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This is way. I'm definitely my brain is not working right. It has been a long day. Welcome to season two, episode nine of acquired, the podcast about technology acquisitions and IPOs. I'm Ben Gilbert. David Rezenthal. And we are your hosts. Today we are coming at you on Tuesday, June 5th, the day following the big announcement that Microsoft is buying GitHub. I thought you were going to say the day after Monday, June 4th. It is also after Monday, June 4th. And you know, this show is clearly patterning after acquired. It is a San Francisco company and a Seattle company that are joining forces. I don't know where I'm going with that. But we sit here in Wave Capital in San Francisco near the headquarters of GitHub to celebrate this momentum occasion. Indeed. Indeed. And this is our second in-person episode in a row. We actually recorded what we thought was episode nine last week together in Seattle. We did. And turns out now that that's episode 10. So, listeners, you'll have to wait and find out what that could be. What Seattle company might we have covered? Tune in next time to find out. All right. Getting into this show, if you're new to the show, you can check out our Slack at acquired.fm. You can also check us out on Apple Podcasts and we appreciate any love or reviews that you could show there. Love coming in the form of reviews. Our presenting sponsor for this episode is not a sponsor, but another podcast that we love and want to recommend called the Founders podcast. We have seen dozens of tweets that say something like my favorite podcast is acquired and Founders. So we knew there's a natural fit. We know the host of Founders. Well, David Senra, Hi, David. Hey, Ben. Hey, David. Thank you for joining us. Thank you for having me. I like how they group us together. And then they say it's like the best curriculum for Founders and Executives. And really, as we use your show for research a lot, I listened to your episode of the story of Akiyama Rita before we did our Sony episodes this incredible primer. You know, he's actually a good example of why people listen to Founders until acquired because all of his great-sendishmenters and investors, they had deep historical knowledge about the work that came before them. So like the founder of Sony, who did he influence? Steve Jobs talked about him over and over again if you do the research to him. But I think this is one of the reasons why people love both of our shows and they're such good compliments is on acquired. We focus on company histories. You tell the histories of the individual people. You're the people version of acquired and where the company version of Founders. Listeners, the other fun thing to note is David will hit a topic from a bunch of different angles. So I just listened to an episode on Edwin Land from a biography that David did. David, it was the third, fourth time you've done Polaroid. I've read five biographies of Edwin Land and I think I've made eight episodes of them. Because in my opinion, the greatest such primer to ever do it, my favorite entrepreneur personally is Steve Jobs. And if you go back and listen to like a 20-year-old Steve Jobs, he's talking about Edwin Land's My Hero. So the reason I did that is because I want to find out like I have My Hero's who were their heroes. And the beauty of this is the people may die, but the ideas never do. And so Edwin Land had passed away way before the apex of Apple. But Steve was still able to use those ideas and now he's gone and we can use those ideas. And so I think what Akwaiers doing what Founders trying to do as well is find the best ideas in history and push them down to generations. Make sure they're not lost history. I love that. Well, listeners, go check out the Founders podcast after this episode. You can search for it in any podcast player. Lots of companies that David covers that we have yet to dive into here on acquired. So for more indulgence on companies and Founders, go check it out. All right, David, are we ready? Let's get into it. So we didn't have a lot of time to research this one given that it's hot off the press. Yep. But fortunately, I actually had a little bit of a shortcut, which was back when I was a first year, a young whipper snapper, first year in business school, in one of my, one of my classes. I believe it was like high tech business strategy or something like that. Sounds official. It sounds very official. Me and myself and two of my classmates did one of our, did a final project for a class on GitHub. So I just so happened to have a 17 page document that we had all put together all about the history and strategy of GitHub. If only every episode's purpose that easy. Unfortunately, it's from back in 2013. But as we will see, not that much has changed with GitHub since 2013. Okay. So with that funds, oh, and other fun story. One of my professors at the time, not actually in this class, but one of my professors at GSB was Peter Levine, the general partner at Injury's and Horowitz, who led GitHub's Series A and was on the board. Unprecedented freaking $100 million first capital in Series A. That's a small Series A these days. At the time, it was unprecedented. Also not really a Series A as we will get into. But to start before we get into the history of GitHub, the company, there are a couple things that we want to cover that are pretty important to understanding the context here. And Ben and I were laughing before the show. Probably half our audience, the more technically minded folks in our audience, engineers and the product managers are probably going to know all this already. Probably we'll know what a greater detail than us and we'll write in and tell us what we got wrong. Yes. As usual with the technical acquisition for those that are more technical than us, we apologize for all the things we will surely get wrong for those that are less technical, bear with us. And I hope that we can make something that's a little in the weeds and little in the details, digestible, understandable, fun, and something you listen to by choice. Indeed. But whether it's fun or not, this is really important to understand and why Microsoft paid $7.5 billion for this company. Okay, so basically there are kind of two concepts. Two not concepts, but areas that we want to talk about as background. One is the whole idea of how managing software projects work. And that's this area of software itself called software configuration management or SCM for as initials or as an acronym. The other area that we want to make sure we talk about is kind of the evolution and dynamics of the open source software ecosystem. And we will get into both of those. Okay, so first, software configuration management. When you're building and managing a software project, the software project could be a small thing that you're building yourself or with a few friends, could be an open source project like Linux or it could be your company's code base for a private company. It's really hard once more than one person starts working on the project to kind of manage all the changes and contributions and different pieces of development that all the different engineers on the project are making. And I would say even just as one person, as a person that used to write PHP scripts and then name them V2 and switched and dot backup. It is excellent to be able to use a version control and all elements of software configuration management, even for your own private projects. Even for all our investment banker and former investment banker friends, you've certainly lived through a merger model V20 final. Final, final. Final, underscore, do not delete underscore V, you know, DR. This is basically making all of that easy and seamless for way more people than ever work on an Excel model in cases. So there's basically kind of three way main ways to do this. In the very, very old school ways, it was really easy. Everybody just worked on the same machine. So there was one file on one machine and that was the code base. And if you were an engineer working on the code base, you went on that machine or you telext into that machine and worked on it. Seems simple, why change? Why change? Well, the computing world evolved a little bit. And what was developed was the client server model. And this was known as the centralized model. And so in this case, there would be what was called a shared repository. And that's where all the code lived and all developers, anyone who's working on the code could work on it, but there was one canonical central repository. And so David, you know, let's say, I'm just doing a little weird thing on the side here. I don't really want anyone else to know about it or be exposed to it. Or have to pull down all the crazy code that I'm doing for my side thing. You're saying that's not possible in this client server centralized model. No, Ben, why would you want to do that? Hmm. It feels like I'm going to spend a lot of time syncing my code base with the centralized server. Or like something existed like an open source project and you wanted to clone it and use some of it and make your own version of it. Would that be easy to do, Ben? Well, it doesn't strike me that once I clone that, it would be easy for me to make a few changes and maybe over the course of several months and upload that back up that feels no, no. That would be tough. So as you can see, this kind of all worked well in the pre-internet days. But once the internet comes around and distributed software development becomes more of a thing, especially in the open source community, this