Squarespace to Go Private in $6.9B All-Cash Transaction with Permira
investors.squarespace.com
investors.squarespace.com
The traffic is controlled by Google and social networks. Most people don't have the skills needed to run their own website. A lot of valuable content is created by people without these sorts of skills.
Didn't support scripts IIRC but with webassembly it doesn't have to be too difficult to support something like NextCloud I'd think.
No, it's a function of economics. Division of labour still works. It is not more profitable to run your own cloud and pay for your own traffic when you're specialized in producing content. It makes financial sense to pay someone to do that for you. The middleman is cheaper, that's why they exist. The internet looks like it does for only one reason, in any system of increasing complexity there are increased returns to specialization and trade.
While I still inspire to launch a twitter 1.0 plain old less featured version, but the thought of moderation kills my motivation immediately. :(
There are still public computing facilities here, like sdfeu, envs.net etc, am not sure how they handle the moderation of spam and pirated content attack.
Indeed. But unlike machines (and AI, in the future), humans don't scale well. managing a potential audience of 10000 user with a few hundred commenters focused in a few countrie is an order of magnitude different from the millions of users with thousands of commenters and a very well established malicious actors with no respect for community.
It's more work, for more people, for less appreciation. It's also harder than ever to pay for labor as a small community, unless you are very well off.
To be clear, I think the admins are mostly white knuckling the moderation problem.
My point: at least there's something worthwhile there on the more desirable network to require moderation, rather than it all being on Facebook.
I could see why this might not scale as well to instances with thousands of users, or if a user is a frequent target of harassment (where opt-in federation might be the only solution), but for our lab, the existence of all the nazi or whatever instances has been resolved via a simple "Oh, these again. click, click, click There, the whole instance is banned." a few times a year. I have a suspicion that Dunbar's number or lower might be the optimal size for any federated social media instance, since knowing every user on my instance makes it a lot easier to tailor the little effort I have to put in.
[0] https://seirdy.one/posts/2023/05/02/fediverse-blocklists/
Is your email still valid as listed?
There's also RSS feeds
Horrible, confusing UX. Very limited feature sets. Mediocre performance, at best.
if that's supposed to be the future, call me a luddite I guess.
Super easy to run your own server to host content from a desk/laptop and super easy to use a client to visit other servers. You could find servers using trackers (name severs that kept track of hotline servers) or keep the server private and only give out the server info to people you want.
well that's the issue. There is no "small community" these days like there would be in the Usenet days. At least not a genreal purpose one for blogging whatever is on your mind. My parents wouldn't really care much about the content so much as supporting me. My friends don't necessarily share all the same interests as me. So you want to seek out like strangers on the internet to bond with.
That's part of why we transitioned to early web 2.0 of utilizing a middleman to host content, and use that to attract a community. The internet grew and people could focus exclusively on what they were genuinely interested in, as opposed to subscribing to users directly.
I think that the right place to provide this is at ISP level, positioning as a beefier router with extras.
I worked for an ISP before and did multiple projects involving consumer hardware. You do not want to be tied to whatever garbage your ISP decides to buy in bulk and give to.
You want your stuff to be movable between ISPs, however, so your domain registrar should be separate.
ISPs are not great, true, but why not build a good one? For a change.
> As much as I'd like to see a web 1.0 revival, this won't happen.
> The traffic is controlled by Google and social networks.
Maybe Web 1.0 won't return as the "dominant culture," but I wonder if something like it could return as a subculture.
> Most people don't have the skills needed to run their own website. A lot of valuable content is created by people without these sorts of skills.
Maybe we just need an new MS Frontpage for the new millennium?
With so many static site generators, I wonder how hard it’d be. Not that it’s simple, just thinking that an opinionated structure, a gui, and gluing it all together.
I’m shamelessly link to this thing I’m running[0] because I personally believe that subculture is already (still?) there and I’m doing what I can to help other people discover this fact.
Just recently I added a guestbook to my site and I’m having fun seeing other people doing the same.
Webrings are also doing a comeback. I have hope for a return of a more personal web, even as just a small subset of the whole web.
That and financial incentives. Substacks seems to be the most successful "web 1" implemenation in the past decade, but that still monetizes the idea (anthetical to a web 1 era).
Of course, the defaults would have to be basically zero-management. But people would be able to choose how much control over their own data they want versus how convenient they want it to be. Right now, it's pretty much all or nothing.
Cyrus-imap + postfix. If I need to scale up, can migrate from sqlite to postgres.
Like, sure, you could probably get away with it. Once at most places. And even then, it would still likely leave a sour taste in your client’s mouth if their new vendor couldn’t even get their shit together to keep their email up and running smoothly.
You had a mid-sized to corporate business sending passports over WhatsApp? I highly doubt that.
This is not even coming from a “US-centric” view. This is coming from a “that will never pass any sort of compliance or hell corporate governance” sniff test.
Before the Russian/Ukraine war, I worked for a US company that did business operations on Russian cloud providers - one (very major one I don't want to name here publicly) had their main support in some sketchy all-russian telegram channel that I only could access via my personal device. You'd type your issue in english, get a bunch of russian responses, and then sometimes hours/days later your issue would mysteriously vanish.
"I don't know, dude is usually black out drunk I will go check on him"
5 min later
"Yeah he was passed out on the floor, I threw a bucket of water on him and rebooted the thing it should come back up shortly."
...and yet WhatsApp Business exists to do exactly that. In developing countries, some businesses use WhatsApp as the only written-communication channel (supplemented via voice calls). For over a billion people, their smartphone is the primary - oftentimes only - computing platform. Business communication over WhatsApp is not as awkward as you suppose it is, and all businesses, including large ones, have to meet their clients on whatever platform(s) they happen to be on.
