How Automattic wants to build the operating system of the web

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Automattic, the company behind, WooCommerce, Longreads, Simplenote and soon Tumblr, is now worth $3 billion. But its founder and CEO Matt Mullenweg has a bigger goal. He wants to make the web better, more open and diverse.

With the rise of social networks and closed platforms, Automattic’s mission statement has never sounded so important. Automattic doesn’t want to be the hot new startup. It wants to build a strong foundation to empower content creators for decades to come.

In an interview this week, Matt Mullenweg discussed why he raised $300 million from Salesforce Ventures, what he thinks of the current state of the web and how Automattic has a shot at building the open-source operating system of the web. The interview was edited for clarity and brevity.

Romain Dillet: Tell me more about how much money you’ve raised, who you’ve raised from.

Matt Mullenweg: What we’re announcing is that we’ve raised $300 million from Salesforce . They took the entire round. Basically Salesforce is buying 10% of the company.

Dillet: I looked at past funding stories. And the last round for Automattic was in 2014. What has changed over the past five years, and why do you want more money right now because it feels you’ve been doing fine over the past five years?

Mullenweg: It is true that we raise money when it’s right, not every year. In 2014, we were somewhere between 200 and 300 people. We’re now close to 1,000 people, we’ll be close to 1,200 when the Tumblr [acquisition] closes at the end of the month. The business has grown tremendously, pretty much on every metric.

We rewrote the whole admin to Javascript and APIs — we use React for that. We released Gutenberg, which is the next-generation of posting. I think WooCommerce was bought in that time, so we moved into e-commerce and that’s grown to be our fastest-growing business.

Really, Automattic then and now is almost a completely different company in every single regard. Like you said, I think it’s going well-meaning that the one thing that hasn’t changed is our respect for our users and doing our best to try to maintain their trust.

Dillet: You talked about WooCommerce. What’s the business breakdown today? What product is the biggest revenue maker for the company? Is it WordPress .com, VIP, WooCommerce?

Mullenweg: The best way to think of it is that and Jetpack are the largest. The second would be WooCommerce. And third is actually going to be [] VIP, so our enterprise business.

Dillet: Do you expect some kind of integration with Salesforce or is it purely a financial move on Salesforce’s side?

Mullenweg: Nothing to announce today, sorry about that. This is a purely financial investment but we’ve been a long-time customer of Salesforce, we’re a big fan of the platform. And definitely, you could imagine, given a lot of thoughts, how WordPress could complement their products.

Dillet: So there will be some synergies in the future…

Mullenweg: I certainly hope so.

Dillet: Do you think there will be synergies the other way round as well for Automattic? Could you leverage some of Salesforce’s technologies and products?

Mullenweg: Definitely, especially as WordPress starts being adopted more and more in the enterprise. [] VIP customers are already Salesforce customers. It’s just a matter of figuring out what are their biggest needs and how we can serve them. As you know, Salesforce has a million products. So it’s really hard to nail it down and choose where to begin.

Image via Takamorry / Flickr

Dillet: Usually, when you have big news about Automattic, you share some metrics saying ‘x% of the web runs on WordPress’, do you have an update on this front?

Mullenweg: 34%.

Dillet: Do you think this is too low and there’s still a lot of room to grow?

Mullenweg: I think there’s potential to get to a similar market share as Android, which I believe now has 85% of all handsets. When you think about it, open source has a virtuous cycle of adoption, people building on the platform and more adoption.

“I think there’s potential to get to a similar market share as Android, which I believe now has 85% of all handsets” Matt Mullenweg

And WordPress has been in this cycle for a few years now. The most interesting is that it’s actually accelerating. Even though there’s more competition than ever, that percentage is growing faster than it used to. Surely faster than the last time we raised money.

Do you remember where it was in 2014?

Dillet: I think it was 20 or 25%, something like that. [It was 22%.]

Mullenweg: What we want to do is to become the operating system for the open web. We want every website, whether it’s e-commerce or anything to be powered by WordPress. And by doing so, we’ll make sure that the web can go back to being more open, more integrated and more user-centric than it would be if proprietary platforms become dominant.

Dillet: You talked about the number of websites running on WordPress. But when it comes to usage, people spend a lot of time on social networks and closed platforms. How do you feel about most people spending most of their time on Facebook, YouTube and Medium?

Mullenweg: I don’t think they actually do. I think it’s just easier to account the time they spend there because it’s on one domain. If you added up all the time that everyone spends on the rest of the web, it would dwarf Facebook, etc. Even though these are impressive platforms and we’re moving into the social network side of things ourselves with Tumblr.

