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THE TECHNOLOGY MONTHLY BOSTON|NEW YORK|PARIS

Volume 2, Number 1 www.research2zero.com


February 26, 2007

In this issue:
The key criteria for judging software in the Web 2.0, SOA world
Two emerging platforms: WordPress and Zimbra
Update on the data and information management space
The Web 20 status and a check on other Web 2.0 adoption metrics

Panning for Software 1. Bind and be bound – Any software function must
be able to bind to whatever interfaces and data are made
How does one separate the gold from the muck in available to it. Similarly whatever functions and data are
the software space given the mania surrounding Web available must be easily identified and bound to external
2.0 and service-oriented architecture (SOA)? These agents. Note that these bindings are arbitrary rather than
terms come with such baggage that it makes it hard to a priori.
see through to the underlying software. Web 2.0 is so
broad it brings in business models, content types, im- 2. Call and be called – Rigid, hierarchical control
structures are anathema to a web of distributed content
plementation methods, usage patterns and even touches and users. Control must be taken when required and
on emotional and social attributes. It’s no wonder the promptly surrendered when requested.
term, so overloaded, defies precise articulation and can
no longer be called a definition. Most practitioners rely 3. Transparency – The functions available as well as
on the old standby of, “We know it when we see it.” their detailed mechanisms of action and interfaces must
be clearly defined and easily understood in a matter that
SOA may be a better place to start. However SOA can be trusted. It’s about more than open source.
has also been extended in many directions, mostly to
suit the needs of corporate computing, so that it too has 4. Context awareness – Taking maximum advantage
become impossibly heavy. Multiple standards groups of context creates dramatic improvements in power and
and technology vendors have increased the complexity usability. The apparent unwillingness of most developers
of SOA to include security, process definition and or- to just exploit what is already possible today has resulted
chestration, monitoring and event management, applica- in painfully slow advances.
tion frameworks and so on. The shear mass and level of
specification has grown beyond the realm of most po- 5. Sub-second response time – Even in a world of
tential implementers. rapidly expanding bandwidth we will continue to struggle
to meet demands for low latency. Response time is di-
An analogy we imagine is that Web 2.0 and SOA are rectly tied to major increases in usage. This has implica-
bills voted into law by congress and then burdened with tions for architecture and service delivery.
hundreds of additional riders tacked by a broad range of
special interests, blunting and obscuring the original So that’s it. No less. No more. In fact taken together
intent. We’re looking for the equivalent of a funda- the first three might be grouped into what could be called
mental bill of rights for software without extraneous ultimate extensibility. The last two might be thought of
additions. as the end-user experience test.

It’s altogether fitting and proper that we should take What about everything else? There are still plenty of
the time to do this. It simplifies the discussion and halts important aspects to Web 2.0 and SOA ranging from
the creeping spread of our definitions to encompass new business models to social computing. However they
things that are well beyond basic principles. can get in the way when we are aiming at software fu-
tures. Many of these are just emergent properties, use
The myriad aspects of future software can be dis- cases or implementation styles rather than fundamental
tilled down to five fundamental principles: characteristics.
Turning back to our five properties we now delve easily import from other programs but can’t export. The
into each one in greater detail. problems with unidirectional design are self-evident.

Binding: Everyone understands the most basic Calling is closely related to binding because binding
property of binding in that some variable such as <inter- has to do with functions and data whereas calling man-
est rate> is bound to an actual number to be used in a ages control and sequencing. If we were real purists we
computation. The bindings in the past have been fairly could probably rely just on binding but the control issue
direct in mapping program variables to data. The mind is too much of an obstacle not to deal with it separately.
needs to stretch just a little bit to grasp that the new
binding involves elements outside of an individual pro- Calendars are a common example of what goes wrong
gram, and that the binding is not just to data but also to with calling techniques. By and large every calendar is
other programs and functions. Data elements, software designed to be the master and have control. They have
functions and computing resources are scattered around improved on the ability to import and export basic data
and come together dynamically as needed to perform a but think for some reason that users will enter events
task. directly in that particular UI vs. another, or that they will
want to schedule meetings or contact people only in their
The application programming interface (API) is the own database. Because of this, calendar creators have
mechanism that provides the binding flexibility needed spent much of the last 20 years rewriting the code for
in most situations. It’s important that the definition of “enter a meeting” rather than actually creating some
the API be granular enough and bidirectional to suffice sorely needed new functionality. Zimbra is perhaps a
for any arbitrary use case. notable exception (see below).

