[superbcarrot]

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.

[djrogers]

I’m not surprised that people on a developer focused forum would find little to no value in something that enables automation without programming.

Y’all can probably automate interactions with hundreds of web based services in your sleep, using multiple languages, with unit tests, and a Turing complete ML-based proxy server for high availability.

For the rest of us, Zapier is a little like magic. Granted there are other servothay do the same thing, but none that I’ve found do it as easily and as well as Zapier.

[brundolf]

The thing is that no-code solutions are nothing new or unique; they're a dime a dozen, and have existed almost as long as microcomputers have. What's not obvious is why Zapier's version is (apparently) a revelation. I'm not saying there is no reason, but that's probably where the GP is coming from.

[gogopuppygogo]

It’s easy to use and well integrated into many platforms.

Reminds me of why WhatsApp took off. They spent the time to make it work well on early smart phones when that wasn’t easy.

[kinj28]

To add to your point - so much amount of software already exists in the world. Tools like zapier enables people to put these different software services in an massive assembly line and kind of use them to get their workflow.

[hooande]

why wouldn't someone just hire a developer to do this? My understanding is that the market for contractors is oversaturated right now. You could probably pay someone hundreds of dollars to write software that interacts with web services etc if you look hard enough

Like the grandparent comment, it's hard for me to imagine that there are enough people in need of this service to justify a $5B valuation

[devoutsalsa]

When I was a non-programmer trying to build a business that needed software, the last thing I wanted was to rely on something I couldn’t maintain myself. For example, I could wire up DNS by hand, but the last thing I’d want is to have to learn Terraform just so I could update my email MX records. Using Herkou because I didn’t want to manage a server was another example. Using something like Zapier to add a row to a spreadsheet or send an email is also amazing.

[freeqaz]

Would you mind elaborating on this? I'm not sure what you're saying here. Is Zapier a positive or a negative for you?

[TheSmiddy]

I think they're clearly saying that Zapier is a positive for them.

[freeqaz]

Re-reading, you're definitely right. Where I got confused was the "Terraform/Heroku is bad because it adds another layer" but then not understanding why Zapier is better?

[RC_ITR]

The process of hiring someone for 'Download attachments from this email address to my Dropbox, then create a note in Quickbooks to pay the invoice' is a lot more complicated / expensive than just using Zapier.

I think you're overestimating what people use Zapier for.

[sjg007]

I think someone could make a good living as a Zapier consultant.

[CapnCrunchie]

There are people who do that, such as https://www.luhhu.com/

[Silhouette]

why wouldn't someone just hire a developer to do this?

Because developers are relatively expensive.

Because hiring anyone requires identifying someone who can do the job and trusting them to do it well. And even before that, you have to figure out what the job actually is.

Because hiring anyone requires some sort of contract, and that has legal implications that might require approvals etc.

As a developer with the required knowledge and skills, these services offer little value to me, but I'm not their target customer. That knowledge and those skills are the result of decades of study and practice, which is experience that most people don't have, and for all of those people the cost/benefit comparisons are going to look completely different.

[namuol]

Developers are ridiculously expensive and comparatively slow for many tasks.

[devoutsalsa]

Also, no developer you’d hire with confidence is gonna get out of bed for an “I can barely explain myself, but all I need is...” job that pays a small amount.

[tluyben2]

Create in zapier, send the login to dev; please recreate. Works fine and can, in very many cases, be done for well under zapier's pro account prices. Especially for tasks you need to run 100k+ per month, which is not uncommon if you are trying to build a product yourself.

[tin7in]

Because people want to click and get it done without dealing with hiring someone else. Tasks that need to be automated could be also very small and not worth the effort of hiring contractors.

[pmart123]

BC you have to maintain the code then. Also, a non-engineering team member can quickly get an integration they need done without waiting for a developer.

[kasey_junk]

How to hire capable developers is an open question for even the most sophisticated technology companies. Anything that allows you to avoid that problem is extremely valuable.

[alvah]

Because you don’t “just hire a developer”, and you certainly don’t do anything close to that for most of the needs Zapier addresses.