becomes a lot harder. So fortunately, in the late 90s, just as the internet and distributed software development and in particular, the open source movement is becoming a thing. A new model emerges for managing the code base for a project and that is the distributed model. And that was pioneered by a bunch of folks, but there was a company called BitKeeper, a company or product called BitKeeper, developed in the late 90s. And it was actually used for the development of Linux for managing all the development ongoing development and maintenance of the Linux software kernel. Even though it itself was paid software, it was used in this open source, massive open source project for Linux. So BitKeeper was the first decentralized, was it the precursor to get? Did they develop get? No, so BitKeeper, I don't know if it was the first, but it was one of the first early sort of stable, sort of stable products that could be used to do this. And it was a private for-profit company. And their software was used by lots of other companies. But because open source was sort of this crazy nonprofit thing that was emerging in a new way to develop software, pioneered of course by Linux and Linux StoreVolds, and they, BitKeeper actually ended up licensing a free version of their product to, I don't know if it was to the Linux Foundation or to the Apache Foundation or just what, but made it available for open source developers to use that. And that became a way to massively scale the number of developers all around the world that could work on these projects. So that continues for a couple of years, and all sort of well and good. But then in 2005, BitKeeper, the company actually pulls the free license that they had been providing to the open source community. Yeah, exactly, you get what you pay for. And so this creates a huge kerfuffle in the open source community. But of course, as we will get into, people have lots of opinions and lots of different opinions. And this leads to two separate projects that are pioneered and undertaken really in an amazingly short period of time to replace BitKeeper. And those two projects are first of his mercurial, which I believe is less market share now today, but is still around, is actually used by Facebook. So all of Facebook's code base runs on the mercurial source control system. And the second, which leads directly to where we are today, is a product called Git. Now Git is interesting because it is actually developed and implemented in like a week, apparently, by the open source man himself, Linus Torvalds. Of course. Of course. Of course. Well, if somebody was going to do it in a week, it would be him. It would be him. And then quickly, he, I don't know that he loses interest, but he hands off the project to other folks to keep implementing and developing. So Git naturally, because it was developed by Linus, Linus becomes first the source control management system that Linux uses, the Linux kernel uses. Then it starts quickly, gaining adoption in the rest of the open source community. Hadoop moves over to it, the Hadoop project, many others. I think a mercurial still lives on. And like we said, Facebook uses it, but Git becomes very popular in a very short period of time. And so is there any sort of graphical user interface to access it at this time? Is there any sort of, you know, not centralized, but pseudo centralized place? Like are people using source forage with Git loaded onto it? Yes. Well, so Git and all this stuff, as we said, in the beginning, is just software. In and itself is software that manages the version. It doesn't actually host the software. The software, the code which itself is just files, has to actually live somewhere, or still on a server or on a distributed set of servers. And so Ben, just like you said, there's still no way to really do this in a nice graphical user interface way. There are what's called forges, which are essentially servers that host code out there and they're using the open source community. They really should have kept that name. They really should have. They really should get forage. And since these are companies like Source Forge, I think a lot of people will know. Google actually launches its own version of this, called Google Code. Yep. And they're the most popular places for the code to actually live. But the problem is there's not much more to them beyond a place to live and like a very standard Wikipedia-style web page about the projects. There's no concept of being able to interact with other people who are working on the projects. It's just hosting the code and then you're using Git or Mercurial to manage all of the changes made to the code. So right around the same time, we're now into like 2006, 2007, 2008. We're in the heyday of on the completely other side of the tech world from all this infrastructure, you know, developer, technical, friendly, or technically heavy work. You have the consumer web popping up. You have Facebook, you have Twitter, you have LinkedIn, and this whole idea of social networks and the combination of what is possible when you take software and people in communities and you all marry it. And people start thinking about, well, what if there's more of a community type site instead of these forges where developers can interact? Yeah, and that really takes the concept of, you know, people arguing on mailing lists and completely decoupled forums that were, you know, totally different than where the code itself was maintained and move it into one place together. And one of the big, you know, the trope of the time, and it's still a trope a little bit, but like, if you were contributing to an open source project, there was likely a flame war. Like there was, there was political people were, you know, grabbing on for dear life to have control over their little corner of the fiefdom and then the mailing list would have flamers that went out. And of course, like, it's not purely because the software made it all better. The industry's matured quite a bit, but it is, you know, we've moved on from that time, at least with a lot of the major open source projects in a lot of ways. Yep. So people are thinking, like, maybe there's some sort of community where all this can come together off of mailing lists, maybe some sort of hub you might think. And that gets into the founding of GitHub. So I'm going to switch over here now to the canonical founding history in the words of co-founder Tom Preston-Warner himself from his own blog. Quote, and Tom was a developer working for a company called PowerSet acquired by Microsoft also in San Francisco at the time, two time Microsoft acquiring. Two time Microsoft acquiring. In his own words, I was sitting alone in a booth at Zeke's Sports Bar and Grill on Third Street in San Francisco. This is in Soma. I wouldn't normally hang out at a sports bar, let alone, love it. This is just like this episode is going to be filled with just instantly throwing shade on anybody who's like not a proper so many tropes. Let alone a sports bar in Soma. But back then, Thursday was I can has Ruby night. Wait, like I can has cheeseburgers? Like I can has cheeseburgers. No way. Yes. Ruby of course, referring to Ruby on Rails, the web development language that was starting to take off and was the development language behind a lot of these social 2.0 websites. I think Twitter was built in Ruby, right? Yeah, Twitter was originally a Rails app that massively, massively didn't scale. That was why it says the front end would always fall over. And I think Alex Payne was brought in, a total side tangent, a AL3X on Twitter, Alex Payne was brought in to kind of redo that whole thing in Scala and decouple the front end from the back end. Totally. Oh, what a mess. Facebook originally of course being built, not even in Ruby, but PHP. And actually, I think GitHub is still largely Ruby. GitHub itself. Ah, interesting. Yeah, that would make sense. That would make sense. So it's Ican has Ruby night. Of course, it has been alluded to, a reference to the Ican has cheeseburger memes. All cats. All cats. From the Seattle company, Ican has cheeseburger at the time. And this is a developer meetup for Ruby on Rails developers in San Francisco. So Tom is at the bar, and he's taking a little break from the meetup. He goes the orders of beer and he sits down in a booth. And apparently right at that time, his not even friend, Acquaintance, Chris Wonstreff walks in, and Chris is also a Bay Area Ruby developer at the time. He has his own startup that he's working on. And Tom, for some reason, even as he's writing this, he doesn't know why he does it. He just kind of gestures Chris over to the booth, and he's like, hey man, check this out. I've got an idea I'm working on. And the morally here is always be looking for people gesturing to you that could have startup ideas. In sports bars and so on. And so Tom says, you know, about a week earlier, he had started on this project that he was calling grit at the time, to basically access these distributed Git repositories, and do so via a bunch of code that he'd written in Ruby. And he has this idea that he can take this code that he's written for accessing these repositories, and turn it into a website that can act as one of like this kind of idea of social coding that people have been talking about. And apparently Chris, they like barely even know each other. He's like, I'm in. Let's do this. And this is like the... Hold my beer. This is like literally the dream of engineers with... This thing happens 10,000 times more often than it works. Software developers can make anything, and what