That description you have of quality inertia certainly seems applicable to other areas of life as well.
I’m certainly seeing a few troubling issues brewing but don’t see as many people as myself taking them as serious warning signs.
But when the collapse happens it’s rapid because the entire foundation has rotted away.
It keeps happening because that’s what the system rewards, short sightedness, and is also why founder led companies have more success, because they are able to execute in years not quarters.
We did this at DigitalOcean for similar reasons, wasn't a feature that was commonly used. Additionally, when you set that limit people then get upset because usually when they go over it for a good reason, like going viral, they aren't anticipating it, and just when their traffic is most valuable the site is down.
What Netlify is doing here is really the best approach for both parties. And typically speaking a $104k bill would be hard to get paid up regardless if the customer's typical transaction balance was $5/mo and their credit card limit wouldn't be that high.
Also, that's the benefits of credit cards - that you can still issue a charge back, and credit card companies very much favor the consumer rather than the merchant.
> Also, that's the benefits of credit cards - that you can still issue a charge back, and credit card companies very much favor the consumer rather than the merchant.
So your suggestion is to issue a chargeback.. to get money back that should under the terms of whatever service you signed up for be owed?.
That seems like bordering on fraud tbh.
> Additionally, when you set that limit people then get upset because usually when they go over it for a good reason, like going viral, they aren't anticipating it, and just when their traffic is most valuable the site is down.
Legit concern and something I mentioned, I'm gonna guess there are broad two camps on that one - mine which is "I want a safety ripcord" and "whee, nice problem to have".
However since this entire conversation is around a guy who got a massive invoice because of a bill he wasn't expecting and couldn't have set such a limit I'm still gonna go with a "I want a way to constrain the financial downside - hell turn it off by default but give me the option".
Since broadly a lot of cloud stuff doesn't, I'll constrain it a different way.
So is the solution to have two thresholds?
Notify me urgently if the traffic exceeds 100$, giving me a chance to evaluate what's going on but shut it down at 1000$ if I don't act.
> Also, that's the benefits of credit cards - that you can still issue a charge back, and credit card companies very much favor the consumer rather than the merchant.
That has not been my experience. I've had to do a few chargebacks for services not rendered, and I've never won. I will submit my evidence, then the vendor will submit 100 pages of random emails, and then I will have my claim denied. Then I will appeal, will point out that they sent 100 random pages of email, and then they will reply with the same 100 pages of emails and I'll get denied again.
It seems that the vendors have found the hack for chargebacks -- just inundate the credit card company with so much data that they assume the vendor must be right.
It makes sense -- the vendors pay the credit card companies a lot more than I do. They'd rather keep them happy than me.
Plenty of morons just use the service and chargeback right before renewal so they got the service for free, some just chargeback instead of cancelling their plan or asking a refund.
I get hit with 15$ bill plus I lose all the money even if I provided the service.
Whatever email / data from my system I send is ignored and the scammer / moron gets his money back.
I'm sure that's how it works if the vendor is large enough.
If you are a small fish you don't stand a chance, which is why for my next project (where I'm supposed to charge a lot and spend a lot on behalf of the user - and I'll be royally screwed if I start getting chargebacks on 500$ of which I've already spent 450$) I'll just accept crypto payments.
That's strange. I think I've done about 10 chargebacks over 35 years. All but one I "won" with just an initial submission and waiting. One my card company came back to me for additional details before also siding with me.
Additionally, when you set that limit people then get upset because usually when they go over it for a good reason, like going viral, they aren't anticipating it, and just when their traffic is most valuable the site is down.
But that's on the user. The user shouldn't get upset in that scenario and has no right to. You're giving the control back to the user.
How about just fix the pricing formula to account for massive surges.
Instead of forcing user to set a low cost limit and missing a viral opportunity or the platform writing off the massive bill the customer can't afford... just put the billing mode into a reduced price mode or have some more nuanced configurations. Sometimes is just asking the question the right way. Instead of "max spend limit" or similar "If your site goes viral, how many requests do you want to serve before going offline? 1M=$20, 10M=$100, etc" at this point, I feel like bandwidth consumption is a bad metric for billing; just use requests/visits/actions and price for those.
This is not prescriptive just illustrative. The point is make a better pricing formula to account for these massively unexpected events. Couple it with an aggressive notification policy when this traffic event gets triggered. The user should know the traffic pattern has changed and a high traffic event is happening. They can login and change the configs and decide if they want to keep it going or not.
> But that's on the user. The user shouldn't get upset in that scenario and has no right to.
I agree. I also agree that when dealing with large numbers of people, there will be people who don't understand this and/or will actively try to social engineer their way out of their own decisions.
Setting customer expectations and meeting them successfully isn't easy.
The site user/admin saying "If this spend goes over $100, shut shit down" is called being a fiscally responsible adult.
