[HN Gopher] Zapier reached a $5B valuation with $1.3M of funding
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Zapier reached a $5B valuation with $1.3M of funding
Author : gmays
Score : 186 points
Date : 2021-03-09 21:40 UTC (1 days ago)
(HTM) web link (www.forbes.com)
(TXT) w3m dump (www.forbes.com)
| eloff wrote:
| > "For us, we've always looked at financing events, whether
| they're primary, secondary or public markets, as a tool in the
| tool belt. It's something that you can reach for as a person who
| runs a business that can help you when you need it," says Foster.
| "I think that's a much healthier approach to things than sort of
| getting on a hamster wheel that is difficult to get off."
|
| That's seems like a pragmatic and healthy attitude towards
| venture capital. I feel like venture capital is gasoline. You can
| pour in on a fire to make it grow quickly, just make sure you
| first have a good fire going and careful not to get burned in the
| process.
| efsavage wrote:
| Most VC would love it if they could be 100% gasoline. The
| common problems people usually generally arise from them having
| more fuel than there are fires to put it on.
| redisman wrote:
| The problem is if you're 100% gasoline then the founders
| would do well to just get a loan
| bpodgursky wrote:
| Having the right investors adds value in a way a bank
| holding a loan absolutely never will.
| redisman wrote:
| But if the company is using money as "100% gasoline" then
| they've got it figured out and don't need intros from the
| investors.
| ben-gy wrote:
| Correct - accelerant can be traded for "equity for lots
| of cash plus advice" or purchased "cash for advice" - I'm
| a big fan of bootstrapping to a financially stable state
| and having the option to take either route without the
| business being reliant on either - then again, in
| Australia we don't have much choice anyway - venture
| capital and banks are both exceedingly conservative which
| perpetuates this approach more so than in other
| ecosystems with more funding liquidity.
| staysaasy wrote:
| I usually equate VC to some new experimental rocket fuel. It's
| by far the best way to get yourself into orbit, but the
| downside is that if it fails you're going to explode rather
| than cruise to a nice landing.
| chris_va wrote:
| I really cannot tell if the secondary market shares were common
| stock or preferred.
|
| $5B valuation for common shares is a very different thing than
| $5B for preferred shares.
| xiaodai wrote:
| Congrats to them!
| ineedasername wrote:
| A great example of a slow-burn startup. They had a solid product
| & revenue stream pretty early meaning they could cover costs and
| just wait as things grew incrementally.
|
| Of course that wouldn't work for every product model... some
| really need that huge capital-driven massive growth to get to
| some economy of scale. But if you can avoid that, you probably
| keep a heck of a lot more equity for both founder & early (and
| maybe not so early?) employees.
| valuearb wrote:
| $5B is a pretty ridiculous valuation for a $140M revenues
| company.
| ineedasername wrote:
| 30x revenue multiples are actually not too uncommon, especially
| for a SaaS firm that appeals to both small & enterprise
| customers, is already profitable, and has a large addressable
| market.
|
| Here's an article that has a frequency chart based on valuation
| multiples. Keep in mind that, while it's front-loaded with
| lower multiples, not all business models have the same
| potential for revenue growth: https://onstartupexits.com/how-
| to-value-the-exit-price-for-a...
| [deleted]
| staysaasy wrote:
| I agree that it feels pretty cray but it's inline with the
| market. Sector is hot, it has a trendy + efficient product-
| driven growth model, they're profitable, and growth looks good.
| There's a lot to like which gives them a revenue multiple at
| the high end of the market - which currently puts them right
| around $5B.
| bpodgursky wrote:
| Zapier has mindshare, enormous depth of functionality, and an
| enormous potential market. Doesn't feel insane to me. I'd buy
| in.
| reducesuffering wrote:
| No, it's not, because that isn't enough information to
| determine your conclusion. That's a 36x P/S ratio. Many
| established public companies are at or exceeding that, like
| Cloudflare and Crowdstrike. (those companies COULD be
| overvalued too, but it depends on something else)
|
| The most important factor or metric you're missing from the
| equation is growth (assuming eventual profit margins are
| normal). It doesn't matter what today's revenue numbers are, if
| there is an eventual much better revenue number in the future.
|
| This can be sustained by something like:
|
| 100% YoY growth over 5 years: 4.5b revenue at a $5b valuation?
|
| 50% YoY growth over 10 years: 8b revenue at a $5b valuation?
|
| Looking much more like a lot of value there.
