Colin Devroe

Blog Posts

Why Shopify is valued higher than Woo Commerce by a public market

22 May 2015

I saw a discussion on Twitter while laying in bed last night. You can catch up right here.

Essentially, it asks… why is Woo Commerce, which has a larger install base, valued so much lower than Shopify by the public market?

A bit of background; Woo Themes, the company that built and maintains the Woo Commerce WordPress plugin, was recently acquired by Automattic for — as some have reported — around $30M in cash and stock (remember this stock part in a moment). Shopify, an ecommerce platform built on Rails by Tobi Lütke and his amazing company, went public this week and the public market valued them well over $1B.

So, why is Shopify valued so much higher than Woo Commerce? Let’s break it down.

Software companies are acquired for a variety of reasons; Some are acquired for their user base + growth (see: Instagram). And some are acquired for strategic reasons to bolster the offerings of the acquirer. And, finally, some are simply purchased for the intellectual property, patents, and or employees.

With Woo it would appear that all of these were factors in Automattic’s decision to acquire them. They have revenue, their product is incredibly popular, they are growing, and they have 55 employees or so. And, to top it off, their company culture seems to align very well with Automattic.

So, why $30M? Using this number we can back into a few guesses as to Woo’s revenue and how Automattic valued them. Again, these are just guesses.

Software companies, even profitable ones, are sometimes valued by their revenue multiplied by some number based on their growth. So if Woo made $1M one year and $5M the next, that would show a fair bit of growth and they could likely get a multiple at the high end of the spectrum… let’s say 5X. So, if Woo was growing their revenues really, really well I’d say they may have gotten 5X revenue. This would mean Woo was likely generating somewhere between 5 and 10M annually at the point of acquisition.

However, if Woo was an agency providing services to clients this multiple would be considerably lower. Say they made $5M in a year but all they did was build websites for clients over and over, this isn’t nearly as valuable as a software product and so they’d likely get 1.5X of their profits not revenue if they were showing growth.

When evaluating the value that Automattic gave to Woo for their company remember that the estimated $30M deal was done in both cash and stock. Let’s say that Woo got $15M in cash and $15M in stock. This could, over time, value Woo at much more than $30M. Certainly having Woo Commerce be part of the Automattic offering will make both Woo Commerce and Automattic far more valuable than not, so I think it was smart of the Woo team to accept stock in Automattic.

Automattic’s last round of funding valued them at just over $1B. However, they are clearly growing and so the $15M in stock that Woo founders now own will, almost surely, be worth several multiples of that should Automattic ever be purchased by a larger company or — as Shopify did — go public. Let’s say between now and that event that Automattic doubles in value, this would mean that this deal would now be worth near $45M.

Some on that Twitter thread rightly pointed out that Woo was profitable and Shopify lost money. Yes. That is true. But that doesn’t matter to a public market. In fact, many if not most companies that go public are losing money when they go public. The entire purpose of going public is to raise more money. Companies are only allowed to raise money from a finite number investors before needing to go public. I think it is 2000. That sounds like a lot of investors… but when Facebook went public — like many other companies — they were using investment firms to cull capital together from many investors under a single umbrella to “beat the system” for as long as they could.

Shopify’s revenue, according to their F-1, was roughly $37M in the first quarter of this year. So, according to my napkin math, that’s easily 6 or 7 times the revenue that Woo may have generated last year. Again, I’m just guessing.

So while Shopify lost $4M in this quarter they earned $37M. Making up that gap with those sorts of revenues in the ecommerce space is — relatively speaking — fairly easy. Shopify is growing and investing pretty rapidly. So it is perfectly normal for them to be burning capital to be able to do so. In fact, if I was buying Shopify stock I would hope they’d be spending money on growth. Shopify is doubling revenue year-over-year. So, please, grow!

Anyway… I hope this explains why Shopify would be valued much higher than Woo in a public market. Shopify did not get acquired. If they did, at the moment they went public, it likely wouldn’t have been for what the market valued them at. Probably around $800M (Revenue 5X). Again, just me guessing.