ideas people come up with are generally problems they're experiencing themselves. And so it is like the total dream of, I have an idea that is a tool or a platform for other software developers or to fix this problem in software development. And like these businesses can be very hard. There's very few that have made it to be $500,000,000,000 billion plus companies. And this is like, you know, this is the realization of the total home run right here. And of course, there's no better customer feedback for your... as a developer, for your idea for a developer tool, then other developers who you respect. There you go. There you go. So it was all magically ordained. So they start working on it on nights and weekends. They both have full-time jobs. And Tom is working for PowerSet, which was a search technology company. And Chris has his own startup with his co-founder PJ Hyatt that they're working on. They get an MVP kind of hack together. And Chris and PJ start to decide that they're going to start using this interface on top of Git within their own startup. And pretty quickly it works great. And like everybody's working there's like, yeah, this is awesome. You know, the whole Be Your Own First Customer thing. Exactly. Exactly. So they work on it for a few more months, January 2008. A couple more months goodbye. They launch it and they open up the tell all their friends about, hey, now there's this way. If you're using Git that we have this cool web interface on top of it and you can basically interact with the project and understand, see a wiki of everything is going on, talk to other people who are working on the project, manage it all from there. It starts spreading like wildfire. It's one of these things. It's a lot like sort of Uber when it launched or Twitter when it launched. Whereas soon as you turn the lights on, there's perfect product market fit. Perfect. It was so, the product market fit was so perfect that and so many people started using it that they actually started becoming really concerned about their own hosting costs because their GitHub is now the forage, the hosting service for all this code and all these people are now using it for their companies, for open source projects, for everything. And they're like, oh crap. I understand why it's great. It always seemed ironic to me that we had this big breakthrough in decentralized version control and then GitHub centralized it again. Yeah, totally. I mean, like it's not fully centralized and there's again, so there's lots of reasons why it's good, but it's still a... This is the engineering counterpart to the business axiom that they're two ways to make money of bundling and unbundling. It's like centralizing and decentralizing. It is funny. I thought about that a lot with cloud computing is this client server model where if you look back in the 80s, if you look back at dummy terminals and mainframes, like nothing lived locally, everything lived in the mainframe. Then CPUs got really powerful and like we got good at storing stuff and hard drives and they got really big. And then you could buy cheap computers. Everybody has their own remotely anymore. So everybody's got their... Everybody's processing locally, everybody's storing locally. And now like we're in this place where if your computer crashes, you can likely just go get another Macbook Pro, bring it home, and within an hour be back up to speed because everything's in some cloud service somewhere. And it's funny how there's this wax and wane of centralized decentralized, you know, client server back to, you know, powerful PC, backed client server. Like a client server. It's the never ending tick-tock of the technology cycle. It is. So they're worried about hosting. All of these centralized, decentralized forges, or the forges that they have now. And they're like, oh crap, we got to build a business model into this ASAP. Because they had launched in anybody who was, who had a Git-based project, could use it. Could be open source, could be a private company. They're like, what could we do? Well, what if we just keep it free for open source? Because remember when Bitkeeper, which had been this private company, was doing distributed version control for open source. And then they pulled the license and had to make, tried to make open source projects pay for Bitkeeper, everybody defected. And then that led to Git and Mercurial. So obviously they can't do that. But what if we charge companies who are using this for their own private code bases? We'll just charge them and we'll make it free for open source. It's really brilliant. Like it is the thing that's keeping us growing the ability for public repos that have no permission set on them, that people are doing open source projects, being free to access and thus continuing to a fuel growth. However, monetizing people that want to do things that are counter to growth by locking it down, it's like the perfect place to draw the freemium line. Totally. I think that from a lot of the companies that we've examined on this show, I think it's really helped me inform what makes sense in a freemium model versus what makes sense in a free trial model. And in the freemium model, it's really all about, I mean, that a massive component to, are you going to build a successful business? Are you able to draw the line in the place such that you're both fueling growth and monetizing exactly in that place when people are finding it so valuable that they'd be willing to pay? And when people want to do private repos, that's exactly that place. It's exactly that place. And not only that, they have just completely nailed the timing back to our hopefully not too dense and not too poor description of the open source community early. Yeah, more more more more exactly. I agree. Please don't judge us harshly. It's been a long day. The back to the open source community, this is right at the time when open source projects and development is just exploding. Like it was like people used to think open source, they used to think Linux and operating systems and value destructive. Yes, and value destructive. Interestingly, and particularly to foreshadow the Microsoft acquisition, like Microsoft was the one carrying the banner on open source value destructive. It's a threat to our business model. It's a threat to selling licenses, selling software licenses. It's a threat to everybody. Everybody is trying to create a software development ecosystem and platform. And I mean, people had done okay, like Red Hat figured out a business model around open source. But it was unclear if open source could ever actually be a successful business. Yep. And you go from that, again, it was all centered around operating systems to now you've got programming language is a open source, Ruby's open source. You've got Hadoop which is open source. You've got data tools. You've got visualization tools. You've got, you know, I don't think like react native was was around at that point. But like now it is like all of these mobile development frameworks. Like with 1000 JavaScript frameworks. Yeah, exactly. So you can pick four of them and use them in some strange concert. The proliferation of open source tools needless to say has its own. And then had a couple, there were a couple secondary effects from that. One is that simply there's so many more projects, so many more people working on it. That just leads to lots of people now using GitHub period. But also it becomes your resume, your badge of honor. As a software developer, people want to know not where have you worked or what have you worked on there. They want to know what open source projects have you worked on. And can I see your code? Can I see which contributions you have made that have actually become part of the accepted by the community as core part of the project? What's your impact? And that's way more traceable and open in a way just like LinkedIn and Facebook in the business world and the social world. Then it ever used to be. Yeah. And of course people don't always have time to be contributing to open source projects when they have day jobs. However, plenty of people start little side projects and weekend things where they're just the only one contributing to a repo. They put it up as a utility for other people to use. It's public. It's searchable. And that can be a resume piece where you show off the quality of your code and what small problem you were passionate about solving. And that's a thing that I think is looked for much more by prospective hiring managers than open source contributions for a lot of employees. Yeah. Well, certainly both are. And it depends what you're hiring for. Yeah. But totally changed the way that software development recruiting was done. Completely. None of that visibility existed at all. I mean, it was like literally it was like LinkedIn, which you know, we'll get to with Microsoft and the acquisitions in a little bit. But it was like LinkedIn and your resume before then, you know, it was people didn't want to share their resumes. And it was weird like it was this super private thing. It was like your bank account number. But after LinkedIn, of course you wanted to share your resume and it became the basis by which all recruiting happened. Very similar dynamic in the software world. So they realize they come up with this brilliant premium model. They realize they need to start making money to keep the lights on. They quickly hack on the site. April 2008, they launch paid private repositories. So again, if you want to make it open to the public, which by nature is anything open source or been like you're