60M cash loss in 2021, with over $100M stock based compensation expense. Maybe with Phabricator shutting down they'll see more growth but the last time I used Gitlab it was not comparable to Phabricator's (and Gerrit's) usefulness for large orgs. It's more like a Github clone in the way it functions.
Most S1 on HN are companies that spend $3 to get $1 in revenue. It was explained to me that this is totally normal and very different from DotCom companies literally buying revenue.
Half sarcastic, half serious? I think the prevailing theory is that yes these companies are spending tons of money to get a little bit of money, but it's a one time per customer expense and that customer will still be there for many more quarters, paying monthly dues.
The theory is lot stronger/valid in enterprise sales like gitlab, customers take a lot of time to switch even if they are not satisfied with a product, there may not viable competitior with bespoke solution the same your current provider gives you etc
It is far less true for consumer/SMB mid market products as cost of leaving there is not high.
Oh yeah, I think GitLab will make a fine company. Even if as a user of their product I routinely find it to be half-baked, but of course in enterprise the actual user is commonly the least important aspect of any deal.
> Even if as a user of their product I routinely find it to be half-baked
I thought so too, but then my enterprise started moving to Github. Hoo boy, that’s a whole different can of worms. Their core functionality is great, but if you need anything outside of that you are shit out of luck.
A lot of that money gets spent on adding features to win sales and those features are a one time cost so they can be used for free to win new customers later. GitLab pushes hard to be the do everything tool.
I guess if you look at it, they almost doubled their revenue in last 1 year but the loss only went up by a fraction compared to last year. So they are on a high growth path which is what investors want I assume.
Income of 152 with total expenses of 344 in 2021 and income of 81 and total expenses of 211 means expenses grow at 1.61x of revenue (344/211) whereas revenues are growing at 1.876x yoy so revenue growth exceeds loss growth in time they’ll be profitable. Especially if in 2021 they were profitable when companies were cutting down on things.
Are they losing money on each customer per year? Are they spending a ton on sales that they expect to earn back over a decade per customer plus, but with a huge initial cost.
It requires closer inspection in this particular case, but losses are not always bad if they’re calculated. For example, if you spend $100 to bring in a customer that yields $200 in a year, it makes sense to “buy” as many customers as you can.
But is the company “default alive”, as I think Paul Graham calls it? That is, could they cut that spending tomorrow and actually have money coming in that more than covers the costs of keeping the lights on?
The overwhelming majority of high-growth technology companies recognize a net revenue loss going into IPO. The purpose of the IPO and prior VC rounds is to finance a strong company & product, and more importantly, help win enough market share early enough in the sector's lifecycle to recognize a full or partial monopoly over the space.
The fact Gitlab are recognizing a loss at IPO could have been predicted at the company's inception.
152% NDR tells me they should either buy as many customers as possible right now (IE burn), or they are under pricing and should raise prices and increase revenue that way.
Cash flow on its own is kinda meaningless.
The bronze plan (4/user/mo) was burned and moved into premium (19/user/mo). If you have any sort of moderately active company, going back to free tier is really not an option (the feature reduction would be simply too much, plus a lot of previous ci/cd work would be binned).
The most important one for us is the `environments` feature, but indeed a lot of four-eyes-principle controls are also missing in free tier (MR approval requirements, committer verification, push rules...).
Yeah, remember how Amazon got theirs. Not that those results will apply here of course. A lot depends on how much upside your investors and stock holders believe will eventually come to pass. Hard to say you are going to take much market share from a project owned and backed by Microsoft though.
Can’t really say that without a cost breakdown. If the LTV of a customer is greater than the CAC then your losses will grow as you do until you reach a more steady state and reduce your marketing spend.
It takes awhile for a SaaS customer to pass their CAC. But if they do then they should be closer to 80% margin after that.
Yeah, but burning $183 to add $71 in revenue is a tough pill to swallow.
Sure, it probably will pay back eventually, but as an investor, you really have to be bullish on retention/expansion. to get a reasonable LTV out of that.
Most bulls have been right in the past, but eventually the music stops (look at the tenuous position Slack was in before acquisition).
You just need to be confident the LTV estimate is correct. That being said I'm pretty bearish on dev tooling in general as it seems like companies don't want to pay for it (but they will pay for expensive AWS services!)
>You just need to be confident the LTV estimate is correct.
I've yet to see an LTV calculation at a VC or from FP&A that is even close to reality (Who cares about WACC, even though the capital we raise is actually very very expensive? Why should we consider Gross Margin? What do you mean we can't just take our best cohort?).
But to mirror the fatalistic tone from my other comment, we're in an easy growth environment, so it kind of doesn't matter (until it does).
No, you're conflating "loss" (negative profit) with "cost". The first sentence acknowledges that plenty of tech companies IPO and are not profitable, so their revenue is below their costs. The second sentence is about losses (negative profit) exceeding revenue.
For a naive example, a company can have $1m in revenue and $1.1m in costs, therefore profit is negative 100,000 dollars - the company is unprofitable. However, they are not losing more money ($100,000) then they are bringing in ($1,000,000 is greater than $100,000) - though they are spending more money ($1.1m) then they are bringing in. This would not be a concerning amount of loss, many companies are deliberately outspending current revenue in order to increase future revenue/growth/market share, but could become profitable if they wanted to.
In this case, the person you replied to is remarking that the losses/negative profit
($192m, $130m) are greater than the revenue ($152m, $81m). This is a concerning sign, as the path to profitability is much further away.
It is also somewhat easy to enter the market. You do not need a hundred million dollars upfront investment to build a competitor, at least in terms of functionality of provided services. A good example in my opinion is how BitMart is eating up Coinbase US market with many of my friends moving on to safe money on the fees since "crypto is crypto". From their IPO coinbase is 25% down as of today, and I don't see any compelling reasons for the stock to rebounce.
this is what I was thinking. I installed a gitlab instance on an old laptop for a friend and myself to use to collaborate on a couple small projects a few years back. I haven't checked in to see what gitlab offers today but I'm having a mental disconnect between all those millions of dollars and what my understanding of the product is. there must be something the product offers that I'm ignorant to that justifies all that money.
GitLab is not just a git hosting and collaboration tool. They want it to be the single tool you use for almost everything to do with an application including monitoring, controlling infrastructure, error logging, project management/planning, security auditing, and a bunch of other things.
If you are using GitLab in a hobbyist or solo way, you are touching about 5% of the features that GitLab provides. Which is fine and a valid way to use it but its easy to see how customers justify spending big dollars on the top plan with hundreds of user licenses when the tool does so much. We even have customer support and project managers using the tool because it caters to them well.
If you want you can even use gitlab to replace something like zendesk as it provides an email address which puts all emails in to a "support desk" queue.
REVENUE:
2021: $152m (loss of $192m)
2020: $81m (loss of $130m)
EDIT: reworded for clarity.