| layoric wrote:
| I'm not that familiar with tech company revenue growth
| examples but can you point to many other $5B companies (or
| companies already making $100M revenue) that get 50% YoY
| growth for 10 years? As far as revenue goes? That kind of
| revenue growth would put them into the top 500 companies in
| the US by revenue, close to eBay [0]. To me this seems very
| optimistic but I only known the basics about Zapier, not
| their future direction etc so I'm likely missing info.
|
| [0] https://en.wikipedia.org/wiki/List_of_largest_companies_i
| n_t...
| jtsiskin wrote:
| For some context, some other current P/Es: Google: 35.06
| Apple: 32.54 Microsoft: 34.64 PayPal: 68.38 Amazon: 73.10
| Shopify: 420.04 Square: 515.13 Tesla: 1,043.84
| hangonhn wrote:
| When Slack IPOed, their revenue was around $500 mil and their
| market cap was $16 billion, IIRC. So Zapier seems pretty
| inline.
| isoskeles wrote:
| I am using Zapier because their service was very easy to
| implement a webhook for what I needed at the time. However, the
| price is high enough that they're on my short list of vendors
| to move on from when I have the time to spend building my own
| integration (not replacing everything Zapier does, just for my
| use-case).
|
| I suspect I am not their intended customer as I don't get a lot
| of value out of the dozens (hundreds?) of API implementations
| they offer. But I wonder how much of that revenue represents
| customers with similar plans.
| mooreds wrote:
| I'll tell you about the first time I started using Zapier. I
| wanted to move some data from google spreadsheets to some
| other system (I don't actually recall what it was, it was
| 2012). I was on a team of three devs supporting a business
| critical application.
|
| The options for me were: * bump something
| else to have a dev build out the integration * pay the
| monthly fee to enable a non technical person to build the
| integration (it was on the order of $50/month). *
| don't get the work done
|
| Above and beyond the value of the UI and uptime managed by
| someone else, the fact that it could get done by a non
| programmer made the monthly fee very worth paying.
|
| I think I've used it at 3 companies since, mostly on the free
| plan. But when I exceed the plan, I don't have any trouble
| pulling out the company's wallet to pay for it.
| frongpik wrote:
| So on paper they are billionaires, but in fact they only have a
| bit over 1M - just enough to pay bills for 6 months.
| nacs wrote:
| From the article:
|
| > Zapier reached $100 million in annualized recurring revenue
|
| They have access to a lot more than a million.
| brenryd wrote:
| They have only raised $1.3m, which they most likely spent a
| long time ago. They have been profitable (self-sustaining) for
| years. Sure their stock is not liquid, but there is a strong
| case that they could move towards liquidation (IPO) at a $5
| billion or higher valuation.
| kyleblarson wrote:
| They went through YC. That's VC funding. (I was in the same
| batch)
| peignoir wrote:
| Really a great story and super proud they started at startup
| weekend https://zapier.com/blog/startup-weekend-part-i-idea/
|
| It's also a good signal for the ecosystem to have alternate
| venture paths and vehicles where founders can keep higher
| ownership.
|
| Kudos to them
| didibus wrote:
| So Zapier is like a later competitor to IFTTT ? But basically the
| same thing?
| alvarlagerlof wrote:
| It's way more business-oriented and has more advanced pipelines
| and integrations.
| supernovae wrote:
| IFTTT kinda gave up in comparison to Zapier - zapier has so
| many api/service/framework/tool interfaces where IFTTT kinda
| just went niche with home automation and basic stuff beyond
| that.
|
| For example, with IFTTT the RSS trigger is pretty stupid but
| with zapier you can trigger based on parsed fields with values
| and triggers on those values...
|
| I had hoped that Zapier would put some pressure on IFTTT to do
| more but it seems like they're comfortable focusing on
| IoT/basics/appliances
| didibus wrote:
| I see, so similar idea, but they have more features with
| regards to triggers and maybe integration is more focused on
| business services then IoT and like consumer needs?
| lawrencevillain wrote:
| They did take VC funding though? By pulling themselves up by
| their bootstraps (and a meager $1.3 million in funding) they were
| able to start a company!
|
| That's not an insignificant sum of money, I see that they didn't
| take further rounds, but still this feels like a nice marketing
| piece with a bad headline.
| vladislav wrote:
| It's strictly speaking correct in that the $5B valuation was
| established purely on the secondary market and only from sales
| of shares of investors (not common holders), which doesn't give
| the company any VC funding. Also $1.3M in seed funding is a
| rounding error to get to $5B.
