GitHub

We’re live on the scene the day following the biggest announcement in the open source software world since well, open source software: Microsoft acquiring GitHub for $7.5B in stock. How did we get here? What does it mean for software developers going forward? And most importantly, why is there a creepy half-cat / half-octopus plastered all over everything? As always, Acquired has the answers. Sponsors: Vanta: https://bit.ly/acquiredvantaServiceNow: https://bit.ly/acquiredservicenow26Legora: https://bit.ly/acquiredlegoraStatsig: https://bit.ly/acquiredstatsig26 More Acquired! Get email updates https://www.acquired.fm/email with hints on next episode and follow-ups from recent episodesJoin the Slack http://acquired.fm/slackSubscribe to ACQ2 https://pod.link/acquiredlpMerch Store https://www.acquired.fm/store! © Copyright 2015-2026 ACQ, LLC Carve Outs: Ben: The Idea Maze http://cdixon.org/2013/08/04/the-idea-maze/ by Chris DixonDavid: Invisible Asymptotes http://www.eugenewei.com/blog/2018/5/21/invisible-asymptotes by Eugene Wei

Speaker names marked ? are inferred from speaking time and the show’s known hosts — they are not voice-verified.

• 0:00David Rosenthal?

  This is definitely my brain is not working right.

• 0:07David Rosenthal?

  It has been a long day.

• 0:20Ben Gilbert?

  Welcome to season two, episode nine of Acquired, the podcast about technology acquisitions and IPOs. I'm Ben Gilbert.

• 0:28David Rosenthal?

  I'm David Rosenthal.

• 0:29Ben Gilbert?

  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.

• 0:38David Rosenthal?

  Ooh, I thought you were going to say the day after Monday, June 4th.

• 0:42Ben Gilbert?

  It is also after Monday, June 4th. And you know, the show is clearly patterning after acquired. It is a San Francisco company and a Seattle company that are joining forces. And 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.

• 1:09David Rosenthal?

  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.

• 1:20Ben Gilbert?

  We did.

• 1:20David Rosenthal?

  And turns out now that that's episode 10. So listeners, you'll have to wait and find out what that could be.

• 1:27Ben Gilbert?

  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 can show there. Love coming in the form of reviews. All right, listeners. Now is a great time to tell you about a longtime friend of the show, Vanta. AI has scrambled the whole security picture. It used to be that you proved that you were secure once a year on audit or a static PDF, then everyone would nod and you're done. But in an AI-first world, that doesn't hold up anymore.

• 2:07David Rosenthal?

  Yep. Your risk surface changes every week now. A vendor turns on an AI feature, or someone writes in a new model without telling IT, and your posture is different than it was last week, let alone at your last audit. Vanta's own research found that around 70% of companies have this quote-unquote "shadow AI" running with no security review at all.

• 2:28Ben Gilbert?

  Right. And that's where Vanta comes in. They're the leading agentic trust platform, meaning they've built the thing that closes the gap. And the way that they close that gap is Vanta Agent. Think of it as a GRC engineer, that's Governance, Risk and Compliance, except that it's software and it doesn't sleep. It finds the issues, drafts the fixes, and cuts the time that you'd spend on vendor assessments in half.

• 2:50David Rosenthal?

  In half, which is exactly why more than 16,000 companies today run on Vanta. Companies like Ramp, Cursor, and Snowflake all stay audit-ready and catch the risks that crop up between audits across every vendor, every AI tool, the whole environment.

• 3:08Ben Gilbert?

  And that's the real value. Trust has to be continuous now, which is why Vanta automates your security, your compliance, and the work to earn and prove trust. We're huge fans of Vanta over here, and literally hundreds of Acquired listeners have become Vanta customers at their companies over the years. So you can get $1,000 off Vanta at vanta.com/acquired. That's V-A-N-T-A dot com slash acquired for $1,000 off. And just tell them that Ben and David sent you. All right. David, are we ready?

• 3:38David Rosenthal?

  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.

• 3:45Ben Gilbert?

  Yep.

• 3:46David Rosenthal?

  But fortunately, I actually had a little bit of a shortcut, which was back when I was a first-year, a young whippersnapper, 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.

• 4:05Ben Gilbert?

  Sounds official.

• 4:07David Rosenthal?

  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.

• 4:23Ben Gilbert?

  If only every episode's prep was that easy.

• 4:26David Rosenthal?

  Unfortunately, it's from back in 2013, but as we will see, not that much has changed with GitHub since 2013.

• 4:35David Rosenthal?

  Okay, so with that fun, 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 Andreessen Horowitz, who led GitHub's Series A and was on the board.

• 4:52Ben Gilbert?

  Unprecedented freaking hundred million dollar first capital in the Series A.

• 4:56David Rosenthal?

  That's a small Series A these days.

• 5:00David Rosenthal?

  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 of things that we wanna, that we wanna 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 gonna know all this already. Probably will know it in greater detail than us and will write in and tell us what we got wrong.

• 5:34Ben Gilbert?

  Yes, as usual with a 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

• 5:50Ben Gilbert?

  a little in the weeds and a little in the details, digestible, understandable, fun, and something you listen to by choice.

• 5:56David Rosenthal?

  Yeah, 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, that we wanna talk about as background. One is the whole idea of how managing software projects work. And that's this, this area of software itself called software configuration management or SCM for, as, for as initials, or as an acronym.

• 6:37David Rosenthal?

  The other area that we wanna 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.

• 6:49David Rosenthal?

  When you're building and managing a software project, a 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 codebase 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.

• 7:19Ben Gilbert?

  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 .backup, it is excellent to be able to use version control and all elements of software configuration management, even for your own private projects.

• 7:37David Rosenthal?

  Even for all our investment banker and former investment banker friends, you've certainly lived through merger model V25

• 7:45Ben Gilbert?

  Final, final.

• 7:46David Rosenthal?

  Underscore 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 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 codebase. And if you were an engineer working on the codebase, you went on that machine or you telaxed into that machine and worked on it.

• 8:24Ben Gilbert?

  Seems simple, why change?

• 8:25David Rosenthal?

  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 the code, 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.

• 8:49Ben Gilbert?

  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 this client server centralized model?

• 9:06David Rosenthal?

  No, Ben, why would you want to do that?

• 9:08Ben Gilbert?

  Hmm, feels like I'm going to spend a lot of time syncing my code base with the centralized server.

• 9:12David Rosenthal?

  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?

• 9:25Ben Gilbert?

  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...

• 9:35David Rosenthal?

  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.

• 10:16David Rosenthal?

  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.

• 10:33Ben Gilbert?

  So BitKeeper was the first decentralized, was it the precursor to Git? Did they develop Git?

• 10:41David Rosenthal?

  No. So BitKeeper, I don't know if it was the first, but it was one of the first or early 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 and a new way to develop software, pioneered, of course, by Linux and Linus Torvalds, 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

• 11:26David Rosenthal?

  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.

• 11:44David Rosenthal?

