billion market cap, and a 600 pe ratio; or LinkedIn with its 1,000 or so pe ratio. The bubble has already exploded for companies like Netflix, whose valuation has collapsed back to earth. A few more like CRM are temporarily defying gravity.
- nl 14y agoHow is GitHub worth less than Pintrest a) Media companies are generally pretty valuable. Pinterest allows users to show clear interests, which should be very easy to convert to commercial intent. b) The potential market for Pinterest users is much larger, with much less competition than GitHub c) Software development tools generally are difficult to make money on. Infrastructure can be slightly better, but still expensive. A16Z knows this market as well as anyone (http://www.hp.com/hpinfo/newsroom/press/2007/070723xa.html http://www.hp.com/hpinfo/newsroom/press/2007/070723xa.html)
- swalkergibson 14y agoWith regard to A, are we not seeing a major correction with the lackluster performance of Facebook on the public market? People have been "Liking" things on Facebook for some time, and they have not yet cracked that nut...
- nl 14y agoNot really. Google's shares have gone down in the past too. Facebook's share price is very high compared to their current revenue. There are very valid questions about how quickly they can grow revenue, and those questions are reflected in the share price.
- raarky 14y ago"How is GitHub worth less than Pintrest?" Markets aren't rational.
- abraham 14y agoI could see there being a need to bolster the payroll for a growth strategy and needing to temporarily bankroll it with outside funds.