The fact that most cloud operators don't have actual hard cutoffs to maintain financial responsibility is intentional. Azure does, but only for specific account types. If it's PAYG, you can't do it. The end result is if you do something "weird", or someone DDoS's you, you're liable.
With a hard limit, a DDoS just takes your site offline.
No, not really. Not really what attorneys do. There might be collections agencies interested in recovering the debt, but if it's some rando guy who doesn't have the money, even that is open to debate.
I mean I'm not familiar with every debt collection scenario under the sun but Internet randos seem to think this is a real thing where like a cloud/hosting company sends an army of lawyers to repo some guy's house and runs him into bankruptcy because of a traffic overage. I've never seen it work that way, what happens like with most business debts, is someone at the company negotiates with the debtor to try and get as much out of them as they can, and failing that, possibly refers it to a collections agency which does the same but plays a bit more hardball.
In the case here with Netlify even before it went viral they reduced the amount from $104K to $5K, no lawyers, collectors or repo men involved, and while I'd hate to be stuck with that $5K bill, I dunno, that does feel closer to the mark of something that maybe you should be on the hook for if you're responsible for 200 TB of bandwidth overage over 4 days? Is this so bad on the part of Netlify?
All that said I'll just add that I've never given my credit card to any sort of host/cloud who had terms where they could bill unlimited overage fees like this. Never will unless there's a cap. Not Netlify not AWS not nobody. That goes for my personal life as well as for the business I operate. The terms is the terms and the answer is to not use these services unless you can afford them imho.
> I'd hate to be stuck with that $5K bill, I dunno, that does feel closer to the mark of something that maybe you should be on the hook for if you're responsible for 200 TB of bandwidth overage over 4 days?
The responsibility part is the tricky part of the equation.
If someone hits your site with a DDoS attack, are you responsible? There's literally nothing[0] you can do as a customer of a cloud provider here because anything you can do is limited to the servers and services you're given access to. For example even if I had access to billions of requests and built an anti-DDoS tool it would still need to run within the cloud provider's provisioned server which means I'd be on the hook for all traffic costs because it's something running in my account.
That doesn't seem reasonable to me as a customer. It means a cloud hosting provider can put an extreme financial burden on a customer and make a killing in profits because of the markup they charge on bandwidth. The incentives are terribly misaligned.
[0]: I mean you can sign up for DDoS protection through a 3rd party company but in this case I'm talking about taking actions within your hosting provider.
All fair points but do they apply to the Netlify situation? As I understand it they generally won't hold you liable for resource usage generated by a DDoS, the guy on Reddit said this was a DDoS, the Netlify CEO said the traffic "didn't match attack patterns..." I think telling a free tier customer that they owe $104K was a pretty stupid PR move either way, but we don't really have enough info to say whether this was a DDoS or not
> As I understand it they generally won't hold you liable for resource usage generated by a DDoS
From personal experience as a customer of a cloud provider (not with Netlify btw), usually cloud providers who profit from bandwidth costs will write their TOS in such a way where almost nothing qualifies as a DDoS attack unless it's truly a distributed and targeted large scale attack specifically on your site.
A random person on the internet who spins up a few VPSs around the world and slams your site with looped curl requests won't count as a DDoS attack even though from your perspective that will result in a massive bill increase due to bandwidth costs.
In other words, I'm not surprised "didn't match attack patterns" was used. I'm guessing that will be the case most of the time.
Traffic doesn't cost money. Bandwidth costs money. Unused bandwidth doesn't cost less than used bandwidth. So, no, you shouldn't pay so much for something that doesn't cost them any money?
Mostly false. Either transit is billed on a 95th%ile basis (so...more money for more traffic), or if it is flat/netted, you're still paying for the capex for the switch ports (fatter connection to support more traffic means more $$$ for the gear to support it).
At Netlify scale, it'll be the latter. And the appropriate thing to do with free-tier traffic is set lower QoS so it doesn't interfere with paid traffic. This, it doesn't have cost.
You can say "the sum total of free-tier traffic requires X additional connections" but the sudden burst of DoS traffic did not raise marginal costs (besides an inconsequential usage of electricity).
They profit when their customers can't hard limit their spend and end up racking up large bills by accident, or for reasons outside of their control.
By the way, your comment was flagged which seemed odd, so I looked at your profile and it seems like all of your comments are being (automatically?) flagged and don't appear on HN by default. You might want to talk to the HN staff about that.
1. This doesn't seem like a rational thing to do. A trillion dollar business built on people making mistakes and actually running up a bill? Which exec is getting a bonus when little Johnny gets hit with a $1000 charge on his CS101 project? Doesn't seem likely.
2. To me, it's more likely they don't have one because there are edge cases to consider that make "hard limits" difficult to implement. What is AWS supposed to do when you hit the limit? Is it a hard limit? Ok, so when I hit my budget, all my s3 buckets get deleted and all my EBS drives get dropped? Do all my code deployments just get deleted? Do you "bless" certain services so that they continue to charge the user even after the hard limit? How is all of this communicated?
