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The Cost of Developers

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Re: The Cost of Developers

#61

Post by segmondy »

ealexhudson wrote: post #25
rsp1984 wrote: post #13

There are times when I really like the thoughtful analysis on Stratechery and there are other times when I think it's a complete pile of detached-from-reality horsesh!t. Today is of the 2nd kind. What it also has is a potentially fatal weakness: no platform with user-based leverage. Sorry, what? Windows still has > 90% market share on desktop. If that isn't "user-based leverage" I don't know what is. This, by the way…

Github would have had trouble getting more VC investment. According to Bloomberg, there are ~21M software developers in the world, and Github has ~24M user accounts. There's little userbase growth possible there; they would have had to start increasing revenue per user rapidly to be interesting for another VC round. Equally, on their $200M revenue (or whatever it was), they would struggle to get a multiple that would…

I've 4 Github accounts, 3 for past companies that I've worked at and 1 that's personal. I wonder how many unique accounts are on there. I've interviewed plenty of devs who say they don't have a github account.

Re: The Cost of Developers

#62

Post by simonh »

scarface74 wrote: post #44
heydenberk wrote: post #30

Earlier quoted context omitted.

Good point. So if our point of comparison is video game consoles, the barriers to entry have indeed been lowered. But is that the right point of comparison?

Before the App Store, you had to have relationships with each carrier to get on thier app stores or you could write independent apps but no one would find you. They also took a 70% cut - not a 30% cut.

It's worth bearing this in mind. Almost everyone expected the App Store fee to be 50%. Opening at 30% was considered stunningly low, to the point where it was almost considered unfair to other platform owners because it was felt Apple was subsidizing the system, taking profitability out of the App store business.

Re: The Cost of Developers

#63

Post by singingfish »

coldcode wrote: post #38
jillesvangurp wrote: post #28

Earlier quoted context omitted.

Correct, github sold out to investors, which then owned them, which then sold them out to get an exit when it turned out the company was in no shape for an IPO which is the only reasonable other exit if you are looking for a 10x ROI on a company that burned through hundreds of millions. Investors were in this for a huge exit and they just got it. In fairness, MS bought a valuable social network of essentially the ent…

At where I work we use Github Enterprise, which costs way more than Gitlab Enterprise, is not scalable, and barely cares about enterprise customers like ourselves. Gitlab on the other hand is much cheaper, is highly scalable, runs in AWS, and is responsive to requests. Ultimately to make it as a business you need to provide what the customer wants and is willing to pay. Github never did.

There are quite a few things about gitlab that smell of amateur hour with the way it's put together, but on the whole it's a really good product and I like that enough to make it usable is free open source, and the CI stuff is much nicer than any other I have used (although the way we've put it together, we've hit its limitations a bit).

Re: The Cost of Developers

#65

Post by jasode »

jillesvangurp wrote: post #28
mgc092 wrote: post #5

Great analysis, although I don't completely agree with this statement: "GitHub, a company that, having raised $350 million in venture capital, was not going to make it as an independent entity." If it is referring to the fact that, in the crazy VC spiral of the startups world, once you have received such a big investment, a sale to a big corp is the only choice, then I sadly agree. But GitHub could have been an indep…

Correct, github sold out to investors, which then owned them, which then sold them out to get an exit when it turned out the company was in no shape for an IPO which is the only reasonable other exit if you are looking for a 10x ROI on a company that burned through hundreds of millions. Investors were in this for a huge exit and they just got it. In fairness, MS bought a valuable social network of essentially the ent…

>, github sold out to investors,

>Investors were in this for a huge exit

I think these excerpts from your comment and also DHH's "VCs need their pound of flesh" are not helpful for readers on how to analyze the situation. They (maybe unintentionally) taint the discussion.

Github is an entity owned by human beings. The founders included Chris Wanstrath, Tom Preston-Werner, PJ Hyett, and Scott Chacon. Therefore, emphasizing that "investors wanted a big exit" is (inadvertently) omitting that those 4 founders may have also wanted a big exit as well. The DHH quote also misdirects people into thinking the VCs are the bad guys. Instead, we have to remember that the 4 founders have to sign off on the documents at closing to get the $350 million. They had to do presentations to convince investors to give them $350 million.

We have to include the founders' thinking about Github's future and not just outsource our frustration to those "evil VCs". VCs cannot give money to a startup if the founders don't want it. (E.g. Craig Newmark refuses VC money for craigslist.org.)

Re: The Cost of Developers

#66

Post by AnIdiotOnTheNet »

scarface74 wrote: post #60
AnIdiotOnTheNet wrote: post #54

Earlier quoted context omitted.

> In the grand scheme of things. No one cares about desktop development. Maybe no one in reality-distortion field of SV cares about Desktop, but offices are full of them and they're still running regular old desktop applications to do real work.

What are those regular old desktop apps? Apps built by Microsoft, Adobe, and a few other large companies. The bespoke internal business apps have been moving to the web for decades.

I think you'd be surprised how few companies that aren't SV startups actually give a damn about the cloud. "Oh, you want to charge me a subscription to use software I already own and host all my data and critical infrastructure somewhere where I don't have direct control over it? And it costs more? Where do I sign up!?"