Side note: How awesome is their ticker symbol?

Watch sales

21 May 2015

In February Canalys estimated that there have been 720,000 Android Wear watches sold. Pretty good, I’d think, for a watch. Any watch maker would likely be proud of those numbers.

Estimates for Apple Watch sales are all over the map.

But recently KGI Research adjusted their figures and estimated that Apple will sell under 15 million Apple Watches in this first year.

I do not know if KGI is right. Let’s say that they are. How are people, like Fred Wilson (whom I agree with from time-to-time on many topics), saying this is disappointing? Disappointing relative to what? The iPod? The iPhone? No. If the estimates are correct the Apple Watch is selling more than the original iPhone did in its debut.

I don’t get it. I think we’re all spoiled with sales numbers these days. A product does not, and should not, have to outsell a previous one immediately for it to be considered a success. A watch is not a phone is not a computer is not a tablet, etc. If the Apple Watch sold 15-25 million units per year I think Apple would be perfectly happy with that. But, no one else will be.

Oh, and one more thing; the amount of revenue generated from the Apple Watch is likely leaps and bounds above that which any other manufacturer squeezes out of their watches. Apple’s supply chain is an incredible thing and they are at the top of their game.

We’ve Made Web Development Complicated

14 May 2015

Alex King:

I’m working on a web app now and it recently struck me how much more complicated things have become.

I agree. While some of the tools we’ve added onto the process of building for the web have some incredible value — we’ve made the barrier to entry much, much higher than it has ever been to get started. If I was just starting to do I’d be overwhelmed.

What is a Panoselfie?

13 May 2015

They aren’t new. You can find them if you dig. But they aren’t “a thing” and I think they should be. So, yesterday I created a Flickr group called Panoselfies. I recommend giving it a try.

How:

  • Put your phone on pano mode
  • Point it just over your right shoulder
  • Slowly rotate your wrist as the phone takes the photo
  • Upload to Flickr

You don’t have to post to Flickr. You could put it on Twitter or Facebook too and simply hashtag it. Squarecroppers need not apply.

My weekend

11 May 2015

A few images from the weekend.

Today: May 7, 2015

7 May 2015

A little something new. Another try at daily blogging.

This is what I looked at most of the day. We’re putting in a fair bit of work on some new things for Barley this week and I’m pretty excited to get them out the door.

Had lunch at Backyard Ale House and managed to stick to salad. Go me.

Casey Liss on Code

6 May 2015

Casey Liss on Microsoft’s Visual Studio Code:

All told, Code may or may not be for you, but it’s working out really nicely for me so far. I definitely suggest giving it a shot.

I too have been using Code as my primary editor since it debuted at Build. I’m enjoying it. It seems much nicer than Atom in a few important ways; speed, debugging. Give it a try.

Stop calling businesses unicorns

6 May 2015

Me, on Twitter early this morning from bed:

Startup culture is such that the word unicorn is used to describe a successful business. Imagine if the culture fostered success more often.

Then, Fred Wilson on his blog this morning:

I hate the word unicorn. It’s using fantasy to describe something very much reality. But I don’t want to digress from the larger point I’m making to go down the unicorn rat hole. Just please don’t use that word around me. I will likely throw up and that won’t be pleasant.

We’re on the same page today Fred. Likely because during AOL TechCrunch Disrupt the word unicorn is being thrown around like crazy.

The conversation around tech startups has been that “90% of companies started fail”. Hence, 10% may have some success and perhaps 1% or 2% will be incredibly successful. That is why the tech press and others call them unicorns — they are incredibly rare.

However, it doesn’t have to be this way. More businesses can succeed if we:

  • Change our mindset for what success is
  • Create a culture of helping small businesses succeed
  • Don’t make the bar for failure so low

Let’s take these one a time.

