The Boring Engineer #1: When boring is successful
In this post, we will focus to review a couple of boring companies that are not usually examples when talking about interesting tech or businesses.
Hi everyone! (Is anyone there? say hi if you’re there!)
This newsletter was intended to share news about Engineering Management. Still, I feel that every single manager out there is already sharing great content, so I decided to pivot to a different sort of content: boring content, discussing engineering, business, and tech from a different perspective. This is not to bash any tech or companies but to put the focus where many are not looking at.
Today’s topic will be the current tech market situation. We transitioned from frantic valuations and growth to companies fighting for survival and desperately trying to get a new round to increase their runway, running to profitability.
Other companies are navigating this storm with a reduced urgency. I think these companies share some core concepts different from VC money.
Many of them are bootstrapped without VC money. They do not owe money to anyone.
Their goal isn’t to dominate the world through unceasing growth. Great idea, fantastic execution, willing to be the best with sustainable growth.
They tend to be small, not having massive teams. More people, more expenses, more people doesn’t necessarily mean faster.
They hire based on their revenue, re-investing sustainably.
They have simple business models that generate revenue. They are not disrupting, and they play in a high-margin business.
They are not hyped, people might not know them, and they do not have the attractiveness of the big tech probably, they do not pay the same.
Let’s go through some examples of boring companies.
Sustainable boring businesses
With these two examples, I want to share a couple of companies that are not trending in the tech scene but are creating an amazing businesses out of simple ideas with great execution.
Craigslist
It’s straightforward to describe Craigslist, and they’re a massive classified advertisements website primarily present in the US. Craig Newmark founded it in 1995. Probably that was the same year that they updated its UI.
The idea’s simple, you pay for posting an ad. It’s a no-brainer business model that works if you get tremendous traffic, as they do.
The profit margin is calculated at around 80%. In 2021 they generated $660 million, with a 17% growth compared with 2020, but still way below the record year in 2018 with $1.034 million.
It’s reported that Craigslist has just ~400 employees (based on Linkedin data). This makes a revenue per employee of $1.63 million. Compared with some big tech: Google ($1.6), Meta ($1.1), and Apple ($1.9).
Based on Linkedin data, I can see only 14 people in Tech. I’m sure the team is bigger, anyone with more info about it?
Let’s talk about Tech. It seems they’re running on-prem using the following tech: Apache as the webserver, MySQL, Perl as the primary programming language, and Sphinx for search. This is an extremely boring tech setup, but they’re running one of the websites with the highest amount of traffic on the Internet.
The job postings confirm they are running their infrastructure, as they’re looking for a Network Engineer, and it seems they are modernizing the frontend side by looking at the Javascript Developer role they have.
Working at this company seems safe, with great revenue, massive margins, and a small team. Boring but very successful.
Not everything is shiny, they have a tremendous issue with fraud and illegal content on their website.
SmallPDF
This company was founded in Switzerland by Manuel Stofer, Lino Teuteberg and Mathis Büchi Ginzbourg. Their core idea… to make PDF files smaller. Anyone that has worked creating reports or exports in PDF knows how painful and boring is to work with that!
This is a great example of a bootstrapped company, they never received money from VCs, but they managed to find a great idea, execute it and reinvest revenue for furthest sustainable growth.
They have a team of around 120 people (based on no Linkedin data) located in Zurich, Barcelona, and Belgrade.
Based on data from Reviewbolt, the estimated revenue (from 2020) was $10.55M. At that time, they were around 70 employees. Which brings an estimated revenue per employee of ~$150.000. Not as high as Craigslist, but in my opinion, enough for being a sustainable business.
They seem to be running in AWS public cloud and have more of a modern tech stack. In the job description, I can see some cool tech like WebAssembly. It seems to be working with React and Typescript on the frontend side.
They’re still actively hiring.
Unsustainable businesses
Some businesses that are suffering right now and that are looking for that sustainable growth is going to navigate an extremely difficult moment; for instance, recently, on the news, we could hear about companies losing their inflated valuation (affecting their employee’s potential future income) like:
Klarna its valuation shifted from $45.6 billion to $6.7 billion.
Klarna hasn’t declared profits since 2018. With 2021 losing $730 million. With a revenue of $1.42 billion.
Similar to Klarna, the world-known Stripe recently reduced its valuation by 28%.
For instance, Adyen, one of the biggest competitors, seems to be in better shape as they have a laser focus on big customers and a smaller portfolio of products and reduced team size. Quick comparison, Stripe ~7000 employees vs. ~2180 for Adyen.
In contrast, Stripe has a broad portfolio of products that might mark the difference in the long run.
In China, the grocery delivery company called Missfresh is close to bankruptcy.
Not to mention quick delivery companies that have closed recently.
These companies have some points in common.
A complex business model based on extremely small margins.
Without VC money, they cannot function, as they need to dominate the world to be profitable eventually.
They can be extremely disruptive to society, like Uber.
Boring Links
Stack Overflow runs nine on-prem servers to run all its sites. No K8s, no containers. Increasing RAM to the SQL database was more effective than adding another caching layer with Redis.
Istio is moving back to the monolith. Well, not to an actual monolith as many of you have seen in the past, but starting to consolidate some microservices into bigger services to reduce complexity.