  They, yeah, exactly. You get what you pay for. And so this creates a huge kerfuffle in the open source community. Of course, as we will get into, people have lots of opinions, and lots of differing 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 was Mercurial, which I believe has less market share now today, but is still around, is actually used by Facebook. So all of Facebook's codebase runs

• 12:25David Rosenthal?

  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, creator of Linux.

• 12:49Ben Gilbert?

  Well, if somebody was gonna do it in a week, it would be him.

• 12:51David Rosenthal?

  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, 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 Mercurial still lives on. And like we said, Facebook uses it, but Git becomes very popular in a very short period of time.

• 13:29Ben Gilbert?

  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 SourceForge with Git loaded onto it?

• 13:44David Rosenthal?

  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, 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, in a nice graphical user interface way. There are, there are what's called forges, which are essentially servers that host code out there. And they're used in the open source community.

• 14:21Ben Gilbert?

  They really should have kept that name.

• 14:23David Rosenthal?

  They really should have. They really should. Git Forge.

• 14:28David Rosenthal?

  And since, so these are companies like, like SourceForge, I think a lot of people will know, Google actually launches its own version of this called

• 14:36Ben Gilbert?

  Google Code.

• 14:37David Rosenthal?

  Yep. And they're the most popular places for, for the code to actually live. But the problem is there, there's not much more to them beyond a place to live and like a, like very standard Wikipedia style webpage 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.

• 15:08David Rosenthal?

  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, 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 and 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?

• 15:46Ben Gilbert?

  Yeah, and that really takes the concept of people arguing on mailing lists and completely decoupled forums that were totally different than where the code itself was maintained and move it into one place together. And one of the big, 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, it was political, people were grabbing on for dear life to have control over their little corner of the fiefdom. And then the mailing lists 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, we've moved on from that time, at least with a lot of the major open source

• 16:31Ben Gilbert?

  projects in a lot of ways.

• 16:33David Rosenthal?

  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.

• 16:49Ben Gilbert?

  All right, listeners. Now is a great time to thank our longtime friend of the show, ServiceNow. If you are running a large enterprise, AI agents are likely spread across every team and deploying them is no longer the hard part.

• 17:03David Rosenthal?

  Yeah. The hard part is knowing what permissions they have, what employees are using them for, or what decisions AI is making. AI security for an enterprise at scale is not a small concern. Like, the risks are real.

• 17:17Ben Gilbert?

  Exactly. And the challenge with AI is governing it, securing it, measuring it, and making sure that it actually delivers value. That is why ServiceNow built the AI control tower.

• 17:27David Rosenthal?

  Yep. AI Control Tower gives enterprises a single place to see, manage, govern, and optimize AI across the entire business. And it works with any AI, not just theirs. Every device on your network, every permission across every system, every AI agent, visible and secure in one place.

• 17:44Ben Gilbert?

  And ServiceNow can do this because they've spent more than 20 years building the operational backbone of the enterprise. The workflows, governance, approvals, security controls, and institutional knowledge that power how work actually gets done across IT, HR, customer service, finance, and security.

• 18:01David Rosenthal?

  ServiceNow already runs more than 100 billion workflows annually and trillions of transactions for more than 85% of the Fortune 500. So when companies need a place to govern AI at enterprise scale, they're building on a platform at the center of how their business already operates.

• 18:17Ben Gilbert?

  And in a future that isn't going to be one AI, it's going to be thousands of AI agents working across every function of the company. But the question is, who's managing them all?

• 18:26David Rosenthal?

  So if you're trying to turn AI ambition into real business outcomes and make it work safely, securely, at scale, go check out servicenow.com/acquired and tell them that Ben and David sent you. So I'm gonna, I'm gonna 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, Tom was a developer working for a company called PowerSet, acquired by Microsoft also, in San Francisco at the time.

• 18:57Ben Gilbert?

  Two-time Microsoft acquiree.

• 18:59David Rosenthal?

  Two-time Microsoft acquiree. In his own words, "I was sitting alone in a booth at Zeke's Sports Bar and Grill on 3rd 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 gonna be filled with, with...

• 19:20Ben Gilbert?

  Just instantly throwing shade on anybody who's like, not a proper nerd.

• 19:24David Rosenthal?

  So many tropes. "Let alone a sports bar in Soma." But back then, Thursday was I-Ken-Haz Ruby Night.

• 19:33Ben Gilbert?

  Wait, like I can has cheeseburger?

• 19:34David Rosenthal?

  Like I can has cheeseburger?

• 19:36Ben Gilbert?

  No way.

• 19:36David Rosenthal?

  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, you know, 2.0 websites. I think Twitter was built in Ruby, right?

• 19:51Ben Gilbert?

  Yeah, Twitter was originally a Rails app that massively, massively didn't scale. And that was why it says-

• 19:58David Rosenthal?

  Bail whale.

• 19:58Ben Gilbert?

  The front end would always fall over. And I think Alex Payne was brought in, this total side tangent, 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.

• 20:11David Rosenthal?

  Yeah, totally. Oh, what a mess. Facebook, originally, of course, being built not even in Ruby, but PHP.

• 20:17Ben Gilbert?

  Yeah. And actually, I think GitHub is still largely Ruby, GitHub itself.

• 20:24David Rosenthal?

  Ah, interesting. Yeah, that would make sense. That would make sense. So it's I can has Ruby night, of course, as Ben alluded to, a reference to the I can has cheeseburger memes.

• 20:35Ben Gilbert?

  Lolcats.

• 20:36David Rosenthal?

  Lolcats, from the Seattle company, I can 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, he orders a beer, and he sits down in a booth. And apparently, right at that time, his, not even friend, acquaintance, Chris Wanstrath 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.

• 21:18Ben Gilbert?

  And the moral here is always be looking for people gesturing to you that could have startup ideas.

• 21:24David Rosenthal?

  In sports bars and so.

• 21:28David Rosenthal?

  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.

• 22:05Ben Gilbert?

  And this is like the-

• 22:05David Rosenthal?

  Literally, hold my beer.

• 22:09Ben Gilbert?

  This is like literally the dream of engineers with like this thing happens 10,000 times more often than it works.

• 22:18David Rosenthal?

  Yes.

• 22:19Ben Gilbert?

  Like, 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 billion, billion, billion dollar plus companies. And this is like, you know, this is the realization of the total home run right here.

• 22:49David Rosenthal?

  And of course, there's no better, you know, customer feedback for your, as a developer, for your idea for a developer tool than other developers who you respect.

• 22:57Ben Gilbert?

  There you go.

• 22:58David Rosenthal?

  There you go. So it was all, it was all magically ordained. So they start working on it on nights and weekends. They both have full-time jobs. Again, 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 hacked together and Chris and PJ start to decide that they're going to start using this, this interface on top of Git within their own startup. And pretty quickly, it works great. And like, everybody's working there is like, yeah, this is awesome.

• 23:34Ben Gilbert?

  You know, the whole be your own first customer thing.

• 23:36David Rosenthal?

  Exactly. Exactly. So they work on it for a few more months. January 2008, a couple more months go by, they launch it and they open up, they 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 that's going on, talk to other people who are working on the project, manage it all from there. It starts spreading like wildfire.