What is success to you? For a business to be successful depends very much on what it set out to do from the beginning. Some businesses are built purely for fun … so the metric for success here is; are you having fun? Some businesses are started with dreams of changing how the world works in some way like mass communication networks or solving issues like access to clean water. So the measure of success for these companies should be; are people all over the world communicating using your product and do more people have access to clean drinking water than before you started, respectively.

Success in startup land is typically about, as Fred Wilson pointed out in his post this morning, valuation. Why did Slack take tens of millions of dollars that its founder explicitly said it didn’t need? Because in the current environment you take money when you can and get the best valuation possible. Stewart Butterfield is simply playing the hand he has been dealt. 

How we do change the culture to help more companies succeed? If we change the mindset from; how many unicorns will we start/find/invest in to, how many businesses can we start and keep in business for as long as possible — everything changes. Incredibly successful rocket-ship-like growth companies will still exist and will still earn their investors a lot of money and will still be rare… but everyone below that tier may have a better chance at success.

What is failure? And how can we make it harder for businesses to fail? Some ideas die because they are bad ideas. And that is OK. Sometimes you don’t know a bad idea until you try it. However, so many really great ideas die because the business dies. And a lot of times the business dies because it was ran poorly or didn’t reach its target market. Believe me, I know.

Remember my post Applaud when people make things? This is how you, whether you’re an investor or “just a consumer” can help businesses thrive. The next time you see a good idea try to support it. With your money, with a tweet, a blog post, tell your friends, anything. Every little bit helps that business stay alive. And, if you’re an investor or board member of a company that has a great product or idea, try to support them with more than just your money. Push customers and partners and talent to them. If you see them heading for a brick wall speak up!

Let’s help more companies succeed and stop using the word unicorn. I suggest; Rapid Growth Business.

Microsoft’s Windows 10 Vision Isn’t Simple

5 May 2015

Cade Metz for Wired on Microsoft’s vision for Windows 10 to be on a billion devices and for applications from Android, iOS, and Windows all running on them “easily”:

But this kind of thing is never as easy as it seems. “I’m skeptical of anything that pretends to be the magic bullet,” says one coder, who requested anonymity because he works closely with Windows. In many cases, coders must manually modify their apps so that they run on disparate devices (these devices, after all, are quite different). And even if Microsoft’s tools provide an onramp to all Windows devices that’s as simple as promised, that’s no guarantee that coders will actually use them to build apps for things like Windows phones or Hololens—particularly if these coders are already focused on other operating systems.

What Microsoft showed at Build is obviously not the best way to build an application for Windows. However, for now, for today, to get up-and-running, it may be the quickest way to get something on Windows so that you’re able to support the new Windows 10 users.

I hope developers port their apps to Windows 10 using Microsoft’s toolset to do so and then go back and rethink them from the beginning if they get any traction there.

Brent Simmons deletes his tweets

4 May 2015

Brent Simmons on his blog:

But those aren’t my reasons for deleting my tweets. Instead, it’s because Twitter is a blogging (or micro-blogging, really) service that doesn’t meet my requirements […]

Follow the link to read the rest of the post.

This is very tempting. Ever since Jeremy Keith went Indie Web with his “notes” (read: tweets) I’ve been wanting to do the same. Thing is, I use Barley as my CMS. So it would be something I’d need to build into our platform to pull it off. This may just push me to putting in the time to do it.

Windows Media Center finally shot in head

4 May 2015

Ed Bott, of the Ed Bott Report, reporting on ZDNet that Microsoft is shooting Windows Media Center in the head:

That decision shouldn‘t come as a surprise. Media Center, once a signature feature of Windows “premium“ editions, has been on life support for years. The team developing Media Center features was broken up in 2009, shortly after delivering the final Media Center code for Windows 7.

I’ve always viewed Windows Media Center as the Front Row of the Windows world. Destined for the dead pool. Glad they made this cut.

Why I wouldn’t bet against Microsoft

1 May 2015

If you follow me on Twitter you can probably tell that for the past 48 hours my brain is swirling around Microsoft’s Build conference and keynote.