To answer your question, no I've never corresponded with a client via WhatsApp
In particular, I’m wondering how much a self hoster can expect to have this sort of downtime because of breaking changes to the mail server application(s) vs. misc. server outages (e.g., breaking OS upgrade unrelated to the mail server) vs. having to fix “my mail was marked as spam” problems.
Installed a second server last year. That had 0 problems since day 1.
I feel like people overblow the whole email thing. Want you to pay for tuta et al when you can build your own and manage it.
I havent updated both servers in a year. Zero problems.
Again, people maybe confuse miab and other email servers maintenance with maintaining nextcloud which is a real pita
This was what eventually broke my self hosting plan.. too many emails sent and never received.
Maybe my buddy hasn't responded because he's got a lot going on at work at the moment. Or maybe my DKIM/DMARC records aren't playing well with his mail forwarder. Pretty difficult for me to tell - I'm not in the habit of phoning someone to tell them I sent them an e-mail.
Heck, the company I work for gave up trying to host our own email blasts to customers as we were fighting with different places around the world *constantly* (we had a dedicated position just for dealing with this shit, and they were becoming overwhelmed).
If there's going to be a web 1.0 revival, maybe it needs to jump straight to version 5 to leave enough of a gap from the taint of blockchain...
Web3 was never part of the Internet in the public consciousness. Nothing that requires logging in with a crypto wallet ever was.
Wait, shit--
As soon as it is owned mostly by investors, everything becomes about shareholder value.
People like to hate on PE, it's just negativity bias. Most people don't hear about all of the PE success stories. If PE just ruined companies as a matter of fact, it would not be a good business...and it's an objectively good business to be.
PE is good business for the raiders, bad business for the raided.
And even with a negative outlook and debts (i.e. liquidation), extracting value without making bigger issues is not at all simple.
And when they part one out like you are referencing, it’s usually a bad business. While what Eddie Lampert did to Sears/K-Mart was criminal, or at least should be, they were not a good business and hadn’t been in a very long time.
A good business is rarely worth more parted out than whole. It’s most often good business for the “raided” too because they are failing and the alternative is bankruptcy. A company that survives after laying off 25% of its staff still employs more people than one that dies entirely.
This is why they prefer companies with high revenue and low profits. That’s nearly always the sign of a business that has been mismanaged and can be fixed.
I have come to the conclusion that people in tech are as largely ignorant of finance as people in finance are of tech.
I've always been very skeptical of the sale/spinoff of various divisions of automakers in the 80s/90s. To me it always felt like they were looking for a short term profit vs the general 'steady pace' of government contracts and the like, I also can't help to feel amazed nobody even showed a good second option for the next gen mail carrier... but again, I feel like it's because everyone sold the farm already.
I think Tesla is a good illustration. They make a lot of parts other auto makers outsource, and they also have a whole lot of quality control issues. I am sure I suffer from observational bias here, as my GF has a model Y and I notice all the parts that fail that never would on any other car (like vent fans, door handles, etc.) but the upside exists in some engineering document or p&l I don’t see.
Well I'm you can certainly speak for yourself, but that doesn't mean the rest of us are, so maybe keep your opinions to yourself. I was responding to the premise that people hate on PE because of negativity bias - there is a negativity bias toward Private Equity, and it is entirely on the fault of the industry for their mendacity and lack of empathy. The fact is, there are more than enough examples of this bad behavior (recently, Chuck E Cheese and Toys'R'Us come to mind). There are also plenty of examples of PE "improving management" by crushing labor, degradation of product quality and screwing customers, so that is is the reputation for the entire industry.
I'm not even specifically criticizing the industry - they have a role to play in the economy. What I am saying is don't go crying about the public perception - if they want the big money, they get to own that reputation and be the bad guy. No one likes a parasite.
PE is a giant thing. There is a lot of it. The ones who don’t run companies out of business have no control over the ones who do. You’re using “they” to refer to thousands of people as if they’re a monolith.
And I don’t disagree that the bias you mention is accurate, I was pointing out that it’s because the people who think that way simply don’t understand finance. And judging by the comments here every time it comes up, the bias you mention is very popular.
Keeping opinions to ourselves would make these comments sections pretty sparse. Why is mine not ok but yours is? I was largely agreeing with you and expounding anyway.
> You’re using “they” to refer to thousands of people as if they’re a monolith.
This is the same thing the cops whine about. The PE industry has a ton of money - if 90% of them are good actors, they could easily organize and lobby for rules to stop the bad actors. That they don't tells me that the incumbents like the rules where they get to do whatever they want.
> I was pointing out that it’s because the people who think that way simply don’t understand finance
I think you are wrong. They understand the impacts that financiers have had on themselves, their families and their communities. There is a reason private equity (and its' older equivalents) have been loathed by common people for over a hundred years in this country :)
It's a strong indicator of a second-class mind and surface level thinking when they say "you compared X and Y!?!?". Comparisons don't mean anything. "Abraham Lincoln and Hitler were both men" is logically equivalent to what I said, and just as true. I didn't equate the societal effects of the two, I was merely pointing out that people who don't understand groups tend to lump them all together and suffer from observational bias. Human irrationality repeats itself in clear, obvious ways. Sometimes it leads to something terrible (centuries of opression), sometimes it leads to something innocuous (people saying something stupid in a comment thread) but it's the exact same mechanism. Think deeper before saying things that dumb, you're hard to take seriously.