The Internet is expanding to include just about every Transparency: This is probably the murkiest and
electronic device, including mundane objects such as most challenging element of our definition. No doubt
your stereo, phone, running shoes, picture frame and so some will feel the requirements for real transparency are
on. Often the interfaces may be described but unnatu- unobtainable. However even incremental improvements
rally limited by the developer. For example an IP phone confer substantial benefits and advantages. At a high
has a keypad and a speaker that should be usable in any level users need to quickly understand what functions are
way, not just for entering numbers or playing audio. If provided, what interfaces are available and how the func-
we want to bind to the 5 on the keypad and make it tions are implemented and results obtained. And all that
display the current status of our traffic variable, it is just to get started.
should be simple to do. The point here is data and
function bindings can be arbitrary. Beyond an initial implementation users become de-
pendent, so any changes can cause ripple effects. People
It’s this property which gives rise to the whole mash- are already experiencing this phenomenon as Google and
up craze whereby users can do things such as link to- others evolve their interface support and deliver new
gether data from say, Google Maps, Flickr Photos and releases. These issues are slowing down innovation be-
Craigslist apartments to show a local map of available cause most are still choosing to build from the ground up
apartments with neighborhood photos. Thanks to the rather than build upon existing functionality. Larry Page
surfacing of APIs and the use of tags these applications of PERL fame has issued a warning that too many devel-
became far more powerful than for a single or small opers are focused on creating their own products rather
group of use cases. These first mash-ups, while limited, than improving those already out there.
clearly get the point across and have created quite a bit
of enthusiasm. Yahoo Pipes is yet another step in this Open source is a major industry trend that does help
direction. in this area. It’s hard to come up with a more transparent
way for software than making source code available to all.
Calling: It seems that the desire for hierarchy and But code is not always the easiest source of functional
control can be as difficult to eradicate in software as it is insight for the non-hardcore programmer, especially for
in people. Most modern software allows some level of complex programs. Furthermore complexity and license
integration and interoperability but assumes a mas- terms prevent it from being a universal solution, espe-
ter/slave relationship. Even casual users have experi- cially for business.
enced a version of this from software programs that

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Lastly there remain myriad legal and business issues receiving some careful scientific study, but we think eve-
surrounding terms of use that are likely to cloud this ryone would agree that the results are valid whether a
area even further. The insistence on technology such as user is sharing one machine with thousands or having
digital rights management (DRM) when rights surround- thousands of machines serving them. Most assume that
ing music have always been extremely murky – often thanks to Moore’s Law and the bandwidth explosion
split between artists, studios, and songwriters and then users will never have response time issues. Think again.
again by geography – seems absurd. Thanks to Apple
and Google progress is being made in this area, but It turns out that the addition of computing resources
there is still a long way to go. can make the problem even harder to solve. If from
France I request a piece of content created in China, we
Stable standards such as HTML, PHP and many oth- generally have a cached version somewhere closer to
ers are helping to make functionality and mechanisms of home. A simple timestamp tells us if the cache is cur-
action very easy to understand. Even the simple “view rent. However when you scale up the number of users
source” ability common in most tools and browsers and sources dramatically so goes the number of cache
today has given a major boost to the practice of trans- locations. Figuring out how to serve the right content
parent systems. can take more computing time than just going back to
the original source without clever algorithms.
Context: Alan Kay highlighted the woeful lack of
innovation in this area by noting that most computers The AJAX programming style went mainstream very
are still using the same general-purpose interface that his rapidly because it struck right at the heart of this issue.
team designed forty years ago! This despite the fact that Thanks to AJAX it was possible to deliver Web-based
it has been demonstrated that productivity skyrockets interaction without requiring the send/receive loop that
when users are given an interface more specific to their was once part of mainframe computing and still domi-
task. nates the Web.

