Vercel raises $150M Series D
vercel.com
vercel.com
What are the reasons for two rounds so close to each other?
The amount of money flowing into venture capital is unprecedented. I run a startup that raised a seed round in June. I’m a co-founder but I’m our CTO, not CEO and I still get 5-10 emails per day from random VCs asking if we need funding.
There’s no way this ends well. But I think it’ll take a decade to shake out.
We raised our pre-seed round in 2020 without anything, just a pitch deck, and fully remote. We didn't meet our investors in person until several months after closing on the round.
We raised our Seed this June based on having roughly 100 companies using our product, a good percentage paying us. So while I wouldn't say we raised our Seed round with PMF, we were (and are) showing signs of PMF.
So yeah, our product is a bit past the MVP stage, but not by much. We still have bugs that come up almost every day, and we fix them as fast as we can. However, the product has matured greatly in the last six months.
- positive reputation. Other founders enjoyed their experience.
- provide value through their network. This is the foundation YC built themselves on. Investors that introduce you to paying customers, other founders, other investors, etc.
- leave you alone and only help when you ask for it. These are the best types of investors. They provide advice only when you ask.
Those are the most important things.
if you have a different physical look or unfamiliar background, the metrics for your existing company are way more important and the bar is much much higher and the multiples investors accept are way way lower.
or just do a crypto version, which is much more inclusive, global, faster, and leapfrogs this rodeo.
How do you think it will end?
When that happens, lots of VC-fueled companies will shut down.
In other words, I think it ends with a return to a funding climate similar to 2015-2016 where money was available, but money also wasn't free. And financing rounds were smaller.
There will be much more resources that can be bought with money, so money will be worth more, compensating for any bubble that is created right now.
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FTA:
It’s hardly surprising that many GPs were afraid Covid-19 would put an end to the past decade’s golden era of private equity fund-raising. But those fears turned out to be unwarranted. Global fund-raising of $989 billion was a decline from 2019’s all-time record of $1.09 trillion (see Figure 18). But it was still the third-highest total in history, and if you add in the $83 billion raised for SPACs, it was the second highest. All told, the industry has raised almost $5 trillion in capital over the past five years. Buyout funds alone raised about $300 billion in 2020, or $340 billion if you include SPAC capital aimed at buyout-type targets, estimated at $41 billion (see Figure 19).
This data corroborates first and secondhand experience from being close to people on both sides of the table wrt technology funding. Most people aren't shy about discussing the topic as it's just taken as a fact of life in the current environment.
Thanks!
If they raise so much that they have to IPO, great!
So what are your plans for this funding? I know that Vercel just raised $100M a few months ago (it seems).
- Support open-source projects
- Make the Web Edge-first
- Build the end-to-end development platform
- Grow our team
Happy to dive further into any of these. We did raise our Series C in June: https://vercel.com/blog/series-c-102m-continue-building-the-....
[2] https://rauchg.com/2014/7-principles-of-rich-web-application...
There's also a real question of whether Vercel and Netlify are really at the edge when they’re mainly running in AWS, GCP etc data centers rather than deploying their own hardware at edge locations, ISPs etc.
Don't get me wrong I think Vercel and Netlify are interesting but they seem to talk about being ‘on the edge’ while they really aren’t ATM
In advance I'll apologize for being this direct, answers can get fishy sometimes these days, so I will parameterize my query, so to speak:
What portion (concrete numbers) are at minimum being earmarked for supporting open source projects and devs directly? I don't mean t-shirt budget and things, I mean what is the total amount of funds that will be donated directly to open source projects and devs?
This is the main reason I refer clients to Netlify as I use IPv6 support to measure the maturity of a platform and its engineers.
Working for AWS and working with hundreds of customers a whopping 0 of them ever required ipv6.
what kind of promises are they making in exchange of the capital?
why don't more capable platforms like Render or Fly.io raise as much?
The next big startup could be an application on Vercel maintained by 2 people instead of a tangle of micro services and AWS configurations maintained by 20.
It's not really something that will run your Rails backend, but it has the potential of doing a lot for creative small teams.
[1] https://vercel.com/docs/concepts/functions/serverless-functi...
Everything is a Mainframe or SAP installation under the hood somewhere, but layers and layers of API mean that product teams can mostly ignore the complexity and ship a mediocre app that is only really a frontend.
I just don’t see the valuations lining up, but I’ll probably be wrong.
I also don’t know who they get acquired by. I don’t see AWS making acquisitions like this. From what I’ve seen, it seems like they try to buy companies at lower valuations (than multiple billions).