You can set an alarm in AWS today and the user can decide what to shut off. If you really need to, you can create a script that can hard nuke your account once a limit is reached; but I don't see why AWS should nuke your account for you.
1. Even if you assume perfectly good intentions, they're not incentivized to fix the problem because they're not on the hook for the bill, but stand to profit from it. Their margins are eye-watering, so sending out a $100k bill for a service which cost them no more than $5 to provide doesn't have a downside (other than bad PR, which they seem to be blind to).
If providing this bandwidth cost them $50k rather than $5, I would bet you my entire life savings that they would QUICKLY find a way to add hard limits to their service, no matter what technical challenges they're quoting now.
2. This is probably a 95/5 problem. The vast majority of these sorts of cases that I've seen and read about are caused by increased traffic, which hits the customer either with extortionate egress fees or unintended compute scaling behavior (FaaS/VMs).
Storage is trickier, but you could stop accepting writes or reads after passing some hard limit.
This leaves some edge cases, sure, but it should handle the vast majority of unexpected bills without any destructive actions.
> You can set an alarm in AWS today and the user can decide what to shut off.
That shifts responsibility back on the customer, which is exactly the problem to begin with. I need assurances that I won't be billed more than $X in any given day, or month and this solution doesn't provide that. Maybe their API down, maybe it's serving stale data, or maybe my automation fails for some reason.
> How is all of this communicated?
Hard monthly limits:
Egress: [ $ 10 ] - When exceeded, all outbound traffic is limited to [ 0 Mbps ].
Compute: [ $ 10 ] - When exceeded, scale all compute instances to [ 0 ]
Data Storage: [ 1 TB ] - When exceeded, all writes are rejected
Reads Ops: [ $ 1 ] - When exceeded, all reads ops are rejected
It's really not that hard. Offer these limits on a per-project, or even per-resource level, that would naturally allow you to limit the blast radius. A personal website that has gone viral would likely want to have different limits than an email server under the same account, for example.
>If providing this bandwidth cost them $50k rather than $5,
No, I believe you are assuming that proving a "hard limit" feature is cheaper than just refunding people from time to time. If you consider the all the products AWS has to offer, all the different ways they are billed, then figuring out what do to for each product once that limit is reached, and potentially doing a destructive action, and then all the code and testing on top of that - it seems far easier to add a human in the loop to just refund people on a case by case basis. It's a ton of complexity for likely a rare issue, and if someone really needs it they can build one themselves and choose how to handle what needs to be done once the limit is reached.
Building all this out just so that some college kid isn't charged a bill they could obviously never pay likely isn't a good use of resources. It's not likely AWS has a reputation of being greedy either, if you explain the situation they refund you. If they are truly doing this to make money they have remarkably poor execution.
>It's really not that hard.
Storage pricing isn't done up front. You pay per gigabyte-month. If your "hard limit" kicks in, then what does Amazon do with the data you are no longer paying to store? Does Amazon drop your entire database once the credit limit is reached? There are plenty of Amazon services like this. Consider secret manager. You are charged 40 cents/month per secret. You have 100 secrets, so $40/mo, but you set your hard limit to $20. The middle of the month rolls around, what does Amazon do? Do they just drop all your encryption keys?
There are 100s of AWS services and many where you can't just apply a sensible rejection policy once you hit that hard limit without doing something the user cannot recover from. It's only not hard because you aren't actually thinking about the matrix of AWS products that exist and how they are billed.
> There are 100s of AWS services and many where you can't just apply a sensible rejection policy once you hit that hard limit without doing something the user cannot recover from. It's only not hard because you aren't actually thinking about the matrix of AWS products that exist and how they are billed.
I don't think you understand what a hard limit is. When I set a hard limit, that means that under no circumstance should I be billed more than this amount. From this you should be able to deduce that the platform needs to stop you from ever entering into a situation where they could end up having to decide between nuking your data, or overcharging you.
This means that for all data storage scenarios, they should apply limits to projected monthly usage rather than actual monthly usage.
If 1 GB of storage costs $1 per month, and my monthly limit is set to $10, then they should not allow me store more than 10GB of data, rejecting writes as needed. This design guarantees that my hard limit won't be exceeded and the data is never at risk.
Any service which doesn't persist data can apply limits based on actual usage, and safely shut them down when the limit is exceeded.
> Does Amazon drop your entire database once the credit limit is reached?
No, they should refuse further writes when your database reaches a size that would exceed $10 a month. That's a safe behavior.
> Consider secret manager. You are charged 40 cents/month per secret. You have 100 secrets, so $40/mo, but you set your hard limit to $20.
If you set your hard limit to $20, then Amazon should refuse to create more than 50 secrets. That's a safe behavior which limits your spend to at most $20.