We too are amazed at the lack of sophistication here. Average user response time serves as a gate on the
After all, our ever-more powerful and connected com- speed of adoption. It’s a real, often overlooked aspect of
puters know everything about our history and standard commercial adoption analysis. The Google founders are
actions. Even within the context of a general UI, why relentless at measuring the initial results response for
aren’t normal actions anticipated to the point of offering their search. They know that having good results back in
us more one-button options to complete an action? less than one second is better than great results back in
three seconds.
This will be very important in the mobile computing
space. In a comic example, one large carrier launched a On second thought, Google really is one giant time-
video feature for users that required eight clicks with a sharing mainframe so our regular readers are right after
rather high latency to play a video clip. Not surprisingly, all.
users turned their noses up at the option. If you receive
an email from a friend (address book, frequent emails) These five key characteristics define what some call
and it includes a video clip why not present a button to Web 2.0 software. Notice we don’t have to explicitly
simply play it? Why not even pre-fetch it while I am include implementation details, business models, content
reading the email? types or user roles in our definition.

Contextual awareness is likely to be a topic for some ÇÇÇ


time to come. Today, even small steps can lead to big
results. YouTube videos offer the ever-so-simple play
symbol under the user’s mouse button. It’s so easy to
click, most do. It might be trivial but we are just at the
early stages of seeing things like this at work.

Sub-second: We expect to hear some groans of,


“That’s so IBM mainframe,” from our regular readers.
It’s true that timesharing was the catalyst for this area

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Emerging Platforms than 90% of blog comments are spam and would quickly
choke off and eliminate the commenting feature if not
Google, Microsoft and Yahoo aren’t the only impor- stopped effectively.
tant players in the ongoing Web 2.0 platform war. Be-
low the surface there is a layer of activity by a number of The 2.0 series release of WordPress garnered 1.8M
providers delivering specific functions and expanding downloads compared to the 207,981 downloads of the
rapidly in the market. Both Zimbra and WordPress are 1.5 release on May 9, 2005. It’s clear from these and
emerging as potent contenders for large numbers of other statistics that the growth of WordPress has taken
users at the expense of the Big Three. off and is likely to maintain a fast pace. Automattic, the
company behind WordPress, boasts just 11 staff as of
WordPress: It’s becoming commonly recognized this writing and received a minor amount of funding
that what started out as blogging software is rapidly from a few venture capital types.
evolving into a full suite of functions and online ser-
vices. We migrated to WordPress ourselves a few WordPress, both the software and the company
months ago and were surprised by the broad array of hosted solution, is available for free. The company does
features in its new release. Even more importantly, the make some money via its antispam technology, services
community that has grown up around this open source and consulting. Support is offered at $2,500 to $5,000
project has allowed capabilities to mushroom far beyond per company contact similar to other open source ap-
what the core developers could have delivered. proaches from companies such as MySQL.

Thanks to a modular architecture for the presenta- The other major blogging platform providers are Six
tion layer (themes) and the internal functions (plug-ins), Apart (TypePad) and Google (Blogger). Six Apart has
extensions are easily delivered and installed by end- been aggressive but growing a bit more in a MySpace sort
users. (They have recently added widgets, which fall of direction, which is less interesting to us. Since Blogger
somewhere in the middle of presentation and functions was acquired by Google its pace of innovation has been
but we’re not sure how much we believe in the widget slow. Google seems far more focused on Docs &
approach in general.) WordPress relies on standards Spreadsheets as a platform play.
such as CSS in the presentation layer, which means
users can easily grasp and customize the look and feel to Zimbra: Turning more directly to the corporate
suit their needs. Elsewhere, WordPress adheres closely space, there is finally some meaningful innovation around
to appropriate standards and has foundations on com- enterprise messaging and collaboration. Microsoft and
mon denominator technologies such as HTML, PHP IBM Lotus have enjoyed a duopoly here with little or no
and MySQL. competition for some time. Zimbra is a next-generation
platform that exploits new technologies in a product built
It’s hard to do justice to the velocity of the Word- from the ground up to understand context and integrate
Press advances except to say that they make Google diverse functions in an intuitive fashion. With a recent
seem like a very slow software company by comparison. user count of 6M the company has certainly reached a
Recently the company has decided to embark on a more critical mass.
regular release schedule of every three to four months.
The company invites users to submit and vote on ideas At first the application looks very much like just an-
for features to be included in subsequent releases. As of other open source implementation of a standard product
this writing there were 422 ideas submitted and more (Microsoft Outlook), but that’s where the similarity ends.
than 24,000 votes on which should get the highest prior- What’s different about Zimbra?
ity. This effectively expands the development direction
beyond code submitters to general user community and To date Zimbra is the best example of an application
enhances the transparency of the platform. that makes use of context that we have seen to date.
Users can get information and take actions from any-
Spam is a scourge on everything these days, blogs in- where rather than navigate to and from various task
cluded. The company has developed a tool called screens and applications. As with many ideas the value is
Akismet, which is a very good spam filter. Thus far we in the quality of the implementation. For example, email
would say it is more effective than the filter used by content is parsed and recognized so that a hover or click
Google for GMail. Akismet is critical as well. More produces logical in-place results. It’s worth watching the