| notyourday wrote:
| This smells like a sophisticated investor pump and dump: sell
| a small number of shares for a stupid amount to use the new
| valuation as the marker.
|
| I would trust this number far less than a number one would
| arrive at a new VC round
| vmception wrote:
| The article says "hamster wheel", not that they didn't take it.
| The headline here adds ambiguity that wasnt written
| dang wrote:
| OK, we've disambiguated that in the title above. (Submitted
| title was "Zapier reached a $5B valuation without VC
| funding".)
| imacoder wrote:
| If there is a valuation, then there was funding or there will
| be funding.
|
| Looks like funding came from YC, so yeah, they were funded.
| jeff18 wrote:
| Not necessarily! Shares trade all the time without funding
| the company. The valuation depends on what people pay for
| those shares.
| imacoder wrote:
| If it has shares, it's funded. Doesn't matter if they are
| traded later. Also, HN is an echo chamber.
| falcor84 wrote:
| It is really unclear, but I suppose maybe they only took money
| from angel investors?
| lawrencevillain wrote:
| It looks like they were part of the S12 cohort for YC, and
| that is definitely VC money.
| [deleted]
| capableweb wrote:
| Very unlike HN to upvote a comment that has reacted only to the
| headline on HN, not even the articles own headline, even less
| the body of the article. Maybe because everyone reading the
| comments is doing it the same way?
| Kaze404 wrote:
| What's wrong with criticizing a headline that presents
| factually untrue information?
| capableweb wrote:
| It's a editorialized headline that only appears on HN. The
| submission itself (it's content) doesn't actually say
| anything like the title is (was? Seems title changed)
| dang wrote:
| It tends to take the thread to a shallow place, when there
| are usually much deeper and more interesting aspects to
| discuss.
| pc86 wrote:
| How is that "unlike HN?" I pretty regularly see comments that
| either make it clear the author didn't read the article (e.g.
| arguing against points not made, or "adding" additional
| information that's in the second paragraph) or explicitly say
| they're only responding to title or some tangential point.
| supernova87a wrote:
| I don't understand. They first say that they didn't start with
| VCs. And only finally, 2 months ago, "Sequoia and Steadfast
| Financial bought shares at a $5 billion valuation from some of
| Zapier's original investors."
|
| But the original investors were "Bessemer Venture Partners,
| Threshold, Salesforce Ventures and Missouri-based Permanent
| Equity..."
|
| So how is that not having VC at your origins?
| dang wrote:
| The submitted title was "Zapier reached a $5B valuation without
| VC funding". We've changed it now.
| stingraycharles wrote:
| HN headline was editorialized, original headline is more
| nuanced and meant to imply "without taking a lot of VC money"
| rather than none at all.
| bradlys wrote:
| Congrats to the founders for not taking much funding but for
| employees... this has to suck unless they get to sell their
| shares to Sequoia as well. (If they even got any options...)
| Maybe they don't compete for SV talent and most employees aren't
| used to even getting options as part of compensation.
|
| Is there a specific reason a company would have IPO in mind but
| wouldn't say they are looking to do an IPO eventually? Is there a
| particular reason to say that?
| matthewheath wrote:
| I believe only a few of the original Zapier folks have options
| (I don't hold any myself, for example but I joined when they
| were around 70 people).
| propter_hoc wrote:
| Really? Only cash comp?
| jcomis wrote:
| Yes
| sjg007 wrote:
| So without options, why did you join?
| [deleted]
| heavyset_go wrote:
| Title is inaccurate, they took VC funding.
| mandeepj wrote:
| > Last summer, Zapier reached $100 million in annualized
| recurring revenue; it's passed $140 million by now
|
| $1.3M in $140M RR is like a paper change. So, they can't find
| that amount somewhere in their revenue stream?
| marketingtech wrote:
| Zapier joins Tealium and Segment on the list of billion dollar
| valuations for powering the next generation of ad tech.
|
| As cross-site cookies and browser pixels are increasingly
| blocked, ad platforms are moving from browser-based tracking to
| server-side data transfer.
|
| Like those other companies, Zapier provides a single integration
| point that funnels user and conversion data to dozens of
| marketing companies' server-side APIs. A few clicks allow you to
| transfer your customer data to/from hundreds of different
| platforms.
