The Twenty Minute VC (20VC): Venture Capital | Startup Funding | The Pitch
00:51:44 · Rory O'Driscoll
[00:51:44] S1: Correct. And this is a company, Automa, that has been the steward of the open source project WordPress, which is one of the most commonly used blogging and website platforms out there. Very successful product. Matt's the CEO of the company that manages the product. I think it's fair to say that the stewardship in the last few years have been troubled. He's been in a big argument with WP Engines about... The argument is WP Engine is a hosting company that is hosting WordPress sites, and I think Automattic wants some of that revenue, so they've been pushing WP Engines. But the way in which he's behaved has been unhelpful to the open source project because it's kind of like, I will use the leverage of my company to try and frankly prevent other people from benefiting from the open source ecosystem, which seems to be antithetical to the idea of it. So I think it's been a troubled situation for a while. I think the truth is the real issue is the world is passing that product. It's kind of a sad little thing because the world is passing that product by and Jason will be able to tell you that you can build most of what you have in WordPress with Lovable or Replit or any one of 10 things. And increasingly, they are, as I've quoted before, the Henry Kissinger thing about academic arguments, the fights are so vicious because the prize is so small. The truth is automatic doesn't matter a damn anymore. It should try and build something new, but it's it's kind of on the tail end of... I mean, to Jason's point about me, it's on the tail end of the tech trends. They should be doing things totally differently to try and survive in the brave new world. Instead, they're arguing internally. So that's kind of the zoom out comment. Within that context, that's kind of the big picture. And the funny thing is, like all litigations, when you get caught up in the detail of the day to day, you forget the big picture. The big picture is this company needs to point WordPress in a forward direction to think about how you take advantage of what's going on in AI and become a relevant player in the next five years, otherwise you won't be. That's the corporate imperative. Instead, the corporate imperative has turned into a pissing match between the board and the CEO, when now it looks like the CEO has won. Congratulations. You've won the poison chalice.
00:53:46 · Rory O'Driscoll
You get to keep your diminishing empire. And it's worth pointing out, this is not a board full of evil VCs. And I've been on boards as an evil VC where you've had to replace the founder. It sucks to the end. This is actually a board of... I think Salesforce is an investor. They have some really good independent board members. They don't need this grief. I'm well about what happened. Like, now down in the tactical weeds, I think Jason probably nailed it. You probably have a board. They probably have a majority. They probably said to the CEO, we're a majority of the board, we're independent directors, we think we should replace you. And my guess is the founder CEO went deep into the bylaws and says, you are the board and you can vote to replace me, but I can actually also vote to replace the board. I'm hereby voting. I've seen this once. I'm hereby voting to replace the board. You're all off the board. Oh, look, the new board is me, my pet dog, and my ventriloquist dummy. And after due consideration, we've decided I would be a great CEO. There you go. And all the independent board members at that point promptly resigned because there's no point wasting your life and getting into a whole bunch of litigation about an ever... Is this... Remember, Jason, your aisle was at the Fortnite Island that's continually You getting are fighting to maintain control of an island that's getting smaller and smaller. So congratulations, Matt. You're in charge. I feel like going, if you are in charge, well, how about you turn this thing around? So, yeah, that's my takeaway of this. It's kind of sad in a way these things happen. People behave how they're gonna behave. I think a lot of other people were involved in that company and put a lot of effort in. You know, one of the guys with Tony was at True Ventures did a lot on it early on. It's kind of a bleh situation. Yeah. It's been pending for a long time and you kind of just go, gosh, I wish there surely should be more of a win win here.