People absolutely do not understand the impacts financiers have had on themselves. They do not understand economics, at all. This is a country (and, in most cases, it's the same everywhere, just swap the title) where most people think the President is a major factor in things like inflation, gas prices, etc. They have no more idea why the economic things they observe happen than they do why they universe exists, and so in the exact same way they jump to the conclusion they understand. Skydaddy made us, rich guys ruined everything for their gain. (There you go, I just compared poor economics knowledge to religion, have fun.)
If a lot of people think something, it is not because it is correct. (Sometimes it is correct by happenstance.) It is because they are exposed to a lot of propaganda to that effect and they don't know enough to have a more nuanced explanation.
PE's, meawhile, don't really have that control. They are shooting all the hell up and we don't know if they are self destructively OD'ing or are curing cancer. Most high profile results are sadly the former. There's simply less financial incentives these days to invest in "saving" a company if you don't emotionally invest in it.
It is not, however, the business model, as many here seem to think, because the people on the other end aren’t THAT stupid. There isn’t that much dumb money.
The business model is buy a company that’s in serious need of improvement, fix it, then sell it/take it public. That’s why they prefer companies with high revenue and losses.
Or sometimes, if they think an industry is just poised for strong growth, they just buy and hold. I suspect that’s what’s going on with all the veterinary office purchases we discussed recently.
I really don’t know where Squarespace falls. They’re allegedly keeping management in place which would make me guess they just think it’s poised for strong growth but I really just don’t know.
LBO is just one type of PE, and even among LBO, there are lots of stories about firms fixing a business. For every K-Mart there’s a Dollar General.
And even with the K-Mart type stories, those businesses were 100% failing without intervention anyway. They might have done so in a way that was better for shareholders, and that’s an egregious example. But they’re not generally parting out thriving companies and leaving banks holding a bunch of bad debt. Banks are smart and good companies are almost always better off whole, just as a running car is almost always worth more than the parts.
If this is a thing that they all do all the time and the creditors always lose, how do the creditors not learn?
Or is it possible that that’s just a story based on events that happened a few times and were extrapolated to be believed to be the norm?
But I do not agree that Web 3.0 will rise from the ashes. IMHO that's pure hopium. And you hear the same thing whenever people talk about federation.
Web 3.0 (and federation) offers nothing users actually care about. It complicates everything and makes everything more expensive. Centalized services won for a reason.
Companies like things like Web 3.0 and NFTs because they simply want to restrict or profit of secondary sales of digital goods. That's it. You don't own your identity or your data. You can just as easily be cut off from the related services. We've seen it with games and NFTs.
Financial transactions are generally reversible. That's a feature not a bug. A Web 3.0, just like with crypto wallets, will generally result in irrecoverable identities (ie wallets). Trying to build that into the contract through a consensus method of trusted contacts is just another potential vulnerability.
I really wish we, as tech-savvy people, were more cognizant of user benefits here rather than having some idealistic utopic view of a federated world.
What happened was that the original web architects, loosely people like Jimmy Wales, had a different vision of the future than the one we're living in now:
1) The web was supposed to make nearly all information freely accessible with sites like Wikipedia and infrastructure like Coral CDN and BitTorrent.
2) The next step was to make computing freely accessible with stuff like One Laptop Per Child and distributed computing with SETI@home, BOINC, and something like a p2p Docker cluster running on idle CPU time, presented as virtual CPUs on your computer to run any platform code you want, perhaps 1000 to 1 million times faster than today, which hasn't been invented yet.
3) The final step IMHO was to make money/resources/time freely accessible with a p2p UBI system similar to Bitcoin, where joining it would start depositing money into a wallet by virtue of need (potential) instead of ability (productivity), like Patreon on steroids.
Instead the powers that be chose greed around 2007 after a long politically regressive period which undid much of the social progress of the 1990s, ending Moore's law and starting the transition to walled gardens and surveillance capitalism.
My life experience has basically felt like living in the alternate timeline in Star Trek TNG when the Enterprise went through the temporal rift and Tasha Yar was still alive. Not only did we NOT get #2 or #3 above, but even #1 has been steadily eroded to the point that search engines have started to not work anymore. It's not just that nobody is able to get real work done because they're working too hard to make rent, but that rent is increasing exponentially faster than wages. And that any forward progress is eclipsed by transnational moneyed interests who can use regulatory capture to control the US Supreme Court for example, cementing corporate money in politics, preventing the breakup of any monopoly/duopoly and defunding the IRS/criminal justice system to prevent enforcement of even the most basic fraud/antitrust laws on financial elites.
Which brings us back to what you said: just like every other time in history, it will be volunteers working in obscurity without financial support who bring us the next revolutionary tech. I really wanted to be one of them. But after so many failed ventures, I'm realizing that I could have made more money delivering pizza and gambling on the stock market. I'll probably have to get a regular job soon to cover expenses for my aging self and family, then be too tired to work on interesting projects. So nothing much will change - the cavalry never arrives.
If someone really wants to change the world, open source something that eliminates a whole market. 3D printed hand-wound cell phone charger cases, I don't know. Something that liberates someone from suffering and removes all profit so it can't be ruined by subscription spyware.
I hope this next iteration brings a proliferation of tools that can help regular folks take part in that (personal sites, blogging, guestbooks, etc) without getting trapped in a walled garden or social network.
We’re trying to do our part to help at our company (Good Enough) with https://pika.page/
It’s really shitty, of course.
Yup, they’re right on the verge of that demise.
They might not be about to die, but they're not exactly healthy either.
You, choosing IPO price from the frothiest IPO environment of the last decade: elevated, rigorous, robust to outliers.
"But, Creddit", the ignorant accuser of cherry-picking whine, "why after 2021?"
