raiyu

That description you have of quality inertia certainly seems applicable to other areas of life as well.

I’m certainly seeing a few troubling issues brewing but don’t see as many people as myself taking them as serious warning signs.

But when the collapse happens it’s rapid because the entire foundation has rotted away.

It keeps happening because that’s what the system rewards, short sightedness, and is also why founder led companies have more success, because they are able to execute in years not quarters.

We did this at DigitalOcean for similar reasons, wasn't a feature that was commonly used. Additionally, when you set that limit people then get upset because usually when they go over it for a good reason, like going viral, they aren't anticipating it, and just when their traffic is most valuable the site is down.

What Netlify is doing here is really the best approach for both parties. And typically speaking a $104k bill would be hard to get paid up regardless if the customer's typical transaction balance was $5/mo and their credit card limit wouldn't be that high.

Also, that's the benefits of credit cards - that you can still issue a charge back, and credit card companies very much favor the consumer rather than the merchant.

Yeah definitely not a good sign for Twilio - the tried and true playbook will now get executed once again.

Fire a bunch of people, especially those that are most tenured and have the highest salaries.

Raise prices each quarter to achieve revenue growth with the assumption that customers are more inelastic than suspected and won't leave.

Doubtful that any smart acquisitions will occur, given that requires an actual understanding of product, customers, and markets.

The beginning of the end until some larger corporation, looking to grow their revenue base decides to acquire them.

End of an era for sure.

Cofounder of DigitalOcean here, I might have some relevant experience =]

Started in the web hosting space 20 years ago, back then it was just managed hosting, then virtualization, and eventually we built DigitalOcean as a product business offering cloud computing (though the initial iteration was more of a VPS with grander visions).

I don't think there is anything wrong with being in the colocation space. Instead of assuming you are in the wrong space, maybe ask yourself why it may be the right space. In order to compete with AWS and DigitalOcean you will need a bunch of programming and a decade to build out a fully featured cloud (Maybe you could do it in 5 years).

But personally I think the datacenter space is fantastic. And if you look at what has happened in the datacenter space in mature markets like the US there is a ton of consolidation. And any provider that sets up a decent datacenter from the concrete foundation up gets acquired for a rather sizable return.

You could join the race that everyone else is in (Cloud, AI, etc.), or you can look into becoming a large datacenter provider in your developing country. Because that is significantly harder in other aspects (physical construction vs virtual), but at the same time also quite lucrative. Just look at Equinix. They certainly aren't doing poorly at all.

And btw, it's easy to see other people's success and think that you should be further ahead, but I just wanted to say that we all start at 0 and then go to 1 before we can get to 1,000 and beyond and so congrats on building a business from scratch that looks like it's doing well.

Anyone else think this has nothing to do with the regulatory agencies but instead the market has dramatically shifted in the past 15 months in terms of valuations and this is a nice cover to cancel the deal?

Figma still gets $1B "investment" without giving up any equity or control and Adobe gets to walk away from a massive $20B fee.

Adobe makes $17B a year in revenue, they would need some pretty strong growth out of Figma to justify the price tag especially after valuations came down.

But it is nice to "blame" the regulatory agencies for the breakup so that both companies save face.

Also just seems unlikely that it was regulatory. Sure Adobe has the market cornered but it doesn't seem like this is where the agencies would suddenly choose to care so much. And if it was regulatory, then shouldn't those agencies come out and say "We blocked this, no go."

While Linode is very well known amongst a set of developers the cross-section of customers that overlap between Linode and Akamai is very tiny.

This acquisition was about selling a product to existing Akamai customers so branding it as an Akamai offering allows them to present this as an enterprise ready solution that their customers can trust immediately.

Akamai did $3.6B in trailing twelve month revenue, and even backing out $200MM (being generous here for Linode) that is $3.4B of revenue.

The bigger play for them is to mark up this as a high gross margin offering to their existing CDN customers where they need a bit of compute power to pair with their CDN offering.