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flash demo available from the company website to ap- For those not wanting a pure open source solution
preciate. there is a supported version of the product priced at $20-
30 per user per year. There are also many providers of
Of course we have seen good collaboration suites the software as a hosted solution where the prices range
come and go over the years with little adoption. Zimbra broadly but get as low as $50-75/user per year; fairly
has been smart enough to recognize that they are a new- similar pricing to Google’s version of office.
comer and support full integration with Microsoft Out-
look, Blackberry and other popular email clients. The Recently Zimbra crossed the six million user mark,
administrative back-end has received the same level of clearly putting it on the map of enterprise readiness. The
attention in design and ease-of-use to help overcome company has substantial venture capital backing from
enterprise inertia. The software is also designed for large investors including Accel, Benchmark and Red-
service providers who offer Zimbra collaboration as a point.
hosted (SaaS) solution.
WordPress and Zimbra are strong examples of next-
Enterprises can easily extend and integrate [Zimbra generation software and infrastructure for modern web-
directly into their workflow with build in tools for creat- based computing. They may not be making headlines
ing “Zimlets.” We may not be fans of the name yet, but their current size and trajectory implies that they
(sounds too much like Gimlet or the ill-fated Zaplet to will.
us) but the implementation and pre-defined Zimlets are
powerful and intuitive examples of a fully-extensible ÇÇÇ
collaboration suite. A few examples:

1. Integration with VoIP solutions from Cisco,


Asterisk and Skype. Especially for companies con-
sidering Asterisk, Zimbra greatly enhances the usabil-
ity for the end-user.

2. Links with Salesforce.com to allow automatic


updating of CRM information directly from the col-
laboration windows. This helps eliminate the mental
overload of having to enter data twice.

3. Hooks into travel applications for booking,


tracking and mapping plans. We’ve been amazed
that it has taken so long to begin integrating travel
functions and information with schedules and con-
tacts given that it is a fairly high percentage of busi-
ness related activities. Finally a user can drag an
event invitation and drop it on an icon to initiate a
travel search and populate the calendar with those
travel arrangements automatically!

The real power for enterprises will come from creat-


ing their own extensions to address their basic business
processes and integrate them right into the collaboration
flow for their end-users. White collar productivity is
notoriously hard to measure but a full implementation
of Zimbra with some customization would offer a
meaningful 10%+ increase in efficiency and effective-
ness.