[cosmodisk]

I'm in a similar boat thinking where are all those people in need of these things but then I look around and realise that 99.99% of the population will ever go as far as using Zapier and not because there's something wrong with it but because it's a good choice for most. Just last week had my colleague with zero tech knowledge connecting Zapier to a couple of systems in minutes savings the company money and more importantly,not delaying pretty important integration.

[ROARosen]

> why wouldn't someone just hire a developer to do this?

...

> You could probably pay someone hundreds of dollars to write software that interacts with web services etc.

The reason is exactly that. They don't want to pay hundreds for a dev to dev for them, and that's just for 'one' integration, with Zapier they can always add whatever they want. They'd rather have the 'cheaper' option (which to be real doesn't always end up being cheaper in the long run, but sometimes does).

The

[daniellarusso]

We could pay Zapier a few hundred dollars per month or hire 5 full-time devs, it is an easy choice.

[djrogers]

Why would I pay someone hundreds of dollars to build something that I don’t know how to maintain, when Zapier can do the same thing for free or $20/mo?

[ipaddr]

Free is free.

Your return on investment at the $20.00 per month level is a year or less. So it depends on how long you need it for.

[djrogers]

Give me a break - there’s no developer that anyone could reasonably trust to write even the simplest program and maintain and modify it throughout they year for less than $20/mo.

Maybe I spend several hours finding someone online who will do the job for $200, then I spend an hour communicating and clarifying my request, then another hour testing the result. 1 months later I decide I need the automated email to have a different subject line, or include an attachment that wasn’t there before, so I find the developers’ email address and pay him another $100 to make the change - or maybe I don’t because it’s too much trouble.

In the alternate world (in which I live), I simply fire up my browser and create a task in about 15-20 minutes. When I need or want a change, I change it myself.

Less time, less hassle, less risk, and in all likelihood less cost.

[fshbbdssbbgdd]

Your opportunity cost for the time spent maintaining, or managing people to maintain it is much higher than $20, if your business has more important problems you could spend time fixing. It’s very obvious that this is true if you’re a yc-type startup, which could be worth $0 or $1B depending on how you spend a few years.

[pishpash]

What will you do to maintain it?

[narrator]

>Sometimes I get shocked by these numbers and it reminds me how little I know about business.

This is because you lack the most overlooked and most difficult to teach skill in investing: empathy. Zapier lets non-programmers, the vast majority of the planet, do things that programmers do. Many programmers have poor empathy and thus make bad salespeople and investors. If you can understand how most of the planet thinks and feels though, you can figure out what is going to work and what isn't.

Twitch.tv is something that amazed me that it became so big. I don't really play video games. Who would spend hours watching people play video games? I couldn't understand this phenomenon because I was limiting my exposure to people only inside my own little bubble of reality. I think one can't be a good investor without constantly developing ones empathy because the appeal of various things is difficult to grasp intuitively without a person who would be the customer in mind.

Personally, I think it's important to spend time with people one has nothing in common with to develop this broader empathy and thus be able to pick up on these trends.

[anm89]

Imagine just blasting out at a person that you've never met and know essentially nothing about, based on a few sentences they wrote regarding startup valuations that "they lack empathy". As in you are willing to assess this other person as being completely devoid of empathy.

That seems fairly insane.

[IAmGraydon]

His reply is a textbook example of psychological projection. He clearly lacks empathy and is attempting to attribute it to someone else as a defense mechanism.

[staticassertion]

Is this intended to be ironic? You're doing the exact same thing.

[sicromoft]

That's because he lacks empathy. (Only someone lacking empathy would accuse someone who accused someone else of lacking empathy of doing so due to lack of empathy.)

[narrator]

The word "empathy" has an enormous amount of baggage attached to it unfortunately and triggers a whole library of insinuations and assumptions. Admittedly, it was the wrong word to use. I should have said "Consumer empathy" which would have been appropriately in context. Also there are varying degrees of consumer empathy. I know some people who are absolute naturals at understanding people and it's amazing to see how vivid their intuitive understanding of people is. It's like watching people do sketch art who can draw beautiful things like it's nothing.

[staticassertion]

Honestly it was really obvious from context that you were referring to consumer empathy and not that you were implying that they were a psychopath.

[Permagate]

It could be phrased better, but I think they got the point across. The message is something that most people (not just programmers) could relate on various levels and learn to get better.

