As announced by Automattic and covered by TechCrunch, I want to take a moment to welcome Elijah Potter and Harper to join Automattic. Harper is a super-fast (way faster than LanguageTool and Grammarly), local English grammar checker. The technology is nascent, but I’m very excited to embed this throughout all of Automattic’s products, and then expanding it to other languages, all in an open source way that can be embedded everywhere. I’m a huge fan of Grammarly and use it every day, but I think we’re doing too much in the cloud right now and there is so much compute and potential at the edge, and I’m excited to drive that forward with projects like Harper, Gutenberg, and Playground.

Last Friday we said goodbye to 159 colleagues as part of our alignment offer. It was a tough day, there are a lot of close relationships within Automattic, and goodbyes are always hard.

On Monday, I got to be Oprah for a few minutes. We had scheduled a town hall for leaders around the company to speak to everyone, and our Woo team had ~350 people in person at a meetup in Tulum. I had five minutes to talk, and over the weekend, I had been brainstorming with finance and HR for something nice we could do for everyone who stayed. We couldn’t give them all a six-month bonus, which would have cost ~$126M, but we did take how much we spent on severance for the 159 people, rounded up a bit, and granted everyone at Automattic 200 shares of A12 stock, so about a $12M bonus for the employees.

What’s A12 stock? This is probably the first time you’re hearing about it, we haven’t had a chance to talk about this publicly much before.

Usually, options or common stock in a private company is fairly illiquid, with rare opportunities to sell or lots of restrictions like what Uber had; it’s not an efficient or predictable market. Options are “nice” because they can defer taxes, but you still have to exercise them, and they can go underwater. Also, as a fully distributed company, we have people in 91 countries, so security and tax laws around options make them not worth it in most places outside of the US.

When thinking about a stock plan for Automatticians, we thought, our most sophisticated investors have nice protections like a 1x liquidation preference, what if we gave that to employees, too? So to summarize, A12 is a special class of stock available only to buy if you’re a current Automattician with these characteristics:

• There are twice-a-year windows to buy. You have to hold for 1 year, but then there are quarterly windows to sell, which is very predictable.
• Automattic maintains the internal market, and provides a backstop so you can always sell the shares at what you paid for them or more, like a 1x liquidation preference.
• Current employees can buy, but former employees are eligible for every selling window, there’s no politics like can happen with tender offers. It’s reliable and predictable.
• Unlike options, A12 stock never expires. Once you own it, you own it.
• Initially we only allowed $25k/year of A12 to be purchased, but as our business has scaled we now allow up to $1M/yr of A12 stock to be purchased. (Remember, the company has to backstop the purchase price.)
• A12 is just economic rights, it doesn’t have any voting rights.
• A12 stock can be transferred to a trust.
• The price is set by an external firm, just like our 409a. Because that process discounts us so much for being private, it’s a pretty good deal compared to what investors would pay for a share.
• We’ve mostly moved away from options, which really only work for already wealthy, sophisticated hires. We pay very generous base salary (which banks love, makes it easier to get a mortgage) and then people can make a personal decision whether the characteristics of A12 fits with their financial planning alongside index funds, stocks, and bonds.

We’ve been running this program since 2016. The main downside risk for A12 holders, which isn’t that different from common stock, is that we go out of business and can’t keep our commitments. But that’s true of any stock investment, and we have a pretty solid track record.

We want everyone to have an owner mentality, so we’ve also now started granting 1 share of A12 stock to every new hire.

Our legal team has their hands full right now with the Silver Lake / WP Engine stuff, but we’d like to open source our docs around this so other companies can offer the same thing easily, I’ll see if we can make time for that in the next few weeks.

We also announced something else cool for employees on Monday around our Grand Meetup in 2025, but to know that secret you have to work with us. We are one of the most open companies, but we can’t publish everything! ☺️

Winston Churchill said, “Never let a good crisis go to waste.” Since I last blogged here, WP Engine filed a meritless lawsuit and Automattic responded, and there’s been a hurricane of public activity and press. Inside of Automattic, there’s been a parallel debate and process.

Silver Lake and WP Engine’s attacks on me and Automattic, while spurious, have been effective. It became clear a good chunk of my Automattic colleagues disagreed with me and our actions.

So we decided to design the most generous buy-out package possible, we called it an Alignment Offer: if you resigned before 20:00 UTC on Thursday, October 3, 2024, you would receive $30,000 or six months of salary, whichever is higher. But you’d lose access to Automattic that evening, and you wouldn’t be eligible to boomerang (what we call re-hires). HR added some extra details to sweeten the deal; we wanted to make it as enticing as possible.