> Building all this out just so that some college kid isn't charged a bill they could obviously never pay likely isn't a good use of resources. It's not likely AWS has a reputation of being greedy either, if you explain the situation they refund you. If they are truly doing this to make money they have remarkably poor execution.
This is just a bad faith argument, everyone from broke college students to medium sized businesses has complained about this at one point or another. Relying on the good will of a megacorporation to forgive a surprise $100k bill is nuts and if you scroll through these comments you'll find some that claim that AWS is no longer forgiving these bills like they used to.
I'm not claiming that this solution is perfect, or that it would cover every failure mode, but it sure beats the status quo and would solve the vast majority of surprise bills that result from unexpected traffic.
>This means that for all data storage scenarios, they should apply limits to projected monthly usage rather than actual monthly usage.
>No, they should refuse further writes when your database reaches a size that would exceed $10 a month. That's a safe behavior.
I think we have gotten to the point where we've lost the plot here. You previously stated "It's not that hard". We are doing projection forecasting! And the storage layer for these range of services (S3, MySQL, Postgres, MSSQL, Kafka, Keyspaces, DynamoDB, probably 20 more im missing.) must now either call out to some financial projections service and reject writes for billing reasons. On top of that if you have a hard limit you are locked out of dynamic scaling. Need to 100 nodes for an hour? Nope, you now must disable billing limits because Amazon assumes you will use every resource for the entire month. Surely someone wont disable billing limits for an hour and forget to re-enable them, right?
>but it sure beats the status quo
I'm not sure handicapping every service for some barely functional billing limit beats the status quo. It's certainly more expensive for amazon in terms of engineering load but with so many footguns I don't see how it ends up anyway other than Amazon having this feature and still having to do service refunds because billing limits were disabled due to awkward limitations.
>This is just a bad faith argument, everyone from broke college students to medium sized businesses has complained about this at one point or another. Relying on the good will of a megacorporation to forgive a surprise $100k bill is nuts and if you scroll through these comments you'll find some that claim that AWS is no longer forgiving these bills like they used to.
Medium sized businesses have had their bills forgiven for things like cryptomining for example. My point is billing limits don't really work for AWS, alerts is the best you will get because AWS doing destructive actions for you or assuming your usage patterns is worse. It's not an easy feature and to imply they keep the status quo solely because Bezos needs another yacht is reductive of the problem.
> I think we have gotten to the point where we've lost the plot here. You previously stated "It's not that hard". We are doing projection forecasting!
It's not a complex "forecast". It's simply the monthly rate as I've illustrated with numerous examples.
If my limit is $10, then don't let me occupy more storage than that. It's a 1:1 conversation between gigabytes and how much they cost on a monthly basis.
Do you have ties to cloud providers you'd like to disclose?
It's a very simple concept that you're refusing to understand, which usually happens when your job depends on it.
> If you set your hard limit to $20, then Amazon should refuse to create more than 50 secrets. That's a safe behavior which limits your spend to at most $20.
I have 100 secrets and no hard limit. Now I set the hard limit to $20. What does AWS do?
That sort of adversarial weaponization of credit cards is really a US thing. In most of the world, payment is not relevant to the question of liability: you create a debt, whether or not you can debit a card. So, looks like DigitalOcean is another name to avoid.
Also: what's common? At the scale these companies so desire, small percentages are still thousands of users. Supporting them with what's ultimately a fairly trivial option shouldn't be seen as such a hassle.
Partially agree, yes the liability is independent of the payment. But in practice the one who has the money has the benefit of the status quo. The other party without money has to actively take legal action which is costly enough that it's often not pursued.
Yes and no, collection costs significant proportions of the outstanding debt, and if you object to the collection of the debt saying it's not justified the business ultimately has to sue. Collector can't do everything.
2) I understand your opinion that you prefer chargebacks but I disagree with it.
The very reason I stay with Hetzner is that I know in advance what my bills will be for the whole year. Heck, I even charge my account in advance so that I don't worry about any charges!
> usually when they go over it for a good reason, like going viral, they aren't anticipating it, and just when their traffic is most valuable the site is down
Of course. And that’s why any limit against a dynamic variable should also have alerts linked to it
Send an alert to the user when traffic starts spiking, especially if a simple projection shows it’s going to go over their limit
Then the user is aware, hopefully with enough time to lift the limit if needed
That's a level of responsiveness that doesn't exist for the vast majority of organizations.
If your customer is aware enough to notice they are being hit with a DOS or legit traffic while it is happening, then great! They can respond, and if needed, engage proserve to get support for scaling or defense depending on needs.
If your customer is not alert enough, then their site is offline, and they won't hear about it until their customers are screaming at them, which will result in a P1 ticket to look at a vendor who won't turn them off during an unexpected peak.