[raindropm]

Damn, misjudge the potential of some product made someone instantly lack of empathy? or maybe it's just that I can't feel deeply relate to everything, and not because I'm heartless bastard...(We can try to understand, yes)

Also, please don't tell other people that they lack empathy straight in the face, that's plain rude, and hey,...sounds like lack of empathy :p

Sometimes I think the application of that word is way too broad, especially in business setting.

[etaioinshrdlu]

I don't think my mother or father could figure out Zapier. Yet they can figure out the MS Office suite and Excel to get work done. I think the premise is just wrong, Zapier is just not easy enough for non-programmers still.

This may be where some of the mystery over the product among programmers could lie. It doesn't look like it would actually let non-programmers do what programmers do at all.

[felipellrocha]

> Twitch.tv is something that amazed me that it became so big. I don't really play video games. Who would spend hours watching people play video games?

Heh. I grew playing games with friends. When I got tired, I'd spend hours just watching them play and having fun hanging out that way. It was no surprise to me they got so big so fast. It really is all about empathy, and I thought this little anecdote would help strengthen your point! :)

[nojito]

>Twitch.tv is something that amazed me that it became so big.

Monetizing loneliness is how social media companies grow. twitch just has a strangle hold on a specific community that no one else thought of.

[selcuka]

To be fair they didn't think of it either. It was a natural pivot from justin.tv when they see that the majority of their users were using the platform to broadcast games.

[slightwinder]

> This is because you lack the most overlooked and most difficult to teach skill in investing: empathy.

Everyone is lacking empathy, that is not limited to the profession. Empathy on most parts comes from your own experience and understanding, and everyones horizon of experience is limited.

> Twitch.tv is something that amazed me that it became so big. I don't really play video games. Who would spend hours watching people play video games?

Which is strange, considering how many people watch sports. And most videogames are nothing else, just more focussed on mental skills than physical skills. But the main selling point of twitch is IMHO not people playing games, but the interaction twitch offers alongside this. Twitch in that regard is more like a sportsbar or a local sportsfield, where everyone meets, talks, interacts while some do stuff on the side.

The more buzzling part for me are youtube-videos of people playing stuff, because those are missing the interacting and it's just like watching a very poor movie with low production-value.

> I think one can't be a good investor without constantly developing ones empathy because the appeal of various things is difficult to grasp intuitively without a person who would be the customer in mind.

Yes, it's a given that you need to understand the thinking and problems of customers if you wanna sell them something well. Just throwing stuff at them might work, but more efficient is to understand what they want and what they need, and then build and sell it specifically to the targeted customers.

Similar like in a game you need to understand the abilities and weaknesses of your enemy to slay them. That's why marketing and reasearch exist.

[arn]

> Who would spend hours watching people play video games

Ask yourself who would spend hours watching people play sports, and it might not seem so foreign.

[daniellarusso]

Twitch started from Justin.tv, so it was not really about videogames originally.

But, if you think about how professional sports is and could foresee the rise of e-sports...

[narrator]

It's kind of like the rise of live electronic music. Oh there aren't any feats of manual dexterity like playing the guitar or drums well, but people go to see electronic musicians perform anyway.

[daniellarusso]

There was an interesting discussion on /r/DJs, about electronic music performances in the late 90s and early 2000s.

One of the comments articulated that the focus was on the music, not the DJ’s performance, and often times the DJ was not clearly visible, nor intended to be.

Another commenter pointed out that as an electronic music producer nowadays, the only way to present your music, as you also pointed out, is to DJ in front of a crowd.

Don’t underestimate a good DJ, though.

But, it was also pointed out that not all good producers are good DJs and vice-versa.

It is also worth mentioning that Twitch has become an increasingly popular venue for DJs to livestream during quarantine. Ephemeral live performances to reduce copyright infringement penalties are the norm.

Interesting times.

[doopy1]

Actually it's because the valuation is insane. They pull like $140MM per year and someone values that at $5B.

[user3939382]

I've been a programmer for over 20 years and I still use Zapier because I find it relatively quick and easy. Dealing with writing code for authentication, various API versions, debugging, deploying and maintaining the code is all a PITA that I'm happy to avoid where possible.