Re: The Cost of Developers

#67

Post by dalbasal »

mgc092 wrote: post #5

Great analysis, although I don't completely agree with this statement: "GitHub, a company that, having raised $350 million in venture capital, was not going to make it as an independent entity." If it is referring to the fact that, in the crazy VC spiral of the startups world, once you have received such a big investment, a sale to a big corp is the only choice, then I sadly agree. But GitHub could have been an indep…

I agree with one caveat, I don't think it's the amount of money. I think it's valuations, and methods of funding/valuing companies.

Zuck still owns 30% of fb, after (I assume) cashing out some shares. Early execs/investors would probably own 75% or more of the company if you exclude shares sold/cashed out (as opposed to dilution).

This is because that FB never had to raise serious^ money. Put another way, it does not cost money to make a FB. This makes sense, FB is a "regular" website/app and those are cheap to make.

You could say the best site wins, the most competent team. You could say it's a lottery. Either way, one site gets to be the social media site. That's valuable. Money is not required to get there.

Compare this to TSLA, on the other extreme. Musk sold all the shares immediately. Then he borrowed as much as he could. This is because it takes money to build a TSLA. You need factories, parts, a supply chain... expensive.

This means capital is being allocated very inefficienttly. FB could be the same fb (to users) @ a tiny fraction (maybe as low as 1%) of its market value. Twitter too. The money that is going into FB (and into shareholder pockets) does not enable FB to exist, help it do more things or benefit consumers/the economy.

If FB's valuations was much lower than it is, FB could have done the exact same things that it did. If Tesla's valuation was much lower, they would have had less capital to invest and they'd be making fewer cars. A dollar that goes into FB makes FB shareholders richer, with no effect on anything else. A dollar invested into Tesla makes cars.

Classical economics isn't supposed to work like this. The market is supposed to allocate capital where it is needed, at least in broad strokes.

I think that we're dealing with 3 distinct things.

(1)the monopoly-like nature of the digital communications economy is having hugely distortive effects. (2) Centralisation of capital into giant pools means money is flowing into giant "investment vehicles." Big investors = big funds = big companies. (3) we're in the middle of a capital bubble. Returns on doing business (selling stuff to people for money) are not as big as returns on investing (selling stuff to investors for shares and other, non-money money). 1 unit of "capital" is worth more today than yesterday. Ie inflation. This is squeezing out the "real" economic activity.

^scaled to market cap.

Re: The Cost of Developers

#68

Post by mariusmg »

apapli wrote: post #6
future1979 wrote: post #2

The purchase of github doesn't make immediate financial sense to me. This article posted a reason - to stave off Windows decline. While it is plausible, I still don't see it.

The reason? Simple. Developer mindshare. Microsoft lost it with Ballmer, and is getting it back under Satya. Ultimately Microsoft's success has always stemmed from providing platforms that support developers, and in turn they build great products people will pay for. And that drives Microsoft revenues, be it the OS, or nowadays, SaaS PaaS and IaaS (and OS).

> Developer mindshare.

Just have to point out how fucking expensive develope mindshare is then :)

But seriously, from a business perspective buy GitHub (a company which gobbled up lots of VS money without a good business model) the acquisition doesn't makes any sense.

Re: The Cost of Developers

#69

Post by alter_eco123 »

icedchai wrote: post #48
alter_eco123 wrote: post #40

Earlier quoted context omitted.

> Seriously? GitHub could have easily gone out for more VC. Making it as an independent company generally involves not taking on more debt on top of a massive pile of debt. What's necessary is, you know, profits and stuff.

1) Equity isn't debt. 2) Profits? You must be kidding. Take a look at some SaaS companies that have gone public in the last 5 years. Few are profitable. It's all about growth of revenue. The profits are way down the line.

> Take a look at some SaaS companies that have gone public in the last 5 years. Few are profitable. It's all about growth of revenue.

Who's kidding? I doubt you genuinely believe we've reached a new paradigm where bankruptcy is no longer a thing.

Re: The Cost of Developers

#70

Post by vinceguidry »

dalbasal wrote: post #67
mgc092 wrote: post #5

Great analysis, although I don't completely agree with this statement: "GitHub, a company that, having raised $350 million in venture capital, was not going to make it as an independent entity." If it is referring to the fact that, in the crazy VC spiral of the startups world, once you have received such a big investment, a sale to a big corp is the only choice, then I sadly agree. But GitHub could have been an indep…

I agree with one caveat, I don't think it's the amount of money. I think it's valuations, and methods of funding/valuing companies. Zuck still owns 30% of fb, after (I assume) cashing out some shares. Early execs/investors would probably own 75% or more of the company if you exclude shares sold/cashed out (as opposed to dilution). This is because that FB never had to raise serious^ money. Put another way, it does not…

The social media industry is still nascent, it takes a lot more time than Facebook and Myspace have had to grow an entire market segment. Eventually we'll see a plurality of options and the ability to move between them with relative ease. But it's already easy to ignore Facebook, I didn't think that would happen for at least another decade.

In fact, the only reason I'm still on it is because it maintains a network of former friends and contacts that no other service has been able to offer. Make no mistake, Facebook is struggling for relevance in an age where the next generation has already moved on to Snapchat and friends.

I don't think any of them are going to emerge dominant, but if Facebook is smart, it'll use it's remaining heft to build a true platform instead of trying to keep going as an aggregator.

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