It's a catch 22, and if you have to choose between:
a) a PR hit because you have to go on a forum and post about waiving the fee, or
b) a PR hit because someone posted a blog post about how you killed their site during a moment of critical growth
any reasonable business will choose A every time because A is far more supportive of customer growth and has drastically better optics. Anyone who thinks A is worse is probably too inexperienced to have an opinion.
> Anyone who thinks A is worse is probably too inexperienced to have an opinion.
I'd say the same about those who only think in absolutes.
That's a false dilemma. You can give your customers a choice in these matters with an optional hard limit, which I realize seems like a rather extreme idea these days.
Someone running a personal project will likely opt to have a low hard limit, say $10, while businesses will more likely opt in for alerts without, or with very high hard limits.
> What Netlify is doing here is really the best approach for both parties.
Sort of, but the approach to the approach isn't great. If you're going to void charges from DDOS traffic anyway, you might as well make that explicit policy, rather than doing it after the fact in a way that seems discretionary.
The Reddit thread is full of people who are saying that they intend to pull their static content off of Netlify and move it to Cloudflare Pages, which has no overages on the free tier in the first place. I can tell you that I personally chose Cloudflare Pages to set up a new static site a couple of weeks ago, and Netlify wasn't even in the running.
If Netlify's free tier is important to their customer acquisition strategy, then they really need to retool how they're offering it, or Cloudflare is going to eat their lunch.
Cofounder of DigitalOcean here, I might have some relevant experience =]
Started in the web hosting space 20 years ago, back then it was just managed hosting, then virtualization, and eventually we built DigitalOcean as a product business offering cloud computing (though the initial iteration was more of a VPS with grander visions).
I don't think there is anything wrong with being in the colocation space. Instead of assuming you are in the wrong space, maybe ask yourself why it may be the right space. In order to compete with AWS and DigitalOcean you will need a bunch of programming and a decade to build out a fully featured cloud (Maybe you could do it in 5 years).
But personally I think the datacenter space is fantastic. And if you look at what has happened in the datacenter space in mature markets like the US there is a ton of consolidation. And any provider that sets up a decent datacenter from the concrete foundation up gets acquired for a rather sizable return.
You could join the race that everyone else is in (Cloud, AI, etc.), or you can look into becoming a large datacenter provider in your developing country. Because that is significantly harder in other aspects (physical construction vs virtual), but at the same time also quite lucrative. Just look at Equinix. They certainly aren't doing poorly at all.
And btw, it's easy to see other people's success and think that you should be further ahead, but I just wanted to say that we all start at 0 and then go to 1 before we can get to 1,000 and beyond and so congrats on building a business from scratch that looks like it's doing well.
Anyone else think this has nothing to do with the regulatory agencies but instead the market has dramatically shifted in the past 15 months in terms of valuations and this is a nice cover to cancel the deal?
Figma still gets $1B "investment" without giving up any equity or control and Adobe gets to walk away from a massive $20B fee.
Adobe makes $17B a year in revenue, they would need some pretty strong growth out of Figma to justify the price tag especially after valuations came down.
But it is nice to "blame" the regulatory agencies for the breakup so that both companies save face.
Also just seems unlikely that it was regulatory. Sure Adobe has the market cornered but it doesn't seem like this is where the agencies would suddenly choose to care so much. And if it was regulatory, then shouldn't those agencies come out and say "We blocked this, no go."
> Sure Adobe has the market cornered but it doesn't seem like this is where the agencies would suddenly choose to care so much. And if it was regulatory, then shouldn't those agencies come out and say "We blocked this, no go."
Both the EU and UK had already provisionally found that the deal was a problem, and the DoJ was expected to file suit. The companies had a meeting with the DoJ last Thursday [0]. They previously met with the EU on the 8th, and had a deadline to submit a settlement offer to them (not sure what that means) on the 21st.
Maybe all of those meetings were actually going better than they're trying to make it sound, but the regulators certainly appear to have been paying very close attention to this one, and the timing of the deal cancellation is about right for it to be due to regulatory pressure.
> Adobe makes $17B a year in revenue, they would need some pretty strong growth out of Figma to justify the price tag especially after valuations came down.
That's not it works.
1. Adobe is at $19B in revenue
2. Adobe's market cap is $272B and just shy of its ATH.
3. Acquisitions, especially at this level, are usually paid with debt and equity, not just cash.
4. The proposed acquisition smells of both one for value (e.g. we buy you and we add $20B to our market cap...ok thats not exactly how it works, but that's the general ide) and one for defense (protect our existing market cap).
5. You have no idea what Figma's revenue and growth rates our (speculation says $400M rev). If you borrow at 10% interest to acquire the biz and the company is growing their profit annually at 20%, then Adobe can still net out in the long run. (again, not that simple, but illustrative is the point)
Could Adobe have overpaid given the timing? Absolutely.
Could Adobe have realized this and when it came time to go through anti-trust they just threw the b-team lawyers at it? Totally plausible.