saying your own side projects that you're just putting out there for anyone to see your code. It's free, but the minute you want to make it private, you have to pay get hub, you have to pay GitHub a certain amount per month to cover that. And once again, it works like wildfire. Shortly thereafter that we had alluded to power set where Tom was working. So Chris and PJ quit there, folded their earlier startup, went full time on GitHub as co founders. Tom, the third co founder who originally had the idea, he's still working at power set July 2008. Power set gets acquired by Microsoft for $100 million. And Microsoft offers Tom $300,000 retention bonus if he signs on to stay for I believe three years. And tempting, tempting, but this premium thing is really kind of taking off to get out. So Tom makes the correct decision does not go work for Microsoft leaves power set Microsoft and goes full time on GitHub. And so the three of them are full time Thomas CEO, but it's completely flat. They're all equal and working working on the company. And so just like in the last scene episode, which we also covered and is also very reminiscent of developer tools and tools for teams and collaborations. They decide that they're going to bootstrap and they're making enough money. They don't need to raise venture capital. And the system that they come up with is they devise, I wasn't able to find exactly what it is, but an elaborate formula based on how much money they made on the site that month, how much they pay themselves. And like they have to hit certain goals and they're basically cliffs and then they increase their salaries via certain amount. And they still haven't hired anybody. It's just the three of them. And that that goes on. They also decide though that they since they have started the company, they need a logo. Where should they look for a logo? Stock photos. This is this might be that there are a bunch of good stories in here. I think this might be the best story of the episode. So they had heard, I'm actually it's it's unclear me if their friends with the founders of Twitter. They must have been it was actually still a much smaller place software development and the startup ecosystem in San Francisco at that time. And if they were both sort of active contributors in the Ruby community, probably, probably, probably, which is how they knew each other. And so it turns out that the Twitter logo, the bird, not the bird you see today, but the original version of the bird was actually an I stock photo by the British graphic designer designer Simon Oxley, who is just very prolific and produced tons of stuff, tons of stock art on I stock photo. The Twitter founders saw that on there and like that's the bird we want and they paid $15 for the original bird and that became the Twitter logo. Yeah, but David that one couldn't be appropriately described by circles. Do you ever see that? So the the quick aside, the newest and really nice, really simple, really beautiful mark for Twitter is a, you know, aspirational sort of upward turn bird and the when the day they announced it made a bunch of hey about it. They were illustrating how it was sort of perfect in all these ways. And it's because you could sort of use a bunch of circles, use the edges of circles to create the exact shape of the bird. And then it became this big thing that like people would just go and create any logo by using circles because given an infinite amount of in a fit and amount of circles and circles of any size, you can kind of like make any shape you want. So it's kind of this like people at first were like, oh my god, it's all made from circles and then everyone sort of looked at each other like, wait, wait, wait, wait. It was also like really disorienting because you know that the current Twitter bird logo faces right. The original one faces less disorienting and I don't think there's a wordmark anymore. So there's it's like difficult to write Twitter properly. Like if you go look at Twitter, it doesn't say Twitter and any logo text anywhere on the site. This is not the Twitter episode total aside, we will revisit that in a Twitter episode someday. But is helpful background the GitHub founders they like great work for Twitter. We're going to go on I stock photo. We're going to look at this dude Simon's work. He's got a ton of stuff on there. We'll find something great for us. Animal like birds sure what should we find what is it was he had the scrolling through. Oh, how about an unholy marriage of a cat and an octopus. Perfect nailed it. Done. And I think it was not called octokat yet. No, it also only had five tentacles. It's very confusing. It's very very confusing. No, it was not yet called octokat. I did look up, but I forget what it was originally called. I think it was octopus. Yes, I think it was. Yes, I think it was octopus or something like that. And so they bought it. I don't know if this is correct, but what I read was for $3 I think that they bought it. They really got a deal versus the $15 the Twitter paid. Yeah, it's like just about half the cost of one month of registration on their site. Totally. It was a bootstrap startup. So they buy the octopus, rename it the octokat. And that is how the octokat became the logo and then very quickly official mascot adopted worldwide by GitHubbers and GitHub fans around the world. And with that, really on the back of the octokat growth continues to come very quickly. So about a year we're in early 2009 now. That's a causation correlation. Absolutely. I think it was no doubt causation. Early 2009 they announced that they now have over 50,000 public repositories. So these are projects, including open source and personal projects that are open to the public that have been created on GitHub. They never they never talk about how many private repositories they have. July 2009 they announced they have over a hundred thousand registered users. So a hundred thousand developers, which is a lot like the there are not that many developers in America. So they already have well around the world or more, but they have pretty high penetration pretty quickly. They have 90,000 unique public repositories. By the next year they have a million public repositories. 2011, two million public repositories. And when you look at these numbers are a little hard to comprehend here on the radio. But when you look at charts, I mean either by repo or by user growth, it is just at any scale that you look at it, just completely geometric or actually I don't have geometric exponential, logmatic, whatever. It is up as it goes to the right. It is getting upper as it goes writer. Yes, exactly. By the middle of 2011, they have now GitHub is now surpassed so we're three years into the company. It is now surpassed source forage and Google code as the number one place where projects where open source and any personal public projects are hosted on the internet. So that was a major milestone for the company. Then the next year, so they have been bootstrapping the whole time, profitable the whole way and making money and very nice salaries by we would assume by the formula that the three founders devised. July 2012, in recent Horowitz, comes in and invests $100 million in the company. The largest check that they've ever written and by all calculations that anybody can even think to do going back as much history as possible. The largest quote-unquote series A ever raised in history. It's got to be. Now, it wasn't really a series A because the company existed. They had a hundred employees. It had just been bootstrapped for a long time. But it was their first round of funding. It was at a $750 million valuation. Incredibly impressive. From what David and I understand from some primary source research, a very, very competitive round where in recent Horowitz just decided, yeah, we're going to do this. Nobody else is going to do this. It's just going to be us. It was a great company, obviously, a great round to do. Obviously, Andrews did great in the investment, but also not super clear that it warranted that much. They had grown so much as we alluded to. I wish I had in my old term paper from GSB. I had the number of software developers in America. They were approaching 100% penetration. It was unclear how much more GitHub could grow. David, if your entire fun thesis is that software is eating the world, you could imagine there's probably going to be a lot more software developers. One would imagine and one would be correct. January 2013, six months after they raised the series A, they announced that they have three million users and five million repositories. Again, you're wondering about how much headroom is there in the market. By the end of 2013, they have 10 million repositories. Doubling the number of users or doubling the number of projects hosted on the site publicly, not to mention the private ones, and things are going great. Unfortunately, 2014 was not the best year for the company. I pulled up your term paper and looked at it. At the end of 2012, GitHub had almost 2.08 million members, compared with the total professional software developer population of the United States of only 1.3 million. They had over 100% of the United States software developer population. Presumably, it was internationally. Half a million from the US and a ton of international leaders. Crazy. Crazy. How much bigger can it get? So, as we were living to 2014, was not the best year for the company. Tom Preston-Warner, who we had talked about, who originally had the idea for GitHub and was the first CEO in a sort of bizarre series of events that's still