• 24:04Ben Gilbert?

  It's one of these things, it's a lot like sort of Uber when it launched, or Twitter when it launched, where as soon, soon as you, you turn the lights on, there's perfect product market fit.

• 24:13David Rosenthal?

  Perfect. It was so, uh, 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 forge, 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.

• 24:35Ben Gilbert?

  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.

• 24:44David Rosenthal?

  Yeah, totally.

• 24:44Ben Gilbert?

  I mean, like, it's not fully centralized in there again, so there's lots of, like, you know, reasons why it's good, but it's still, it's like a-

• 24:50David Rosenthal?

  This is the, the like, engineering counterpart to the business axiom, that there are two ways to, you know, make money of bundling and unbundling. It's like centralizing and decentralizing.

• 25:00Ben Gilbert?

  Yeah. It is funny. I thought about that a lot with, um, um, so, cloud computing is this, uh, client server model, where if you look back in the eighties, if you look back at like 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. So, we didn't do anything-

• 25:25David Rosenthal?

  Everybody has their own, you know?

• 25:26Ben Gilbert?

  -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, you know, 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, to, you know, powerful PC, back to client server.

• 25:50David Rosenthal?

  Client server. It's a, it's the never-ending TikTok of the technology cycles.

• 25:57Ben Gilbert?

  It is.

• 25:58David Rosenthal?

  So they're worried about hosting all of these centralized, decentralized forges, or this forge that they have now. And they're like, oh crap, we got to build a business model into this ASAP. Because they had launched it and 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 for open source? And then they pulled the license and had to make, tried to make open source projects pay

• 26:39David Rosenthal?

  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?

• 26:55Ben Gilbert?

  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 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.

• 27:19David Rosenthal?

  Totally.

• 27:20Ben Gilbert?

  I think that from a lot of the companies that we've examined on this, this show, I'm, 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, a massive component to, are you going to build a successful business is, 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, like that's exactly that place.

• 27:52David Rosenthal?

  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.

• 28:04Ben Gilbert?

  More concerned about it being poorer than.

• 28:05David Rosenthal?

  Yeah, more, more, more. Exactly. I agree. Please don't judge us harshly. It's been a long day. The, uh, uh, 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.

• 28:26Ben Gilbert?

  And value destructive.

• 28:28David Rosenthal?

  Yes, and value destructive.

• 28:29Ben Gilbert?

  Interestingly, uh, and particularly to foreshadow the Microsoft acquisition, like Microsoft was the one carrying the banner on open source is value destructive. It's a threat to our business model. It's a threat to selling licenses, uh, selling software licenses. It's a threat to every, 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.

• 28:57David Rosenthal?

  Yep. And, and you go from that, again, where it was all centered around operating systems to now you've got programming languages are 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 nowadays, like all of these mobile development frameworks.

• 29:17Ben Gilbert?

  A hundred thousand JavaScripts frameworks that are all open source. So you can pick four of them and use them in some strange concert that proliferation of open source tools, needless to say, has its own.

• 29:30David Rosenthal?

  And that had a couple, there were a couple secondary effects from that. Um, one is that simply there's so many more projects, so many more people working on it. Um, that just leads to lots of people now using GitHub, um, period. But also it becomes your, your sort of your resume, your badge of honor. Uh, as a software developer, people want to know not where have you worked, uh, or what have you worked on there? They want to know what open source projects have you worked on? Can I see your code? Can I see which 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

• 30:15David Rosenthal?

  in the business world and the social world than it ever used to be.

• 30:19Ben Gilbert?

  Yep. 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 your 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.

• 30:50David Rosenthal?

  Yeah, well, certainly both are. And it depends what you're hiring for.

• 30:54Ben Gilbert?

  Yeah, but totally changed the way that software development recruiting was done.

• 30:57David Rosenthal?

  Completely. None of that visibility existed at all. I mean, it was like, literally, it was like LinkedIn, which we'll get to with Microsoft and the acquisitions in a little bit, but it was like LinkedIn in 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.

• 31:26Ben Gilbert?

  Yep.

• 31:28David Rosenthal?

  So they realize, they come up with this brilliant freemium 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 Ben, 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 GitHub, you have to pay GitHub a certain amount per month to cover that. And once again, it works like wildfire.

• 32:04David Rosenthal?

  Shortly thereafter that, we had alluded to PowerSet where Tom was working. So Chris and PJ quit their, 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 PowerSet. July 2008, PowerSet gets acquired by Microsoft for $100 million. And Microsoft offers Tom a $300,000 retention bonus if he signs on to stay for, I believe, three years.

• 32:36Ben Gilbert?

  Hmm.

• 32:37David Rosenthal?

  And

• 32:38Ben Gilbert?

  Tempting.

• 32:39David Rosenthal?

  Tempting, but this freemium thing is really kind of taken off of GitHub. So Tom makes the correct decision, does not go work for Microsoft, leaves PowerSet, Microsoft, and goes full-time on GitHub. And so the three of them are full-time. Tom is CEO, but it's completely flat. They're all equal and working, working on the company. And so just like in the Atlassian 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, and the system that they come up with is they devise, I wasn't able to find exactly

• 33:21David Rosenthal?

  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 by a certain amount. 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?

• 33:48Ben Gilbert?

  Stock photos.

• 33:50David Rosenthal?

  This is, this might be, 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 unclear to me if they're 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.

• 34:10Ben Gilbert?

  And if they were both sort of active contributors in the Ruby community, probably.

• 34:14David Rosenthal?

  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 iStock photo by the British graphic designer, designer Simon Oxley, who is just very prolific and produced tons of stuff, tons of stock art on iStock 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.

• 34:48Ben Gilbert?

  Yeah, but David, that one couldn't be appropriately described by circles. Did 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 hay 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. So the bottom curve of it and all the feathers. 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, infinite amount of circles and circles of any size, you can kind of like make any shape you want.

• 35:33Ben Gilbert?

  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.

• 35:39David Rosenthal?

  It was also like really disorienting because, you know, the, the current Twitter bird logo faces right. But the original one faces left.

• 35:48Ben Gilbert?

  Disorienting. And I don't think there's a word mark anymore. So there's, it's like difficult to write Twitter properly. Like if you go look at Twitter, it doesn't say Twitter in any logo text anywhere on the site.

• 36:00Ben Gilbert?

  This is not the Twitter episode.

• 36:01David Rosenthal?

  Total aside, we will revisit that in a Twitter episode someday. But as helpful background, the GitHub founders, they're like, great. Work for Twitter. We're gonna go on iStock Photo. We're gonna 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, or what should we find? What does he have? They're scrolling through. Oh, how about an unholy marriage of a cat and an octopus?

• 36:28Ben Gilbert?

  Perfect. Nailed it.

• 36:29David Rosenthal?

  Done.

• 36:31Ben Gilbert?

  And I think it was not called Octo Cat yet.

• 36:35David Rosenthal?

  No. It also only had five tentacles.

• 36:38Ben Gilbert?

  It's very confusing.

• 36:39David Rosenthal?