Because as anyone in tech knows, that was the frothiest IPO environment of the last decade. Source for those who aren't aware: https://site.warrington.ufl.edu/ritter/files/IPOs-Tech.pdf
current Squarespace users about to get gouged
Also, and perhaps Google will finally find this, if you are an OWNER on a SQUARESPACE DOMAIN after the GOOGLE DOMAIN TRANSFER, you can't seem to create MX or TXT or other records.
But if you ADD A NEW USER as a DOMAIN MANAGER then you can create the records, as far as I can tell.
I didn’t need to contact support, but the process requires patience … and some downtime as I had no way of knowing exactly when the transfer happens to recreate the DNS records.
You can setup alternative nameservers first, they clone current DNS settings, then you update nameservers. Do the transfer after.
This worked while they were at Google Domains and about to be transfered. Haven't tried with squarespace yet, but it ought to work
I have an existing blog on Blogger and have no need for ecommerce or a lot of business stuff. It's basically a home page and a blog. I came to the conclusion I should just leave things as they are and maybe add a second blog for a different purpose.
It's free and if it becomes a problem, I'll deal with it when it does.
Even on expensive AWS it’s 5 dollars: https://aws.amazon.com/lightsail/pricing/
Also - there's a bunch of integrations with their other stuff (serverless, D1, etc.) You'll get more lock-in, but you can scale up the static site to become basically a full frontend-backend app from there.
After like a year or maybe it was 2 I forget, the cost of my domain was going to double from $15 a year US to to $30 with Squarespace.
Moved it to Cloudflare, and now it's cheaper than it was with Google.
Most people never understood URLs.
You only need to "be better".
And here "better", means eveything on can think of, including NOT spending money.
When the asteroid came, only the small mammals survived.
Of course I'm talking about one way that could possibly lead to a sucessful business. There are many ways, nothing is garanteed but that also applies to failure.
"Competition is for losers."
I suppose if you're really passionate about the space, go ahead, but it's incredibly crowded with dozens of players. Some are even owned by the fintech giants.
For smaller companies, I'd say programmers have done their share of good and evil. the AI sector is in real time gray area with some very malicious actions not too long ago to try and be first to market.
Of course retention helps too but my gut is that Squarespace had reasonably low churn but increasingly elevated customer acquisition costs along with no real enterprise traction.
Squarespece looked like a fairly competent company, even as they were perhaps overspending on advertisement. Their competitors don't seem to be doing that much better except for Automattic perhaps.
If private equity is able to outbid the stock market, they must have spotted a way they can extract more value. Sometimes that's by raiding the pension fund and cranking up prices. Other times it's a distressed business and better management can turn it around.
Neither is exactly good news for customers.
So there may be an opportunity, but finding customers and funding will be hard.
10%? Go away.
20%? You can certainly negotiate it up to 30%.
30%? There’s considerable value here, and threats to walk away will be felt.
40%? Why, when you can get it to 30%?
Great-Grandparent> most M&A transactions trend to have a 30% premium above the trading price. I [...] could not find a good explanation to why
You> It’s probably just a good rule of thumb.
Me> But why is 30% better than 15%?
You> The equilibrium appears to be 30% above asking
I still don't understand how that's supposed to explain why 30% is the stable value, instead of another, as the GGP was asking. How does what you are saying add anything more than "It is what it is" to the discussion?
The directors therefore have a strong incentive to only accept offers at a normal premium to current price, which seems to be about 30% by back of the cigarette packet maths.
Bidders therefore have an incentive to bid around 30% so their bids are more likely to be accepted.
The key thing is an incentive to avoid liability and get deals done. If the equilibrium was 80% then bids would be all at 80% and there would be less of them.
I don't think purely qualitative arguments work here.
If you go much higher, shareholders start to wonder why someone is willing to pay so much for a stock. People start to get cagey and wonder what's going on. The sellers interest is to keep it lower as well.
It's just the region things have settled over time. It's generally enough that the board feel they're doing the right thing, it doesn't spook anyone, and it's what the buyer is expecting.
I don't think there's any more magic behind it, it's just what has become the norm over the years.
It's like tipping. There's no ideal value that can be picked; just agreed normal values. If 30% appears to work most of the time then that's probably why it's used.
At 10%, many shareholders will feel that their risk-adjusted returns on the stock would do better than the buyout.
30% is likely below the costs to acquire a controlling share on the market, and above any reasonable belief in risk-adjusted returns for shareholders (barring exceptional companies).
A lot of it is wishy washy because it’s based on math, but math with presumptions baked in. How much do shareholders think their stocks are worth? How much would it cost to buy them on the open market? How much does the buyer think the stocks are worth? There are approximate answers to all of these, from which an even more approximate price needs to be determined.
In many transactions, being like all the other ones is the way to go.
If that’s the case, 30% is the minimum premium at which not only are you speedrunning returns for existing investors, you’re also doing it for the average person who was going to invest in Squarespace today.
At the top of the list would be the one who is the most interested in selling, and thus is willing to take the lowest price. At the bottom of the list would be the person who is the least interested in selling, and is demanding the highest price.
In order to buy one share you ask the guy at the top of the list. But to get the whole company you need the guy at the bottom of the list to agree too.
That's definitely not a perfect analogy at all, there's more subtlety than that. But it accurately describes the underlying dynamic.
For the stock market quote, you're always talking about the guy at the top of the list.
But I think you’re spot-on. If someone owns the stock, usually it’s because they think the company is worth more in the future than it is currently.
And you need to convince the majority of the shareholders to sell it to you now.