Cloud services are one of the most profitable businesses to ever exist. There’s so much lock in and network effects. Especially with managed solutions like these.
[0] ref "red teaming at Intel", https://news.ycombinator.com/item?id=21095977
The Innovator's Solution addresses these and other issues.
http://web.mit.edu/6.933/www/Fall2000/teradyne/clay.html: Even after correctly identifying potentially disruptive technologies, firms still must circumvent its hierarchy and bureaucracy that can stifle the free pursuit of creative ideas. Christensen suggests that firms need to provide experimental groups within the company a freer rein. "With a few exceptions, the only instances in which mainstream firms have successfully established a timely position in a disruptive technology were those in which the firms' managers set up an autonomous organization charged with building a new and independent business around the disruptive technology." This autonomous organization will then be able to choose the customers it answers to, choose how much profit it needs to make, and how to run its business.
If you can hold onto control of your company and take a few million off the table, why not?
No reason why this won't change. A market leader needs to consolidate their position year-after-year. GitHub was a great acquisition AWS missed. They shouldn't want to miss the next GitHub.
For context Heroku was created in 2008 just after the housing crash. By the time they exited Facebook was still 2.5 years away from going public and a solid seed round still looked like a few hundred grand if you were a hot company (on top of the ~17k you'd get from YC).
The acquisition doesn’t have to happen at these valuations for the investors to make money. See - Liquidation preferences
Why not $150M? All these companies were founded ~4 years before Render and it takes time to build to the point where these huge valuations and funding amounts make sense (to the extent they do).
There are some neat static site generator plugins out there (simplystatic, wp2static) which can be used in localwp, an easy to use and popular local dev environment from wpengine.
People could start with a static site for free/cheap, deployed from their local env to Render, and then move to docker when their sites and dynamic needs grow. This could make it a lot easier for peeps building their audience with blogs and digital products before they get into SaaS.
But I assume most of the money goes to hiring new folk. Dunno how much new engineers you can get out of it. Anyway, good for them.
Having heard of this first time I tried looking it up and all I see is this:
> Vercel combines the best developer experience with an obsessive focus on end-user performance. Our platform enables frontend teams to do their best work.
The heading above it is even more nonsensical. So many words which convey absolutely nothing to me.
Can anyone please tell me what does it do? Is it a cdn or some kind of hosting?
Coke is 1) a drink. and 2) 7 Billion people know what it is.
Vercel is 1) complicate and 2) nobody knows who they are.
It's such an embarrassing problem for them, I find it hard to fathom how they even have new users, much of their language is dense and ridiculous like this.
It is not 'reasoned' and they are definitely not intentional in their focus, they have just put some scruff on a page that's confusing.
Companies fail at these things all the time because often there are no checks and balances.
This is the exact same issue that came up last time they raised money, #1 post: 'What is it?'.
From the doc page:
...
"Vercel is a platform for frontend frameworks and static sites, built to integrate with your headless content, commerce, or database.
We provide a frictionless developer experience to take care of the hard things: deploying instantly, scaling automatically, and serving personalized content around the globe.
We make it easy for frontend teams to develop, preview, and ship delightful user experiences, where performance is the default."
...
That still does not say 'what it does'.
Is this a hosting service? Some open source UI like React? Does it to back-end logic?
Saying "It'A a Front End Framework That's Really Cool And Solves All Your Problems" is not marketing.
This is a fairly giant marketing/communications fail.
I have enough experience to be able to know what it is from a quick summary, but I still don't quite get it.
It's an epic communications failure.
Vercel marketing team has created a huge problem on the funnel whereby a lot of casual / semi-interested visitors are effectively bouncing without having ingested a nominal understanding of 'what it is'.
Technology is not quite like brand marketing where 'Jordan / Kapernick / Yeezy' do the selling, it's generally something we need to understand in order for it to make sense. The 'aha' moment can only come after that.
Vercel does face the additional challenge that 'Next.JS' is not a widely known framework, and they have to additionally explain that, but it's not an insurmountable problem.
This is not uncommon in SaaS actually, but it is kind of ridiculous.
As a rule of thumb: if people feel the need to visit your Wikipedia page to understand 'what you do' - then the marketing department is acting against the best interest of the company, and is literally a source of confusion instead of clarity.
It probably means the vector of spread is word of mouth and other things.
SaaS companies are notorious for this.
I suspect that VC money will be used to acquire and influence key open source contributors, and commercialize their work after giving them fixed salaries to work on their projects.
I'm hoping to see them hiring more people to work on open source as oppose as acquiring the already well sponsored ones.
Anyway, congrats to the team and their success thus far! and I hope they keep the healthy spirit of open source.
