The Exchanges

Q a lot of cold-hearted capitalists that listen to this, along with a lot of developers, but I don't want to lose my capitalists, so I have to ask the question. You know, you're a, you're a guy that just seems hyper-focused, and we'll talk about what happened in 2007 or 2005 here in a second, but, um, talk money to me for a second. How do you guys make money?

A So we are, you know, vast, vast majority, 98, 99%, uh, subscription business. So, uh, the three main things people subscribe to are wordpress.com, which is hosting for WordPress, and Jetpack, which is services for WordPress if you host it someplace else, like, uh, could be Bluehost or GoDaddy or Rackspace or anywhere, and then finally WooCommerce, which is our e-commerce platform, and so that's people who build stores, listings, they sell digital goods, physical goods, or just take bookings, like, for salons and stuff. People use it for all sorts of e-commerce. So between those three, we have Kind of products you can subscribe to at each. And, um, that's really the main driver of the business for Automatic.

AI assessment note: “vast, vast majority, 98, 99%, uh, subscription business.”

Q Yeah. You gave a good analogy on stage, which, uh, was to kind of think of yourself as the, as the proctor and gamble between behind brands that we know and love, like WordPress, WooCommerce, Jetpack, and others, right? Yeah. All right. So give us the backstory here. You, you know, you were early on at CNET, I think doing open source stuff. Was that right out of college?

A Yeah, I actually ended up dropping out, uh, to take the CNOT opportunity. I had visited San Francisco, uh, kind of in between my sophomore and junior year and ended up connecting with a lot of great companies, including Google, Yahoo, CNET. And then when I returned, um, started to get some job opportunities and I decided that, you know, it was such an incredible opportunity. I could stay in college two more years and hope to get that kind of job or I could just go for it. And it didn't seem, uh, I wasn't too into college at the time, but I also wasn't going to like an amazing school. I was going to University of Houston, which was fine, but wasn't like, it was great on the tech side.

AI assessment note: “I actually ended up dropping out, uh, to take the CNOT opportunity.”

Q Okay. And, uh, when you say you both, and I don't understand what you mean when you say you turn that into an investment, the company that invested instead of acquired you?

A No. So, you know, it's very common when you, Get an acquisition offer. It sets a value for the company. And so you can use that to go back to your investors and say, Hey, you know, if I'm not going to sell, why don't you invest at this value? So we were able to do a round at like a two hundred million valuation. Um, and that was, uh, New York Times actually joined that and it was largely our existing investors. So all of our existing investors kind of re-upped and we did do a secondary part of that round. So they bought some stock from existing folks, including myself. Which, you know, I would say is good for founders by taking a little bit of money off the table. Um, I was certainly in a place that I didn't really need to think about money again. Um, And that allowed me to focus on the company, not worry about any of that stuff.

AI assessment note: “No. So, you know, it's very common when you, Get an acquisition offer.”

Q Surprise, surprise. Yeah. Um, okay. That makes a lot of sense. So, so, and, and again, I'm curious to understand in the press messaging wise, you were very clear. You are not raising this capital to go public. You're raising it to stay private. Why be so clear with that message?

A That's a good question. I think, well, it was three years ago, so if we were promising to go public, we would have been wrong. Um, I think the main thing, it was a hundred and sixty million dollars, which is the size of many IPOs. Um, and really felt like being private would give us the most flexibility, uh, for the next several years, including against our public market competitors who are reporting things quarter to quarter. And while they have access to, you know, the public capital markets, which is great. Um, there, I think lost, you lose a little bit of your ability except for very few companies to make really long-term strategic bets. And we believe that this is still very much, you know, the first inning of this space and that we're making investments, some of which are going to pay back over three, five, and even 10 years. So having a set of investors on board that are thinking long-term Uh, was really, really important, and we've been very lucky to really develop that investor base over time.

AI assessment note: “felt like being private would give us the most flexibility”

Q Next year. Next year will be a billion, right? All right, good. So I want to transition now to more, some of the softer stuff in the business. We got some economics. You were running the company. Walk me through the process. Uh, how, why did you replace yourself with Tony and strategically, how do you recommend other founders do that if they want to go down the same path?