Limelight Networks (throw back alert) was doing the same thing back in the day and they approached us (DigitalOcean) in 2012 looking to potentially partner with us so that we can use our software to build an internal white labelled cloud for them that they could resell to their customers.

This is seen as more of a brand extension through product acquisition under the Akamai umbrella rather than something like Microsoft buying Github where that is a service that is known globally by pretty much every developer and what they wanted was the brand and developer clout.

Here there was no real interest from Akamai in the brand, but simply in a robust enough product that they could resell into their existing customer base.

Sure the current management team is full of bean counters that aren't doing great at understanding product, but don't give the old management much credit.

They completely missed the transition to cloud, they missed AWS, and they laughed when I told them that we (DigitalOcean) wanted $100MM if they were serious about any acquisition talks. This was in 2013 so startup economics were different back then.

They were early to a massive market that is growing and they basically botched their lead repeatedly and every transition since then has been a comedy of errors.

They would have been better off following Equinix's model of just acquiring and managing datacenter space instead they ran their own DCs, didn't have great support, couldn't build product, and ultimately were acquired by PE and saddled with debt along with no road towards innovation.

Is it possible yes. You do not need VC to go public. It’s not a requirement.

Also this whole journey started a decade ago. There are many more avenues for liquidity and for raising capital. However it is a bit gated.

However if you have good advisors and ensure you retain control with board structure and dual class voting shares you shouldn’t look at as a negative

Appreciate it, thank you =]

Thank you =]

Hard work alone will not garauntee success, but I think there is also a tremendous amount of knowledge that you can pick up that a lot of entrepreneurs seem to ignore, that greatly increases their likelihood for success and also reduces how much time they spend going in the wrong direction.

Likewise there are also so many great mentors out there now, and many of them are happy to give a helping hand, expecting nothing in return, because they recognize how much others have helped them, that if you aren't reaching out to those folks and finding them, then you are doing yourself a disservice.

Don't build in a vacuum. And by that I don't mean simply get customer/user feedback, but I mean have mentors, both active, and inactive - that are constantly reviewing your ideas with you. The inactive ones come from reading books like innovators dilemma, and the active ones, you need to find and reach out to and get them on-board, just like you would reach out to VCs and pitch for funding.

I think there are several major lessons there that can be generalized to an extent.

1. If you don't have the funds to start a business directly, you may have to acquire them indirectly. In our case building a service business was much faster and you could literally setup a single server at a datacenter and call yourself a web host. So the startup capital was small and something that you could certainly acquire by saving while working a high paying job like System administration back in the day.

2. Be in the right place at the right time - this one is key for pretty much everyone everywhere and is one the of the main factors in success and failure. By itself it isn't everything but it is a huge component. We started doing web hosting before AWS existed and when the largest player in the space was Rackspace. There was plenty of room for small up-start individual providers and the internet was still rapidly expanding and also very much still catering to the early adopters.

3. Learn Business - You hear the stories of people like Mark Zuckerburg starting something in college and then building one of the largest companies in the world, but those are ideas that require a special time and place in history. Where the product is the key driver to it's success in many ways, and many non-consumer startups don't get as much attention, but I would certainly recommend learning business. That doesn't mean get an MBA, but read business books. That's what we did between our first company and then starting DigitalOcean. We definitely made a ton of mistakes with the first business and the books helped to elucidate what we did wrong, while also showing us what are the right questions to ask to avoid those same mistakes in the future. I think of business lessons like laws of physics, it's better to know them if you are going to be building around them and certainly the results speak for themselves. The first business peaked at around $5MM in revenue and $DOCN will do over $500MM this year.

Another DO? Definitely not. It was a time and place that allowed us to be successful. Plus if DO exists competing with it head on wouldn't make sense. Also if it didn't exist, I imagine someone would make a similar company that would succeed. You can see this clearly with all of the different versions of Heroku that people tried to build. DigitalOcean's success means that there is a market for the service that it provides and so, someone would have come along and created something to fill that void.