unclear exactly what happened. He and his wife, who did not work at the company, were accused of harassment at the company, led to an internal investigation, and ultimately in Tom leaving the company. So, since 2014, he's still a founder, but has not been part of the company. And David and I don't profess to know anything about what goes on at the company, or by all accounts, it's still kind of unclear what happened there. But you can kind of read between the lines on super young founding team. Company growing incredibly fast. A lot of very unorthodox management principles. So, if you were to represent a couple of people you know where to start? What went down there but the internal investigation did reveal? I believe it revealed, according to the internal investigation, not specifically harassment, but lots of signs of laps in judgment judgment. Yeah. Anyway, as we've said multiple times on the show, we're not super equipped to prosecute one way or another and this is a particularly tough-to-parse case. But anyway, we're results in Tom leaving the company and Chris Wonstruff, the co-founder who walked into the bar, becoming the CEO, and he would remain the CEO until yesterday. But we will continue on that. The company still keeps growing. In 2015, Google just gives up and Google shuts down Google code, says, just go to get help. It reminds me of Google video, except they didn't acquire in this case. Yes, they did not. Microsoft did. Could you imagine if Microsoft had acquired YouTube, that would be a what would it have another wise? Anyway. A big video wouldn't be flourishing so it just doesn't have the same ring to it. We love Microsoft, but we really do. July 2015, things are back on track going really well. The company raises another $250 million led by Sequoia at a $2 billion valuation and they announced that they have 10 million users. It's important to note this is not... We have covered times on this show before, where a company is cashflow positive or profitable or the could-be profitable at any moment scenario and they're raising extra cash just to double down on growth or just to have cash reserves in the bank for competition or to go to an IPO or for whatever reason. This is not the case. This is we are not running a profitable business. We're generating nice revenues and the adoption is crazy and the stickiness is huge. But we are... We need this capital in order to continue to operate the business. Well, and I think it's also a fair question to ask. Certainly the any market size estimate of the number of software developers in the US or in the world in 2011-2012 would have massively underestimated the growth. Certainly. That said, I have a GitHub account. I have contributed to do a few projects. I would in no way consider myself as is obvious by this episode a software developer. So there is very much a question of like how much of... I'm sending you a poor request tonight. You just wait. Oh, no, I'm scared. No, I'm real scared. So there is some question in there. But yes, as Ben as you referred to, you know, over the next few years, again, the company continues to grow very nicely. But end of last summer, August 2017, they make a curious announcement. They announce that they have passed the $200 million dollar annual revenue run, right? Which is impressive. But relative to being valued two years before at $2 billion it is lower than you would expect. And the punch of that announcement comes from the fact that 110 million of that was from their business line. Basically, hey, we sell to individuals and we sell to businesses, kind of like Dropbox in the episode that we covered there. And our business division or enterprise division has sort of outpaced the consumer adoption. So before we were talking about, hey, I just want to make this private repo versus, okay, my company has adopted GitHub as the way we develop software. And so I think it was in part to tout, hey, we actually have a real sort of enterprise beat it be business here. And that's all ARR. So, you know, it's it's not just one off revenue. Yep, recurring subscription revenue. Which is great. The other part of the announcement, though, is that Chris is going to be stepping down as CEO. And they're going to be running a CEO search in the company to bring in a new, you know, experienced, nothing, Chris has an experience to this point, but a new more experienced CEO to run and lead the company. An action jack, if you will. Indeed, indeed. And then that leads to yesterday, well, really, to over the weekend when the rumors started swirling. But then the announcement yesterday, which was that they had found the CEO, Nat Friedman, who had been the founder of Xamarin, a developer platform, mobile developer platform, right? Clip cross platform, mobile development that Microsoft had acquired a few years ago. He's going to be leaving the Xamarin division with him Microsoft to run GitHub. And concurrently, Microsoft is buying the company. Oh, yeah. And there's another piece of the announcement too. Yeah. Oh, yeah. Yeah. We're getting this guy as CEO. Also, he's currently employed. And he's already configured and ever since David än a giờ old voice twitch the rumors, they've been working so hard so been working so hard for the amount of development that he's been employed. And tech companies has gotten many jobs,árias companies that have been working so hard for the whole thing. They're on a different level. They've become an organization. They know investors and the GitHub board and the GitHub management, you know, entertaining the sale of the company, hiring investment bankers, I believe Morgan Stanley in this case to help make it happen, to get the best price, to looking around for counter parties, and then when the transaction, in thinking about how the transaction was gonna get done, I'm sure Microsoft thought, gosh, you know, the only way that this is going to succeed is if we really have the right person here at the helm, and then a sort of process with the former Xamarin CEO to make that happen, but really interestingly leading with the leadership announcement in the press release, because they sort of anticipated, people are gonna freak out about this, and they have to have a beloved open source community, technology leader at the helm of this thing, in order to give us a shot. Yep, when this gets to, we alluded to this earlier in the episode, but GitHub is really the outcome of the rise of the open source community, and everything that's done to transform software development, and huge swats of the enterprise over the last decade plus, but the historical enemy of that mortal enemy, sworn, sworn enemy has been Microsoft, and it's just such a funny testament to how much the world has changed now, that that's not Microsoft, and now Microsoft is buying GitHub. Yeah, so, story time from me being at Microsoft, in one of my first few days as an intern, I was specifically warned not to look at anything, actually first it was not to look at any patents, then it was do not look at any source code that has the GPLV3 license. It's sort of the most strict crazy license where you can get in the most trouble if you are a company like Microsoft, and the threat, and I, you know, GPL license being the new public license. This is the core of legally what it means to be open source software. And there's other ones, so it's the GPLV2, there's the MIT license, but and caveat I'm not a lawyer, I haven't quite looked into this, but the thing always going around, whenever you talk to people about this at Microsoft was the fear that if we used a bit of code that was GPLV3 licensed in our software, then we could be forced to open source the whole thing. Wow, like all of Windows, all of office. And it was sort of unclear exactly what all of would be, but LCA, legal and compliance affairs, or something like that, made that very clear. And so, and I think is this part of the whole philosophy, because there's so much also like in open source and all of technology of the 60s counterculture, you know, element embedded. And is this part of the whole copy left idea? So there's copy right. I'm not sure. And then there's the idea of copy left, which is part of the open source software movement, which is not only is what you're making copy, you know, the opposite of copy righted, it's that you have the obligation to contribute back, to contribute back to keep open and anything else you use in conjunction with it to open as well. Yeah, and so even one step further, I remember at one point I had GitHub open during my internship and gotten a little trouble. And it was, it's kind of crazy. I mean, it was, it was. Repromanded by Microsoft for you. Yeah, you haven't GitHub open. Only eight years ago, eight years ago, something like that. I got in trouble with Microsoft for having GitHub open. And like it seems awesome. Absolutely insane to say. But and, and, you know, even seems insane like two years later to say, because that was sort of the end of an era toward my end of my end at Microsoft. There was a group starting MS Open Tech that was a partnership between Microsoft is like a sort of Microsoft have spin out. And then slowly the dramatic adoption of open source software in the company. So being able to do Linux on Azure and. And to the point where Microsoft of course, we, we really, in the best interests of everybody including ourselves glossed over a lot of the history of Virgin control software and software configuration management. But Microsoft has a massive historical product that they've sold to me a lot of money in this base called team foundation server. And