[jaxn]

Does Zapier only get revenue from paid subscriptions? Or do companies pay for promotion / integration? I suspect there is a big business around semi-private APIs and gluing "enterprise" partnership deals together.

[subpixel]

I empathize - in fact I feel the pain. Yet in all my many years of using Zapier I've never paid for the service, and I also would never have guessed the scale of their business.

[duxup]

" Zapier lets non-programmers, the vast majority of the planet, do things that programmers do"

I doubt that's the reason for the evaluation, that's hardly unique.

[jojobas]

There was already plenty of middleware tools that allowed API to API translation.

They all (and I assume Zapier is no exception) only allow "no code" integration in only the most basic scenarios.

I don't think it has much to do with empathy, much rather unbounded money printing of late.

[xwolfi]

Dentists lack empathy: they cant understand how most people think and never explain how they think outside of their bubble.

Our startup, Dentir, makes you do things dentists do :p

[rtpg]

The core difference being that “put value X from system S into value Y in system V” is actually conceptually extremely simple, and is mostly encumbered by machinery around it and “incidental complexity”.

Dentistry _is_ all the complexity and the skill of , like, drilling into your mouth or whatever.

[hervature]

To me, you just proved the GP’s comment about “empathy” (in quotes because imagining yourself in someone else’s shoes isn’t empathy, but that’s what they call it). The difficulty with programming has almost nothing to do with the machinery around it and entirely to do with the ability of the general population to understand statements like the one you just made with 4 variables. The direct proof of this is that Word is much more complex than Sublime Text which I use to program. Yet, everyone knows Word. Of course, if someone starts programming with an IDE, they have an additional tool to learn.

For what it’s worth, I think it’s easier to teach someone to be precise with a drill than it is to teach computer literacy.

[toomuchtodo]

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.

[syndacks]

Curious to hear why you left one for the other. Not too often you hear that move. How is it going so far?

[toomuchtodo]

I fell out of love with tech, and found more leverage in finance. I still write code (Python) for myself for fun, but would rather live in Excel versus VS Code and k8s 50 hrs a week (I squeeze in commits on my open source projects when the family has gone to bed).

I’m semi retired in my late 30s, so it’s gone well. I am so extraordinarily thankful for the experiences and opportunities I’ve had, but recognize when it’s time to close a life chapter.

[anonymouse008]

If you’re willing to offer advice, when did you make the switch and how? That’s quite a jump, and usually upon entering finance you end up with different tasks to fill up a 50+ hour week. PE/IB/etc ... only way you strike rich with easy schedules is a family office?

[artemonster]

Any other good sources, like books or articles ?

[ab_testing]

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.

[throwawayyipyip]

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?window=MAX

[valzam]

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?

[chii]

> What's the point of owning the stock?

to sell for capital gains when it is higher in the future. Dividends aren't the only way to generate a profit. And for a lot of high income earners, dividends are very tax inefficient as well.

[jurassic]

Dividends are taxable while price appreciation doesn’t become taxable until you sell. Unless you need income, it’s more tax efficient to shareholders if the company reinvests free cashflow in continued growth.

[mdeck_]

The point is that (a buyer expects that) the value of the stock itself is increasing. Whether it pays dividends is not the pertinent question.

[andrewmcwatters]

> 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.

[Silhouette]

This argument is based on the idea that stock markets should price rationally based on value, but evidently that's not really how the markets work. Share prices have -- and need -- very little connection to any "true" value of the business whose stocks are being traded. For the basic investment strategy of trying to buy low and sell high, investors win if the stock subsequently goes up and lose if it subsequently goes down. The reason for the change, if there is any logical reason at all, is largely irrelevant.

Assuming any sort of pricing rationality risks the well-known problem that the markets can remain irrational longer than you can remain solvent. It should never have been possible in a rational market for the recent WSB pump-and-dumps to work, yet many billions changed hands as a result. Not that I have much sympathy for the losers on that one, because it should also never have been possible in a rational market for the short-selling strategy that left them vulnerable to work either. Both groups got away with something dodgy for a while and then some of them lost a lot of money when the house of cards fell.

Whether this disconnection of prices from real value is a healthy way for stock markets to operate as a key element in our financial systems is a separate question, and it's one that a different and probably much smaller group of people care about.

