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.
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.
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.
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.
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.
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.
I did not say that they have 20 sales people for VIP. I said they could hire 20. I also did not say how many customers they have for VIP. I was doing a what-if analysis of sales expenses.
What is your analysis? Are they worth $1B? If so, why?
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.
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.
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.
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.
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.
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/
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.