So you need to take into account their expected future value on holding, and give them a reasonable risk-adjusted premium for that expected future value of their shares.
because of those precedents, taking anything below a "standard" premium opens the door for shareholders suing the board for a breach of their fiduciary duty, arguing they should have waited for a better offer. it's a bit of a self fulfilling prophecy. pay more than 30% and the buyers' shareholders will argue the same
which is not to say there aren't 10% or 80% premium transactions, but there's a higher bar to be met before everyone is willing to go outside of the 25-40% premium range (my own numbers)
It comes from a 2004 Delaware court case, which found “recent appraisal cases that correct the valuation for a minority discount by adding back a premium ‘that spreads the value of control over all shares equally’ consistently use a 30% adjustment” for the control premium [1]. (Under Delaware law, shareholders are entitled to the pro rata share of a company’s fair value. The courts can and do revise merger prices to reflect this.)
Also, this one is a 15% premium [2].
[1] https://casetext.com/case/doft-co-v-travelocitycom-inc-2
[2] https://www.prnewswire.com/news-releases/squarespace-to-go-p...
Really? The sub-headline near the top of your link says 29%, so basically 30%.
That said, you see the bankers bending over backwards to find a metric that satisfies Doft.
Companies have big shareholders and small. Absent controls, the big shareholders (and management) have an incentive to negotiate deals that are better for them than for the small shareholders. Delaware is good at designing these controls, which is why savvy investors like companies to be based there.
One of these controls allows shareholders to sue if they think the company they own stock in was sold too cheaply. In those cases, the court will step in to check the math. That happened in Doft.
Most of the case revolved around comparing Travelocity’s value to Expedia’s. But buying a share in Expedia is different from buying all of Travelocity, because the latter lets you e.g. pay yourself—the owner—all the money in the bank account as compensation or unilaterally sack management. The value of this privilege is called the control premium. After the court valued Travelocity conventionally, it added a control premium of 30% to come up with the final enterprise value.
Why 30%? Because that’s what most valuation consultants did. What Doft changed was now that convention was cited in case law. So a shareholder who is upset about their shares being sold at a 15% premium can credibly threaten to sue and win, which companies want to avoid, and so we get this circular convention of a 30% control premium (loosely defined) being the norm for converting companies from widely-held (usually public) to narrowly-held (usually private).
[1] https://arstechnica.com/information-technology/2014/01/malwa...
For a company like SquareSpace unless they're massively overspending and they are rife with inefficiencies I don't see how this works out for the PE firm.
red lobster acquired by Golden Gate PE in cash deal in 2020 [1]
red lobster subsequently squeezed for any value at all costs (cuts in labor, switching suppliers) [2]
[1] https://www.restaurantbusinessonline.com/financing/asian-inv...
[2] https://www.cnn.com/2024/05/03/food/red-lobster-seafood-rest...
1. Acquire loan to buy company
2. Take money that was being spent on growth and use it to make the payments on the debt
3. Try to decrease operating costs while maintaining revenue or increase revenue while maintaining operating costs (or some combination)
4. Sell the company for more than you paid based on the improved profit margins
The key is finding a company who's still spending on growth but isn't really growing. If the company is actually still growing then you're going to have trouble making your money back if you cut growth activities (because your initial price would be higher due to implied growth in the future).
The challenge is in step three. Can you increase revenue or decrease operating costs without sacrificing too much goodwill? If you do too much to scare away suppliers or customers then step 4 is hard and the whole thing blows up.
...and have more site downtime
Because on average, target firms of leveraged buyouts become more productive [1]. That lets them pay back shareholders and lenders in most cases.
The reason public perception is off is the size effect and availability heuristic. The first shows that big deals do badly [2]. The second means the last widely-reported deal is likely to stand in for private equity in the public consciousness [3]. Add in inflation, which makes each sticker price seem more historic than it is, and the fact that the last deal in a cycle is doubly cursed by being financed and priced at precisely the wrong time and you have a consistent pattern of the most recently-memorable deal being a clusterfuck.
[1] https://www.jstor.org/stable/43495362
[2] https://www.sciencedirect.com/science/article/abs/pii/S03044...
I think private equity-induced lay-offs seem to create more negative PR than corporate ones, but I have no hard numbers.
(Private equity in healthcare has also been an unmitigated disaster, which obviously doesn't help its image.)
It's always hard to analyze anything this big, especially with something as vague as "more productive":
> First, employment shrinks more rapidly, on average, at target establishments than at controls after private equity buyouts. The average cumulative difference in favor of controls is about 3 percent of initial employment over two years and 6 percent over five years. Second, the larger post-buyout employment losses at target establishments entirely reflect higher rates of job destruction at shrinking and exiting establishments. In fact, targets exhibit greater post-buyout creation of new jobs at expanding establishments. Adding controls for pre-buyout growth history shrinks the estimated employment responses to private equity buyouts but does not change the overall pattern. Third, earnings per worker at continuing target establishments fall by an average of 2.4 percent relative to controls over two years post buyout
So if I'm reading this right, huge layoffs followed by lots of churn with an overall decrease in salaries. But I must be missing something because the framing & wording seems to suggest that this is a positive thing. That paper also only looks at 2 years of data following acquisition. But the criticism for leveraged PE takeovers like this is that the PE firm is starting a 5-10 year project to strip mine the company for all it's worth and leaving a husk of a company that's loaded with the debt that was used to acquire it and no real assets. I'm not sure how looking at the first 2 years tells you anything.
The PE firm's switch to cheaper labor and suppliers is also reflected typically in a significant decrease in product quality which isn't analyzed here.
The main argument for leverage PE buyouts are they are performing a valuable service as they're doing a more graceful shutdown of a company vs letting the company fail on the public markets. But that's a harder argument when squarespace doesn't seem to be particularly struggling - they just IPOed during the pandemic bubble when internet stocks were crazy overvalued but they've been working their way back up.
