Why would anyone fund a company $20m?

"Why would anyone fund a company $20m for providing a service that is no different from many-many others?

This article is highly opinionated. Please bear with me. Someone is
always wrong on the internet and today might be my day to be wrong.

I'm talking about a company called Resend (resend.com) which launched in 2023 and has raised $20+ million.

AND,

I want to compare it with SENDUNE (sendune.com), a product that my company has built and maintained since 2018. We raised zero dollars.

Why do i choose to compare with Resend?

Because both SENDUNE and Resend are in a similar space; Email Delivery. What makes us even more similar is - behind the scenes - both of us use AWS SES to send emails. The only difference is Resend uses their own SES account for all their clients. SENDUNE operates on a bring-your-own SES basis. The end goal for both companies is the same - to safely deliver transactional and marketing emails on behalf of companies that use us.

Resend is well positioned. It is a YC company. Apparently Paul Graham described Resend as “the Stripe for Email” ¯_(ツ)_/¯. Email is a decentralised system. The standards and protocols are very rigid and changes are few and far between. These standards are what makes this highly decentralised system work. There is really nothing one can innovate on email API's. Maybe make the API documentation page pretty. That's about it. If i were asked to assign that tagline to anyone, i would give it to AWS SES.

The YC Network and the Hacker News platform gives Resend phenomenal marketing outreach and escape velocity. We do not have all that but we did have our 'front page moment' on Hacker News.

Perhaps the single biggest advantage of being a YC company is a readily available market of fellow alumni companies you can sell to. Resend claims a user base 200,000 developers. SENDUNE has about 5,000. Resend's revenue is $5 million in 2024*. SENDUNE's revenue is closer to zero. Most of our users are on our very generous free plan.

I'm jealous of Resend and what they have achieved.

SENDUNE is a favorite side project for us. I personally like the dopamine hits i get when people discover us on their own and start using our product. There are lots of services that let you hook into AWS SES and send emails. Some of them are quite popular. We never considered any of them as our competitors. We know we have a far superior product.

To put it crudely, all of us are just wrappers around AWS SES. This is why I cannot comprehend why anyone would assign $ millions of value to someone like us. What am i missing?

Yet, i now believe Resend is a good thing for SENDUNE. First, we know we have something valuable. Second, we have someone we can call our competition and benchmark ourselves against.

My understanding of the industry is this ....

Email is a crowded space. There are probably a 1,000+ email service providers catering to the Transactional and Marketing email needs of companies of all sizes.

Yes, you can make a little money in the email sending business - enough to pay a small team decent salaries and take care of servers. But there is no 'VC Returns Level' money in this space.

Email is a mundane thing. Email is a solved problem. There are really no moats here. Anyone can launch a similar service with a little effort. This is another reason why i cannot comprehend VC's are throwing risk capital at a company in this line of business. VC's expect a 10x return on their investment over a five to seven year period. When VC's gives you $20 million, they expect to get back $200 million.

Get Acquired or IPO?

That's a lot of pressure on Resend to deliver. You can get away with high growth numbers for a few years and keep the VC's happy. The YC network boost will give you those numbers. Ultimately Resend will have to get acquired or go the IPO route to satisfy VC's.

I'm not sure if Resend will be an attractive acquisition target. A major amount of consolidation has already happened in the industry. Twilio acquired Sendgrid. Intuit acquired Mailchimp. Postmark has been acquired by ActiveCampaign. Mailgun is with Sinch. All these companies that got acquired had built their own email delivery infrastructure over many years. Resend just uses AWS SES. So there's really no technology IP that comes with this deal.

An IPO does not make sense unless it involves $billion+ in valuation. Resend will have to deliver a revenue that can get them that valuation multiple or resort to some EV/EBIDTA financial engineering. Sorry Resend, if i'm scaring you ;-).

Closing

Resend is a great product. But the financial eco system in which they are embedded is their Achilles' heel.

We have our advantage. We do not have the burden of venture capital. We have no growth targets or milestones to hit. That gives us immense independence and we intend to keep it that way. This is how we will compete with Resend or any others in our industry. By being independent of VC distractions and focussing on product.

I sincerely wish Resend will overcome these odds and succeed by a large margin. I thank them for showing us that we too are a valuable product. If you are using Resend you should continue using them.

Meanwhile we have decided to adopt a Basecamp style business model for SENDUNE.

It's going to be a long game of survival. Something we're used to.

Thank you for reading.

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'* I could not find a more reliable source. Leave a comment if you find one.