I’ve been asking people to vote with their wallet a lot recently, and this is another example!

159 people took the offer, 8.4% of the company, the other 91.6% gave up $126M of potential severance to stay! 63.5% were male. 53% were in the US. By division it impacted our Ecosystem / WordPress areas the most: 79.2% of the people who took it were in our Ecosystem businesses, compared to 18.2% from Cosmos (our apps like Pocket Casts, Day One, Tumblr, Cloudup). 18 people made over 200k/yr! 1 person started two days before the deadline. 4 people took it then changed their minds.

It was an emotional roller coaster of a week. The day you hire someone you aren’t expecting them to resign or be fired, you’re hoping for a long and mutually beneficial relationship. Every resignation stings a bit.

However now, I feel much lighter. I’m grateful and thankful for all the people who took the offer, and even more excited to work with those who turned down $126M to stay. As the kids say, LFG!

There’s an apocryphal story about Ernest Shackleton putting an ad in the newspaper that read:

Men wanted for hazardous journey. Small wages, bitter cold, long months of complete darkness, constant danger, safe return doubtful. Honour and recognition in case of success.

If you’ve read the book Endurance by Alfred Lansing, you know how that went. Pretty legendary. One of my most treasured possessions is actually a copy of Ernest Shackleton’s Heart of the Antarctic book signed by every member of the shore party and Shackleton.

You may have heard the news that we’re going to migrate Tumblr onto WordPress. Automattic has put up a similar page calling for talented engineers of any gender who want to join the voyage.

It’s such a delight when a plan comes together and unfolds, especially when it’s something you’ve been working on for many years. Today the announcement went out that we’re combining the best technology from Beeper and Texts to create a great private, secure, and open source messaging client for people to have control of their communications. We’re going to use the Beeper brand, because it’s fun. This is not unlike how browsers have evolved, where solid tech and encryption on top of an open ecosystem has created untold value for humanity. Eric Migicovsky has written well about the plan going forward.

A lot of people are asking about iMessage on Android… I have zero interest in fighting with Apple, I think instead it’s best to focus on messaging networks that want more engagement from power-user clients. This is an area I’m excited to work on when I return from my sabbatical next month.

The Washington Post writes The U.S. economy is booming. So why are tech companies laying off workers? This article has some good data, but I think misses the point with sub-heads like “Shine has come off the tech industry.” Really? How is that reflected in their stock prices?

I think a few things are happening.

First, tech companies are typically best at adopting new technology, which leads to productivity gains.

AI may be an obvious example of this, though for all its hype it hasn’t had a huge impact on most companies yet. I agree with Sam Altman when he says there may someday be a billion-dollar company run by one person who is able to highly leverage future AI agents to automate most traditional roles at a company. That said, I think there are advantages to teams including allowing people to go on vacation or take time off, and provide business continuity and succession, so literally one-person is probably an exaggeration. We don’t need AI to see very small teams being valued highly: Instagram had only 13 employees when it sold for a billion dollars to Facebook, in 2012!

Some of this productivity gains just come from adoption of existing tools like Google Workspace or Office 365, issue trackers and version control with tools like Gitlab, Github, or Jira. At Automattic we don’t use email to work or communicate internally, it’s all Slack and P2. We also leverage our distributed nature to effectively have teams around the world coordinating several shifts of product work per day, and 24/7 coverage for things like systems and customer support without the need for “graveyard shifts.”

The way tech companies operate, the pace and culture, would be unrecognizable to people at many more traditional companies.

At tech companies some roles are highly leveraged, like systems, engineering, and design, and everything else in the company really exists to support these. These leveraged roles can create enormous amounts of value, and that’s why it’s not unusual to hear of machine learning engineers working on ads at Google with salaries in the seven figures. (There’s been a weird accounting thing where companies put a lot of their compensation into equity, but I think that’s going away as investors are learning to better account for dilution and employees appreciate the fungibility of cash.)

Creators are also highly leveraged, which is why Joe Rogan can sign a new $250M deal with Spotify (which smartly puts him back on Youtube) after laying off 1,500 people in December. Some people like Hagen Terschüren try to tie this together and say you should avoid Spotify for it, but there’s nothing wrong with a business becoming more efficient to serve its customers, it’s the whole point of capitalism. Capitalism is, as Nicholas Stern says (via Marc), the best way to take care of people we don’t know. There’s no honor in keeping people employed inefficiently, it’s better for them to find someplace in the market where their talents will be better leveraged for society and themselves.

