Automattic After-Market, Lee Fixel, and Tiger

One of the most striking shifts in entrepreneurship when I started Automattic seven years ago was the rise of the Founder Friendly VCs. The standard operating procedure at the time for VC-backed companies consisted of bringing in “adult supervision,” founders often taking largely-ceremonial roles like “chief architect” after the business had scaled to a certain point, aggressive financial terms around liquidation preferences, and a control structure that more often than not left founders with a minority say in the future of the company, especially if it went through rough patches. Folks like True Ventures (who Automattic has always been intertwined with) appeared as iconoclasts because they came out saying that founders were the best ones to grow a company long-term and structuring their entire practice and way of investing around that idea. It seems non-controversial now, but it was like Dylan going electric. Still in spite of their philosophical innovations, many of these funds were structured in similar ways to the ones of old, with 7-10 year fund lifetimes, for example.

Fast-forward to 2013 and there’s an even more founder-friendly class of investors rising, at least for companies that have made it past a certain exit velocity of growth and revenue. Most visibly pioneered by Yuri Milner and Facebook in 2009 there’s a breed of later-stage investors from largely financial backgrounds that come in with the ability to write checks larger than the entire size of most VC funds and a desire to align with founders so strong that they embrace things that even VCs from the founder-friendly cohort would balk at: forgoing board seats, assigning voting proxies to founders, taking very long term approaches to growth, and investing in (and seeking out!) companies outside of the California/New York bubble, from South Africa to Russia to Brazil. The most interesting thing to me about this new generation is how behind the scenes they are: forget about a blog or Twitter, most of these guys don’t even have websites for their firms. These are some of the smartest and most successful people you’ll ever meet and you’ll never hear about them… they like it that way. Asymmetric information is their core competitive advantage.

Anyway, wanted to get in front of the news that will inevitably come out in the next week or two: there has been a large secondary transaction in Automattic stock, about $50M worth. “Secondary” means that it’s existing stockholders, like the earliest investors or employees, selling stock to another investor versus money going into the company (“primary”). It was led by Lee Fixel at Tiger Global, one of the behind-the-scenes quiet geniuses that has previously invested in SurveyMonkey, Facebook, LinkedIn, Palantir, Square, Warby Parker… Automattic is healthy, generating cash, and already growing as fast as it can so there’s no need for the company to raise money directly — we’re not capital constrained. The minority of stockholders that elected to participate are holding on to the vast majority of their shares. We’re building an independent company that’s going to be a growing part of the fabric of the web for many years to come, so allowing early investors to lock in some returns releases any short-term pressure there might be on the company for a liquidity event and allows us to focus fully on the long road ahead.

As sometimes happens in with regulated financial things, I can’t answer every question about this, but will leave comments open. I hope to see some of you on Monday the 27th when I’ll be celebrating the 10th anniversary of WordPress alongside community members in over 500 cities. Also check out Toni’s post about all of the above. If you’re interested in living anywhere and working hard alongside people passionate about the same, Automattic is always hiring.

60 thoughts on “Automattic After-Market, Lee Fixel, and Tiger

  1. Great new design Matt and congrats 🙂
    It’s a pleasure to see Automattic stay on the “indie” path these days!

  2. Is this a modified version of the TwentyThirteen theme in 3.6? As for all of this business stuff you speak of, did you know about Venture Capitalists and all that jazz when you founded Automattic or has it been an evolving learning process for you? Also, does this news mean that certain Automattic employees will receive a nice payout or is this move strictly related to previous investors and their stock?

    1. This is a modified TwentyThirteen, worked on by Joen. I didn’t know as much about starting companies before Automattic, but learned a lot quickly in the beginning. Can’t comment on the last question.

  3. Congrats, Matt! Love what you’re doing with Automattic. The constant innovation and new product releases are the very reason we power our site on WordPress.

  4. Matt,
    first off, congrats to you and the Team on the 10 years of WordPress.

    Wish you more great supporters like Tiger Global to help you follow your mission.

  5. I did not understand a single word of this post, but you know what, I trust you and WordPress is amazing software, so I’m okay with everything you’ll do on the market. Release the kraken!

  6. A few things:
    1) First of all, that’s awesome with the investors. I took a couple classes based on this stuff (starting companies) in my undergrad and the wisdom (this was ~10 years ago) was that founders suck at growing companies so you need VCs to lead the way. Glad to see there are some VCs who don’t believe that
    2) I’m glad you guys are able to, for the time being, remain private. Everything in life has positives and negatives, but I feel that public companies just have too much pressure to focus on the short-term.
    3) @julien51 it apears that matt has gone for a variant of Twenty Thirteen
    3.5) So does that mean you’re now running 3.6?
    3.7) If that’s so….WHEN OH WHEN IS IT COMING OUT? I know these delays in FLOSS usually lead to a better product but I’m so anxious for the new features!
    3.9) And while it Twenty Thirteen looks lovely (I plan to adopt it for my site), I really loved your old theme – that artwork was pretty awesome. Hope you took a screenshot as a memento!

  7. Matt, this is great long-term news (and short term for select folks, I’m sure)!

    That said, does this event impact what you think Automattic should be valued at? Just to try and compare apples-to-apples, say, against the $1.1 billion Tumblr realized? 😉

    1. I have an extraordinarily high opinion of the value of Automattic that would be tough to be matched by any investor or acquirer, but it’s influenced by our products, team, user growth, and revenue, not any particular investment event.

  8. What do you mean by “Asymmetric information is their core competitive advantage”? Is being under the radar a competitive advantage to you? If so, why? It is a bit counter intuitive to me, thus interesting.

    1. It is, because you get fewer copycats or competitors with cashflow in other businesses trying to leverage into your space.

      1. The whale that blows its whole gets harpooned.

        Knock-off competitors are not true innovators, they are either copycats or evolutionaries (not a real word). Evolutionaries take an enlightening idea (product/service/technology) and leverage it in the either the same or next logical way; they’ll take all the information they can get and use it for themselves which may hinder your own competitive advantage.

        Thanks for the information, Matt.

        Other people have commented about your theme, which is nice. However, in Chrome it’s really difficult to read the new posts/comment notification message options when replying. Here is a screenshot

  9. Matt, congratulations to you and the rest of the team there. I wrote up some thoughts riffing on this post as to why I think this deal – and the way you all structured it – really matters. I may be reading too much into it though, and would really appreciate a reality check:

    Sorry. I don’t usually link to my site in a comment. But your post is what inspired me to write it up and think a little deeper about what you all are doing. Which, by the way, continues to rock the world…Again, congrats to all there.

  10. Huge Congratulations…always good to see smart, intelligently calculated entrepreneurs in Silicon Valley build seriously valuable companies over time and not just get sucked into the oft-glamorized quick flip.

  11. Love the transparency, Matt. I think it’s great that your early investors are able to get some return without you having to make major changes in the way you run the company. You still have autonomy and hopefully less short term pressure.

    Congrats on 10 years. With moves like these, I can see WordPress as a 100 year company! Fortunately for you, you’ll only be 118 by then :).

  12. I am no venture capitalist or rocking web maven, but I enjoy reading your take, and I did once go to school in Houston…