As a footnote, it's probably worth mentioning that some businesses, including tech stocks, don't necessarily follow the traditional models for either growth or dividend payments. So although those P/E ratios might be considered very high by traditional standards, those traditional rules of thumb aren't necessarily useful in these cases, even if we only look realistically at the potential for future profits. A high-growth tech startup might have low earnings in the early days and rely on some big investments for funding instead if it's building a huge user base without yet having a firm strategy for monetization, for example. That doesn't mean it won't have genuine potential to earn a huge amount of money from that huge user base later on if it does find the right monetization strategy.

[s1artibartfast]

>News flash, 15 to 25 years isn't normal.

I think it is fair to say 15-25 is pretty normal. The average P/E on the NYSE has been above 15 for the last 30 years, and most of it's 90 year history.

https://www.macrotrends.net/2577/sp-500-pe-ratio-price-to-ea...

An easy reality check is other asset classes like bonds or real estate. If you are doubling your money after inflation in less than 15 years you are either gambling or outsmarting the the market.

[cosmodisk]

The problem is that there's too much money lying around and nowhere to spend. Look at Softbank: throwing money at some most absurd companies with the hopes someone else will pick up dogs shit when they're gone. VCs are flushed with money and that's how the model works. At least for now.

[quickthrowman]

> 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.

You’re off by anywhere from 2-20x on the price to sales multipliers. At one point Snowflake had a market cap of nearly 200x the projected sales of the next twelve months. Before rates started creeping up, most SaaS was trading between 20-40x NTM and up to 60-80x on upside spikes.

[formercoder]

So the theoretical reason for the high values of tech companies is that margin is one of the biggest drivers of value in a dcf, due mostly to the non linear nature of division. However, many of the tech companies we’re seeing don’t have near those margins, they are in fact negative.

[bryik]

> ...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

What "internet" company has a P/E ratio above 100?

  Facebook: 25
  Apple: 31
  Netflix: 81
  Google: 36

Netflix is close, I guess.

[jaxn]

Shopify: 420 Square: 513 Salesforce: 95 Zoom: 149

[tamrix]

Me: I'll sell you 0.0000001% of my company for $1.

You: sure

Me: My company is now worth $10B!

Hackernews: wow that's so amazing! One day in going to be rich doing startups too!

[wombatmobile]

The $5b valuation is speculative. Only $1.3m has been raised, which is less than 0.02% of that valuation.

[anonymouse008]

Or you could say $1.3m of a theoretical $5bn demand curve has been tested, at one point.

[ErikVandeWater]

Why are you assuming the value VCs give it is even close to an honest estimation of its value?

[iambateman]

Despite the replies, I thought this was a good take.

$5,000,000,000 is a truly unimaginable amount in both senses of the word unimaginable. I couldn’t tell the difference between a $5B and $7B company, for example.

And it’s especially hard to tell for a service which is, somewhat by nature, invisible.

But my smart, non-programmer friends love Zapier and I imagine many of their customer relationships will be multi-decade. There really are so many odd businesses in the world.

[beachy]

I think of a billion as (very roughly) half of a cruise liner or half of a casino in the strip in Vegas.

Not sure how accurate that is but at $5b, I imagine zapier as a cruise ship tied up alongside a glittering glass casino.

[sgpl]

I think another thing to keep in mind is that wikipedia pages don't tell the whole story. So you shouldn't feel bad about being way off.

Investors assigning value have access to other metrics not visible to us - customer numbers, growth numbers, revenue and what the revenue growth looks like, internal product roadmaps and other areas of growth, etc.

[specialist]

Word.

IIRC, Microsoft acquired CompareNet for $400m in 1999. Scripts for scrapping prices. Written in Perl.

I always get stuck on the little questions. Like: Does it work? Is idea worth doing? How big is the market?

(I mention CompareNet because I had some contact with one of the founders. It's my IRL example that I never figured out how to play this game.)

[JohnJamesRambo]

Maybe valuations are just way astronomically off right now.

https://www.bloomberg.com/news/articles/2021-02-12/warren-bu...

[warent]

I was shocked by how low the number is! My guess was that Zapier was in the 10s of millions