In a lot of ways my brain is swirling in the same way that it did in 2002 when I saw Steve Jobs debut the 17” iMac. This was the moment I knew I was going to switch from using a PC and Windows — as I had for the majority of my computing for 8 years prior — to using a Macintosh which I have for every single day for the last 13 years.

And now my head is swirling with questions yet again. Is Microsoft poised to make a huge jump forward? Will they change from being a company that was afraid of innovating because Windows and Office was such a cash cow to one that innovates to save those cash cows? Will they change from a company that simply announces things to a company that launches things? I wouldn’t bet against them now that I’ve seen what they are up to.

In 2002 Apple was on their way towards figuring themselves out. They were starving for many, many years prior and if they didn’t innovate their way towards success we wouldn’t be talking about them at all today; let alone describing them as the most valuable company on the planet.

So why can’t Microsoft do the same? They certainly have the resources. If their attitude towards innovation does a 180 — where they go from innovating behind closed doors and simply allowing great ideas to die on the vine — to a company that finishes and polishes those ideas for the mass market… I’d say Apple, Google, Samsung, and even Microsoft’s own OEMs had better be concerned.

Notice this nugget from a piece in the New York Times by Nick Wingfield:

Founded in 1991 by Nathan Myhrvold, Microsoft’s chief technology officer at the time, as an early warning system for disruptive new technologies, Microsoft Research occupies a building that has a spacious, multistory atrium, filled with a swirl of employees in T-shirts, jeans and other timeless fashions of tech.
It is the biggest operation of its kind in the technology industry, with more than 1,000 scientists and engineers working in labs as far away as China and Israel. The company’s research-and-development spending last year was $11.4 billion.

Microsoft has had one of the largest R&D departments of any company for 25 years. I can remember conversations with many employees at Microsoft R&D over the years, one of them being none other than Ze Frank who was Microsoft R&D’s first Designer in Residence, about some of the fascinating things that MSFT R&D was toying with. Those conversations reminded me of Xerox, Kodak, and Bell Labs — the greatest R&D departments of the 20th Century.

So, why in the world did they end up with Windows Phone only having 1-5% marketshare? Why did we end up with the Zune? Why did they ever ship Microsoft Vista? I described Vista in 2007 this way:

I‘ve only got limited experience with Vista but from that limited experience I have drawn the opinion that if I were forced to use the operating system full time I‘d likely jump off of a bridge.

But yesterday Microsoft’s demonstration of their cloud computing services, Windows 10, HoloLens, and their jump towards a far more inclusive software development platform — has got me downright excited. I want Microsoft to do great things. I want Windows Phone to be as amazing as it is but with thousands more applications. I want HoloLens to exist. I want to see whether Microsoft’s unified Windows Platform will be a better idea than Apple’s bifurcated one.

It is going to be an exciting 5 years.

Now, which PC am I going to buy?

Microsoft’s Build Keynote

30 April 2015

I just finished watching Microsoft’s Build Keynote from yesterday. If you haven’t seen it, and understand developer jargon, I recommend you watch it.

My takeaways: 

  • Windows is about to get a lot more applications
  • Office is now as big a platform for MSFT as Windows is
  • Visual Studio Code is very good (I’ve been using it all day)
  • Azure is a beast

That first one is pretty important. Me, in August 2013 regarding Windows Phone:

Windows Phone is a much better competitor to iOS than Android currently is. It is clean, simple to use, vastly different than iOS (which is good since Android and iOS just bite off each other with each release), and really fun to play with. The problem? Official apps.

Yesterday Microsoft announced a slew of things that could change the only gripe I had with Windows Phone.

Quit it with the loading screens

28 April 2015

Web people, 

Quit it with the loading screens for your home pages. We needed them ten years ago when we connected to the Internet through 56K modems. We shouldn’t when our work connection speeds are 100Mbps and our home connection speeds are 12Mbps or more.