> And if it was regulatory, then shouldn't those agencies come out and say "We blocked this, no go."
Not necessarily. Behind closed doors, they might have said "during our reviews with regulators we've been advised that the fight with regulators would be too risky and costly if we didn't succeed"
There are multiple factors that could sour this deal from a financial standpoint. ARR multiples have been falling, interest rates have risen, and Adobe's performance has been quite strong without Figma.
Meanwhile, from what I've observed, Figma is approaching 100% market penetration among designers, so they will need to look beyond their core to sell things like Figjam to "normal" people. With full access to financials, Adobe may have seen the growth curve tapering off much sooner than expected. Just a hunch.
Nah, I think this is truly a case of regulatory agencies shutting the deal down. Adobe knows Figma is best-in-class in their category, and even in the current market downturn, $20b still feels like a good bet to own the winner in and up and coming category for the next 5-10 years
I dunno, seems like there are massive risks to Figma as a business at this point with the developments in generative AI. I'm not that confident spending $17bn is justified if its going to take 10-20 years to make it back. Some generative AI startup could easily leapfrog figma.
And Adobe already has its own massive trove of copyright images that it can use for much better generative AI.
I think the last year has put adobe in a much stronger position and figma in a much worse position.
Generative AI isn’t useful without a good editor for humans to manually tweak and integrate the AI’s output, and Figma is essentially the only name in the game for that.
In what ways is it better? I've found Figma to be vastly superior, especially since they treat design like development, automating tedious processes like manually tweaking the layout and instead having a version of flexbox literally built into the design ("auto constraints"). They're bringing web dev and mobile dev ideas into design software.
My information might be out-of-date, because I gave up on Figma years ago, and I recalled Sketch being significantly more powerful as an actual design tool. But now I'm looking up differences and it seems Figma has improved in areas it was weak in previously, like not having color profiles. From their feature lists they seem about identical.
In the small startup M&A market, maybe 50% of deals are falling through? Of the 50% that don't fall through, the vast majority are closing only after being renegotiated in the last hour, e.g. buyers promising to pay $x, but in the last hour the buyer changes their offer to $x/2.(These are deals with zero regulatory review)
Most common issues is buyers backing out because they couldn't secure the debt to finance the deal like they expected they could, multiples decreasing in the market, investor sentiment shifting away from riskier tech ventures, etc.
If those trends in small company M&A also apply to large company M&A, the parent's hypothesis is very valid.
Where are you getting those numbers from? The valuations of small acquisitions are closely held information; afaik there is no place to just look this stuff up.
1st hand info / network. I'm a CEO. YC Founder and Techstars founder. My CFO is a fractional CFO that works with other startups clients, same stories.
This kind of information and what really goes on behind the scenes is rarely revealed. Mainly because if I told you about the shitstorm story of a top tier VC trying to buy my company and the deal exploding, that VC will do everything in their power to bury the story and make sure I'm personally not able to operate in the industry in the future.
The people at the top of tech are cut throat individuals. (And the people at the "top of tech" are not CEOs... they're the investors. The people who sit on boards who you never hear about. And that's the way they like it)
Thanks. I've sold two companies, and gotten a pressurized squeeze from a major player (which we said no to - we were profitable so didn't have runway problems), but I've never heard of dropping an offer valuation at the last minute.
I can give you one worse: a board member (and deal lead, from <redacted> Ventures) telling me there are only 3 people on the board.
3 months later a month before the deal is supposed to close, 2 more board members come out of the woodwork and shut the deal down. No idea they were on the board. Was outright lied to. (I have the call recordings to back that up)
Mind you these are top tier brand-name VCs. They hide behind their reputation, and it works because people like me are extremely hesitant to write comments like this calling out specific firms and people.
ugh sorry to hear that. That squeeze I mentioned before (lowball offer at "this is what it will cost us to copy you") was, thankfully, for a company that we bootstrapped so we had no VC pushing us to close. And we bootstrapped because of my experience at my previous, VC-backed company.
Curious why you are referring to the termination fee as an investment, does Adobe get anything back in return for it?
Along those lines, maybe that would have been a better course of action in the first place, give Figma some money as an investor and own a piece of the upside as Figma grows, would probably have faced little or no regulatory resistance
I could believe this but if so why wouldn’t Figma fight to get the deal through? $20B is a lot to leave on the table, assuming they’d already emotionally accepted to lose control of the company? Why settle for the $1B “fuck off” consolation?
What would you want Figma to do that Adobe cannot do itself?
In the end 3 probes is way too much legal tape for even Adobe to step into hence the abandoned deal being cheaper in the long run than fighting to acquire Figma.
you are right also with genAI trend adobe is drinking the kool-aid like everyone else and most likely all investment will go to that. to be fair they are the best company to ride this wave and the new photoshop features already proves that
It's not completely implausible what you're getting at is right, even if your numbers don't quite make sense.