| tootie wrote:
| Zapier isn't necessarily just for ad tech. It can any kind of
| ad hoc automation between well-defined services. We use it for
| support ticket automation.
| kritiko wrote:
| How is this CCPA / GDPR compliant?
| [deleted]
| michaelbuckbee wrote:
| CCPA/GDPR don't really prohibit you from doing things with
| data or sharing with 3rd parties you just have to be really
| upfront about it.
|
| Say you were going to take the "Contact Us" form submissions
| from your website push those to Zapier to check if they were
| legitimate (before sending email to the addresses), you would
| need to disclose what 3rd parties you're using, what data is
| shared with them, etc.
|
| Checkout this massive list of companies that PayPal "shares"
| your data with -
| https://www.paypal.com/uk/webapps/mpp/ua/third-parties-list
|
| (mostly for fraud + geo checking)
| marketingtech wrote:
| There's a distinction between being a data controller and a
| data processor.
|
| The businesses that use these platforms are the data
| *controllers* and are responsible for implementing consent,
| "do not sell my information", "show me my data", or "delete
| my data" flows as required by law. The platforms generally
| offer APIs to implement these required data flows in a
| centralized way, which is another major value prop for them.
|
| The platforms serve as the data *processor* and can assume
| the data is compliantly obtained by the controller until
| informed otherwise.
| staunch wrote:
| Zapier is a good example of copying a good idea (IFTTT) and fast-
| following with good execution. Sure, copying can seem lame, but
| Google was copying Alta Vista, Facebook was copying Friendster,
| Microsoft was copying everyone, etc.
|
| Good ideas are important but good execution is more important.
| amelius wrote:
| Yes but did they copy the idea using their own skills, or did
| they need VC funding to get it off the ground?
|
| The former seems ok-ish, the latter not so cool and unfair to
| the original inventors of the idea.
| staunch wrote:
| We can't run the experiment but it's safe to assume most
| startups that took very early funding did need it to succeed.
| That doesn't really take away from the founders effort
| though. Although it does mean there were probably 10 other
| teams that had the same idea and skills that failed for not
| having the ability to raise funding.
| ineedasername wrote:
| It's also unclear just how much IFTTT influenced that start of
| Zapier. IFTTT was announced only about 10 months earlier than
| Zapier. Zapier announced right around when IFTTT has a live
| prototype. REST APIs were _really_ hitting popularity at that
| point, so services like these were becoming more & more
| obvious-- simultaneous invention is a thing. [0] Also, years
| earlier, there had been a relatively similar offering from
| Yahoo, Yahoo Pipes, [1] so the idea was pretty much out there
| before both of these companies. The rise of REST APIs really
| just made it much more feasible.
|
| [0] https://en.wikipedia.org/wiki/Multiple_discovery
|
| [1]https://en.wikipedia.org/wiki/Yahoo!_Pipes
| mooreds wrote:
| RIP Yahoo Pipes! It even had a GUI editor. Reminded me of an
| ETL tool much more than Zapier did (even though in some ways
| that is what they both are).
| superbcarrot wrote:
| Sometimes I get shocked by these numbers and it reminds me how
| little I know about business. Like if you showed me the wikipedia
| page for Zapier and asked me give it some value, I would be way
| off. Or if you pitched the business idea to me, I would tell you
| do something better with your time.
| toomuchtodo wrote:
| Khan Academy has an amazing collection of videos on finance. I
| highly recommend it for understanding cash flows, enterprise
| value, etc. It's helped me transition (one foot out the door)
| from tech to finance.
| artemonster wrote:
| Any other good sources, like books or articles ?
| ab_testing wrote:
| The valuation of current tech companies is way astronomical
| compared to what is considered normal for mature companies.
|
| The average price to sales for S&P used to be between
| 1.5-2.5 for many decades. However for these newly IPO
| companies the price to sales ratios are around 10-15.
|
| Similarly the P/E ratio for S&P companies used to be in the
| 15-25 range to the considered normal .
|
| However with these internet companies, they usually do not
| turn a profit or if they do, their PE ratios usually
| lingers in from ~100 to 1000. And the market considers that
| normal behavior now.
| andrewmcwatters wrote:
| > However with these internet companies, they usually do
| not turn a profit or if they do, their PE ratios usually
| lingers in from ~100 to 1000. And the market considers
| that normal behavior now.
|
| That's not normal, it's pure stupid. So if you don't
| think there are people sitting on the sidelines watching
| idiots bid up shares way, way beyond the replacement
| value of companies, you're not watching the same thing
| happen that others are.
