4 ms·

What are you hoping for when you get in at this valuation that will follow dillution? That a cloud web hosting company will be publicly valuated at 30B ?

sixhobbits 2y ago
"with participation from existing investors" Probably "hey crazy times are over and everything was too highly valued your only options are to admit you f'd up and lost or to try push this thing higher and leave someone else holding the bag, what you wanna do?"
- rvnx 2y ago
  Let’s just hide it with our other losses and persuade the board of our IPOed companies to purchase it, like we did with Giphy you know
seanhunter 2y ago
That's exactly what I was thinking when I read this. I like vercel as a technology but am always baffled by these sorts of valuations in the sense that I just can't imagine a future where they have enough profit from Saas revenue to earn that out in any feasible amount of time. I guess people are assuming that they get snapped up by someone like Heroku was bought by salesforce, but that was for <$250m which is a very different proposition from $3.25B.
- fakedang 2y ago
  Heroku was once a unicorn, and was touted to be a 100B SaaS at one point.
  - pjmlp 2y ago
    And now everyone misses the good old days from Heroku.
    - jokethrowaway 2y ago
      It was valued by hobbyists and small companies spending relatively little money (albeit a significant amount for the resource provided). Heroku had excellent DX, it was an experience similar to working in a mid-large company with a working CI/CD pipeline and an infra team. But even 50-100 people companies can afford to have an infra. There was never a lot of money in Heroku imho. Same for Vercel
- rchaud 2y ago
  The methodology of startup valuations is completely opaque, so it's in the interest of VCs to claim the highest possible number, because why not? Everybody putting in money is NDA'd up to here and they're certainly not going to upset the apple cart by broadcasting skepticism about the 'valued at' number. WeWork was worth $50bn when only VCs could look at their numbers, and $10bn when the S-1 came out.
alephnerd 2y ago
Founders are getting better terms in private markets instead of public markets. This is why you are seeing these massive series rounds. Vercel was able to get $250M with much less overhead compared to creating an S-1 and publicly listing for a similar amount of money. Most of these companies will remain private long term, get acquired by large players, and a couple will publicly list once expectations for public listing ease. An IPO isn't an end goal - it's just one milestone of multiple that companies will need to hit.
- JumpCrisscross 2y ago
  > Founders are getting better terms in private markets instead of public markets. This is why you are seeing these massive series rounds They asked why there are massive rounds. You answered founders are going to private markets because there are massive rounds. This is circular logic.
- arisAlexis 2y ago
  So you think Microsoft will buy private vercel for a multiple of 3 billion? They use aws! It's a software service for web sites.
  - filoleg 2y ago
    Microsoft bought Github for $7.5bil and LinkedIn for $26.2bil. I think any big tech company of an even remotely close caliber would have no reservations about purchasing Vercel, if they cared to. I mean ffs, Adobe almost acquired Figma (“it’s just a software service for software UI mockups!”) for ~$20bil, and the only reason they abandoned the deal was due to legal challenges from the European Commission and the UK Competition and Markets Authority. With the take of those authorities, in crude and simplified terms, essentially meaning “this deal seems way too good for you and gives you [Adobe] too much of an unfair anti-competitive advantage”. So yeah, it kinda makes sense why Adobe and the rest don’t mind spending billions on those types of acquisitions (assuming they actually go through), given how good it ends up for their business. So yes, if Adobe was more than willing to buy Figma for $20bil, then I don’t think there would be a lack of big tech companies having any reservations about acquiring Vercel for “multiple of $3bil” (assuming they were interested in the company in the first place).
muttantt 2y ago
It's really simple, this is VC pyramid scheme at play. Say you put $100M into a company at $1B valuation. A year later you put $250M at a $3.25B valuation. Your $350M is now valued at made up $580M. When the company later sells for just double, $7B, your $350M became $1.2B.
- lotsofpulp 2y ago
  > When the company later sells for just double, $7B, your $350M became $1.2B. “If”, not “when”.
  - riku_iki 2y ago
    They may have clear path to "when", since they invest. For example, I see some transactions where smaller company is acquired by larger company, and it looks like both companies have the same core investors who guide through this route.
- ilrwbwrkhv 2y ago
  Yup this is really it. For the last decade VCs have played this horrible pyramid scheme. It is bad for the whole country and the economy.
riku_iki 2y ago
> That a cloud web hosting company will be publicly valuated at 30B ? they are now "AI"
qq66 2y ago
Worth noting that this is preferred stock so the investor will get their money back if Vercel sells for anything more than $250m.