Lastly, I think that a lot of great businesses have to sound a bit stupid at the beginning. If they didn't sound stupid then someone would have built it already. Occasionally you can have a good sounding business idea, but then literally, nothing compelling should exist in the space as a competitor. Otherwise, it would already be done. So in a sense the fact that it sounds "stupid" means that it's different. Now is it good different, or bad different, that's a question that you have to figure out. But often that difference is the crux of what is the key driver for your success.

For us it was creating a simple version of AWS and competing directly (though in our case we felt it was indirect enough) with them. For Airbnb it was the crazy idea that people would pay money to stay in a strangers house. Occasionally an idea actually makes sense from the start. If you use a data warehouse and tried to do analytics before Looker it was a bit of a pain in the butt so Looker does seem straight forward. And certainly DataDog already existed in many different flavors, such as Nagios, but repackaging something and then riding another wave (AWS) can create massive success if the "wave" is large enough.

I think to truly count yourself as "fantastic" at the game of startups you would need to create 3 successful businesses. Because so much of it is chance, timing, luck, that can't be ignored. But if you can do it 3 times, I think that definitely speaks to a person's ability to spot the intersection of so many critical factors.

That’s become less and less true as the capital required to start a business has diminished and virtual products allow for rapid and unprecedented scale.

For me and my brother we were immigrants, divorced household, single mom as some bread winner, didn’t attend Ivy League schools, paid for college through debt, and started a business with savings from working full time at system administration, which was self taught, while being in college.

Fast forward 20 years, DigitalOcean IPO’d.

Our mother did provide a roof over our heads but we had no inheritance, and no friends and family round.

We built a service oriented business doing web hosting first. Service businesses are traditionally much cheaper to start because there is no product development cost to front with zero revenue.

Then after a decade of that we built digitalocean as a product business which was financed from the cash flow of our original business.

By the time we closed our series Seed in Digitalocean we were already well past $1MM ARR and in one year went from $100k ARR to $18MM ARR.

Having less resources does force you to be more scrappy and figure things out that other people who have a safety net often give up on.

Point is it can be done either way.

You may have 3 out of 5 board votes, but unless you have complete control and full voting control they usually have carve outs like approving any change of control (aka selling the company).

You may receive a buy-out offer you find very interesting but your board is against it and then you find out very quickly how much control you actually gave up and how aligned you really were.

If you are testifying remotely, I suppose you are still under oath and have serious consequences for perjury ?

Seems like minimal overlap potentially if they were just using it for a theme, but the tone is a bit defensive, and I don't think that John was rude in his original tweets and more of like tongue in cheek sort of fun and offering to collaborate.

A more direct, yes we use some code, oops we will add attribution, thanks again, much appreciated, would have sufficed.

The reality of is that for profit insurance companies want an opaque and high pricing structure. This allows them to charge higher premiums across their entire set of customers meanwhile the number of people that are getting seriously sick or injured is small allowing them to create huge profits.

So these higher prices, create higher premiums, which create higher profit, so there is no actual incentive for the insurance companies to get hospital prices down because the majority of their insured users are not going to be getting massive bills throughout the year and also they can still litigate or pass healthcare costs back to the customer due to coverage issues and let's not forget deductibles.

This is great, one of the annoying bits of doing anything in Crypto has been buying Crypto in the first place, this certainly makes the whole process easier. And since Stripe is handling the KYC portion it reduces the complexity tremendously on anyone building and Stripe is a trusted party so great on all accounts.

Now ... if there was just a killer app that was actually useful ;)

You are confusing Gemini Exchange with Genesis. Gemini Exchange for now is fine, but their earn product which actually works with Genesis (separate entity) is where withdrawals were paused because Genesis is having a liquidity crunch as a result of the fallout of FTX.

Genesis was the middle man for majority of earn products for various other crypto companies so if it goes under, which it may, this week, the fallout will continue to increase in scale as a result.

I think the reason that Elon Musk is doing all of these layoffs so brashly is because he essentially paid $44B for an asset that's worth $15B. That's a $30B hole he needs to climb out of.

