WP Engine acquires Flywheel

WP Engine has acquired Flywheel — which boasts more than 200 employees and $18 million in revenue. WP Engine is setting the stage for an IPO in the next couple years.

WP Engine has acquired Flywheel — a competitor in the managed WordPress hosting space. Flywheel has 200+ employees, a high growth rate, and $18 million annually in revenue, according to WP Engine CEO Heather Brunner quoted in Techcrunch.

Flywheel had raised a little over $14 million, but that revenue and employee growth could put a heavy burn rate on the company.

Eric Jones, WP Engine's VP of Global Communications, said to me in an interview that WP Engine considers itself to be geared “more toward enterprise and as a ‘digital experience provider.'” In contrast, Flywheel is oriented “more toward ‘managed hosting‘ and really good at servicing slightly smaller brands, and also smaller agencies and freelancers,” while WP Engine “excel[s] with the bigger enterprises and bigger agencies…” Put that all together and “there's actually quite a bit of synergy.”

To my eye, Flywheel and WP Engine carry a broad spectrum of similar customers, although I certainly see that WP Engine can attract a higher tier of enterprise customers.

Flywheel is a great brand and has made some strides that I think are endearing to the freelance and developer community, such as their development of Local by Flywheel for local site development.

Eric said that WP Engine won't be making any immediate changes to either product and that they are doing a brand audit over the coming weeks to “examine the assets of both companies and see what makes sense.” They'll base future plasn around the results of that audit which is expected to “shed a whole lot more clarity on how the products and portfolios look post acquisition.”

There are no major changes to Flywheel's executive team. Flywheel CEO Dusty Davidson will report to Heather Brunner directly and join the WP Engine executive team. Flywheel's head of Finance will also report directly to WP Engine's CFO.

WP Engine is not being shy about their desire to hit both a $1 billion valuation and go public in the coming years. Their current annaul revenue is $132 million, and (again according to Techcrunch), Heather estimates they will reach $200 million annually in combination with Flywheel by 2020.

WP Engine has raised a total of $290.7 million according to Crunchbase — the majority of which ($250 million) was raised in 2018 from Silverlake, which also served as an exit for some prior investors. Despite having those funds in hand, WP Engine still needed to raise some additional funding to close this deal — which they've described as “the largest acquisition in WordPress” history.

I pressed Eric on that statement, but he declined to provide further detail. I take it to mean they paid more than the $30 million reported for the WooCommerce acquisition by Automattic. With $14 million raised and revenues of $18 million, it's hard to say how much more (probably not a lot), but that at least can give you a conservative estimate.

WP Engine is also likely motivated by Flywheel's presence in Omaha, which offers another hub for growth and employee development in a fairly low-cost region, with what looks to me like a great company culture.

I think WP Engine acquiring Flywheel is fine; it feels natural. Both are good brands with some overlap but also their own unique takes on the managed WordPress market — despite WP Engine clearly trying to define themselves beyond the confines of “managed WordPress.” That larger identity and market will be easier to lock onto with an in-house Flywheel product.

Consolidation is a long tradition in the hosting market, and it continues to be an emerging trend in the WordPress space. Expect more.

Image provided by WP Engine.