8 ms·
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
by lifeofanalysis 12y ago
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.
- krogsgard 12y agoI 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.
- lifeofanalysis 12y agoI 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?
- photomatt 12y agoVIP has 15 people of the 243 that work for Automattic. It's a great business, and a great deal for enterprises, but not our primary focus as a company.