|
| Do people even understand what these numbers mean? It
| means after expenses, assuming no future growth, that's
| how many years it would take to make back your
| investment.
|
| Do you know why a P/E ratio of 15 was historically
| considered high? Because even with modest growth, no one
| wants to wait 15 years for corporate revenues and
| acquisition costs to break even. News flash, 15 to 25
| years isn't normal.
|
| The average company doesn't even make it 15 to 25 years
| these days.
| throwawayyipyip wrote:
| Well, to some extent it is. You can argue both ways, and
| in Zapier's case, I'd say it's overvalued as the 10-15
| range assumes obtaining a monopoly. I don't see how
| Zapier will do that since there's also IFTTT and other
| services I've tried.
|
| With that said, consider huge successes like Amazon. Huge
| successes like Amazon have been generating much more
| profit compared to what they were projected to earn in
| 2010 [1]. I picked 2010 since 2 things are out of the
| way: the tech boom and the credit crunch. Moreover,
| people understood that Amazon was here to stay. Despite
| that, 10 years later, they make 20 times as much profit.
| If investors knew that 10 years ago, I'd bet that the
| price would not have been about 130$ since according to
| Google Finance, the diluted earnings per share (EPS) is
| about 42$, which is about 30% of the 2010 stock price.
|
| Mind you, in 2010, investors already put crazy multiples
| on stocks like Amazon. Yet, their prediction on how much
| money it would make has been underestimated back then. If
| the estimates of 2010 were correct, you'd expect Amazon
| to now have an EPS of like 6.5$ (130/20) since by
| conservative measures, the P/E ratio is in the 15-25
| range.
|
| Correct me if I'm wrong on this, I'm not the sharpest
| cookie in the jar.
|
| [1] https://www.macrotrends.net/stocks/charts/AMZN/amazon
| /net-in...
|
| [2] https://www.google.com/finance/quote/AMZN:NASDAQ?wind
| ow=MAX
| valzam wrote:
| However, Amazon never pays dividends. And you probably
| cannot really vote on anything with your stock either. So
| what's the point? There is an interesting article about
| Facebook with a similar opinion. Zuck owns the majority
| vote and they never pay dividends. What's the point of
| owning the stock?
| enra wrote:
| The article title is accurate, the one in HN right now is not.
|
| The point was that they did YC and seed round but didn't raise
| funding after that. Traditionally startups raise every 18mo and
| have raised A,B,C,D etc in ~10 years and before hitting $5B
| valuation.
|
| Even with the latest round, it was a secondary sale, so not
| dilutive raise. Some investors sold shares to other investors but
| no new shares where created.
|
| Avoiding that "vc hamster wheel" is that you avoid the
| conversations, meetings, fundraise roadshows and dilution every
| 18mo or so. So I think Zapier is an interesting example of a
| startup choosing a different path. Not purely bootstrapped or
| traditional vc backed company.
| DamnYuppie wrote:
| This will work out very well for YC as well as it means their
| shares were not diluted. Overall it is a huge win for everyone
| at Zapier and their early investors, job well done!
| dang wrote:
| (The submitted title was "Zapier reached a $5B valuation
| without VC funding". We've changed it now.)
| alexashka wrote:
| This company reminds me of library vs service topic on here a
| couple of days ago.
|
| 5 billion dollars for what should've been a free set of libraries
| and competing UI interfaces to cater to different levels of tech
| savviness.
|
| It's crazy how complicated the simplest things are in tech that
| these companies even need to exist. Hopefully it's just growing
| pains, rather than consolidation and a swamp for decades to come,
| like we've had with Microsoft.
| jeremy_k wrote:
| Who are these engineers that would have built these free
| libraries?
| newsclues wrote:
| They work for the companies selling the UI?
| alexashka wrote:
| The same people who built Ruby on Rails or D3.js or a hundred
| other projects because they had an itch that needed to be
| scratched.
|
| The only reason we don't have free libraries for these things
| is because the vendors are not forced to provide basic
| interop functionality such as import/export.
|
| I'm no historian but I imagine it goes back to proprietary
| file formats. That should've never been a thing and since
| then, people've just accepted that they don't have any
| ability to modify their own data unless they use a
| proprietary tool, which is crazy.
| ineedasername wrote:
| @dang HN's title is misleading as the actual title doesn't say
| Zapier avoided VC funding.
| dang wrote:
| Fixed now.
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