Dillet: Do you think it comes in waves and we’ve gone too far in one direction and we’re going to go back to a more open web?

Mullenweg: I like to think about it in terms of user experience. What Twitter, Facebook, etc. have done is actually create an amazing user experience. No one should deny that. It’s really nice to have all your friends in one place. And it’s just easier.

It’s now up to the technologists to figure out how to make an experience, which is just as good but puts more control back in the hands of users.

Dillet: How do you feel about the fragmentation of the open web? It feels like we had an okay solution with RSS feeds but not many people are using RSS feeds anymore. Do you think you should also work on a way to integrate the diversity of the open web in a central interface of some sort?

Mullenweg: Yes, and the good news is that Tumblr’s dashboard is incredibly compelling. They built a fantastic way to follow and enjoy things. I think that there’s a way to bring more of the open web back into people’s daily habits.

The social networks as we’ve seen optimize for engagement in ways that sometimes are detrimental to people’s mental health and happiness.

Dillet: Will you be optimizing for engagement with the acquisition of Tumblr?

Mullenweg: I think we’re trying to optimize for fun and a better world. I apologize if that sounds a bit cheesy but we’re going to try.

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(Photo: MARTIN BUREAU/AFP/Getty Images)

Dillet: With so much funding on your hands now, do you have some moonshot projects that you’ve been putting on the back-burner and that you can now tackle?

Mullenweg: We’re trying to show that we invest for the long term wherever possible. We can make our funding go a really long way. Even though we’re 15 years old, this is only our fourth round. Things like Calypso, Gutenberg, Tumblr, WooCommerce… are big bets. And with each one of those, we have a long way to go.

“The problem we’re trying to solve is likely multigenerational” Matt Mullenweg

The problem we’re trying to solve is likely multigenerational. It can take the rest of our lives and we need to pass it on to the generation that comes after to continue to work on it. Hopefully for the rest of humanity because I can’t imagine a time when humanity cannot benefit from an open, free, connected web.

Dillet: How do you feel about Progressive Web Apps?

Mullenweg: I think it’s very exciting. We’re definitely in a weird area where the app stores are… When you think about the amount of the tech economy that goes through them, it’s shocking how much power they have and how little oversight or accountability they have.

“We shouldn’t be surprised when a closed marketplace favors itself. And I think we should be mad at them.” Matt Mullenweg

And the web allows you… It’s a kind of exit hatch. It’s a way to really be in control of your destiny as a business in a way that isn’t reliant on the judgment calls of largely Google and Apple. I think overall they are great companies. They have made some decisions on their app stores that benefit them sometimes over their users or folks in their stores.

We shouldn’t be surprised when a closed marketplace favors itself. That’s just a natural thing to happen. And I think we should be mad at them. We should be mad at ourselves for not demanding on relying on something more open.

Dillet: Do you think people are not mad enough?

Mullenweg: When I say mad at ourselves, I’m not talking about the general population. I’m talking about us as people building things on these platforms. Like this story that Amazon favors its own products, that’s ‘dog bites man’. It’s not that interesting, we should have expected that to happen.

Dillet: When you look at the roadmap before raising from Salesforce, and the roadmap after. Is the roadmap that you defined, let’s say, three years ago for the next ten years going to be the same?

Mullenweg: The roadmap is the same. I just think we might be able to do it in five years instead of ten.

Macron announces €5 billion late-stage investment pledge from institutional investors

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French president Emmanuel Macron announced in a speech ahead of France Digitale Day that the French government has convinced institutional investors to invest more heavily in late-stage VC funds and asset managers in one way or another. Institutional investors have committed to investing $5.5 billion (€5 billion).

“We’ll have €2 billion that will go in so-called late-stage funds and €3 billion for funds managed by asset managers specialized in tech,” Macron said.

In addition to that financial pledge, the French government wants to break down any hurdle that prevents French startups from raising $100 million+ funding round in France, becoming a unicorn and eventually going public.

A couple of years ago, Macron gave a speech at Viva Technology in Paris. It was the first time he addressed the startup community after his election. At the time, I wrote: “Macron wanted to send a message to the startup community — he still cares about technology very much, thank you for asking.”

Since then, the French tech ecosystem has thrived, but without any radical policy change to shake things up. But today marks a departure as it’s all about startups, startups and startups.

“I’m talking about the jobs of tomorrow” Emmanuel Macron

It’s clear that Macron believes that startups represent a huge opportunity when it comes to job creation, competitiveness and reshaping the economic landscape in France. In other words, according to him, if you help startups thrive, it’s going to trickle down all the way and have positive impacts on your neighbor who has never used a computer in her life.

Some will applaud such a move, others will say that it divides society.

