[sbisker]

GoDaddy was entirely bootstrapped before a large chunk of it was sold to private equity firms in 2011. The founder self-funded it based on a $MM sale of a previous company, though - so they're awfully nice boots to be strapped up by. :)

As a result of being bootstrapped, the 2011 sale single-handedly put its founder, Bob Parsons, on the Forbes billionaires list: http://www.forbes.com/profile/bob-parsons/

[dabent]

I am pretty sure Parson's previous company, Parson's Technology, was boostrapped as well. He used, and apparently nearly lost, the millions he earned on that sale to fund GoDaddy until it was profitable.

[spaldingwell]

GoDaddy is actually not profitable.

In 2013 the company lost $199.88 million and in 2012 they lost $279 million .

http://techcrunch.com/2014/06/09/godaddy-files-for-100m-ipo/

(just a minor correction as I am not the biggest fan of GoDaddy)

[patio11]

This is an artifact of a longstanding issue that they've had with GAAP. They sell non-cancelable non-refundable multi-year services (like domain registrations) and receive cash up front for them. GAAP requires that they book that revenue on a pro-rata basis over time.

This means that if it costs them $200 to acquire a new customer and that customer immediately whips out their CC and buys $1k of domains spread over ten years then, at the end of the year, they "lost" $100 on that customer and have to console themselves by drying their tears on $800 in cash.

It also makes their balance sheet look over leveraged due to the $900 in unearned revenue booked as a liability.

[fookyong]

Fascinating - thanks for the explanation on this. I'm often surprised at how slow accounting practices are to catch up on business models that we see as commonplace in the tech world.

[patio11]

I'm of two minds on it. On the one hand, revenue recognition rules seem to lag common practices in our industry. They're wacky for domain registrations and absolutely insane for e.g. virtual currencies used to purchase improvements in video games. (If I sell you four dragon eggs for $10 and you spend 1 dragon egg on a Sword of Dragonslaying, do you know how much revenue I can recognize? Make a guess. Answer: I have to estimate your lifetime as a player given my best data of player behavior, subtract the age of your account, and pro-rate $2.50 over the remaining days of your estimated life.)

On the other hand, most time when tech companies chafe under GAAP restrictions, it is because they're trying "creative accounting" in the abusive rather than the creative senses of the term. Salesforce, for example, is periodically annoyed that they have to account for stock-based compensation to employees. Well, yeah, you can't simultaneously say "Equity grants are why people work for startups" and also say "But on the other hand they're totally free." They also have some other things which are apparently allowed in their GAAP accounting but... are rather aggressive, like $3.5 billion in goodwill on the balance sheet.

Disclaimer: I have in the past held, and currently hold, options positions which express the opinion that CRM is far overvalued and which profit if the market decides to agree with me.

[mrfusion]

Why is it a liability? I'm thoroughly confused.

[patio11]

So if I promise to pay you money in the future, that is clearly a liability, right? Same if I sell you a chicken today for $25 and promise delivery next year. My assets increase by $25 cash and my liabilities increase by 1 chicken, which I'd probably record at $25.

This makes a lot of sense for chickens. It feels to me like it makes a lot less sense when I'm selling you something with a COGS which is too cheap to meter and where there is essentially no meaningful risk to delivery.

[mrfusion]

Thanks for explaining. So why would your liability for the chicken be $25, the retail price? Why wouldn't it be what a chicken costs to you?

[jmathai]

I think the key point here is that it was profitable for the founder :)

[freejack]

If I understand and remember the finances correctly, debt takes them to about $3b in the hole. Not much of a success story there...