If your agency site home page needs a loading screen you’re doing it wrong. Leave the heavy lifting for pages the visitor may not mind loading such as large case studies, lab experiments, and proofs of concepts. But your home page? The first thing your potential customer may conclude is that you’re not capable of making a quickly loading web page. But you are. So show them that you are.

Zeldman on Medium

20 April 2015

Jeffery Zeldman on whether or not Medium is a death knell of the open web:

You may think I exaggerate, but I’ve heard more than one respected colleague opine that publishing in Medium invalidates everything we independent content producers care about and represent; that it destroys all our good works with but one stroke of the Enter button.
I’ve even had that thought myself.
But isn’t the arrival of a new-model web publication like Medium proof that the web is alive and healthy, and spawning new forms of creativity and success?

I have no issue with people publishing on Medium. I am skeptical of it as a business. I’m also scared that one day it could be acquired and/or disappear entirely — making it, perhaps, not the best place to put your content if you want it around for years and years. However, if you publish something on Medium (or any other publication) that’s fine. Just know there are consequences.

The primary downside to publishing on any site other than your own is your control over whether or not it will be where you put it a year from now. Second, perhaps, is that any attention received by what you publish may well benefit the site you’ve published on far more than you.

Just one example of this is when Dave Pell published something on Medium rather than his own site and it got pretty popular. And he regretted it.


Two needs for deep linking

15 April 2015

What are Deep Links? Scott Rosenberg recently wrote a piece on Backchannel on Medium about Deep Links. He wrote:

Deep linking means to bore a wormhole-tunnel that hops you directly from a specific spot in one app to a spot in another, no side trip to a browser or a home screen needed.

You get it. If you have Swarm and Foursquare or Facebook and Messenger installed you get pushed from one application to another all the time. Facebook forces you to send private messages via Messenger and Foursquare forces you to check-in via Swarm. So, if you’re in one app and need to do one of those tasks it “deep links” you from one application to another.

Sort of like a hyperlink on the web goes from one web page to another.

Rosenberg goes on to state why he thinks they’ve failed (so far). But I have just two reasons;

  • they need a new name
  • they aren’t discoverable

Deep Links? Terrible name. What about App Links? I’ll leave the naming to someone else but I do not think the links are all that deep so please let’s ditch that word. They are, in my opinion, as deep as a web link. Hyperlinks are one, two, three clicks into a web site if you were to start from a site’s home page. A “deep link” is one, two, three taps into an app. So why is one any deeper than the other?

The second problem is that they aren’t discoverable. They can’t easily be found, written, and shared. You may see one from time-to-time. For example, if you click on a Periscope link on Twitter, while on your iOS device, you will be asked to open Periscope to view the live video stream. This is a “deep link”. And, the “URL” for the deep link looks sort of familiar but also foreign and weird. It is typically something like pscp://broadcast/2034390

To me that reads; open Periscope to this broadcast. 

Wouldn’t it be cool if I could hand-write some Periscope links to send people to one of my broadcasts? A friend’s broadcast? Or my profile? I asked Periscope about this 3 days ago on Twitter. No response from them. Boo.

I think if “deep links” had a new name and were easily written and sharable we’d see a huge increase in their usage.

Note: I found Rosenberg’s Medium piece via Jeremy Keith.

The full-stack employee

15 April 2015

Chris Messina, inventor of #hashtags, on Medium:

The conventional seams between disciplines are fraying, and the set of skills necessary to succeed are broader and more nebulous than they’ve been before.

He waxes on about how the lines between nearly every single area inside a company are blurring more and more. His piece reminded me of what I just wrote in The pull towards design.

The pull towards design

15 April 2015

For the past several years our industry, the tech industry, has been pulling designers that work within it down the stack — so to speak — towards engineering. They’ve drilled into their heads that they need to learn to code or, at the very least, to be able to create functional prototypes of their designs so that they can demonstrably visualize interactions, animations, transitions, and more.