sixhobbits 2y ago

"with participation from existing investors" Probably "hey crazy times are over and everything was too highly valued your only options are to admit you f'd up and lost or to try push this thing higher and leave someone else holding the bag, what you wanna do?"

rvnx 2y ago
Let’s just hide it with our other losses and persuade the board of our IPOed companies to purchase it, like we did with Giphy you know

seanhunter 2y ago

That's exactly what I was thinking when I read this. I like vercel as a technology but am always baffled by these sorts of valuations in the sense that I just can't imagine a future where they have enough profit from Saas revenue to earn that out in any feasible amount of time. I guess people are assuming that they get snapped up by someone like Heroku was bought by salesforce, but that was for <$250m which is a very different proposition from $3.25B.

fakedang 2y ago
Heroku was once a unicorn, and was touted to be a 100B SaaS at one point.
- pjmlp 2y ago
  And now everyone misses the good old days from Heroku.
  - jokethrowaway 2y ago
    It was valued by hobbyists and small companies spending relatively little money (albeit a significant amount for the resource provided). Heroku had excellent DX, it was an experience similar to working in a mid-large company with a working CI/CD pipeline and an infra team. But even 50-100 people companies can afford to have an infra. There was never a lot of money in Heroku imho. Same for Vercel
rchaud 2y ago
The methodology of startup valuations is completely opaque, so it's in the interest of VCs to claim the highest possible number, because why not? Everybody putting in money is NDA'd up to here and they're certainly not going to upset the apple cart by broadcasting skepticism about the 'valued at' number. WeWork was worth $50bn when only VCs could look at their numbers, and $10bn when the S-1 came out.

alephnerd 2y ago

Founders are getting better terms in private markets instead of public markets. This is why you are seeing these massive series rounds. Vercel was able to get $250M with much less overhead compared to creating an S-1 and publicly listing for a similar amount of money. Most of these companies will remain private long term, get acquired by large players, and a couple will publicly list once expectations for public listing ease. An IPO isn't an end goal - it's just one milestone of multiple that companies will need to hit.

JumpCrisscross 2y ago
> Founders are getting better terms in private markets instead of public markets. This is why you are seeing these massive series rounds They asked why there are massive rounds. You answered founders are going to private markets because there are massive rounds. This is circular logic.
arisAlexis 2y ago
So you think Microsoft will buy private vercel for a multiple of 3 billion? They use aws! It's a software service for web sites.
- filoleg 2y ago
  Microsoft bought Github for $7.5bil and LinkedIn for $26.2bil. I think any big tech company of an even remotely close caliber would have no reservations about purchasing Vercel, if they cared to. I mean ffs, Adobe almost acquired Figma (“it’s just a software service for software UI mockups!”) for ~$20bil, and the only reason they abandoned the deal was due to legal challenges from the European Commission and the UK Competition and Markets Authority. With the take of those authorities, in crude and simplified terms, essentially meaning “this deal seems way too good for you and gives you [Adobe] too much of an unfair anti-competitive advantage”. So yeah, it kinda makes sense why Adobe and the rest don’t mind spending billions on those types of acquisitions (assuming they actually go through), given how good it ends up for their business. So yes, if Adobe was more than willing to buy Figma for $20bil, then I don’t think there would be a lack of big tech companies having any reservations about acquiring Vercel for “multiple of $3bil” (assuming they were interested in the company in the first place).

muttantt 2y ago

It's really simple, this is VC pyramid scheme at play. Say you put $100M into a company at $1B valuation. A year later you put $250M at a $3.25B valuation. Your $350M is now valued at made up $580M. When the company later sells for just double, $7B, your $350M became $1.2B.

lotsofpulp 2y ago
> When the company later sells for just double, $7B, your $350M became $1.2B. “If”, not “when”.
- riku_iki 2y ago
  They may have clear path to "when", since they invest. For example, I see some transactions where smaller company is acquired by larger company, and it looks like both companies have the same core investors who guide through this route.
ilrwbwrkhv 2y ago
Yup this is really it. For the last decade VCs have played this horrible pyramid scheme. It is bad for the whole country and the economy.

riku_iki 2y ago

> That a cloud web hosting company will be publicly valuated at 30B ? they are now "AI"

qq66 2y ago

Worth noting that this is preferred stock so the investor will get their money back if Vercel sells for anything more than $250m.