“When I talk about startup funding, I talk about the ability to help those startups succeed,” Macron said. “I’m talking about the jobs of tomorrow. And I’m saying that for many French citizens who think that those are only financial numbers.”

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(Photo Credit: Aliocha Boi)

Financing hypergrowth

So here’s Macron’s plan. First, French VC funds have been good when it comes to funding startups at the seed, Series A and sometimes Series B level. But many startups then look for international investors for late-stage rounds. For instance, just last week, Akeneo raised $46 million in a round led by Summit Partners, a Boston-based VC firm.

“Numbers show that we’re getting there, and I want to start from there,” Macron said. “The goal when it comes to technology is that we should be one of the countries that matter. Fundraising from French startups keep setting new records — we had $3.1 billion in fundraising in 2017, $4 billion in 2018 and $5.5 billion in 2019 probably.”

Following a report from Philippe Tibi, the French government has been working on a way to foster late-stage funds and investments in public tech companies in France. “We managed to rally big insurance companies, asset managers and long-term public investment funds,” a source close to Macron told me.

Private companies, such as Axa, Generali and Allianz, as well as public investors, such as EDF, Caisse des Dépôts, the pension reserve fund, are all going to invest in late-stage VC. Overall, two-thirds of them are private companies, one-third of them are public institutions, according to the source.

They’ll have three ways to invest and take part in the initiative:

  • If they have their own VC fund, they can create a new late-stage fund.
  • If they are limited partners in various VC funds, they can invest in late-stage funds managed by third-party teams.
  • If they don’t know anything about venture capital, they can invest in a special fund of funds managed by Bpifrance. Bpifrance will then select various late-stage funds and invest that money in those funds.

Eventually, the French government hopes that there will be at least 10 French VC firms with a late-stage fund above €1 billion. By pushing them to redirect some of their investments in VC, the French government thinks that they’ll invest more regularly in venture capital in the future.

When it comes to going public, the French government wants to make European stock exchanges more attractive. They’re hoping the new influx of late-stage cash will convince banks and other financial institutions that manage huge positions in tech companies to create local teams in Paris.

Attracting foreign VCs too

French startups still want to become global players and the French government is well aware of that. And foreign VCs shouldn’t be at odds with French VC firms.

That’s why the French government also invited around 40 partners of venture capital firms and limited partners for a couple of days in Paris this week. They’ll meet key people in the ecosystem as well as promising startups.

I covered the first edition of this tour last year. The message was clear: Foreign VC firms should think about investing in French startups. Some are already doing it while others never thought about it. And the thing is nobody wants to be the first one to invest in something new, but nobody wants to be the last one, either.

This year, the French government is inviting a new batch of foreign investors from Khosla Ventures, Accel, Andreessen Horowitz, etc. There are more Asian investors in the mix this time round.

But Macron said that France should control its own destiny when it comes to startup funding. “When I talk about sovereignty, I deeply believe in that concept. It’s a politically-charged word, but I think it’s at the heart of your approach. I believe in technological and economical sovereignty,” Macron said.

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(Photo Credit: Aliocha Boi)

Transforming La French Tech

The French Tech Mission, also known as La French Tech, is a government-backed initiative that promotes French startups around the world and provides a few services to help startups.

And the government is going to overhaul the French Tech Mission drastically. This is as significant as the late-stage funding news. In addition to the small core team, every French ministry and administration will have a French Tech correspondent — Urssaf, INPI, AFNOR, Banque de France, customs, etc. Eventually, there will be 150 people spread out across the entire government working in some way or another for French startups.

“We’re not alone, we get to coordinate with everyone,” French Tech Mission director Kat Borlongan told me. “The overarching announcement is that France is going all in.”

La French Tech is going to become a one-stop shop for tech startups to overcome any administrative hurdle. La French Tech is going to pick 40 (and later 120) top-performing startups and give them the label Next40 and French Tech 120 — a play on words with the CAC40 and SBF 120 stock indexes. Those companies will automatically be able to access this fast-track administrative system — every startup will get a representative for their particular needs. This special treatment proves that startups have become a center piece of France’s economic policies.

“The coolest thing is that they can ask us for anything: ‘I’m about to do bizdev in China’, ‘I’m launching a rocket and I need to test it on a space facility’ or ‘I’m hiring 50 people and I need them and all their families here’,” Borlongan told me.

All companies that are unicorns or have raised more than €100 million are automatically in the Next40. Then, the government is looking at growth rate and annual turnover to find the most promising 40 and 120 startups.

“I’ll leave you with a goal: there should be 25 [French] unicorns by 2025,” Macron said at the end of his speech.