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...)?
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...)?
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.
The Disruption Opportunity (that has been out there for quite a time and is very resistant to disruption :)
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.
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.
What is your analysis? Are they worth $1B? If so, why?
Marketing/advertising and employees.