that was based on an old centralized version of source control management. But to the point where in 2013, they actually added Git support to TFS. Yep, and even today they have another thing that is currently operating that, you know, many people outside of ANS, inside the company are sort of wondering about called visual studio team services. They cut, they shut down codeplex about a year ago and, or maybe six months ago. And, you know, the company has this incredible developer division or group of people that produce software to enable developers throughout the world. And a big part of that is things that looked like GitHub in different ways over the years. And so historically, they've competed with it. They're currently sort of competing with it. There's definitely a, you know, it's not like Microsoft hasn't thought about this problem. Yeah, well, it'll be, what will be interesting. Well, flash forward here to grading. I don't even know how we're gonna put a grade on this, but given it happened yesterday. But will Microsoft keep those? Well, they go all in on GitHub. Like what happens to the, quote unquote, Google video version of everything, you know, that's as opposed to the YouTube. Yeah, so the stated plan is keep it and it serves a different purpose and it's for different customers, blah, blah. You know, we, David and I reached out to sort of several different birdies in preparation of this episode. And one source in the company said that they're, they felt like it's kind of only a matter of time until some executive gets upset and looks and says, how can we have two of these things? And then you have another Skype link merger. Okay. This is a different Microsoft. I don't think that will happen. I think this will look a lot more like LinkedIn, but you know, LinkedIn was a business that was doing really great on its own and didn't compete with any internal Microsoft products. So there's, that one's harder to screw up. Yeah, yeah. Well, on that note, should we move into acquisition category? We should. We should. I invented a new one for this because. No. Innovation. I can't play my role. Are you going to open source your invention? It depends is the, is, is our structure following a copy left license? Absolutely. I'm going to contribute back to our shared Google doc. So I initially, so for new listeners of the show, we have acquisition category, which is people, technology, product, business line asset. We recently, and somehow only recently added consolidation or other, which is the part where that gives David and I license to do whatever we want because we're the hosts. I initially said product and not business line because if you look back at the, that stat of $200 million in revenue, they, I don't believe we're profitable. If you take another stare at that from the previous year, the run rate in 2016 was that they did $140 million of revenue and generate an $88 million loss. I don't think they had reversed that in the, in the next year, probably not in the next two years either. But they could be closer. As is, if, if it was a $200 million revenue business, it would be a 38x revenue multiple purchase. For a probably unprofitable business. So I shied away from saying, from saying business line. But as I thought about it more, I think product is right because they're going to sell this product through their sales channels to additional enterprise customers because Satin Adela said that one of the stated reasons is to accelerate the adoption of GitHub and the enterprise. And they believe that they can do that. I'm sure they can. The best or one of the best sales forces in the world. But I think there's another thing here that's sort of ecosystem. And that's the. You're just saying Microsoft was missing out on this ecosystem because, and particularly the developer ecosystem, because Windows isn't important anymore. And that's a ridiculous hyperbole. Statement Windows is very important. But without the growing consumer base with the sort of enterprise shift to be more open to other things, they've sort of lost the ability to coerce developers by just saying everybody's own Windows, I'm pretty sure you're going to develop for Windows. So it's a way to sort of get the ecosystem of developers to sort of continue to be a friend of Microsoft. And yeah, so this is, didn't, so Bentompsons take on this was similar to this, right? Yeah, he just started having the leverage to be able to, yep. Yep, Bentompson of course of Stratackery, which are great admirers of here on acquired. Yeah, it's okay, interesting. I can buy that. It's like the equivalent of like strategic reasons I'm doing that here, quotes here. Yeah, yeah. Yeah. Yeah, okay, so I had product. I went through the same line of thinking about like, business line, like LinkedIn, business line. I don't remember what we said LinkedIn was, but I don't know how we wouldn't have called it a business line. But then you read the press release and it's like, you know, Nafri Min, founder of Xamarin, will report to Microsoft's cloud and AI division chief, Scott Guthrie, it's within a business line. Like, yeah, of course, like this makes sense as a product. But I see what you're saying, like, yes, it's a product, but they didn't buy this for the product. They bought it for the strategic place they GitHub has in the developer ecosystem. And particularly as the ecosystem of software developers and what a software developer is, continues to grow and expand, you know, in the coming years. Yeah, and another way to put it is they bought a customer base. Mm-hmm. And obviously they're going to sell this product to additional customer base, but this customer base is super sticky to this product and there's tremendous network effects within this product. And so, you know, I think they bought a customer base and they bought that customer base for years to come. It almost recalls another famous saying within Microsoft from one particular man who's no longer at Microsoft, who we also did an episode on. Developers, developers, developers, developers, developers, developers, developers. You've honed that well. I've never done it before. Oh, wow. You're a natural. So it only took us how many episodes to do that live on the air? I think someday in the distant future when Saty Nadella is ready to retire, I think we've got a good candidate for next Microsoft. See, you're on a quiet. A return to the honey pouring developers lifestyle. We got a bomber on at some point. We'll redo the clippers and have them on. Yes. We definitely have to have bomber on for the clippers, not for anything. For what is worth, I mean, I'm a huge fan of post-Microsoft bomber. I think he's just huge fan. Huge fan. USAFacts is an awesome project. Yeah. He's teaching at Stanford GSB. I don't know if he's still as, but he was for a while. I can't knock that. Okay, what would have happened otherwise? I think the specific question, it's clear. I mean, yeah, we joke about it a little bit on, you know, in the history of facts, but like when an announcement comes out, like we just cross 200 million in revenue and we're starting to see your search. Like you're definitely looking, you're going to be entertaining acquisition offers. Right. So I think the question is who else could was in the mix for buying this year? And every listener or lots of listeners, I'm sure you're also thinking Google, like Google's, Google has to have reports are that they didn't formally, but informally sort of entertain. Does this make sense for us? And Google was one of the main competitors of GitHub, of course, with Google code. And they just waved the white flag three years ago and said, you won. We're done. Yeah, I think so going back to the point from Stratekery, Ben Thompson had a really interesting point that is that if someone like Google had bought GitHub, there would be enormous temptation to leverage it to funnel developers at your product. And the great thing about GitHub is that it's Switzerland. Like it works for all these things. It gets to be a horizontal. And I think Ben is a little bit insulting Microsoft and saying, they don't have a platform to funnel these developers to. And then by product, you mean GCE, Google Cloud Engine? Google Cloud Engine, Android. I don't, probably not Chrome or Chromebook developers. But there's more thriving developer ecosystems such that if they bought it, there's an open question of do they prioritize their own platforms on that and use this horizontal thing to feed the vertical? Certainly at least Google Cloud Engine. I mean, they're locked in a war with AWS, trying everything they can to get market share. Like if you've got all the developers in the world, pretty much more than 100% of the developers in the world, if you include me on GitHub as their primary user interface for their work, you could probably think of some bundling strategy. Yeah, and I was wondering is Microsoft going to do that too with Azure? Like is there going to be some like ease of deployment to Azure? You can deploy to anywhere, but like we made this extra easy button. I don't know. That's interesting. This isn't quite what happened. What would have happened otherwise? But I asked another super sharp CTO friend to for his thoughts. And he mentioned that it's great for consumers or for developers, Microsoft's amazing at security and scale. But they could try to change Git upstream to add in enterprise features so that it's Git and then they're far from GitHub. Yeah, so the open source project of Git. Exactly. Maybe more suitable for the customers that Microsoft has in their sort of sales channel, but GitHub