  Very, very confusing. No, it was not yet called Octo Cat. I did look up, but I forget what it was originally called.

• 36:46Ben Gilbert?

  I think it was Octopus.

• 36:48David Rosenthal?

  Yes, I think that was right. 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.

• 36:59Ben Gilbert?

  Yeah.

• 37:00David Rosenthal?

  They really got a deal versus the $15 that Twitter paid.

• 37:03Ben Gilbert?

  Yeah, it's like just about half the cost of one month of registration on their site.

• 37:09David Rosenthal?

  Yeah, totally. You know, it was a bootstrap startup. So they buy the octopus, rename it the Octo Cat, and that is how the Octo Cat became the logo and then, very quickly, official mascot, adopted worldwide by GitHub-ers and GitHub fans around the world. And with that, really on the back of the Octo Cat, growth continues to come very quickly. So about a year, we're in early 2009 now.

• 37:45Ben Gilbert?

  That's a causation correlation.

• 37:47David Rosenthal?

  Absolutely. I think it was no doubt causation.

• 37:53David Rosenthal?

  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 talk about how many private repositories they have. July 2009, they announced they have over 100,000 registered users, so 100,000.

• 38:16David Rosenthal?

  10,000 developers, which is a lot like the there are not that many developers in Americas. They already have well around the world. They're 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, 2 million public repositories.

• 38:38Ben Gilbert?

  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 at any scale that you look at it. Just completely geometric or actually, I don't have a geometric exponential logarithmic, whatever it is.

• 38:56David Rosenthal?

  It's up as it goes to the right.

• 38:58Ben Gilbert?

  It is getting upper as it goes righter.

• 39:01David Rosenthal?

  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 SourceForge and Google Code as the number one place where projects where open source and and any personal public projects are hosted on the Internet. So that was a major, major milestone for the company. Then the next year, so they've they've 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.

• 39:38David Rosenthal?

  July 2012, Andreessen 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.

• 39:58Ben Gilbert?

  Gotta be.

• 39:59David Rosenthal?

  It's gotta be now. It wasn't really a series A because like the company existed. They had 100 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, incredibly impressive.

• 40:15Ben Gilbert?

  Yeah. And from what from what David and I understand from some some primary source research, a very, very competitive round. Where Andreessen Horowitz just decided, yeah, we're going to do this and nobody is gonna, nobody else is going to do this. It's just going to be us.

• 40:31David Rosenthal?

  And and it was.

• 40:34David Rosenthal?

  A great company, obviously very hot, a great round to do. And obviously Andreessen did great in the investment, but also not super clear that it warranted that much. I mean, they had grown so much, as we alluded to, I wish I had in my old, in my old term paper from GSB, I had the number of software developers in America. They were like approaching 100% penetration. So it was unclear like how much more GitHub could grow.

• 41:02Ben Gilbert?

  Well, David, if your entire fund thesis is that software is eating the world, you could imagine there's probably going to be a lot more software developers.

• 41:09David Rosenthal?

  One would imagine, and one would be correct. So January 2013, six months after they raised the Series A, they announced that they have 3 million users and 5 million repositories. And again, you're wondering about how much headroom is there in the market? By the end of 2013, they have 10 million repositories, so 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.

• 41:46Ben Gilbert?

  And let me, I actually, so I pulled up your term paper and looked at it. At the end of 2012, GitHub had almost 2.8 million members compared with the total professional software developer population of the United States of only 1.3 million.

• 42:02David Rosenthal?

  Right, so they had over 100% of the United States software developer population.

• 42:08Ben Gilbert?

  Right, so presumably it was probably what, like, you know, half a million from the US and a ton internationally or something, but crazy.

• 42:15David Rosenthal?

  Crazy. How much bigger can it get? So as we were alluding 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 it's still unclear exactly what happened, he and his wife were, 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 is, he's still a founder, but has not been part of the company.

• 42:55Ben Gilbert?

  Yeah. And, and, and, and you know, David and I don't profess to know anything about what goes on at the company or, and you know, by all accounts, it's, it's still kind of unclear what happened there, but you know, you can kind of read between the lines on, you know, super young founding team, company growing incredibly fast, you know, a lot of very unorthodox sort of management principles.

• 43:22David Rosenthal?

  They adopted the valve management style of a completely flat organization. Nobody reported to anyone else.

• 43:28Ben Gilbert?

  Yeah.

• 43:29David Rosenthal?

  Anyone could work on whatever they wanted.

• 43:30Ben Gilbert?

  Yeah. You could imagine it would be a culture that, that wasn't sort of the tightest run ship. And, you know, that, that I would say we, the, the public never really knows the true story of, of what went, what went down there, but the internal investigation did reveal.

• 43:48David Rosenthal?

  I believe it revealed, according to the internal investigation, not specifically harassment, but lots of signs of lapse in judgment.

• 43:56Ben Gilbert?

  Judgment, yeah.

• 43:58David Rosenthal?

  Anyway, as we've said multiple times on this show, we're not super equipped to prosecute one way or another, and this is a particularly tough to parse case. But anyway, it results in Tom leaving the company and Chris Wanstraff, 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, in 2015, Google just gives up and Google shuts down Google Code, says, just go to GitHub.

• 44:31Ben Gilbert?

  It reminds me of Google Video, except they didn't acquire in this case.

• 44:35David Rosenthal?

  Yes, they did not. Microsoft did. Could you imagine if Microsoft had acquired YouTube? That would be a, what would have happened otherwise?

• 44:46David Rosenthal?

  Anyway.

• 44:46Ben Gilbert?

  Bing video would be flourishing, so.

• 44:50David Rosenthal?

  It just doesn't have the same ring to it. We love Microsoft, but we really do.

• 44:58David Rosenthal?

  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.

• 45:13Ben Gilbert?

  And it's important to note, this is not, we have covered times on this show before

• 45:20Ben Gilbert?

  where a company is cash flow positive, or profitable, or sort of 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.

• 45:40Ben Gilbert?

  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, you know, we need this capital in order to continue to operate the business.

• 45:56David Rosenthal?

  Well, and, you know, I think it's also a fair question to ask.

• 46:01David Rosenthal?

  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.

• 46:12Ben Gilbert?

  Yep.

• 46:12David Rosenthal?

  Certainly. That said, I have a GitHub account. I have contributed to 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?

• 46:28Ben Gilbert?

  I'm sending you a pull request tonight. You just wait.

• 46:31David Rosenthal?

  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 last, end of last summer, August 2017, they make a curious announcement. They announce that they have passed the $200 million annual revenue run rate,

• 47:04David Rosenthal?

  which is impressive, but relative to being valued two years before at $2 billion. It is lower than you would expect.

• 47:14Ben Gilbert?

  And the punch of that announcement comes from the fact that 110 million of that was from their, the business line, basically, hey, we sell to individuals and we sell to businesses, kind of like Dropbox and the episode that we covered there. And our, our, you know, business division or enterprise division has sort of outpaced the, the consumer adoption. So before, when 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 B2B business here. And that's all ARR. So, you know, it's, it's, it's not just one-off revenue.

• 47:58David Rosenthal?