I think this pull has been good for everyone; designers, engineers, and end users of the products they build. I believe that designers are now able, perhaps more than ever, to fully realize their visions for a product or feature. I believe that engineers are now able to focus more on core pieces of an application or service and are less frustrated by the friction between the design and engineering teams. And the consumer is, presumably, getting a much more refined and purposed end product. Good. Good. Good.

My friend Paul Stamatiou is a designer at Twitter working on Twitter Video & Photos. He recently published a great blog post explaining how he and his team were able to prototype their designs for Twitter for iOS’s video feature in a way that allowed their vision for the feature to be fully realized within the application. He noted: 

Prototypes are partly for me to get a sense for what something could feel like and validate the interactions of the concept. However, they are very much also for communicating intended designs with all stakeholders. I would often show early prototypes to my manager Brendan Donohoe for his thoughts along with others at design critiques, in addition to emailing screencasts to the video team.

As a programmer I’ve always wanted what Paul now has. The ability to take an idea and see it through from beginning to end. You see, for years I’ve worked with great designers and that has somewhat stunted my ability to bring my ideas fully to life on my own. I’ve been so spoiled from working with Mike Rundle, Larry Angel, and Kyle Ruane that whenever I would try to design something on my own I simply couldn’t. I “needed” them. Lately, I’ve had this nagging feeling that I need to change what I’m doing, how I do it, and start walking towards design in order to get what I want. I may never be a great designer, but I know I can be a better designer than I am now.

Last month at Designal Tap, Kyle Ruane’s monthly design critique, I voiced that opinion to a little over a dozen local designers. My point that night, whether I made it or not I do not know, was that our industry has been pulling designers towards engineering and I think it is time for it to pull engineers more towards design. Why should designers have all the fun? Many in attendance were nodding so perhaps I am not alone.

As engineers let’s stop thinking the only way to pull designers towards us is for them to move on their own. Perhaps we can pull our way towards them and meet them halfway.


DuckDuckGo

8 April 2015

Marco Arment on DuckDuckGo:

In my experience so far, DuckDuckGo’s search is good enough the vast majority of the time. Sometimes, its results are even better than Google’s, and they’re rarely much worse.

I’ve been using DuckDuckGo as my primary search engine on all of my devices for several months. I’ve had some speed issues with it (and still do from time-to-time) but the CEO of DuckDuckGo attempted to help me personally on Twitter when it happened.

DDG is vastly different than Google. Aside from DDG being completely private, one big difference is being able to build on top of DDG using DuckDuckHack.

Google, however, has a deal with Twitter so if you’re searching for tweets you still need to use Google. As I did for finding the tweet I linked to above.

I’d suggest giving DDG a try if you haven’t.

Beethoven

7 April 2015

Noah Read on music:

When I became a teenager this music fell by the wayside as my tastes followed those of most teenagers trying to be cool while not popular. Some of what I liked then has stood the test of time, but much of it has proven itself culturally and emotionally bankrupt. In recent months I have found myself returning to the classical music of my childhood when I need to think, meditate, and focus. I have been drawn back to Beethoven particularly.

I’ve always enjoyed the classics far more than anything pop. Classical, jazz, folk, rock.

git turns 10

7 April 2015

Linus Torvalds, creator of git:

You can actually see how it all took shape in the git source code repository, except for the very first day or so. It took about a day to get to be “self-hosting“ so that I could start committing things into git using git itself, so the first day or so is hidden, but everything else is there.

You can see all of the commits on GitHub. Here is the first page (as of today) and the first commit.

A whale of a distraction

7 April 2015

Photographer Eric Smith in Going Viral on Medium:

When I reviewed the pictures two weeks ago I was astounded by the juxtaposition of the young man immersed in his phone while this creature is feet away. Over the course of six shots showing the whale emerging and vanishing, he never looked up, even while the three other people on his boat were all excitedly looking right at it.

Follow the link to see the images.

By the way, the exact same thing could happen if he was wearing a watch.

Also, this post would have been a great opportunity to launch a blog on his own site rather than publishing on Medium. Oh well.

/via The Loop.

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