isn't a perfect fit for right now. And after digging into it with him a little bit, Git uses the GPLV2 license, which is copy left. And so if Microsoft decided to change anything in Git specifically for GitHub without going to sort of get as a broad community and getting it approved by Git everywhere regardless of GitHub, then they would have to open source whatever changes they made to their fork of Git used in GitHub to improve the enterprise functionality. So I think what Microsoft may do is try and get that support added to GitHub and then it would come downstream to them. I'm sorry, to get, come downstream to them for GitHub. And then I don't know how this works, but maybe have sort of more leverage and lobbying power in doing that to make it more of a product that they can push through their channel, but I don't know. What does Linus Torvold's that is my question? Yeah, no kidding. No kidding. Hopefully that guy goes on a podcast. Oh, acquired follow up. So another really interesting point and this was on the Motley Fool podcast. Very interesting that this was an all stock acquisition. Very interesting. So Microsoft. It's not like Microsoft couldn't afford the cash. No, Microsoft has 43 billion in net cash right now. And so there's a really strange thing that's going on that's Microsoft has authorization to do 30 billion in buybacks and they're in the middle of a buyback program. The same way that Apple is, which is basically saying, hey, we think our stock is really cheap right now. Like we're going to pick it up on the cheap. We got some cash. We like holding our stock. We it's it's show of good faith for the company for the future. If you think that the whole this dice that they buy the stock and retire it. So they reduce the number of shares outstanding. So everybody's value goes up. Right. They anti delusion. Yeah. So but then they go and they buy a company and all stock, which if you have the option to buy in cash and you think your stock is going to appreciate and you think it's undervalued and you're doing this buyback, it's the opposite. So is it like somehow hedging against their buyback strategy? Is the signal that they actually think their stock is overvalued and so they want to buy in that. It's a good question. The other thing that the host of that show postulated, which I thought was interesting is maybe they're going to do something else with the cash and that maybe there's another acquisition coming that is going to be a require more cash. I don't know if we can read that much into it, but that that was interesting. It seems like Microsoft has so much cash. Yeah. Interesting to speculate why they did this in stock. Yeah. Which we should also say the founders of GitHub are now the largest shareholders in Microsoft other than Bill Gates. Yeah, we were talking about this earlier. So this must mean that Bomber has liquidated a lot of most of the stock at this point. I guess so. So here's the quote from Bloomberg. The each of the three co-founders would have 0.16% of Microsoft from this because the acquisition was about 1% of their market cap. And so that's about 10 times more than Satyana Dela. Wow, 14 times more than President Brad Smith. And among insiders, only co-founder Bill Gates 1.34% would exceed theirs. So I guess the moral of the story is. More than Satyana Dela. Each of the GitHub co-founders now owns more of Microsoft than Satyana Dela. Each of them. Wow. Yep. And so the moral here, I mean, there's a bunch of morals, but late capital raises after bootstrapping. So super low delusion. They did that 100 on 750 raise. And then that 2.5 on two. I mean, you're just taking very little delusion there. So late capital raises after bootstrapping plus few capital raises, plus an all stock acquisition equals you're one of the biggest shareholders of one of the biggest publicly traded companies in the world. It's funny. I actually have the opposite takeaway from that, which is that it's very nice to have a liquid public stock where if you are an employee or a founder of a company, you can actually get liquidity unlike the world in which we live in San Francisco in 2018. So you're saying these guys could probably buy some, like a house? Yeah, a house. Imagine that. Yeah, they could probably buy a shack here in San Francisco. Yeah. Well, cool. Okay, so any other points on that, like what, so let's say they don't get acquired, can this company go public? Like do they end up doing like a Dara situation and bringing in a great state or CEO and try and... It's a little bit like, I am preparation for this episode. I went back, I really listened to our episode on Atlassian, which we haven't talked about as much, but it's been a long day. They compete, well, we're gonna leave it at that. In the Atlassian episode, we were grading their IPO and I was like, this is an A. It was completely uncontroversial. This is exactly what you want. Like the narrative was super clear. And you were like, yeah, but I like the cowboy, like the James Bond style. You're driving off towards a cliff at full speed. You pull the e-brake and turn around. I think that's what would have had to have happened with GitHub here to ultimately go public. I mean, they announced that the CEO was leaving. They've had a history of management turnover. There clearly was a lot of company building work left to be done here at the company to get it to a point where it could go public. Not that it couldn't have been done. It certainly could have been. But this is feeling great outcome. Yeah, so interestingly, maybe if the assertion there is that there's a lot of company building still to be done, maybe there is gonna be a lot more integration with Core Microsoft than LinkedIn had. Like LinkedIn was a standalone company with all the executive team in place. Jeff Feiner's still there, you know, doing great. Yeah, very different situation. Well, I think let's do tech themes and then I wanna hear predictions on what they will do with it. And I've got a couple also. All right. Tech themes. Do you wanna go first on tech themes? Yeah, I think we've mostly talked about them. Microsoft's monumental reversal of philosophy and open source was a big one. A point of integration is a big one. And this is getting back to that that's a tech recomet from earlier. Sort of about ecosystem, Linchpin, Bundling, point of integration. Like Microsoft used to have so much leverage in saying you are a developer, you wanna reach customers, Windows is the way. And then they would monetize by selling Windows licenses and they would monetize by other platform features of Windows and selling off as some Windows and things like that. Without that enduring Linchpin, you have to take other measures to get people. If developers are a core element of your ecosystem, you have to take great measures to get those developers since you don't have the leverage of the platform that they need to develop for anymore. Now the question still remains, how do you monetize that developer? Like why is it important to get that developer if they're not going to build software that will go to 2 billion people that you will make a ton of money off the license of each of those 2 billion people that are using it because seven bucks a month or even the $2,500 a month for 10 seat enterprise license of GitHub is not nearly as good of a business as selling Windows. So if you're not making enough money off the developer directly, how do you end up monetizing the software they create? So that's my sort of big question on the episode. But yeah, that's a total key theme for me is using leverage of having users in order to get developers on your platform to be sticky and come and develop and when you don't have that, doing things like this. Yeah. I think we fit everything. The only thing I just wanna highlight again that I actually hadn't quite thought about until you brought it up earlier in the episode. So I'll bring it up again is the power of freemium models if and only if you'd get the line, exactly right and the incentives aligned between growth and usage and a customization of your target market to your platform with a very easy to understand and aligned incentive way to monetize around that and get up just nailed it, how did the gate might be? I mean, having a hard time thinking off the top of my head. Certainly top three, if not best freemium model ever devised. Cause if you think about it, like ones that are time bounded are weird, ones that are usage bounded are super weird because it's like, oh, it's free to use until like drop-backs, until you hit a certain amount of space. Well, that incentivizes you to just like delete stuff when you get close to your cap. Like it's just really hard to nail this but like I've never seen anything that I can think of that nails it so well. Yeah, my general rule of thumb that we sort of use at PSL when we're coming up with what's the right sort of pricing model for things in terms of thing about pricing and packaging is if it requires network effects, it should be freemium. If it's a utility for you personally, it can be time bound trials and get hubs sort of took the best of both worlds. So to your point of being one of the best of all time, it's like up there with Spotify and placing the line exactly in the right place to convert people. But even Spotify would say like it's still... Like the network effect isn't really important in Spotify. Like cause the little social sidebar thing got them off the ground but it's not that important anymore. That was a distribution hack. Right, right. So this notion of like by me using the free version of Spotify