  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, not that Chris isn't experienced to this point, but a new, more experienced CEO to run and lead the company.

• 48:19Ben Gilbert?

  An action jack, if you will.

• 48:23David Rosenthal?

  Indeed, indeed.

• 48:26David Rosenthal?

  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 Zamarin, a developer platform, mobile developer platform, right? Cross-platform mobile development that Microsoft had acquired a few years ago. He's going to be leaving the Zamarin division within Microsoft to run GitHub. And concurrently, Microsoft is buying the company.

• 48:56Ben Gilbert?

  Oh, yeah. And there's another piece of the announcement, too.

• 48:58David Rosenthal?

  Yeah. Oh, yeah.

• 49:00Ben Gilbert?

  Yeah, we're getting this guy as CEO. Also, he's currently employed. Therefore, we're going to get owned by them.

• 49:10David Rosenthal?

  So a curious, a curious case of a CEO search, but an incredible outcome. Seven and a half billion dollars is a lot of money.

• 49:21Ben Gilbert?

  And David and I joke, but it's certainly not how it went down. It absolutely went down from the GitHub investors and the GitHub board and 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 counterparties. And then when the transaction, you know, in thinking about how the transaction was going to 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 ZAMM and CEO to make that happen.

• 50:05Ben Gilbert?

  But really, interestingly, leading with the leadership announcement in the press release, because they sort of anticipated, people are going to 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.

• 50:22David Rosenthal?

  Yep. Well, and 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 that's done to transform software development and, and huge swaths of the enterprise over the last decade plus. But the historical enemy of that, mortal enemy.

• 50:46Ben Gilbert?

  Sworn.

• 50:47David Rosenthal?

  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.

• 50:58Ben Gilbert?

  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, any patents, then it was do not look at any source code that has the GPL V3 license.

• 51:20Ben Gilbert?

  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.

• 51:28David Rosenthal?

  DPL license being the

• 51:31Ben Gilbert?

  GNU.

• 51:32David Rosenthal?

  GNU public license. This is the, the, the core of legally what it means to be open source software.

• 51:38Ben Gilbert?

  And there's other ones. So is GPL V2. There's 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 GPL V3 licensed in our software, then we could be forced to open source the whole thing.

• 52:01David Rosenthal?

  Wow. Like all of Windows, all of Office.

• 52:04Ben Gilbert?

  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.

• 52:14David Rosenthal?

  And I think, is this part of the, the whole philosophy? Cause there's so much also like in open source and, and all of technology of the sixties counterculture, you know, element embedded in it. Is this part of the, the whole copy left idea? So there's copyright.

• 52:30Ben Gilbert?

  I'm not sure.

• 52:31David Rosenthal?

  And then there's the idea of copy left, uh, which was part of the open source software movement, um, which is not only is what you're making copy, you know, the opposite of copyrighted. 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.

• 52:50Ben Gilbert?

  Yeah. And so even one step further, uh, I remember at one point I had GitHub open, uh, during my, my internship and, uh, got in a little trouble. Um, and it was, it's kind of crazy. I mean, it was, it was.

• 53:04David Rosenthal?

  Repromented by Microsoft for you.

• 53:06Ben Gilbert?

  Yeah.

• 53:06David Rosenthal?

  Having GitHub open.

• 53:07Ben Gilbert?

  Only eight years ago, eight years ago, something like that.

• 53:12Ben Gilbert?

  I got in trouble at Microsoft for having GitHub open. And like, it seems absolutely insane to say, but and, and, and, you know, it 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 half spin out. And then slowly the, the dramatic adoption of open source software in the company. So being able to do Linux on Azure and.

• 53:42David Rosenthal?

  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 version control software and software configuration management. But Microsoft has a massive historical product that they've sold a lot of money in this space called Team Foundation Server. And that was based on an old centralized version of, of source control management. But to the point where in, in 2013, they actually added Git support to TFS.

• 54:12Ben Gilbert?

  Yep. And even today, they have another thing that is currently operating that, you know, many people outside and inside the company are sort of wondering about called Visual Studio Team Services. They cut, they shut down Codex about a year ago and, or maybe six months ago. And, you know, the, 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.

• 54:53David Rosenthal?

  Yeah. Well, it'll be, what will be interesting. Well, flash forward here to grading. I don't even know how we're going to put a grade on this, but given it happened yesterday, but. Will Microsoft keep those or will they go all in on GitHub? Like, what happens to the quote unquote Google Video version of everything that's as opposed to the YouTube?

• 55:18Ben Gilbert?

  Yeah, so the stated plan is keep it and it serves a different purpose and it's for different customers, blah, blah, blah. 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 felt like it's kind of only a matter of time until some executive gets upset and looks and says, how come we have two of these things? And then you have another Skype link merger. This is a different Microsoft. I don't think that will happen. I think this will look a lot more like LinkedIn, but LinkedIn was a business that was doing really great on its own and didn't compete with any internal Microsoft products. So that one's harder to screw up.

• 56:02David Rosenthal?

  Yep, yep.

• 56:03Ben Gilbert?

  All right, listeners. Now is a great time to talk about a new partner of ours here on Acquired, Logora, the agentic operating system that is redefining how the world's best legal teams work.

• 56:17David Rosenthal?

  Yep, it's sort of obvious that AI is going to completely change the legal industry. I bet most of you listening have dropped a contract into some sort of AI chatbot out there. Logora took that insight and asked the question, what if you really built something with that power from the ground up for the legal industry?

• 56:33Ben Gilbert?

  So the founders did exactly what great founders do, operate with obsessive customer focus. They embedded inside a massive law firm for months. They sat with the lawyers just watching how the work really gets done.

• 56:48David Rosenthal?

  And that's how you get features that customers love, like tabular review, where you drop in a folder of hundreds of contracts and it pulls every key term into a grid a lawyer can actually work with. Logora's bet here is interesting. Since it lets each lawyer handle more complexity, any given person can increase the quality of their work and do higher value work. And this means that the pie can grow even as each individual task takes less time.

• 57:12Ben Gilbert?

  And they recently launched Logora Agent, offering greater intelligence and performance. The agent lets lawyers set an objective, then it can handle the planning and the execution and delivery of the final product. Legal teams get to maintain full control and transparency since they're still involved where judgment is required.

• 57:31David Rosenthal?

  And Legora works where you already work. You can use it within Microsoft Word while redlining or drafting. The early Legora numbers essentially speak for themselves. When they have a head-to-head pilot with their top competitor, they win 70% of the time. Legora now has over 100,000 lawyers on the platform from 1,200 legal teams in 50 countries. And crazily, they went from 1 million to 100 million in ARR in about 18 months.

• 58:01Ben Gilbert?

  Truly insane numbers. And that is the real test. Plenty of things demo well, but the question is whether a busy associate actually reaches for it during crunch time, or whether a partner trusts it before going into a conversation with a major client. If your legal team wants to check it out, whether you're a law firm or you're in-house at a company, you can learn more at legora.com/acquired and just tell them that Ben and David sent you.

• 58:26David Rosenthal?