Hey enterprise sales folks. If you want me to use your enterprise services, post your prices.
We're all adults here. If I can't afford your offering and you still want my business, we can work out a discount.
If you're going to make me hop through hoops to find or determine pricing, you go directly to the bottom of my comparison list, and possibly leave it altogether. If you're truly the only option in market you _might_ make it if I can't afford to build your service.
Stop foggy pricing. We've known since at least 2013 this is a bad economic practice.
[0] Miravete, E.J., 2013. Competition and the use of foggy pricing. American Economic Journal: Microeconomics, 5(1), pp.194-216.
if you want them to have your business, then you have to post your budget
it's a great way to filter out orgs that have no money to begin with
and big businesses might be paranoid about their competitors knowing their costs
Getting someone's business means they are paying you.
Point understood regardless. Basically enterprise sales are unwilling to sell a product, would prefer to sell an associated labor cost.
My prioritization remains though. If you obfuscate price, I want as little to do with your product as possible.
if you don't have serious money lined up (typically 5-6 numbers minimum) sales won't bother with you anyways
sometimes pricing can't be easily calculated and there might be many factors and even some custom agreements in place (like SLAs), which do add up the cost substantially
in my own projects, however i always list minimum commitment for every tier
but only because i don't have enterprise sales team
> If SpaceX can list pricing for launching a payload into space on their website, you can do the same for your [...] software.
If I want to use your software as-is without access to your developers to prioritize features, there isn't a need for "enterprise" approaches.
They could totally replace the icon with just a (Max 10).
I think it makes complete sense. There's a lot of room to grow in this space. There's a lot of money going into tech salaries, and even then it's hard to find people. Anything that saves developer time and saves companies from having teams to build and manage cloud infrastructure is honestly very promising.
[1] https://pitchbook.com/newsletter/netlify-captures-2b-valuati...
see nextjs repo: https://github.com/vercel/next.js/
and for frontend infra, vercel is a pretty great developer experience. Just hookup your github repo and on commit its deployed, behind CDN, preview branch URLs, etc
Edit: grammar
Today there three or four companies in the EV space alone that are either outright universally known frauds (Nikola) or where senior management has told investors that they will run out of money before ever making a product. Yet they all have billion dollar+ market caps (Workhorse, Lordstown, etc...)
Rivian, Tesla, and Lucid do have products but are worth $1.3 trillion together. What do you call that if not insanity?
You would have a case if Vercel has no revenue, or no chance of becoming profitable. I don't know their numbers, and I'm sure the multiple is high, but relating this to EVs is a non-sequitur.
Startup valuation is no different. Very unlikely to be a new normal, but a brief period of hysteria as has happened many times in history.
Not speaking to the Vercel case by any means... Not aware of their prospects or otherwise that justifies this value.
We'll pretty soon see those who have been swimming naked get crushed when the tide goes out. Likely happening around now/start of next year with Fed shift to tightening, and effect of 2020/21 transfer payments waning.
Vast majority of tech valued at 100x sales have no justification as an investment. It's dotcom 2.0, but with more legitimate businesses that are simply far overvalued.
EV is just the most obvious and visible manifestation of this. Rivian at 150B value with 0 sales and many competitors. You have to be pretty delusional to invest in things like this and expect not to lose big. And best case you may 2 or 3x many years from now? What kind of risk/reward tradeoff is that?
I think its a worthy exercise for new programmers but IMO there is 0 reason to waste the time and mental overhead. Im sure we all have about 6 projects languishing because we dont want to ssh into an instance and remember what the hell is going on in there. Maybe just me.
USD has become a liability for the world. The only reason China doesn't dump all their USD reserves is because they know the global economy will pop instantly because there's no real value behind it to support such big, unfairly distributed numbers in the pockets of so many unproductive people. The world is simply afraid of what comes next but they will have to face it regardless because time is running out and citizens of the world are tired of propping up this fiat pyramid scheme.
That said, I don't understand why the fiat exchange rates are stable (USD even coming out ahead as you say) but inflation is not even. In Europe, I'm not seeing any noticeable inflation in consumer goods but apparently consumer goods inflation is very noticeable in the US... But you'd think this uneven inflation should affect exchange rates. Why can't Americans get the same price for the same product as Europeans can? That should be a major arbitrage opportunity.
IMO, there is some serious manipulation going on here to prop up the USD and this may be what is causing the inflation and shortages in spite of stable exchange rates.
Also agree that EU does distribution wrong way. It would be better if they simply gave more cash to extend reach of already succesful companies, maybe. Or just sane law to fund startups via shares EU wide.