Long-term default rates for private-equity targets are low across markets [1]. Banks and leveraged-loan lenders tend to get paid back.
Also, most targets that later go public have low enough leverage to be able to immediately pay dividends [2]. You just don’t tend to hear about the specialty farm equipment maker IPO in most circles.
> that's a harder argument when squarespace doesn't seem to be particularly struggling
They’re turning hundreds of millions of dollars of revenue into hundreds of thousands of profits by spending hundreds of millions on sales and marketing.
[1] https://core.ac.uk/download/pdf/154670852.pdf
[2] https://www.darden.virginia.edu/sites/default/files/inline-f...
You read it right. Private Equity firms come in, and then lay off everyone they can and replace them with the cheapest folks possible, to churn down salaries and get rid of long-time staff with higher benefits costs. It's the classic playbook, and it's written here positively because if you're a soulless MBA beancounter, this is a positive thing. If you're a 50 year old engineer who is 12 years from retirement and just got a cancer diagnosis 6 months prior, it's not a good thing though.
Also good to remember that the business model of PE firms is to buy a leveraged asset, hold for 5 ish years, resale asset at a higher price than it was bought from. Ofc easier said than done, but these investors don’t get involved to lose money purpose
traditional LBOs are not done on revenue multiples
Also, CFs are the most important thing for an LBO. The point of this investment model is for an asset to pay for itself, so if it has no cash flows how can it possibly do that. Also cash flows =/= profit here. You can be cash flow positive and not be profitable.
And you are right about LBOs not being done on rev multiples
The point is Tech companies don't strictly need profitability to be considered good LBO candidates, because everything is done at the top line level for the "sexier" very high growth companies.
The asset still "pays for itself" on exit, just not so much during the investment period. In other words, the value to equity holders is not from debt paydown with the assets' cash flows, but with the exit proceeds.
[1] https://d18rn0p25nwr6d.cloudfront.net/CIK-0001496963/d08174f...
I don't know what the customer makeup of Squarespace is. It could be that by volume their typical customers are business that fail a lot, or have a high amount of churn (think sole proprietorships, businesses with 1 - 10 employees without in house tech experience, or part-time/side businesses like Etsy or Instagram stores). Depending on the makeup, a significant amount of this marketing could be required just to maintain a constant customer base.
If this is the case, Permira and its lenders are bailing the public out of a shit business on their own dime.
https://cloud.substack.com/p/5-interesting-learnings-from-sq...
Mainly when I look at this, I think "it doesn't seem like its that easy to make money in PE these days." Maybe in the 80s there were lots of large corporations that were so poorly run that you could buy them with debt, cut costs, and make lots of money (see RJR Nabisco/Barbarians at the Gate, that was a terribly run company). But in regards to this deal, someone raised $6B, had to find a place to put it, and found the pickings were pretty slim.
Still, someone apparently thinks they can cover the debt service with the cash flow.
https://investors.squarespace.com/news-events-financials/inv...
Not always true. Certainly your impression is based on something real, i.e. people like Carl Icahn and other 1980's corporate raiders. But the fundamental way in which PE can add value is by forcing leadership change and removing the pressure (from public markets) to deliver better numbers every quarter, to instead make deep cultural change and deep investments in the business that will take years to pay off. One of the better examples from recent years was Dell: https://www.crn.com/news/data-center/dell-s-public-journey-f... .
I'm interested in hearing other PE success stories where the product isn't ruined as a result.
Refs: 0: https://www.plunderthebook.com/
Here's an article from last year, but if you search "IPO drought" in a news search engine you can find a lot of more recent articles https://www.forbes.com/sites/forbesbusinesscouncil/2023/02/0...
The lack of IPOs is not from market demand, it is just easier to be private. If there are venture firms willing to invest or the debt market is accessible, then there is no need to for a company to go public.
Generally speaking, private equity sales are not more attractive than IPOs.
Worse still, the concentration of wealth has enabled large private equity firms to gobble up what were once thriving small businesses across various industries - from veterinary clinics to engineering firms. This trend stifles entrepreneurship and limits opportunities for employees to rise through the ranks and become owners themselves.
America has lost half its public companies since the 1990s. The count of publicly listed companies traded on US exchanges has fallen substantially from its peak in 1996. Back then, the number exceeded 8,000 companies. Today that count has dropped by more than 50% to just 3700 [1].
[1] https://www.cnn.com/2023/06/09/investing/premarket-stocks-tr...
The demand for ever-increasing a growth demanded by the markets is not sustainable for a majority of businesses. IMO the employees, customers, and general public would benefit from companies growing to a healthy size and then maintaining that plateau.
SquareSpace has ~44% of the self-hosted website market. Shouldn't that be enough?
They’re making hundreds of thousands of dollars of profit on hundreds of millions of dollars of gross profit [1]. Most of the cost is marketing & sales. Private equity is actually about focussing less on growth and more on sustainability; the logic of this acquisition is that 44% is enough.
[1] https://d18rn0p25nwr6d.cloudfront.net/CIK-0001496963/d08174f...
Sure? Most people are motivated by compensation.