  Well, should we move into acquisition category?

• 58:29Ben Gilbert?

  We should. We should. I invented a new one for this because

• 58:35David Rosenthal?

  Innovation.

• 58:36Ben Gilbert?

  I can't play by the rules.

• 58:37David Rosenthal?

  Are you going to open source your invention?

• 58:39Ben Gilbert?

  It depends. Is the, is, is our structure following a copyleft license?

• 58:47David Rosenthal?

  Absolutely.

• 58:48Ben Gilbert?

  I'm going to contribute it 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 are 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 were 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 generated

• 59:32Ben Gilbert?

  an $88 million loss. I don't think they had reversed that in the, in the next year, probably not 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,

• 1:00:00Ben Gilbert?

  I think product is right because they're gonna, they're going to sell this product through their sale, sales channels to additional enterprise customers because Satya Nadella said that one of the stated reasons is to accelerate the adoption of GitHub in the enterprise and they believe that they can do that. I'm sure they can. They have 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 that

• 1:00:27David Rosenthal?

  Interesting.

• 1:00:27Ben Gilbert?

  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 on Windows. I'm pretty sure you're going to develop for Windows. So it's a way, it's a way to sort of get the ecosystem of developers to sort of continue to be a friend of Microsoft.

• 1:01:02David Rosenthal?

  Yeah. So this is, didn't, so Ben Thompson's take on this was similar to this, right?

• 1:01:07Ben Gilbert?

  Yeah. He described as having the leverage to be able to, yep.

• 1:01:10David Rosenthal?

  Yep. Ben Thompson, of course, of Strategery, which we're great admirers of here, here on Acquired.

• 1:01:18David Rosenthal?

  Yeah, it's okay. Interesting. I can buy that. It's like the equivalent of like strategic reasons. I'm doing that air quotes here.

• 1:01:27Ben Gilbert?

  Yeah.

• 1:01:28David Rosenthal?

  Yeah.

• 1:01:28Ben Gilbert?

  Yeah.

• 1:01:30David Rosenthal?

  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'm, 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, Nat Freeman, founder of Xamren, 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 that GitHub has in the developer ecosystem and particularly as the ecosystem of software

• 1:02:12David Rosenthal?

  developers and what a software developer is continues to grow and expand, you know, in the coming years.

• 1:02:19Ben Gilbert?

  Yeah. And another way to put it is they bought a customer base.

• 1:02:23David Rosenthal?

  Hmm.

• 1:02:23Ben Gilbert?

  And, 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.

• 1:02:41David Rosenthal?

  It almost recalls a, another famous saying within Microsoft or from one particular man who's no longer at Microsoft, who we also did an episode on.

• 1:02:51Ben Gilbert?

  Developers, developers, developers, developers, developers, developers, developers.

• 1:02:57David Rosenthal?

  Uh, you've honed that as well.

• 1:03:01Ben Gilbert?

  I've never done it before.

• 1:03:02David Rosenthal?

  Oh, wow.

• 1:03:05David Rosenthal?

  You're a natural.

• 1:03:05Ben Gilbert?

  Oh, it only took us how many episodes to, to do that live on the air?

• 1:03:09David Rosenthal?

  I think when, someday in the distant future, when Satya Nadella is ready to retire, I think we, we've got a good candidate for next Microsoft CEO. You're on a choir.

• 1:03:20Ben Gilbert?

  A return to the honey pouring developers' lifestyle. We can have Ballmer on at some point. We'll redo the Clippers and have him on.

• 1:03:27David Rosenthal?

  Yes, we definitely have to have Ballmer on for the Clippers. Not for anything.

• 1:03:32Ben Gilbert?

  For, for what it's worth, I'm a, I'm a huge fan of post-Microsoft Ballmer. I think he's just killing it. USA FAX is an awesome project.

• 1:03:40David Rosenthal?

  He's teaching at Stanford GSB. I don't know if he still is, but he was for a while. Can't knock that. Okay. What would have happened otherwise? I think the specific question, it's, it's clear. I mean, we, yeah, we joked about it a little bit on, you know, in the history of facts, but like, when an announcement comes out, like, uh, we just crossed 200 million in revenue and we're starting a CEO search. Like, you're definitely looking, you know, you're going to be entertaining acquisition offers.

• 1:04:04Ben Gilbert?

  Right.

• 1:04:06David Rosenthal?

  So I think the question is who else could, was in the mix for buying this here?

• 1:04:11Ben Gilbert?

  And every listener, or lots of listeners, I'm sure you're also thinking, Google, like Google's, Google has to have, have, um, reports are that they didn't formally, but informally sort of entertain. Does this make sense for us?

• 1:04:25David Rosenthal?

  And, and Google was one of the main competitors of GitHub, of course, with Google Code. And they just waved the white flag, you know, three years ago and said, you won. We're, we're done.

• 1:04:36Ben Gilbert?

  Yeah, I think so. Going back to the point from Strategi, 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 like, they don't have a platform to funnel these developers to.

• 1:05:08David Rosenthal?

  And then by product, you mean GCE, Google Cloud Engine?

• 1:05:12Ben Gilbert?

  Google Cloud Engine, Android, probably not Chrome or Chromebook developers. But you know, there's more sort of 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?

• 1:05:33David Rosenthal?

  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, you know, pretty much more than 100% of the developers in the world, if you include me, on GitHub as like their primary user interface for their work, you could probably think of some bundling strategy.

• 1:05:54Ben Gilbert?

  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.

• 1:06:07David Rosenthal?

  Yeah, it's interesting.

• 1:06:08Ben Gilbert?

  This isn't quite what happened, what would have happened otherwise, but I asked another super sharp CTO friend for his thoughts. And he mentioned that it's great for consumers or for developers. Microsoft's amazing at security and scale, but.

• 1:06:27Ben Gilbert?

  They could try to change Git upstream to add in enterprise features so that it's Git and then therefore

• 1:06:36David Rosenthal?

  The open source project of Git.

• 1:06:38Ben Gilbert?

  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 them a little bit, Git uses the GPLV2 license, which is copyleft. And so if Microsoft decided to change anything in Git, specifically for GitHub, without going to sort of Git 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

• 1:07:20Ben Gilbert?

  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 Git 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 they can push through their channel. But I don't know.

• 1:07:41David Rosenthal?

  What does Linus Torvalds think of all this is my question.

• 1:07:45Ben Gilbert?

  Yeah, no kidding.

• 1:07:46David Rosenthal?

  No kidding.

• 1:07:46Ben Gilbert?

  Hopefully that guy goes on a podcast.

• 1:07:48David Rosenthal?

  Ah, acquired follow up.

• 1:07:50Ben Gilbert?

  So, so another really interesting point. And this was on the Motley Fool podcast. Very interesting that this was an all stock acquisition.

• 1:08:00David Rosenthal?

  Very interesting.

• 1:08:02Ben Gilbert?

  So Microsoft

• 1:08:03David Rosenthal?

  It's not like Microsoft couldn't afford the cash.

• 1:08:05Ben Gilbert?

  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 show of good faith for the company for the future. If you think that

• 1:08:33David Rosenthal?