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Web 20 Update and Other Barometers out, the group could easily add another 10-20% from
these levels for the year.
During the past year the Web 20 has traveled a
winding road basically to get back to where it started. 2007 2008 2008
Company EV/S P/E PEG
Akamai 15.3x 35x 0.92
Equinix 7.2x 13x 0.46
WebEx 3.3x 19x 0.92
Intuit 3.7x 19x 1.46
BEA 2.6x 17x 1.00
Google 9.4x 27x 0.55
Apple 2.4x 22x 0.90
F5 4.7x 29x 0.89
Salesforce 6.6x 63x 1.33
Adobe 6.9x 23x 1.17
Amazon 1.2x 38x 1.88
Yahoo 6.9x 39x 1.93
NAVTEQ 4.3x 23x 1.17
Red Hat 8.1x 31x 1.00
Figure 1 – Web 20 TTM Performance QUALCOMM 6.4x 18x 0.85
eBay 5.8x 22x 0.90
Also buried in the flattish 12-month performance Broadcom 3.8x 31x 1.46
was a large divergence within the group shown in Table Websense 3.0x 18x 0.94
1. Rackable 0.7x 13x 0.31
SanDisk 1.8x 14x 0.50
YoY YoY Group Total 4.6x 26x 1.02
Company Price Δ Rev Δ Table 2 – Web 20 Valuation Ratios
Akamai 157% 51%
Equinix 79% 30% A full table of metrics for the Web 20 and a dynamic
WebEx 53% 23%
Intuit 20% 19%
version of our Web 20 chart available as a Google Wid-
BEA 19% 11% get can be found at the Web site.
Google 16% 73%
Apple 14% 38% Skype
F5 11% 40%
Salesforce 7% 60% This month Skype downloads crossed the half-billion
Adobe -2% 31% mark. Our usage data for Skype shows continuing adop-
Amazon -16% 26% tion. Given the variation around both time of day and
Yahoo -18% 23% holidays it is clearly being driven by business use.
NAVTEQ -21% 17%
Red Hat -21% 32% Skype Peak/Avg. Concurrent Users (Aug '06 - Jan '0

QUALCOMM -21% 33% 9.5

eBay -25% 31%


Broadcom -30% 37% 8.5
Peak CCUs
Peak CCUs Trend

Websense -34% 20% Avg. CCUs


Avg. CCUs Trend
Rackable -36% 67%
Concurrent Users/Millions

7.5

SanDisk -40% 41%


Group Total 5.5% 35% 6.5

Table 1 – Web 20 YoY Changes 5.5

Average estimates for 2007 results suggest revenue 4.5


growth of about 26% for the group. We are starting
the year about 15% higher in terms of price. When we 3.5

roll our numbers forward to begin to use EV/Revenue


A

Se

Ja
ug

ov

ec
ct

n-
p-

-0

-0
-0
-0

07
0

multiples on 2007 estimates and P/E on 2008 the


6
6

6
6
6

Figure 2 – Skype Usage


valuations improve substantially. If estimates prove
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There’s clearly a minor divergence between average and applications for using information; and 2) Volumes
and peak Skype users. This suggests an increasing pro- of data and information continue to grow at an acceler-
portion of users who login for a specific reason rather ating rate.
than those who stay online all day inviting calls.
Along with the increase in volumes and types of data
Job Listings gathered, the cycle times available for processing and
decision making get shorter; substantially compounding
We’ve started to take some snapshots of job listing the problem. Every few years this reaches a sort of
data to begin to build a useful time series. Just for fun threshold, prompting the active consideration and adop-
here are some of the numbers for the current month. tion of new applications and approaches.
(All are from the Simply Hired job search engine,
which had 4,747,436 listings at the time.) Investors are likely to revisit this area thanks to the
coming spin-off of Teradata from NCR, creating a new
Jobs by OS (153,892)
standalone company with more than $1.5B in revenues.
After the spin-off NCR will be more of a pure play on
retail POS technology with over $4.5B in revenue. NCR
Linux
22% stock has been on a tear to a projected fair value of
$47/share based on an estimate of the value of Teradata
and NCR as separate businesses. The table below sug-
Solaris
10%
Windows
gests that post spin-off NCR may still have some upside.
68% If it can execute its way to an average EV/R multiple
the stock could be worth 2x current prices.

Figure 3 – Operating Systems EV Rev OI EV/R R/Emp


Diebold $3.5B $2.9B $153M 1.2x $199K
Windows still occupies the lion’s share of hiring activity VeriFone $3.5B $581M $108M 6.0x $254K
but we will see how this develops during 2007.
Micros $2.3B $679M $91M 3.4x $179K
TOTAL $9.2B $4.2B $352M 2.2x $203K
Jobs by Language (125,125)
EMC $31B $11B $1.2B 2.8x $415K
AJAX
NCR $8.5B $6.1B $473M 1.4x $216K
Perl
5%
C# 17%
20% PHP
6% Table 3 – POS and Data Company Figures
Ruby
1%

Teradata may be better off outside of NCR, but it’s


hard to imagine that the company will be able to stay
independent. Outside of financial ratios, the firms that
Java
51% own the data have a special status. Teradata has a mar-
ket position that is just too tempting strategically for
Figure 4 – Languages firms from Microsoft to HP to EMC.