doesn't make Spotify better for everyone else. No, not really. By me using GitHub for free doesn't make it hub better for everyone else. Absolutely. Yeah, absolutely. Cool, that's what I got. Gritty. I just want to approach this. Oh man. Okay, well let's first talk about what we think they're gonna do with it. I'm, there's two things that I think they could do and I'm so hand wavy. Like I'll say there's three. I've mentioned the one about pushing GitHub into the enterprise. So maybe by opening up the Microsoft sales channel and recommending this to all the Microsoft customers that are developing on any part of the Microsoft stack, which of course may compete with Visual VS, VSTS or whatever that is. Whatever it's called. Yeah. You know, you could, you could start turning this into a profitable business line. It doesn't feel like that's gonna make a ton of money. Probably not enough to earn back seven and a half bees. Bees anytime soon. Yeah. I think they will use it to leverage people on the Azure. I don't know how and I don't know how they'll strike the right balance of not being too heavy handed with that. Their version of what Google would have done with Google. Yeah, cloud engine. Yeah. Okay. And my left field one is sense GitHub, it's as many other purposes, but it's sort of linked in for developers. Doing some kind of linked in integration or some kind of hybrid product. Could maybe see that. It's pretty left field though. And I have a feeling they're not going to risk the continued success of the LinkedIn acquisition without integration by starting to integrate them with this acquisition. So I don't know how they'll play together yet. But the clear takeaway for me is it's the clear takeaway is it's not clear yet. How they'll ever make back this purchase price. And maybe Azure. Interesting. I don't have a ton of thoughts other than the thoughts I had were all in that last third bucket that you were talking about on the recruiting side. Because it really has, I mean, GitHub is the main resume for software developers now. And it's kind of like Microsoft is like a VC that has an investment thesis around like what is the modern day resume in particular industries? It does cost. This is actually an interesting thing. This might be what they, nobody said this, but like it costs $30,000 to recruit an engineer. Well, okay. So this is where I was going to go with this. It's the most expensive position to recruit. And there's the least data on LinkedIn about the most valuable position to recruit. Absolutely. That's where I was going with this. So it's actually two things. Yeah. Like that's, there's a big market there. Yeah. However big the market is for GitHub services, which is big for sure. The market for recruiting engineers is at least as big. You know, what's the, so what's the enterprise version of GitHub you're paying effectively $250 per seat per year, right? Yeah. But it costs $30,000 to recruit an engineer who's going to stay at your company for somewhere between one and X years, you know? It's certainly not enough. Way more in the upfront recruitment fees than however much you're going to pay for a GitHub seat for. Yeah. It's kind of interesting. Over the, say they're there for three years, it's $750 versus $30,000. Yeah. That's a big delta. And maybe there's also a piece of like, you know, who just like any other company in technology is locked in talent wars for recruiting engineers, Microsoft. Wow. Did they spend $7.5 billion just to peek under the hood and see what kind of... We've been working hard here to acquire these delusional thoughts are flying around. Yeah. What is the, what's the, presumably the license doesn't let you do this and maybe there's even a GDPR thing around this. Like, imagine your rock star developer at Apple and Microsoft now has, I mean, actually, they have access to these code bases, which I'm sure is completely off limits. But like, what signal could they mine about you? Or even like, you don't even have to go that far. Just like, it's funny. We've been talking about for lots of reasons. Ben and me and, you know, I said wave like perceptions of Microsoft. And certainly, you know, vastly improved since that you had an adult, an adult became CEO. However, still in the valley, like, and I know like, having lived in both worlds and Seattle in the valley, like, I view Microsoft very differently than I think a lot of people in the valley do. Like, to a lot of people here, Microsoft is still Microsoft. But Microsoft now owns LinkedIn, now owns GitHub. They almost certainly are going to brand LinkedIn, GitHub, just so that every single page view of an engineer everywhere, seeing them every day gets a flash of the Microsoft logo as a software crew. Yeah, I mean, they have to. I mean, GitHub, beloved by engineers. Either they have to or that would be like Disney's slapping the Walt Disney castle at the beginning of Star Wars. Either they have to. It's completely off limits and I can't decide which one. Yeah, I don't know either. So David, we're dragging out this episode length because neither of us want to answer the hard question. What would you grade this acquisition? I've been trying to oblique this for like an hour plus at this point. I don't feel good about it. I'll just. No, okay. Yeah, whatever. So I think the question facing us is like, what do we think? Like, you know, fast forward five years? How are we going to like back on this? So the reason I don't feel good about it is because it's so much cash for a money losing thing that doesn't actually have that much revenue. So then it's clearly not a business line that never will be a business line to Microsoft. It's a strategic thing. And the point I was going to make when I was looking at it more as a business line was at what price would I like this deal? Is it a billion dollars? Is it two billion dollars? But if it's a strategic thing and I don't quite understand exactly how it fits in yet, if it's worth too surely, it's worth seven and a half. It's great, great quote. We do need to do a Twitter episode someday. But there's a legend and lore that Facebook tried to buy Twitter for I think something like five hundred million dollars or a billion dollars is publicly reported, whatever it was at some point early in the life cycle. And I believe it was ever Williams after the meeting where they talked prices like, you know, if we're worth a billion dollars, we're worth ten. That's the equivalent. And they were more than that as a matter of fact. Okay, yeah, for me, I, well, what's your grade? I hate this. It's super high variance, but I'm going to go C plus. And hope Satya makes me look like an idiot in a couple of years. Great, great. I actually think the most likely path here, I hope this isn't a cop out, but I don't think so. Is it just land somewhere in between, you know, I mean, like Microsoft's a huge company, lots of divisions, like if this were linked in, like clearly, it's going to be standalone, like, you know, a little bit like, there's some high degree of difficulty here, but Microsoft's like, you know, Satya gets it, like all this stuff, but it's just going to be hard to really pull this off. So I think it probably ends up somewhere in the money middle. I'm going to give it a B money middle. B. Yeah. Yeah. All right. Fair. Carvouts? Carvouts. Mine is from Chris Dixon, great blog post called the IDMAs. I'm sure many of you have already read it. It's been floating around the web, and I'm a little late to the party here, but it is, it's a really great read. It's short. And it's a lot about basically teasing out the, there's a phrase that floats around that's, it's not about the idea. It's about execution and ideas are worthless and blah, blah. And it really teases out, like ideas aren't worthless. We just refer to the idea as like your original two minute pitch, and a company is actually a series of ideas. And execution is really a bunch of ideas. And so to the extent that ideas matter, or to the extent the execution matters, then there's a bunch of ideas along the way that matter. And it's a really great blog post about sort of the things you realize while you're executing reasons to get out into market, ways that you can sort of learn faster to make better decisions and to basically be an informed, continuous idea person as you operate your business. And so I highly recommend that. But mine, I really do that blog post that went around the internet, the inner webs about a week ago, Eugene Wei, former Amazon employee and part of the original team at Hulu, wrote a great blog post called Invisible Asmatoats about his time in Amazon and they're in the relatively early days. I think just after going public days, when they started thinking about the business in terms of what are the ceilings to growth and market size that we're going to bump him to? How do we address those in the product and then how do we start adding more? Really cool, interesting, unique take on thinking about strategy and tech that I hadn't thought about before. I highly recommend if you haven't read it already, which I assume many of you already have. Well worth doing. Cool. Well, that's it, kids. If you aren't subscribed and you want to hear more, you can subscribe from your favorite podcast client. If you feel so inclined, we would love a comment on Apple podcasts. Feel free to share with your friends, tweet. I hear that's doing well. Twitter's back in the S&P 500. Yeah. We're acquired as blowing up on Twitter, by the way. We got like 50 new followers last weekend. You could be that 51st. All right. Thanks, everyone. Have a great night.