A Yeah, it's, uh, it's definitely factually true to say I was running the company in the very beginning, but it was also just like five people, so it's not like, it wasn't like, uh, although a CEO, it wasn't like CEO, like you might think of a CEO, and I had already met Tony and knew that I wanted Tony to join the company, um, so it was more a matter of him kind of wrapping everything up at Yahoo, where he had sold his previous company to, and, uh, but I knew I wanted Tony to be CEO, so he joined, and, um, And we always worked super, super closely together. So it was very much like, um, we were paired essentially. And I learned a ton working alongside him. Uh, but we were always really clear with everyone because I had seen co-CEO and other kind of arrangements and that seemed to create a lot of conflict. So I wanted everyone in the company to be clear. There was like, there was a clear hierarchy and Tony was at the very top. So he had the final say on everything. Um, Which I just think is healthy for an organization to have kind of a clear lines of responsibility. Um, but then as it's sort of started to scale and we started talking about this probably, uh, certainly a few years before we made the switch was Tony's passionate about smaller teams. And I was really excited about taking automatic Matic from like 200 people to 2000 people. So, um, we talked about it for a while and t…

AI assessment note: “I had already met Tony and knew that I wanted Tony to join the company”

Q So, but Matt, that's a big deal, right?

A Um, well, our strategy with, with the many, many web hosts out there, including WP Engine, is to really create a great set of services with Jetpack that complement what they do. Um, I mean, WP Engine at this point is 450 people. You know, that's, Automatic's only six 50. So just serving their customer base, which is much smaller than ours takes almost the same number of people. And if you add that up with the other people working on WordPress at GoDaddy and Bluehost, I mean, you get into the many, many thousands. So it's just kind of a different business. And, um, and there's people who will build that type of business and be really passionate about it. Automatic's really like a technology and product company. So that's why WooCommerce made a lot of sense is it's both a technology and a product and we'll create SaaS services for it. And, you know, you can run it on wordpress.com, so there's definitely a hosting piece as well. But we believe, think of it kind of like Google with Android. Like, they'll make their Pixel phones, so we'll make some, some versions of WordPress that we think are the best in the world. But very key to our strategy is also working with every other manufacturer out there and every other host out there. So, um, maybe there'll be Samsung, you know, maybe there'll be HTC, like, who knows? But there's, there's lots of space for, for many companies in the, in…

AI assessment note: “our strategy with, with the many, many web hosts out there... is to really create”

Q And how did the open source community, uh, judge you opening up a company that was clearly meant to, to kind of build the ecosystem and also make money to enable you to build further? How did you manage those expectations with the open source community?

A Oh, I think people were highly skeptical, but rightly so, um, regardless of who I am or anything like the history of most companies coming out of open source projects is that the open source project really suffers. Especially kind of years four to six when the company like starts to maybe feel the grind of fundraising or growth or something like that. Um, we now have, you know, over a decade of automatic and WordPress. So, uh, even though today there is still some skepticism on my motives or automatic motives or things like that, or just people in the ecosystem who work against automatic very directly. Um, we now have a lot of history showing that, uh, I very much take a long-term view to these things, and that the Automatic and WordPress can grow very much together, and in fact, Automatic, I think, has helped WordPress grow far, far beyond what it would have without it.

AI assessment note: “I think people were highly skeptical, but rightly so”

Q because, um, I just did it. I was, I'm blessed. Uh, portfolio just did a big deal with me and they also publish, uh, my agent also did, uh, this book with, uh, with Ray. Um, so I, I loved it so much. I bought it and then I get a hand signed copy from, from Ray two days after. Right. So what do you think? Do you like it?

A Amazing. Uh, I'm not done with it, so I won't call it my favorite book, but I would say I would highly recommend it to everyone listening. It's, um, it's not a blueprint, right? You shouldn't take it, you know, whole cloth and apply it. And in fact, he says that, but it's, um, so fascinating to really get into the mind of, of this guy, Ray Dalio, who's created, you know, far and beyond the sort of Bridgewater financial stuff, just a really interesting organization. And I often, you know, one of my fantasies is like, I would love to just work at some of these really, uh, companies like Google or be inside Facebook for just like a year to like learn about their internal systems. I would just read the internet the whole year. I don't, I don't actually want to work at those companies as much as like really deeply understand how they work and how they manage things and everything like that. And, um, and he really kind of opens the playbook for how they do it. And I'm also excited for the coming year when they're going to release some of the tools around assessments. And I think he's going to release the coaching app and a few things that he talks about, like internal tools they developed at, uh, at Bridgewater. Um, it's actually been something automatic's always been, uh, good about in the past and trying to be better about in the future and that we work in a unique way. And we want…

AI assessment note: “Amazing. Uh, I'm not done with it... but I would say I would highly recommend it”