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Wow huge round for 7,000 users, but I think I missed something. The plans range from $14 to $293/month and then there is an enterpise plan. If we say the averag

by wellboy 12y ago

Wow huge round for 7,000 users, but I think I missed something. The plans range from $14 to $293/month and then there is an enterpise plan. If we say the average revenue/user is $100/month that would be $700,000 in revenue/month * 12 = $1.14M/year? Pretty impressive for 7,000 users, however, with 200 employees the burn rate is $10M/year? Despite that the valuation is $200M, what did I miss?

beambot 12y ago
$700k/mo * 12 = $8.4M/year (not $1.14M). So they're nearing profitability, have triple-digit per year growth, and the latest investors get liquidation preference that limits their downside. EDIT: Fred Wilson has a good explanation about why "frothy" valuations make sense right now: http://avc.com/2014/03/the-bubble-question/ http://avc.com/2014/03/the-bubble-question/
- wellboy 12y ago
  A sorry for the miscalculation, did that on the way out the door. Just thinking how big the market is. According to https://www.quantcast.com/top-sites/US?jump-to=110000 https://www.quantcast.com/top-sites/US?jump-to=110000 there are 110,000 sites with >10k monthly visitors, so I think that's the market of which they probably can get 30k users max for which they can charge $100/month on average: 30,000 $10012 = $36M/year revenue. So for web, that's the cap it seems. According to http://www.appbrain.com/stats/android-app-downloads http://www.appbrain.com/stats/android-app-downloads, there are 200,000 Android apps that have >100,000 downloads, which probably equates to 10k monthly active users, with iOS apps that's 400,000. So this will probably bring another $72M/year making it $108M revenue cap for Optimizely. So looks like the money for Optimizely is in the app market. With 300 employees at max that's a burn rate of $15M + $25M marketing + $10M other costs, we got a profit of $58M = maybe $700M company, not bad. Back of the envelope calculation, probably totally wrong, ok now back to work :)
  - beambot 12y ago
    I can guarantee their TAM is >$108M / yr. I am involved in two websites that get a lot more than 10k visitors / month. Neither are listed in Quantcast. Using (crummy) traffic estimates based on Alexa ranks, I'd wager that there are at least 600,000 websites that would qualify for your >10k monthly visitors mark. But I suppose it's all a moot point: They convinced at least one VC to invest, and that's all that matters. (Having used their product in the past, I probably would've invested too given the opportunity. Their product is pretty slick and saves a lot of time compared building your own A/B testing framework.)
    - matnewton85 12y ago
      Agreed. One of my sites is ranked 490,000 or so in Alexa. The worst month in the last year was 165,000 visits.
alttab 12y ago
Inflated valuations due to a frothy market propped up by interest free cash fueling speculative tech stocks?
brettfarrow 12y ago
I'm guessing a meaningful percentage of the companies interested in an A/B testing service like theirs (e.g. online retailers) are over 200k monthly visitors and are on the $400/month plan, if not an enterprise plan.
lukethomas 12y ago
Enterprise plans go well into 4 digit/mo territory (I'm an enterprise customer.) These plans are based on visitors, and they also have custom targeting to specific locations.
- wellboy 12y ago
  True but for each enterprise customer paying $4k/month, there are 25 bronze customers paying $14 month.
akbar501 12y ago
Your assumption of $100/month is way too low.
- zefi 12y ago
  you can probably 10x that average per month
  - deleted 12y ago
    [deleted]
teahat 12y ago
Rather than starting with an assumption on avg revenue per user, start with the valuation, figure out what that would imply about revenue/revenue growth, and you'll probably learn something about their likely avg revenue per user (i.e. it's a lot higher than your estimate).

by wellboy 12y ago

beambot 12y ago

$700k/mo * 12 = $8.4M/year (not $1.14M). So they're nearing profitability, have triple-digit per year growth, and the latest investors get liquidation preference that limits their downside. EDIT: Fred Wilson has a good explanation about why "frothy" valuations make sense right now: http://avc.com/2014/03/the-bubble-question/ http://avc.com/2014/03/the-bubble-question/

wellboy 12y ago
A sorry for the miscalculation, did that on the way out the door. Just thinking how big the market is. According to https://www.quantcast.com/top-sites/US?jump-to=110000 https://www.quantcast.com/top-sites/US?jump-to=110000 there are 110,000 sites with >10k monthly visitors, so I think that's the market of which they probably can get 30k users max for which they can charge $100/month on average: 30,000 $10012 = $36M/year revenue. So for web, that's the cap it seems. According to http://www.appbrain.com/stats/android-app-downloads http://www.appbrain.com/stats/android-app-downloads, there are 200,000 Android apps that have >100,000 downloads, which probably equates to 10k monthly active users, with iOS apps that's 400,000. So this will probably bring another $72M/year making it $108M revenue cap for Optimizely. So looks like the money for Optimizely is in the app market. With 300 employees at max that's a burn rate of $15M + $25M marketing + $10M other costs, we got a profit of $58M = maybe $700M company, not bad. Back of the envelope calculation, probably totally wrong, ok now back to work :)
- beambot 12y ago
  I can guarantee their TAM is >$108M / yr. I am involved in two websites that get a lot more than 10k visitors / month. Neither are listed in Quantcast. Using (crummy) traffic estimates based on Alexa ranks, I'd wager that there are at least 600,000 websites that would qualify for your >10k monthly visitors mark. But I suppose it's all a moot point: They convinced at least one VC to invest, and that's all that matters. (Having used their product in the past, I probably would've invested too given the opportunity. Their product is pretty slick and saves a lot of time compared building your own A/B testing framework.)
  - matnewton85 12y ago
    Agreed. One of my sites is ranked 490,000 or so in Alexa. The worst month in the last year was 165,000 visits.

alttab 12y ago

Inflated valuations due to a frothy market propped up by interest free cash fueling speculative tech stocks?

brettfarrow 12y ago

I'm guessing a meaningful percentage of the companies interested in an A/B testing service like theirs (e.g. online retailers) are over 200k monthly visitors and are on the $400/month plan, if not an enterprise plan.

lukethomas 12y ago

Enterprise plans go well into 4 digit/mo territory (I'm an enterprise customer.) These plans are based on visitors, and they also have custom targeting to specific locations.

wellboy 12y ago
True but for each enterprise customer paying $4k/month, there are 25 bronze customers paying $14 month.

akbar501 12y ago

Your assumption of $100/month is way too low.

zefi 12y ago
you can probably 10x that average per month
- deleted 12y ago
  [deleted]

teahat 12y ago

Rather than starting with an assumption on avg revenue per user, start with the valuation, figure out what that would imply about revenue/revenue growth, and you'll probably learn something about their likely avg revenue per user (i.e. it's a lot higher than your estimate).