The Limelight Effect

The overall CDN market is improving, with Akamai and Limelight leading the way. Akamai is killing it, while Limelight is making great progress. Limelight is more representative of the CDN startup industry. Its valuation impacts the entire CDN startup ecosystem. If Limelight were valued at $3B, EdgeCast could have possibly sold for $1B; and the current valuation for all startup CDNs might be double what they are today. How do I arrive at such numbers?

The Limelight Effect

I look to the cousins of the CDN players, the cloud security companies, such as Imperva, Qualys and Zscaler. The way it works in their niche, if they reach $100M in annual revenue, their valuation skyrockets to $1B. It’s as though the CDN industry gets no respect. I don’t count Akamai in the equation of things; they are an anomaly, almost untouchable; the only thing stopping Akamai is Akamai. Akamai’s only real challenge is reaching $5B by 2020

Since the health of LLNW impacts the valuation for the entire CDN startup ecosystem, its benefits all competitors alike, that Limelight kills it, just like Akamai. There’s no reason Limelight can’t be a $3B CDN, and Akamai a $15B CDN.

Old Limelight Networks

Limelight has generated about $45M in sales for the last 5 quarters, which equates to $15M per month. In 2014, it’s likely they’ll do the same for the next 4 quarters. LLNW has momentum right now, and it should use this momentum to innovate its way out of its current position. LLNW should take a risk, and invest in developing a new technology, that is outside the CDN feature set, yet is able to leverage the assets it has in its portfolio, and utilize the incredible engineering skill set it has in its ranks.

On a recent call with Financial Analysts, LLNW Execs discussed year-end results for 2013, and stated their investing in the current feature set, improving it and expanding it. That’s good LLNW is doing this, however, this is a given for all CDNs. CDNs must invest continuously in their feature set, or else they’ll get left behind. What LLNW needs to do is disrupt the CDN industry, and turn it inside out, and at the same time rattle the market of another industry, that is not in the CDN ecosystem, like the cloud security market.

New Limelight Networks

LLNW should set aside $3M – $5M, gather a small team of its most talented engineers, ship them out to Santa Monica, Venice or Hollywood, away from HQ, and fund a new startup. LLNW will own the voting shares, and a decent percentage of the startup, but give the new team enough leeway to operate independently. The new startup team will be responsible for creating the most disruptive CDN technology of the last decade. LLNW understands that founders of a startup are infinitely more passionate, creative, hungry, and all of the above. Once the founding team of LLNW left, that’s when things started going downhill. That’s okay, it was a lesson learned.

The next lesson is to take a page out of tech history, and learn from the partnerships of EMC-VMWare and Yahoo-Alibaba. LLNW needs to believe in its people, and give them a shot to change the destiny of LLNW. If the startup surpasses all expectations, goes public and reaches multi-billion dollar valuation, then it can merge with LLNW; and LLNW can take on the new name, in a new body. Limelight Networks was a great company at one time, now in its new body, it can support the next generation of customers.

“Learning and innovation go hand in hand. The arrogance of success is to think what you did yesterday will be sufficient tomorrow.” William Pollard