00:55:28 · Jason Lemkin
[00:55:28] S2: Well, Automatic would have been a great company if it hadn't raided venture capital because Matt could do what he cared about, right, which is having a commercial arm of an open source product he created, right, very young. Imagine it's doing 500,000,000 a year, spinning off 200,000,000. It's like a bigger base camp. Those guys aren't venture backable, and they don't give a rat's ass with their 22 Lamborghinis and Panganis and villas in Italy. And they're fine growing 30% at 60,000,000, spinning off 30,000,000 or 40,000,000 in cash here. It doesn't bother them at all, does it? This is... Don't know the full funding history, but one could imagine it didn't really need to raise all this money. A version of it and it might have done just fine. It's easy to say, but that might be the one... And that might be why Matt's frustrated. It would haunt me as well. Companies do get overfunded, boys. And I might be sitting here, I'm like, this could have been 37... Like, I could have been like 37 signals. I could be running this... I didn't need this... What the hell did I need this 800,000,000 and a bunch of people running around doing nothing all day long? I could have run WordPress and Automatic both side by side with 80 people, like DHH and be making 100,000,000 a year and and and who the fuck cares if I'm growing? If this is my mission in life. If you're making 9 figures a year out of your company and your growth is 5% and you're happy and you're and you're doing a good deal for the world, you know, screw you VCs.
00:56:42 · Rory O'Driscoll
[00:56:42] S1: Yeah. I mean, first of all, I do agree is that you shouldn't take VC if you're not signed up for that program. I'm also not sure that... That's one dimension, VC versus kind of lifestyle business. I do think there is another dimension here of the open source business. I mean, so on the first dimension, VC versus lifestyle business, it's clear. You should do the lifestyle if you want the lifestyle. There is another dimension, which is open source community project versus managing just for the quote unquote company that controls the open source product. And I'm not sure that on that dimension, company's been an amazing steward of the project. Right? So I hear you. I think that's just an initial dynamic. But you could also say to your point, Jason, if you didn't take any venture money, if you initiated the project, if you have whatever open source rights you have under the copyright or whatever leverage you have in terms of the licensing and the copyright, then it's your company. Do what you like. And, actually, I do agree with you. It's that this is America. If you built a thing and you want to mismanagement, mismanage it, and you want a 100% of it, you're allowed mismanagement. Go team. That's what ownership means.
00:57:47 · Jason Lemkin
[00:57:47] S2: You know what's tough, Tute? I know you wanna wrap it up. I just... I'm just learning. I'm I'm learning later in my investment career. You gotta be effing ruthless to do a venture backed open source company. Ruthless. You really do. Because look what Matt did. Matt did said, listen, I'm focused on the platform. This is what I'm passionate about. I'm not so into the hosting. Okay? That's a commodity business. I'm gonna let WP Engine do 500, you know, 100,000,000, 80,000,000, a 100,000,000, 300 of these other folks do and there's like I'm kind of into this e commerce thing like WooCommerce but I don't want to do what Shopify and Toby did like that's too extreme and so you end up not owning that much of the revenue in your ecosystem and I don't think he's mad about the the WooCommerce thing not being huge from revenue. Because WooCommerce actually is... Used to be massive in terms of scale versus Shopify. But I think he's looking at WP Engine, he's like, not only did these guys treat my community worse after the PE buyout, which I do think is objectively true, but I kind of want that 500,000,000 now guys I wouldn't have minded having that extra 500,000,000 for this crappy commodity hosting that I could do a better job but in fact we're on their own product it's a great product but my guess is it's doing a fraction of what it has to be mathematically right it's like I want that you know and so if you're too kind in open source, think you lose. If you're too kind, you lose. You got to be ruthless.
00:58:59 · Rory O'Driscoll, Harry Stebbings
[00:58:59] S1: If you think about a couple of different agenda items that we've talked about here, you know, on the one hand trailing edge of tech trends, you have Mirror getting bought for 2.7 times, and you have a nasty little spat over with flat to declining asset in open source land in automatic. And then on the front edge of the thing, have companies like Instinct, you know, raising literally four weeks ago at 2,500,000,000, now raising at 10. You mentioned the Jeff Dean kind of spin out raising at 10,000,000,000, now raising at 50,000,000,000. The big picture point, it really captain obvious here, but it just shows venture, so unlike PE, is not about valuation, and there's not any safe assets. It's just you're either in the head of the train, in the new, new thing, everything is possible, or you're in the tail end of the train and life is shitty. [00:59:52] S0: I was with one of the biggest CIOs the other day, and I said, you've been doing this for thirty years. Have you ever seen a time like this? I'm cognizant that I'm on the younger spectrum. I'm not that young anymore, but I haven't seen all cycles. And he said, I've never seen a time like this. This is more nuts than it's ever been. This is unprecedented.