  Hold this dice that they buy the stock and retire it. So they reduce the number of shares outstanding. So everybody's value goes up.

• 1:08:39Ben Gilbert?

  Right. They

• 1:08:41David Rosenthal?

  Anti-dilution. Yeah.

• 1:08:43Ben Gilbert?

  So, but then they go and they buy a company in 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?

• 1:08:58David Rosenthal?

  Is the signal that they actually think their stock is overvalued and so they want to buy? It's a good question.

• 1:09:04Ben Gilbert?

  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 and require more cash. I don't know if we can read that much into it, but I thought that was interesting.

• 1:09:22David Rosenthal?

  It just seems like Microsoft has so much cash. Yeah. Interesting to speculate why they did this in stock.

• 1:09:30Ben Gilbert?

  Yeah. Which we should also say, the founders of GitHub are now the largest shareholders in Microsoft other than Bill Gates.

• 1:09:40David Rosenthal?

  Yeah, we were talking about this earlier. So this must mean that Bomber has liquidated a lot of, most of his stock at this point.

• 1:09:46Ben Gilbert?

  I guess so. So here's, here's the, here's the quote from, 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 Satya Nadella.

• 1:10:12David Rosenthal?

  Wow.

• 1:10:12Ben Gilbert?

  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-

• 1:10:24David Rosenthal?

  More than Satya Nadella. Each of the GitHub co-founders now owns more of Microsoft than Satya Nadella.

• 1:10:29Ben Gilbert?

  Each of them.

• 1:10:30David Rosenthal?

  Wow.

• 1:10:31Ben Gilbert?

  Yep. And so the moral here, I mean, there's a bunch of morals, but late capital raises after bootstrapping, so super low dilution, they did that 100 on 750 raise. And then that 2.5 on 2, I mean, you're just taking very little dilution 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.

• 1:11:01David Rosenthal?

  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.

• 1:11:17Ben Gilbert?

  You're saying these guys could probably buy some, like a house?

• 1:11:19David Rosenthal?

  Yeah, a house. Imagine that. Yeah, they could probably buy a shack here in San Francisco.

• 1:11:24Ben Gilbert?

  Yeah.

• 1:11:27David Rosenthal?

  Wow, cool.

• 1:11:28Ben Gilbert?

  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 stable CEO and trying to?

• 1:11:41David Rosenthal?

  It's a little bit like I, in preparation for this episode, I went back, I re-listened to our episode on Atlassian, which we haven't talked about as much, but it's been a long day. They compete. 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's great. 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 know, you, you're driving off, you know, 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.

• 1:12:22David Rosenthal?

  I mean, they announced that the CEO was leaving. They've had a history of, you know, 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, feels like a great outcome.

• 1:12:42Ben Gilbert?

  Yeah. So interestingly, maybe if, if, if the assertion there is that there's a lot of company building still to be done, maybe there is going to be a lot more integration with core Microsoft than LinkedIn had. Like LinkedIn was a standalone company.

• 1:13:00David Rosenthal?

  Was a standalone public company, like all the executive team in place. Jeff Weiner's still there, you know, doing great. Like, yeah, very different situation.

• 1:13:09Ben Gilbert?

  Hmm. Well, I think, let's do tech themes and then I want to hear predictions on what they will do with it. And I've got a couple also.

• 1:13:21David Rosenthal?

  All right.

• 1:13:24David Rosenthal?

  Tech themes. Do you want to go first on tech themes?

• 1:13:26Ben Gilbert?

  Yeah, I think we've mostly talked about them. Microsoft's monumental reversal of philosophy on open source was a big one. Point of integration is a big one, and this is getting back to that that Strategri comment from earlier, sort of about ecosystem, lynchpin, bundling, point of integration. Like, Microsoft used to have so much leverage in saying, you are a developer, you want to 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 Office on Windows and things like that. Without that enduring lynchpin, you know, you have to take other measures to get people. If developers are a core, a core element of your ecosystem, you have to take

• 1:14:11Ben Gilbert?

  great measures to get those, 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 7 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

• 1:14:55Ben Gilbert?

  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, to be sticky and come and develop. And when you don't have that, doing things like this.

• 1:15:14David Rosenthal?

  Yep. I think we've hit everything. The only thing I just want to highlight again that I actually hadn't quite thought about till 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, you know, exactly right and the incentives aligned between growth and usage and a customization of your target market to your platform with a very very easy to understand and aligned incentive way to monetize around that. And GitHub just nailed it out of the gate. Might be, I mean,

• 1:15:58David Rosenthal?

  I'm having a hard time thinking off the top of my head. Certainly, you know, top three, if not best freemium model ever devised.

• 1:16:09David Rosenthal?

  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 Dropbox 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 this, 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.

• 1:16:32Ben Gilbert?

  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 thinking 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.

• 1:16:49Ben Gilbert?

  And GitHub 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 in placing the line exactly in the right place to convert people.

• 1:17:00David Rosenthal?

  But even Spotify, I would say like it's still.

• 1:17:03Ben Gilbert?

  Like the network effect isn't really important in Spotify, like because the little social sidebar thing got them off the ground, but it's not that important anymore.

• 1:17:10David Rosenthal?

  That was a distribution hack.

• 1:17:11Ben Gilbert?

  Right, right. So this notion of like, by me using the free version of Spotify, does it make Spotify better for everyone else? No, not really. By me using GitHub for free, does it make GitHub better for everyone else? Absolutely.

• 1:17:24David Rosenthal?

  Yeah, absolutely.

• 1:17:28David Rosenthal?

  Cool. That's what I got. How do you want to approach this?

• 1:17:33Ben Gilbert?

  Oh, man. Okay, well, let's first talk about what we think they're going to do with it. I'm, I'm, 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.

• 1:18:10David Rosenthal?

  Whatever it's called.

• 1:18:10Ben Gilbert?

  Yeah. You know, you could, you could start turning this into a profitable business line. It doesn't feel like that's going to make a ton of money.

• 1:18:20David Rosenthal?

  Probably not enough to earn back seven and a half bees anytime soon.

• 1:18:24Ben Gilbert?

  Yeah. I think they will use it to leverage people onto 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.

• 1:18:37David Rosenthal?

  Their version of what Google would have done with Google Cloud Engine.

• 1:18:40Ben Gilbert?

  Yeah.

• 1:18:43Ben Gilbert?

  And my left field one is since GitHub, it serves many other purposes, but is sort of

• 1:18:53Ben Gilbert?

  LinkedIn for developers, doing some kind of LinkedIn integration, or some kind of hybrid product,

• 1:19:01Ben Gilbert?

  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, this acquisition. So I don't know how they'll play together yet. But I, the, the clear takeaway for me is it's, it's, the clear takeaway is it's not clear yet how they'll ever make back this, this purchase price. And

• 1:19:33Ben Gilbert?

  maybe Azure.

• 1:19:35David Rosenthal?

  Interesting. I.

• 1:19:37David Rosenthal?