Consider also the fact - news of this merger was almost universally received poorly by Figma users. The internet was awash with "open source equivalents" - "You don't need Figma" articles, etc.
While Linode is very well known amongst a set of developers the cross-section of customers that overlap between Linode and Akamai is very tiny.
This acquisition was about selling a product to existing Akamai customers so branding it as an Akamai offering allows them to present this as an enterprise ready solution that their customers can trust immediately.
Akamai did $3.6B in trailing twelve month revenue, and even backing out $200MM (being generous here for Linode) that is $3.4B of revenue.
The bigger play for them is to mark up this as a high gross margin offering to their existing CDN customers where they need a bit of compute power to pair with their CDN offering.
Limelight Networks (throw back alert) was doing the same thing back in the day and they approached us (DigitalOcean) in 2012 looking to potentially partner with us so that we can use our software to build an internal white labelled cloud for them that they could resell to their customers.
This is seen as more of a brand extension through product acquisition under the Akamai umbrella rather than something like Microsoft buying Github where that is a service that is known globally by pretty much every developer and what they wanted was the brand and developer clout.
Here there was no real interest from Akamai in the brand, but simply in a robust enough product that they could resell into their existing customer base.
I have nothing much to add except that Akamai paid 900 million for linode, so 200m was a low guess. But linode was debt free and profitable unlike their competitors.
Sure the current management team is full of bean counters that aren't doing great at understanding product, but don't give the old management much credit.
They completely missed the transition to cloud, they missed AWS, and they laughed when I told them that we (DigitalOcean) wanted $100MM if they were serious about any acquisition talks. This was in 2013 so startup economics were different back then.
They were early to a massive market that is growing and they basically botched their lead repeatedly and every transition since then has been a comedy of errors.
They would have been better off following Equinix's model of just acquiring and managing datacenter space instead they ran their own DCs, didn't have great support, couldn't build product, and ultimately were acquired by PE and saddled with debt along with no road towards innovation.
That’s become less and less true as the capital required to start a business has diminished and virtual products allow for rapid and unprecedented scale.
For me and my brother we were immigrants, divorced household, single mom as some bread winner, didn’t attend Ivy League schools, paid for college through debt, and started a business with savings from working full time at system administration, which was self taught, while being in college.
Fast forward 20 years, DigitalOcean IPO’d.
Our mother did provide a roof over our heads but we had no inheritance, and no friends and family round.
We built a service oriented business doing web hosting first. Service businesses are traditionally much cheaper to start because there is no product development cost to front with zero revenue.
Then after a decade of that we built digitalocean as a product business which was financed from the cash flow of our original business.
By the time we closed our series Seed in Digitalocean we were already well past $1MM ARR and in one year went from $100k ARR to $18MM ARR.
Having less resources does force you to be more scrappy and figure things out that other people who have a safety net often give up on.
Doesn’t matter if you were raised by an alcoholic who fed you beatings for breakfast. Many people will still claim luck and argue that no one should ever try to do great things, much safer to wagemax and invest in index funds and not step out of your lane.
Your story is the correct attitude and the reality of creating real wealth. Unfortunately many will denigrate your story.
but one must also temper the idea that you can be self-made, just as long as you put in the hard yards. Wasn't there a recent ask HN front-page thread about how the poster was ready to give up being an indiehacker and an entrepreneur?
it is indeed much safer to min/max wage & work-life balance, and spend that time improving yourself. Then, use the capital to invest. But you will not reach billionaire status doing this - but you can make enough to be comfortable.
Hard work alone will not garauntee success, but I think there is also a tremendous amount of knowledge that you can pick up that a lot of entrepreneurs seem to ignore, that greatly increases their likelihood for success and also reduces how much time they spend going in the wrong direction.
Likewise there are also so many great mentors out there now, and many of them are happy to give a helping hand, expecting nothing in return, because they recognize how much others have helped them, that if you aren't reaching out to those folks and finding them, then you are doing yourself a disservice.
Don't build in a vacuum. And by that I don't mean simply get customer/user feedback, but I mean have mentors, both active, and inactive - that are constantly reviewing your ideas with you. The inactive ones come from reading books like innovators dilemma, and the active ones, you need to find and reach out to and get them on-board, just like you would reach out to VCs and pitch for funding.
Congratulations. I can relate with your journey - going from living in cockroach-infested apartments to bootstrapping a $70m ARR business. Random question, but do you think it's feasible to go public without institutional investors? My co-founder & I have been seeing a ton of businesses with seriously weaker financial metrics going through SPAC's (see GETR). But, we're wondering if this outcome is gated by first raising from VC or PE.
Thank you. We turned down VC because we're concerned about the stranglehold they have on exit outcomes. I guess everything is negotiable, and I need to get better at communicating our concerns around control in a way that builds trust with investors. It's cool that you're open to having conversations like this. I imagine when you're publicly successful, you get inundated with people seeking help.
