With all this free money floating around, it feels nice that some of it landed on good people.
That said, being overcapitalized is perniciously corrupting. I saw first hand what happens when there's too much money floating inside a company. Malinvestment is an issue at the company level just as much as at the macroeconomic level.
Management starts acting like trust fund kids, forgetting that, one day, the money might run out, and making a profit is the only sustainable way to run a company.
A billion dollar valuation implies billion dollar expectations. They must surely be well on their way to $100M ARR in order to attain a valuation this high - and likely at 100% annual growth rates. I'd say congratulations are in order.
As much as there are examples from history of companies that have blown venture capital on stupid things, I think Redis Labs has a good shot at reaching the holy grail of an IPO.
Being a former Redis Labs employee (disclaimer: I own a few shares), I can attest that their leadership has a scrappy ethos and this is a company that doesn't waste money on stupid things.
Do you mean the hosted or enterprise versions? The enterprise version is a behemoth (in a good way). Tuning an open source redis to be able to do what it does is nearly impossible.
I think the root of overcapitalization is fear. People who can't face their fears, will look for ways to run away from their fears.
For a founder, that way is runway. The founder who is terrified about the company's future, will raise a lot of money to not think about that future. Money buys them time and time buys them distance. A clean, safe separation from reality where unpleasant voices like "do we have product market fit?" or "is our moat large enough?" can be ignored or saved for "later". A "later" that seems further and further away depending on the money raised.
Overcapitalization, in that sense, is meant as a security blanket, not a safety net. In that sense, the complacency and eventual corruption of the organization derives from the need for safety that executives and their managers subconsciously & naturally prioritize above all else.
On that note, I'm curious how Slack will fare over the next few years.
I don’t think it’s (generally) a question of “product-market fit” when raising $100M. It’s a question of “product-market domination”.
It’s not a bet that the product will be profitable and successful—that should be a given. It’s a bet on the company becoming the leader in a huge market.
That said, your larger point still holds :) And of course raising the stakes this way can also increase the risk of ruin.
OK, I suppose they are on the exit line now. I wonder who the buyer is going to eventually be. I can't imagine an IPO, though; maybe my imagination is weak.
In the broader market there’s still hype for SaaS businesses which Redis can easily become because everyone wants to be a rentier and earn passive income.
Raising today 100M you'd want to at least, worst case, triple the exit valuation, and so you grow as crazy your enterprise sales for the next year or two so your 15x ARR gets to $3-4B and you sell for $6B+ and let the buyer carry all that support and tech debt.
Comments
With all this free money floating around, it feels nice that some of it landed on good people.
That said, being overcapitalized is perniciously corrupting. I saw first hand what happens when there's too much money floating inside a company. Malinvestment is an issue at the company level just as much as at the macroeconomic level.
Management starts acting like trust fund kids, forgetting that, one day, the money might run out, and making a profit is the only sustainable way to run a company.
A billion dollar valuation implies billion dollar expectations. They must surely be well on their way to $100M ARR in order to attain a valuation this high - and likely at 100% annual growth rates. I'd say congratulations are in order.
As much as there are examples from history of companies that have blown venture capital on stupid things, I think Redis Labs has a good shot at reaching the holy grail of an IPO.
Being a former Redis Labs employee (disclaimer: I own a few shares), I can attest that their leadership has a scrappy ethos and this is a company that doesn't waste money on stupid things.
How does redis make money?
Hosted cloud redis and enterprise redis. It's all in their website.
I used it a few times.
Pricy, and worth every penny.
Made my life so much easier
Do you mean the hosted or enterprise versions? The enterprise version is a behemoth (in a good way). Tuning an open source redis to be able to do what it does is nearly impossible.
Redid labs.
Click a few buttons it gives me an URL to point my apps at.
Now and then I’d get an email, hey instance X needs more memory, click here to see what’s going on, or just drag the slider to a higher plan.
Worked great, Hardest part was giving good names so I could remember what each instance was for.
I doubt you need to be close to $100MM in ARR to raise at this valuation, given the current state of affairs.
My guess is that fast growth + $35-40MM in current ARR should have sufficed.
Just my 0.02.
Yeah, you could be right. 20x ARR is not unheard of. Cloudflare was trading at 30x recently.
I think the root of overcapitalization is fear. People who can't face their fears, will look for ways to run away from their fears.
For a founder, that way is runway. The founder who is terrified about the company's future, will raise a lot of money to not think about that future. Money buys them time and time buys them distance. A clean, safe separation from reality where unpleasant voices like "do we have product market fit?" or "is our moat large enough?" can be ignored or saved for "later". A "later" that seems further and further away depending on the money raised.
Overcapitalization, in that sense, is meant as a security blanket, not a safety net. In that sense, the complacency and eventual corruption of the organization derives from the need for safety that executives and their managers subconsciously & naturally prioritize above all else.
On that note, I'm curious how Slack will fare over the next few years.
I don’t think it’s (generally) a question of “product-market fit” when raising $100M. It’s a question of “product-market domination”.
It’s not a bet that the product will be profitable and successful—that should be a given. It’s a bet on the company becoming the leader in a huge market.
That said, your larger point still holds :) And of course raising the stakes this way can also increase the risk of ruin.
You are correct. I've adjusted my comment to not confuse my point.
OK, I suppose they are on the exit line now. I wonder who the buyer is going to eventually be. I can't imagine an IPO, though; maybe my imagination is weak.
In the broader market there’s still hype for SaaS businesses which Redis can easily become because everyone wants to be a rentier and earn passive income.
Raising today 100M you'd want to at least, worst case, triple the exit valuation, and so you grow as crazy your enterprise sales for the next year or two so your 15x ARR gets to $3-4B and you sell for $6B+ and let the buyer carry all that support and tech debt.