  Yeah, 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, is the main, you know, resume for software developers now. And it's kind of like, it's kind of like Microsoft is like a VC that has an investment thesis around like modern, you know, what is the modern day resume in particular industries?

• 1:20:03Ben Gilbert?

  It does cost, here's this got actually an interesting thing. This might be what they, nobody said this, but like, it costs $30,000 to recruit an engineer.

• 1:20:13David Rosenthal?

  Well, okay, so this is where I was gonna go with this.

• 1:20:15Ben Gilbert?

  It's the most expensive position to recruit.

• 1:20:17David Rosenthal?

  Yep.

• 1:20:17Ben Gilbert?

  And there's the least data on LinkedIn about the most valuable position to recruit.

• 1:20:23David Rosenthal?

  Absolutely. That's where I was going with this. So it's actually like two things. Yeah, like that's, there's a big market there. Like, however big the market is for GitHub services, which is big, for sure. The market for recruiting engineers is at least as big.

• 1:20:44David Rosenthal?

  You know, what's the, so what's enterprise version of GitHub, you're paying effectively $250 per seat per year, right?

• 1:20:51Ben Gilbert?

  Yeah.

• 1:20:51David Rosenthal?

  But it costs $30,000 to recruit an engineer, who's gonna stay at your company for somewhere between one and X years, you know?

• 1:21:01Ben Gilbert?

  It's a few zeros.

• 1:21:02David Rosenthal?

  Certainly not enough. Way more in the upfront recruitment fees than however much you're gonna pay for a GitHub seat for.

• 1:21:08Ben Gilbert?

  Yeah, it's kind of interesting. Over that, say they, they're there for three years, it's $750 versus 30,000.

• 1:21:14David Rosenthal?

  Yeah, that's a big delta.

• 1:21:19David Rosenthal?

  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.

• 1:21:31Ben Gilbert?

  Wow, did they spend $7.5 billion just to peek under the hood and see what

• 1:21:36David Rosenthal?

  We've been working hard here at Inquire. These delusional thoughts are flying around.

• 1:21:40Ben Gilbert?

  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, but like, imagine you're a 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?

• 1:22:04David Rosenthal?

  Or even like, you don't even have to go that far. Just like, it's funny, we've been talking about for, for lots of reasons, Ben and me and, you know, us a way of like perceptions of Microsoft. And certainly, you know, vastly improved since Satya Nadella became CEO. However, still in the valley, like, and I know, like, having lived in both worlds in Seattle and 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.

• 1:22:33Ben Gilbert?

  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 soft recruit.

• 1:22:46David Rosenthal?

  Yeah, I mean.

• 1:22:47Ben Gilbert?

  They have to.

• 1:22:49David Rosenthal?

  I mean, GitHub beloved by engineers.

• 1:22:53Ben Gilbert?

  Either they have to, or that would be like Disney slapping the Walt Disney Castle at the beginning of Star Wars. Either they have to, or it's completely off limits, and I can't decide which one.

• 1:23:02David Rosenthal?

  Yeah, I don't know either.

• 1:23:03Ben Gilbert?

  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?

• 1:23:09David Rosenthal?

  I've been trying to avoid this for like, an hour plus at this point.

• 1:23:17Ben Gilbert?

  I don't feel good about it. I'll just.

• 1:23:20David Rosenthal?

  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 look back on this?

• 1:23:31Ben Gilbert?

  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, it's a strategic thing.

• 1:23:46Ben Gilbert?

  And the point I was gonna 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 $2 billion? But if it's a strategic thing, and I don't quite understand exactly how it fits in yet, if it's worth two, surely it's worth seven and a half.

• 1:24:07David Rosenthal?

  There's this 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,

• 1:24:23David Rosenthal?

  I think something like $500 million or $1 billion. It's publicly reported, whatever it was at some point early in the, in the lifecycle. And I believe it was Evan Williams after the meeting where they talked prices like, eh, you know, if we're worth a billion dollars, we're worth 10.

• 1:24:43David Rosenthal?

  That's, that's the

• 1:24:44Ben Gilbert?

  And they were.

• 1:24:44David Rosenthal?

  The equivalent, and they were more than that, as a matter of fact.

• 1:24:49David Rosenthal?

  Okay, yeah, for me, I, so what's your grade?

• 1:24:52Ben Gilbert?

  I, I hate this. It's super high variance, but I'm gonna go C plus.

• 1:24:57David Rosenthal?

  Okay.

• 1:24:58Ben Gilbert?

  And hope Satya makes me look like an idiot in a couple of years.

• 1:25:02David Rosenthal?

  Great, great.

• 1:25:05David Rosenthal?

  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 LinkedIn, like clearly it's gonna be standalone, like, you know, a little more 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 gonna be hard to really pull this off. So I think it probably ends up somewhere in the muddy middle. I'm gonna give it a B.

• 1:25:35Ben Gilbert?

  A muddy middle.

• 1:25:36David Rosenthal?

  B.

• 1:25:37Ben Gilbert?

  Yeah.

• 1:25:39Ben Gilbert?

  Yeah. All right. Fair.

• 1:25:42David Rosenthal?

  Carvouts.

• 1:25:43Ben Gilbert?

  Carvouts. Mine is from Chris Dixon, great blog post called "The Idea Maze." 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, blah. And he 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

• 1:26:27Ben Gilbert?

  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, to basically be a, be an informed, continuous idea person as you operate your business. And so highly recommend that.

• 1:26:50David Rosenthal?

  Nice. Mine, related to that blog post that went around the internet, the interwebs about a week ago, Eugene Way, former Amazon employee and, and part of the original team at Hulu, wrote a great blog post called "Invisible Asymptotes" about his time at Amazon and there 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, 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?

• 1:27:29David Rosenthal?

  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. Highly recommend if you haven't read it already, which I assume many of you already have, well worth doing.

• 1:27:46Ben Gilbert?

  Cool.

• 1:27:47David Rosenthal?

  All right, listeners. Now is a great time to talk about one of our favorite companies, Statsig.

• 1:27:53Ben Gilbert?

  Yes, there is a reason why the best product teams rely on Statsig, whether they are iterating on their core product features or shipping AI-powered experiences at scale.

• 1:28:04David Rosenthal?

  Yep. In the crazy speed of today's AI world, shipping fast is just table stakes now. It's basically trivial to build and deploy your app constantly. The real advantage is how quickly you learn what changes actually created value for customers, and how fast you can use that signal to guide what you ship next.

• 1:28:24Ben Gilbert?

  This is where Statsig comes in. It brings experimentation, feature flags, and product analytics into one unified system, so teams can ship safely, test rigorously, and directly link what they changed to how users actually behaved.

• 1:28:37David Rosenthal?

  So if you want to make learning your competitive advantage, whether you're building new AI experiences or just evolving your existing core product, go to statsig.com/acquired to get started.

• 1:28:48Ben Gilbert?

  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 and P 500.

• 1:29:07David Rosenthal?

  Yeah. Acquired is blowing up on Twitter, by the way. We got like 50 new followers last weekend.

• 1:29:14Ben Gilbert?

  You could be that 50 first. All right. Thanks, everyone. Have a great night.