Additionally the amount of debt he took on to avoid having to pay out of pocket and higher interest rates means that there is a large debt service that now needs to be paid monthly and as a result he is cutting very deep and quickly.

I think he's also in his own reality distortion field, I mean why buy Twitter in the first place for $44B with no due diligence a month before the whole market tanks.

And for those wondering is that a fair statement, I sold everything back at the end of 2021 because valuations had gotten way too ahead of anything rational.

Now obviously there is tremendous disarray, I'm sure there are people inside Twitter that actually want to work with Elon, and so far the systems have stayed up and been resilient. There is definitely a lot of positions that could have been cut that would allow Twitter to still function but his speed at doing all of these changes doesn't register as anything other than outside forces forcing his hand, because there is no logical sense to get rid of this many people this quickly and start calling them back because you don't even have a basic understanding of how the underlying asset works.

Actually a pretty good idea.

I think Sheryl Sandberg running Twitter would be a great idea. She definitely has a ton of experience, is used to dealing with complicated founders and executing on their vision, the only place that she could move up in her career is to be the CEO of not just a large corporation but something meaningful.

In a way Twitter and Facebook are no longer as directly competitive as they were in the old days when it was just FB and Twitter.

Appreciate it! Thank you =]

I would be the wrong person to ask about that, as I tried to stay as far away from the details of that along with the low level details around finance. But basically as a public company there a bunch of regulations around a bunch of internal processes, think of it like having a process for how to create emails, or get rid of emails, or have communications, or do various number of internal things, or how you treat customer data.

It is a bit annoying, but ultimately reviewing how those systems are operated in the business and documenting them, while tedious, is a good idea because it allows you to review your security measures and you can use it as a catalyst to make changes and invest in areas that often get neglected in the product market fit/growth phase of a business.

So instead of looking at it as a burden, it becomes an opportunity to just improve internal controls.

The only reason we would consider a SPAC is to decrease time, but you do take a reputation hit. You also aren't building relationships with banks, which is very positive, again because it provides future financing needs which could be very useful during acquisitions.

Also, while the IPO process does take about a year, from start to finish, give or take a quarter, the conversation about an IPO starts well in advance. I think the the first time we met with Goldman Sachs was probably in 2017 or 2018 (don't quote me) to discuss IPO planning, and the company went public in 2021.

So while it does take longer through a traditional IPO, the conversation starts much, much earlier, and because it's a year long process, that's part of the planning as well, so it doesn't really come up as a year delay in the roadmap.

So we were already well in to our planning phase as the whole SPAC craze was hitting, and so there were only downsides to it, not real benefit or saving a quarter or two in terms of timing.

Having gone through an IPO (cofounder DigitalOcean), it honestly wasn't a set back internally. The majority of the burden is on the finance team, having your finances in order and audited is a huge benefit to the business, the rest of it is around internal process control, some are perfunctory, others are good investment of time.

The rest of the work is done with the bankers as they draft the S-1 along with information provided by the management team.

In terms of pitching the bankers, ours was during Covid so there was no travel, it was all done remotely, and given the large financing event that the IPO was, the amount of time invested vs the capital raised was certainly worth it.

IPOs open up liquidity for shareholders, early employees, also provides new avenues for the business to create financing for various activities as you are now seen as a premier partner with all of the major banks. Honestly worth the effort, so long as you continue to run the business with a long term mindset and don't give in too much to the quarterly pressure it's a huge plus.

Besides the obvious benefits to shareholders and early employees it also does open up a significant amount of opportunities when it comes to M&A, if are strategic with that, it can dramatically change the outcomes for your business.

White collar crime doesn’t dole out that sort of punishments unless defrauding the IRS is involved.

Will be some jail time but no where close to life. Just doesn’t happen that often that there is a precedent for that.

When covid started sporting events were cancelled and the general population received cash stimulus and with the ease of use of iPhone apps a lot of people that were used to gambling on sporting events switched to crypto. This led to an increase price which then attracted the second set of people and so forth.