There is no reason that random mom and pop shops shouldnt be able to list their sandwitch shop and raise 50k to remodel. Will there be tons of scams and nonsense? Yes. Dont invest in tiny companies with no track record then, easy solution. Will productive stuff also happen? Also yes. People can already waste their money gambling/smoking/lotteries/drugs/stock options/supid luxury goods - all of which have a guaranteed chance of working out poorly for society, but this is apparently ok and we instead need to protect people from the stock market.
as the current rate hike cycle started, PEs were less willing to transact at higher rates, companies were less likely to transact at lower multiples and M&A markets cooled off
I'm not out of the industry, but from the outside, it seems like most parties are in a holding pattern waiting for the soft/hard-landing that is yet to come. I suspect sellers are still holding their breaths for valuations to go back to where they were
I know of at least two companies in the billion+ range that could have sold at 20%+ premium to their current valuations but walked away thinking those offers were too low, only to see markets melt in the 6-12 months that followed...
There are tons of business that are private that are doing great. I host with OVH they are private, lots of the businesses I have worked for have been private.
Candidly without the pressure of "this quarter" it might be a good thing for Squarespace.
Unfortunately because the domains were just transferred days before this announcement, we're locked in for 60 days.
That being said, the second Permira increases the prices of a single domain name I own, I'm moving my domains to somewhere else.
Namecheap is fine, but I've moved all but one domain off of them.
Forward-looking statements often contain words such as "expect," "anticipate," "intend," "aims," "plan," "believe," "could," "seek," "see," "will," "may," "would," "might," "considered," "potential," "estimate," "continue," "likely," "expect," "target"
For users, on the other hand, I'll hardly trust a PE firm with a SaaS product. There's just too much incentive to jack up prices to service the debt taken to acquire Squarespace, and cut costs on customer support and building new features.
Honestly, isn't that a great match for PE?
Once a company has run its innovation sprint, convert it to keep-the-lights-on and cut costs.
In return, PE gets to buy a revenue stream.
We're all familiar with the gut-and-life-support PE examples.
But there are a lot of trim-the-fat PE examples too.
I’ve seen a lot of changes from Square, though half of them were bad.
Different company than Square.
So what's the best ownership structure? Public companies have their issues (short-term thinking), acquisitions have their issues (getting closed down)...
I mean, cutting costs and upping prices isn't awesome for the customer, but do you have more faith in a company that's scraping by versus working to be profitable?
Working to be profitable is not correlated with well-functioning. Its usually correlated with enshittification (https://en.wikipedia.org/wiki/Enshittification), and poor functioning.
The most profitable (at least in the short term) is to provide a costly product that you took no time to produce, with zero support.
The most recent SEC filing shows the founder owns 2.8M class A shares, and there are 88M shares of class A shares outstanding and 48M shares of class B shares outstanding.
I do not see why they would pocket 28% of the sale price.
https://d18rn0p25nwr6d.cloudfront.net/CIK-0001496963/5ba2ffc...
https://investors.squarespace.com/news-events-financials/inv...
> (ii) 4,930,175 shares of Class A Common Stock and 40,835,572 shares of Class B Common Stock held directly by the Anthony Casalena Revocable Trust, for which the Reporting Person is the trustee. Each share of Class B Common Stock is convertible at the option of the holder into one share of Class A Common Stock.
> The Reporting Person may be deemed to have voting power and dispositive power over the securities held by the Anthony Casalena 2019 Family Trust and the Anthony Casalena Revocable Trust.
https://www.sec.gov/Archives/edgar/data/1496963/000110465922...
He'll convert his 40 million+ Class B shares into Class A and sell them to Permira. His Class A and Class B shares total 47 million+.
At $44 per share, that sums up to slightly over $2 billion in cash.
Permira is well known for what was their management approach with AA in the UK, so for the employees this will probably mean massive layoffs soon.
https://www.theguardian.com/business/2007/feb/23/privateequi...
"MPs accuse owners of asset stripping AA motoring group" - https://www.independent.co.uk/news/business/news/mps-accuse-...
Gambling on exponential growth and then having the growth fall short (say, because people moved their personal web sites to facebook instead of squarespace) is a risk in any time you go big or go home. Sometimes (often!) you ... go home.
So from that perspective, was this ever a successful company or just a grand party thrown by the investors? Isn't this just "how it works" ?
The vast majority of investors in the railroads lost their money; lots of people lost money running fiber around the world, iridium went bankrupt and lots of people use those phones, etc.
Look at YCombinator's top/most darling startups. Hardly any of them are profitable or sustainably profitable
Never to actually create a proper business...
Here's why -- income is taxed, and growth is rewarded, heavily, in the valuation of the company. If every dollar of business you make is worth $6 (Roughly $1.2bn in revenues = $7bn buyout), and every $1 of new business you earn costs $1, then by spending all your cash, you make 5x on it. In the alternative, you can keep $0.78 / dollar, so the net gain versus keeping earnings is $4.22. I like that trade, and I'd make it as the CEO of Squarespace.
What's unusual about SAAS companies is how easy it is to manage this part of the business economics as compared to, say a bean factory. Much of the spend is digital marketing, and sales teams are much easier to scale up and down than say factories.
You mean to tell me the best thing you can do with that revenue is put it in your pocket? There’s no way to spend it on your business to make more money? Sounds like you don’t have much of a startup then.
Taking a company private CAN indeed counter short term profiteering if done by a group that actually cares about the company but I have yet to see a PE firm provide that.
And there’s lots of small businesses who could probably afford to pay $2k/year instead of $100.
I expect that prices will really go up. I always avoided squarespace because I didn’t like the idea of paying a monthly fee “just” to host content. I mean, Wordpress has flaws but at least you design once and then host on one of the billion Wordpress servers. And if one gets uppity or sells to PE, you can just switch.
Does anyone have a new favorite domain registrar?
I miss being able to search the search capabilities of Google Domains, specifically the exact match and TLD-specific filtering.
My decision to pick wordpress paid off.
Personally having used squarespace I'm not a fan of their product, but that's beside the point!
