Vercel completes $250M Series E round at $3.25B valuation | Hacker News Reader

Vercel completes $250M Series E round at $3.25B valuation

reuters.com

44 pointsthm30 comments

What are you hoping for when you get in at this valuation that will follow dillution? That a cloud web hosting company will be publicly valuated at 30B ?

"with participation from existing investors"

Probably "hey crazy times are over and everything was too highly valued your only options are to admit you f'd up and lost or to try push this thing higher and leave someone else holding the bag, what you wanna do?"

Let’s just hide it with our other losses and persuade the board of our IPOed companies to purchase it, like we did with Giphy you know

That's exactly what I was thinking when I read this. I like vercel as a technology but am always baffled by these sorts of valuations in the sense that I just can't imagine a future where they have enough profit from Saas revenue to earn that out in any feasible amount of time. I guess people are assuming that they get snapped up by someone like Heroku was bought by salesforce, but that was for <$250m which is a very different proposition from $3.25B.

Heroku was once a unicorn, and was touted to be a 100B SaaS at one point.

And now everyone misses the good old days from Heroku.

It was valued by hobbyists and small companies spending relatively little money (albeit a significant amount for the resource provided).

Heroku had excellent DX, it was an experience similar to working in a mid-large company with a working CI/CD pipeline and an infra team.

But even 50-100 people companies can afford to have an infra. There was never a lot of money in Heroku imho.

Same for Vercel

The methodology of startup valuations is completely opaque, so it's in the interest of VCs to claim the highest possible number, because why not? Everybody putting in money is NDA'd up to here and they're certainly not going to upset the apple cart by broadcasting skepticism about the 'valued at' number.

WeWork was worth $50bn when only VCs could look at their numbers, and $10bn when the S-1 came out.

Founders are getting better terms in private markets instead of public markets. This is why you are seeing these massive series rounds.

Vercel was able to get $250M with much less overhead compared to creating an S-1 and publicly listing for a similar amount of money.

Most of these companies will remain private long term, get acquired by large players, and a couple will publicly list once expectations for public listing ease.

An IPO isn't an end goal - it's just one milestone of multiple that companies will need to hit.

> Founders are getting better terms in private markets instead of public markets. This is why you are seeing these massive series rounds

They asked why there are massive rounds. You answered founders are going to private markets because there are massive rounds. This is circular logic.

So you think Microsoft will buy private vercel for a multiple of 3 billion? They use aws! It's a software service for web sites.

Microsoft bought Github for $7.5bil and LinkedIn for $26.2bil. I think any big tech company of an even remotely close caliber would have no reservations about purchasing Vercel, if they cared to.

I mean ffs, Adobe almost acquired Figma (“it’s just a software service for software UI mockups!”) for ~$20bil, and the only reason they abandoned the deal was due to legal challenges from the European Commission and the UK Competition and Markets Authority. With the take of those authorities, in crude and simplified terms, essentially meaning “this deal seems way too good for you and gives you [Adobe] too much of an unfair anti-competitive advantage”. So yeah, it kinda makes sense why Adobe and the rest don’t mind spending billions on those types of acquisitions (assuming they actually go through), given how good it ends up for their business.

So yes, if Adobe was more than willing to buy Figma for $20bil, then I don’t think there would be a lack of big tech companies having any reservations about acquiring Vercel for “multiple of $3bil” (assuming they were interested in the company in the first place).

It's really simple, this is VC pyramid scheme at play. Say you put $100M into a company at $1B valuation. A year later you put $250M at a $3.25B valuation. Your $350M is now valued at made up $580M. When the company later sells for just double, $7B, your $350M became $1.2B.

> When the company later sells for just double, $7B, your $350M became $1.2B.

“If”, not “when”.

They may have clear path to "when", since they invest. For example, I see some transactions where smaller company is acquired by larger company, and it looks like both companies have the same core investors who guide through this route.

Yup this is really it. For the last decade VCs have played this horrible pyramid scheme. It is bad for the whole country and the economy.

> That a cloud web hosting company will be publicly valuated at 30B ?

they are now "AI"

Worth noting that this is preferred stock so the investor will get their money back if Vercel sells for anything more than $250m.

vercel costs 20 bucks. if every eng makes 100 websites using it, and theres 1% of the population = developer, then revenue would be 20 million a year, or a valuation of 100m tops. and thats if everyone buys..

They do also charge (dearly) for usage.

20$/month * 12 months in a year * 100 websites = 24k$ per dev

20m / 24k$ ~= 834 devs

Getting the world population assuming 1% devs: 834 / 0.01 = 83,400

The world population is actually around 8 billion so you might be off by about 10^6 or 6 orders of magnitude.

Not necessarily saying you're wrong about their valuation being overblown but your argument isn't a strong one.

My math is a bit ofc too. Should be 10^5 not 10^6.

oh i thought $20 was for infinite projects, but it seems like its per project.

1% of 8 billion = 80 million developers

80 million developers * 100 websites * $20 per month * 12 months

= $1.9 trillion revenue per year

How is this top HN comment?

Vercel has major enterprises with 7 figure contracts…

It’s not simply hobby infra

Yes. At a minimum it’s very easy to imagine contracts on the order of 10k per month and 100k per month. If you read about enterprise sales those numbers are normal.

In my opinion their huge valuation is wack but the parent comment wasted their time doing math based on $20/month services - not even including all the add-ons they have in the “hobby”/small project tier.

Congrats! Well deserved achievement by one of the best executing teams.

the people at vercel do incredible work.

but given, their marketing spend on things like next.js etc, the cost is shouldered by companies losing productivity.

if your app, uses - mostly next. then it could have simply been server-rendered by any of the traditional frameworks like django, rails etc.

but doing that ain't fancy so

Actually it is more than that.

Vercel has made agreements with key CMS vendors to have Next.js as the main SDK integration.

Building and deploying a Next.js app compared to Django is like in 2008 comparing Rails to Java.

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