Thanks for sharing, big congrats! Do you feel there were others that tried a similar path but failed ? And why do you think that is ? E.g: do you think if you started over from today you would have a good chance of creating another service like DO?
I think there are several major lessons there that can be generalized to an extent.
1. If you don't have the funds to start a business directly, you may have to acquire them indirectly. In our case building a service business was much faster and you could literally setup a single server at a datacenter and call yourself a web host. So the startup capital was small and something that you could certainly acquire by saving while working a high paying job like System administration back in the day.
2. Be in the right place at the right time - this one is key for pretty much everyone everywhere and is one the of the main factors in success and failure. By itself it isn't everything but it is a huge component. We started doing web hosting before AWS existed and when the largest player in the space was Rackspace. There was plenty of room for small up-start individual providers and the internet was still rapidly expanding and also very much still catering to the early adopters.
3. Learn Business - You hear the stories of people like Mark Zuckerburg starting something in college and then building one of the largest companies in the world, but those are ideas that require a special time and place in history. Where the product is the key driver to it's success in many ways, and many non-consumer startups don't get as much attention, but I would certainly recommend learning business. That doesn't mean get an MBA, but read business books. That's what we did between our first company and then starting DigitalOcean. We definitely made a ton of mistakes with the first business and the books helped to elucidate what we did wrong, while also showing us what are the right questions to ask to avoid those same mistakes in the future. I think of business lessons like laws of physics, it's better to know them if you are going to be building around them and certainly the results speak for themselves. The first business peaked at around $5MM in revenue and $DOCN will do over $500MM this year.
Another DO? Definitely not. It was a time and place that allowed us to be successful. Plus if DO exists competing with it head on wouldn't make sense. Also if it didn't exist, I imagine someone would make a similar company that would succeed. You can see this clearly with all of the different versions of Heroku that people tried to build. DigitalOcean's success means that there is a market for the service that it provides and so, someone would have come along and created something to fill that void.
Lastly, I think that a lot of great businesses have to sound a bit stupid at the beginning. If they didn't sound stupid then someone would have built it already. Occasionally you can have a good sounding business idea, but then literally, nothing compelling should exist in the space as a competitor. Otherwise, it would already be done. So in a sense the fact that it sounds "stupid" means that it's different. Now is it good different, or bad different, that's a question that you have to figure out. But often that difference is the crux of what is the key driver for your success.
For us it was creating a simple version of AWS and competing directly (though in our case we felt it was indirect enough) with them. For Airbnb it was the crazy idea that people would pay money to stay in a strangers house. Occasionally an idea actually makes sense from the start. If you use a data warehouse and tried to do analytics before Looker it was a bit of a pain in the butt so Looker does seem straight forward. And certainly DataDog already existed in many different flavors, such as Nagios, but repackaging something and then riding another wave (AWS) can create massive success if the "wave" is large enough.
I think to truly count yourself as "fantastic" at the game of startups you would need to create 3 successful businesses. Because so much of it is chance, timing, luck, that can't be ignored. But if you can do it 3 times, I think that definitely speaks to a person's ability to spot the intersection of so many critical factors.
You may have 3 out of 5 board votes, but unless you have complete control and full voting control they usually have carve outs like approving any change of control (aka selling the company).
You may receive a buy-out offer you find very interesting but your board is against it and then you find out very quickly how much control you actually gave up and how aligned you really were.
There are theoretical consequences for lying to congress, but I can't recall a high profile case of them being applied to anyone. Famously James Clapper, then director of the NSA, told congress that the NSA does not collect data on Americans[1] which is what inspired Snowden to leak the info on NSA data collection. Despite this, he went on to continue serving as head of the NSA right up until the end of Obama's term in office.
yes, so he's been hard at work practicing coming up with all kinds of non-answers several interviews a day.
but seriously, I'm not sure how much they expect from this. He does have a legitimate excuse of being cut off from all the corporate data, so he can just keep replying "I'd tell you but the bankruptcy ceo took all my data".
They don't expect to get any useful information out of him, they expect to be doing their jobs. When this kind of disaster happens, politicians don't question the perpetrators to get any key insight into them, they do so to put on a bit of theatre, that they can later use to support legislature that they are going to draft. (Or quietly kill in committee.)
The only people who can do anything meaningful about SBF are working for the DOJ, and they don't do their work by holding public hearings.
More accurately, this doesn't happen except in "egregious" cases. Otherwise, if the judicial system tried to prosecute people for all lies under oath, they wouldn't have time for anything else.
Seriously. Ask someone who works as a judge or a lawyer.
I’m certainly seeing a few troubling issues brewing but don’t see as many people as myself taking them as serious warning signs.
But when the collapse happens it’s rapid because the entire foundation has rotted away.
It keeps happening because that’s what the system rewards, short sightedness, and is also why founder led companies have more success, because they are able to execute in years not quarters.