There was a bubble in hiring because tech had so much money it tried to throw people at problems. But the unlock in technology can come from a single person, a single insight. It’s the mythical man-month. Tech-first companies are going to become leaner and more leveraged. Fewer people are going to create more value for society, in ways that will follow power laws and I think we should investigate things like Universal Basic Income to provide for all living beings. Technological progress creates abundance, where we have more than what we need.

At Automattic last year we did not do layoffs, but allowed performance management and natural attrition (voluntary regrettable was 2.9%, non-regrettable 6.8% for us in 2023) to allow our size to shrink down more naturally, on average two people left for every person we hired last year, from a peak of about 2,064 to 1,936 today.

Today is the day! The first day of my sabbatical. What an experience it has been. On Thursday I delivered my very first Ignite talk on the subject! Here it is.

The Ignite format is a tricky one as a speaker! I will do better next time. My friend Connie has delivered seven Ignite talks now and I thought hers and Adam Savage’s were the highlights of the ones I saw. (I didn’t see everything because I was popping in and out.)

Preparing for this sabbatical has been the most fun I’ve had working at Automattic, ever. It brought so much clarity to things, we’ve been able to resolve in hours things that have lingered for months, including two acquisitions, several hires, big strategies, and more.

After this talk I caught a redeye to NYC to meet with the WordPress.com leadership team and hand off my leadership there to Daniel Bachhuber.

It is a beautiful symmetry that the first-ever sabbatical taken at Automattic was by its CEO at the time, Toni Schneider, which gave me the opportunity to step in and try on being a CEO, and it’s an incredible gift that Toni is returning to be CEO of Automattic while I’m out for the months of February, March, and April.

What am I going to do with all this free time? Blog a ton. So follow along if you want to see this journey. I’m going to try to open source all the things. 😇

Update: I ended up extending this to May 15 since it got a late start.

Considering I am going on sabbatical in 83 hours and passing the CEO torch to Toni Schneider until I return in May, it seemed like a perfect time to do a giant re-org! Just kidding. But we did introduce a concept into Automattic that I think will provide a lot of clarity for the teams within Automattic, and hopefully for the broader WordPress ecosystem that works and partners with us.

The frame is there’s a game, each person gets a card: Be the Host, Help the Host, or Neutral.

You cannot change cards during the course of your day or week. If you do not feel aligned with your card, you need to change divisions within Automattic.

If you’re Be the Host, you are hyper-competitive. You are trying to make the case to a customer for why they should host with you and not consider anyone else. This is what everyone assumes all of Automattic is, but it’s actually just one sub-division, which is a minority of our revenue.

For Help the Hosts, your word is ecosystem. You plant the seeds of open source software that grow everywhere. Every WordPress is precious to you, wherever it grew up. You want every host to be as successful as possible, because the real threat is from the Big Proprietary folks outside, who steal all your good ideas and don’t let you touch them again. You want to get to know every WordPress in the world, however it grew up, and help it out by selling it attachments.

Neutral treats everyone equally, either because they don’t care (Day One, Pocket Casts, et cetera don’t have a horse in this race) or because they are a support function like finance or HR.

Whenever you meet or talk to an Automattician you can ask what their card is.

Also, WordPress.com is going to orient itself more towards developers, and have an experience that feels similar to WordPress hosted other places, less Calypso more wp-admin.

The big tension this surfaced was Woo Express, going forward that team is switching under WP.com, and Woo.com will recommend a variety of hosts (like W.org) to get started with Woo. Now people can meet with Paul Maiorana, who leads Woo, or James Grierson, who leads Jetpack, and know they have Help the Hosts cards as their teleological goal.

If you’re obsessed with Sonos like I am, a nice MacOS utility is the Menu Bar Controller. Hat tip to Mike Tatum, who happened to be the gentleman who convinced my parents it was okay for me to drop out of college and move to San Francisco to take a job at CNET. Mike’s now at Sonos and in October arranged for some top execs at Automattic to go to Santa Barbara to meet with their peers at Sonos, and Patrick Spence and I did a joint CEO town hall that was broadcast to both of our companies. It was I think fascinating for both sides because of a shared passion for craft, design, culture, and execution, but our companies are in no way competitive, so it allowed for a lot of transparency. I learned a ton, and I think that kind of sharing is what increases the mimetic evolutionary speed of companies.

Atoms are hard! I think I’ll stick mostly to bits.

Apple almost never fails to wow, and they had a lot of cool announcements at WWDC yesterday. Apple’s previously favorite (app of the year!) journaling app was Day One, one of Automattic’s products, but they announced their own Journal app. One nice thing about competing with Apple is they only really interoperate with their own devices, and they’re usually not good at social. Day One is launching Shared Journals soon, a social feature so you can have fully end-to-end encrypted shared private journals with friends and family. It’s been the thing I’ve been most excited about since we bought the app. (Paul can attest how much I ask him about it!)