Each month we will be expanding this section with Exploring the vast data resources has long been the
more data as we collect more and add new external purview of large established players such as Oracle,
sources. Business Objects, Cognos and others. A frequent ques-
tion these days is whether these existing solutions are
ÇÇÇ passé and whether new offerings from small companies
Update: Information Management such as Greenplum, Endeca, DATAllegro, RiverGlass,
SeeWhy, Dabble DB, Kaskad and StreamBase reflect the
Corporate interest in information and data man- future direction of data mining and business intelligence.
agement technologies is very high. This is likely to re-
main true for some time for two very basic reasons: 1) It’s certainly true that new approaches to processing
There seem to always be new high-return opportunities real-time data coming from the Web or other sources
are garnering more market share. This could be evi-
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© February 26, 2007 
 
dence that information management is entering a new pany gets there is not only half the fun but also perhaps
phase where customers are seeing distinct application two-thirds the final valuation! We expect many of the
areas differently. It could be the case that we will see existing emerging players in this space to do well and
sustained differences in how customers approach stra- others to emerge over the course of 2007 thanks to in-
tegic vs. operational BI. This could mean that small creasing awareness of the potential.
areas today could grow to challenge the data and in-
formation management Death Stars of Oracle, EMC
and IBM.

Some of these new approaches will catch on, and


the large players will acquire or replicate their way to THE TECHNOLOGY MONTHLY
offering similar capabilities. Between now and then, Kris Tuttle, Editor
however, the market is offering opportunity to grow Pete Bishop, Analyst
Charlotte Borde, Copy Editor
into critical mass ($25-50M revenues) and even reach
potential public market revenue levels of $100M+. It’s The Technology Monthly is published by
too soon to tell if it will be possible for any company to Research 2.0 12 times a year by Blue Cat-
erpillar LLC, 1313 Washington Street,
propel itself into the multi-hundred-million-dollar level Boston MA 02118. USA Telephone:
of sustainability. For every success (Business Objects, 617.381.4762.
Informatica, MicroStrategy) there is a failure (Pervasive,
Individual subscriptions by the month or
Versant, Persistence) or one that was absorbed (Infor- year are $32 and $256 respectively. Some
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www.research2zero.com.
The overall landscape of public players in the data
space paints an alluring picture as even companies that It is a violation of federal copyright law to
reproduce or distribute any part of this
institutions might consider also-rans (Sybase, Progress, publication to anyone by any means with-
Hyperion) trade at substantial market values. out permission (often readily provided.)
Sponsorships come with internal redistri-
bution rights and in some cases the right
2007E Enterprise 2007 to distribute externally to customers and
Company Revenue Value EV/Rev prospects is available. Copyright 2007,
Blue Caterpillar LLC. All rights reserved.
Oracle 17.6B 87.4B 5.0x
EMC 12.7B 30.9B 2.4x
Sybase 1.0B 2.2B 2.2x
Progress 471M 931M 2.0x
Bus. Objects 1.4B 3.1B 2.2x
Cognos 972M 3.2B 3.4x
MicroStrategy 313M 1.5B 4.1x Coming in future issues…
Informatica 374M 910M 2.4x
Actuate 137M 255M 1.9x Gödel would be short
SPSS 290M 492M 1.7x Proof of Moore’s Law for Energy
Hyperion 890M 2.0B 2.2x
Fair Isaac 864M 2.5B 2.9x
More emerging platforms
Open Text 584M 1.4B 2.4x What happened to .NET?
Applix 67M 148M 2.2x Virtualization tornado?
Group Total 37.7B 137B 3.6x Update: Enterprise IT
More Web 2.0 adoption metrics
Table 4 – Data and Information Company Values Individual company reports
In conclusion the data and information space offers
real opportunity for new players. Other areas such as
virtualization are hot but don’t offer the freedom of
entry and differentiation that is needed to create major
new value. There is clearly still some art to be had in
that getting to $300M in revenues can result in a market
valuation ranging from $500M to $1.5B. How a com-
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