So why are VC’s not looking?
WordPress is probably the most underrated and overlooked opportunity in the software world right now. In an age of billion dollar valuations for startups that aren’t turning a profit, it boggles the mind that an entire industry that generates billions of dollars in sales is being ignored by Venture Capital firms.
About the only segment in the WordPress world where venture capital has staked a claim is hosting – an area that requires large capital investments and that has little cash-flow leverage.
Software (plugins), has almost no VC investments – even though the operational and cash-flow leverage available in software is massive (as is normal for successful software companies)!
The lack of attention is obvious when you realize that you can probably buy the top 150 non-Automattic WordPress plugin companies for less than twenty million dollars! The only non-Automattic WordPress company that is worth 100+ Million or so is Envato – a marketplace service based in Australia that specializes in selling low-priced WordPress plugins and other design related products and services.
The Opportunity
Users spend millions of dollars every year on plugins – many of them with features that do not come close to matching their SAAS counterparts.
And many users install SAAS products because they can’t find plugins that meet needs for functionality, quality, ease-of-use and design.
Which means that millions of dollars flow out of the WordPress ecosystem every year – money that users would prefer to spend on WordPress plugins – if only they could find ones that matched the functionality and ease-of-use of those SAAS products!
In other words, many areas of WordPress are crying out for world-class software / plugins. But most plugin companies are simply too under-capitalized to be able to provide what’s needed.
So which areas present the most opportunities?
The basic e-commerce / shopping cart functionality is already being met adequately with WooCommerce and Easy Digital Downloads. But other areas are woefully under-served. These include:
- CRM
- Chat
- Project Management
- Client Areas
- Customer Experience
- Back-end services such as HR and other segments of ERP
and more.
And because there is a massive amount of talent available, a couple of million dollars of investment would go much further than one might expect.
The Risks
There are two big risks in investing in WordPress software:
WordPress.org – anyone that really wants to sell plugins need to have a free version listed on WordPress.org. But, because there is no accountability, any business can wake up and realize that their plugin has been black-listed – which would dry up 90% of leads overnight. Most VCs would throw-up at that kind of risk and I posit that this is likely the biggest reason there is little VC activity in WordPress software.
Open Source – everything you do is open source. So nothing is proprietary – which means that every dime you spend on writing code can be used by your competitors. But, then again, the biggest software acquisition ever was an open-source company – IBM buying Red Hat for BILLIONS!
Wrap Up
Any VCs out there want to take advantage of this opportunity? Or just want to learn more? Then lets talk!
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