That complements another advantage Day One has, which is being cross-platform. If you have a family member on Android, you don’t want to ostracize them from your Shared Journal. Apple doesn’t care, their priority is getting everyone on the Apple ecosystem. You care, and Day One/Automattic does too, that’s why it works great on all Apple devices, Android devices, and the web itself.

In February of this year, Automattic closed a new primary funding round of $288M, bringing in some great new partners including BlackRock, Wellington, Schonfeld, and Alta Park. Existing investors ICONIQ and Aglaé (Bernard Arnault) also participated. This round was common stock, and like all funding since 2011, included a proxy assigning me the right to vote the shares.

Automattic was very busy during this time frame, as we were working on what would become the Parse.ly, Day One, and Pocket Casts acquisitions, our investments in Element and Titan, plus more acquisitions and partnerships we haven’t announced yet, so we haven’t mentioned the February funding round until now. And while we are a bit surprised the fundraise did not leak to the press, it’s now been an awkwardly long time since February and I’m pleased to formally announce it now.

And since then, Automattic has continued to grow at a rapid pace and we recently took the opportunity to do a $250M share buyback at a $7.5B valuation that just closed last week. The buyback was primarily targeted at current and former employees. 

We’ve grown and increased our valuation at a rate higher than most other alternate investments available to investors. However, some of Automattic’s employees and former employee shareholders have been part of our journey for a very long time. Selling a bit of their equity holdings could have a significant impact on their lives. 

Automattic was founded 16 years ago and is still private, so it’s important for us to try to provide liquidity to any shareholder who wants it. We do the same with our internal A12 stock plan where we let our employees buy our shares and also offer an opportunity for all holders to sell them back to Automattic, every quarter. (I need to do a longer post on that.)

One interesting thing we’ve been doing in these buybacks is holding the shares as treasury stock within the company instead of canceling the shares at purchase. This allows us to buy shares that come onto the market, and then when an investor comes and wants to put a larger quantum of capital into the company, we can re-sell the treasury shares that the company bought earlier. In effect, we are providing both a sell-side and buy-side for Automattic stock, serving previous and new investors and making money on these trades since we bought and took the risk earlier. We’ve established a logical valuation methodology, which is based on a simple multiple of the last twelve month’s revenue, so shareholders can track and anticipate performance.

All of this has been a lot of fun and we’ve seen a great amount of success, but it’s not all smooth sailing; we still have our share of challenges, probably the biggest being hiring. We have significantly scaled up our ability to find and hire great folks, with 371 accepted offers already in 2021 and it’s only August. However, with the growth of WooCommerce (hiring a Head of Payments) and our enterprise business, WPVIP, in particular, we need to move faster to keep up with the opportunity. For me and many other of the most-tenured Automatticians within the company hiring is the top priority. To that end, I’m also looking for someone to partner with me and our top executive group (which we call Bridge) in Creative Talent Development, an executive recruiter to help craft the highest performing teams of executives for each of our businesses. 

We have a multi-decade opportunity ahead of us to create the best solutions for the open web platform of WordPress, and WooCommerce is doing the same thing for commerce; growing together over the long-term with people passionate about the same mission is my favorite part of my job.

Excited to welcome Parse.ly to the Automattic family, in an acquisition that’s closing today. They’ll be joining our enterprise group, WPVIP. The deal has been nicely covered in the Wall Street Journal and Axios. As a bonus, here’s Parse.ly co-founder Andrew Montalenti’s first comment on this blog, in 2012.

Great article, Matt. I wrote about this on my blog — Fully Distributed Teams: Are They Viable?

http://www.pixelmonkey.org/2012/05/14/distributed-teams

In it, I drew the distinction between “horizontally scaled” teams, in which physical offices are connected to remote workers via satellite (home or commercial) offices, and “fully distributed” teams where, as you said, “the creative center and soul of the organization on the internet, and not in an office.”

At Parse.ly, we’re only a couple years old but have been operating on the distributed team model, with ~13 fully distributed employees, and it’s working well. Always glad to hear stories about how Automattic has scaled it to 10X our size.

And, likewise, we blow some of our office space savings on camaraderie-building retreats; our most recent one was in New York, see [here] and [here.]

Very excited to share the news that Revue is joining Twitter. I’m a huge fan of the idea of better newsletters and Automattic was the largest investor in Revue. I’m looking forward to seeing what the very talented team will do as part of the Twitter network. Also many thanks to Kevin Kelly and Om for introducing me to Revue early on.