Automattic Raises $160 Million, Valued at $1.16 Billion

http://recode.net/2014/05/05/wordpress-parent-automattic-has-raised-160-million-now-valued-at-1-16-billion-post-money/

by dkasper • 12 years ago

123 35 12 years ago

recode.net

hayksaakian• 12 years ago

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

spada• 12 years ago

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

jes5199• 12 years ago

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

poopsintub• 12 years ago

The WordPress Foundation is a separate entity from Automattic at this point. They're just contributors.

rabino• 12 years ago

"WordPress.com parent" is correct, though. "WordPress parent" wouldn't.

jmathai• 12 years ago

Automattic, makers of Wordpress.com, ... is more accurate.

iwasphone• 12 years ago

The reason is cultural: on HN you are expected to know products by the name of their corporate entity.

chexee• 12 years ago

"The longer a thread about Automattic exists, the likelihood the WordPress v. WordPress.com argument will come up approaches 1."

The curve grows steeper.

krogsgard3• 12 years ago

The original post title didn't include the .com, so said "WordPress parent company" which is inaccurate. It was probably submitted to be technically accurate. Now that the post title has been adjusted to include .com, it would make more sense to use that here.

rokhayakebe• 12 years ago

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...)?

TheBiv• 12 years ago

Regarding the second question, the high head count most likely is in account management/support

davidu• 12 years ago

Companies that sell a product, especially an "enterprise" product need more people.

Instagram is engineering driven. Growth there is engineering driven.

Companies like Box have sales people, account managers, sales engineers, code engineers, marketing folks, finance and planning people doing modeling and running the books, etc. Growth is technology driven but people enabled.

trhway• 12 years ago

Companies that sell a product, especially an "enterprise" product need more people.

The Disruption Opportunity (that has been out there for quite a time and is very resistant to disruption :)

dkasper• 12 years ago

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

Marketing/advertising and employees.

untog• 12 years ago

All three examples you gave are consumer products that are either free or near-free. The level of support people expect from Instagram is very different to the support they expect from the company they pay to host their corporate web site.

lifeofanalysis3• 12 years 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.

krogsgard3• 12 years ago

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.

photomatt2• 12 years ago

VIP 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.

leorocky• 12 years ago

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

krogsgard3• 12 years ago

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/

lifeofanalysis3• 12 years ago

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

antidaily• 12 years ago

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

Jgrubb• 12 years ago

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.

photomatt2• 12 years ago

Thanks!

wehadfun• 12 years ago

Is Facebook and Automattic the main companies keeping php around

akgerber• 12 years ago

Etsy makes extensive use of it and employs the originator of the language, Rasmus.

joshdance• 12 years ago

Inertia. Lots of tuts about php. Relatively easy to get something to show up. Runs just about anywhere. But FB and Automattic definitely push it forward.

paulgb• 12 years ago

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

drgath• 12 years ago

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.

jackbravo• 12 years ago

Wordpress, Joomla and Drupal. Those 3 CMSs run more than 50% of all the CMS powered websites on the entire Internet (http://trends.builtwith.com/cms), all written in PHP.

donniezazen• 12 years ago

As someone who has recently learned programming and is unaware of history of programming languages, all this PHP hate leaves me whimsical.

georgiecasey• 12 years ago

magento, the leading self-hosted e-commerce software.

yawz• 12 years ago

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...

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majani• 12 years ago

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.

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Automattic Raises $160 Million, Valued at $1.16 Billion

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