Squarespace certainly does a lot of development, but "R&D" (especially when it comes to things that PE firms will cut) usually means completely new stuff with significant uncertainty in terms of revenue impact.
If Squarespace, for example, had been a significant contributor to HTML standards to make website rendering easier, I would be unhappy about a loss of R&D.
“How do I push this user metric” “How do we increase conversion” “How can we increase conversion for our customers” “Can square space be easier to use”
I think the question is more like, "what is Squarespace innovating on that we're afraid of losing under new ownership?"
I generally wouldn't classify those (except for maybe the last one if you are developing fundamentally new user interfaces) as actually being R&D.
I also know that the IRS classifies software development as R&D, but we all know those are not the same thing in reality.
I think you may have spent too much time writing software to notice how R&D it is.
You can pick whatever citation you want [1] but writing software is a very risky endeavor (in terms of ROI).
"Generic IT" or SRE is really not R&D. If your solution to a bug is to "reboot" the device; that's an operational fix. If your solution is instead to read a stacktrace and write some code; that's R&D.
[1]: https://www.google.com/search?q=most+software+projects+fail
I am sure that most software projects fail, but I am also sure that as a software developer, almost all of your work ends up in production. Sure, you will have minor technical setbacks, but not on the scale of actual R&D projects. In contrast, people doing R&D in pharma or other similar fields will spend months or years working on a single project that doesn't go anywhere because it is too hard. The same goes for civil engineers building bridges, for example: the work is highly technical, but it is not R&D.
I very much disagree with you that pushing a 10-line bugfix is anywhere near R&D. There's no uncertainty, and there is no research.
By the way, the act of thinking or problem solving does not make your work R&D. If it did, retail workers and construction workers would be doing a lot of R&D, too.
So does your argument boil down to “software moves faster than the sciences, so it’s not R&D?”
Initial development isn’t R&D. Like you said, setting up a webpage and hooking up payments isn’t R&D.
After a product is established, future work is R&D. A cycle of desired outcome, hypothesis for how to get there, and successive implementations until something sticks or the project fails and the hypothesis is proven wrong.
Technical risk is the risk that your technical development won't pan out. I'm not referring to schedule risk - the risk that it will take longer than you thought - but actual risk that it will never work at all. Intellectual property is a durable, hard-to-copy advantage over your competition.
Pharma is a great example because it is a very pure form of R&D - you find a drug, test the shit out of it, those tests mostly go negative, and if you succeed, you have a formula and a manufacturing method that lets you charge extortionate rates. Most software work is not like this at all.
And no, ongoing future work is absolutely not guaranteed to be R&D. If anything, it is the opposite: most startups begin with R&D - creating an uncertain product with a (hopefully) durable advantage - and move out of doing R&D as they mature and the competition catches up. That is generally the lifecycle of companies that develop new product categories, from Singer (the first company to produce a sewing machine), to IBM, to Google.
It's not like they've been sitting on their hands
> Why have I been blocked? This website is using a security service to protect itself from online attacks. The action you just performed triggered the security solution. There are several actions that could trigger this block including submitting a certain word or phrase, a SQL command or malformed data.
What?? I'm just trying to open the page in the link.
I'm behind a CGNAT (if that's the trigger because of possible same external IP with bots that have nothing to do with me), there's nothing I can do.
Some expensive lessons are about to be learnt.
(assuming democratic governance remains in effect, otherwise all bets are off)
While I was previously on the fence about keeping my domains with Squarespace, mainly because of laziness, this announcement and the timing of it means that I will be transferring my domains the minute I'm allowed to.
I remember TravisCI being bought by PE. As soon as announcement came out, we migrated out of it just in time before they jacked up the prices 2X.
Don't know where TravisCI is nowadays.
Edit: from the first result in Google:
> Casalena and long-term investors General Atlantic and Accel, which make up about 90% of the Squarespace’s voting shares, have agreed to vote in favor of the transaction.
So I guess the shareholders mentioned in the subheading of the linked press release own a majority.
That contract can govern all manner of different circumstances including the circumstances in which the allocation of shares are transferred.
Sometimes only a motion of the board is required, sometimes additionally a motion by a general meeting with various options for requiring super majorities across and within the different classes can be required too.
Fiduciary duties often require the Board to act in the objective best interest of the members.
In my opinion it is better model to think of a company as a club (hence shareholders often being called a Member) rather than something that you own.
The growing number and net worth of so many equity firms, as well as very, very wealthy individuals, seem to indicate that the value stream of public investment isn't _really_ needed at all. At least for the right product / market.
I mean, the hassles of public stock (of which there are many: filing constraints, very "impressionable" public opinion, entanglements with Wokeism vs. Conservatism, etc.)
Basically, my thought here is that "Billionaires breed billionaires." They do not, in any way, breed richer "masses" investing their 401Ks.
Fundamentally these are the people who are fucking everybody over and it’s really literally just a handful of managers at these massive private equity funds
Squarespace is an example of a company that was never going to fit that model, for a host of reasons.
Furthermore, if a company is highly unlikely or never going to become a large cap growth stock, providing extra working capital, acquiring ancillary services, funding additional advertising and marketing, will not change those prospects. Only revolutionary increases in functionality will.
Feel free to migrate your domains somewhere else. I chose CloudFlare
The Squarespace acquisition of Google domains was announced, yes.
I don't recall seeing anything about Squarespace immediately going private and being beholden to an investment firm showing up in those emails.
>Feel free to migrate your domains somewhere else.
Thanks for the permission, that's exactly what I and I'm sure many others are about to do. Too bad the timing of this announcement is days after the migration from Google to Squarepspace, so I'm not actually allowed to migrate my domain for 60 days :)