re: the "10x dev" — a CEO's PoV 🦄 ⁉️
A founder's case for why this is an ideal time for starting up, learning to pull the still-novel levers of the open source model, and revisiting the recurring allure of the "hero developer."
Welcome to the fifty-first edition of The Baton. A fortnightly newsletter that brings you three, hand-curated pieces of advice drawn from the thoughtful founder-to-founder exchanges and interviews taking place on Relay and the interwebz. So, stay tuned!
In this edition, you’ll find instructive and inspiring pickings from the brains of Airplane’s Ravi Parikh, dbt Labs’ Tristan Handy, and Jellyfish’s Andrew Lau.
Recently on Relay:
Heuristics and Hunches — Early stage startups and mental health
#1: Some structural reasons behind why this downturn might be the best time to start a startup — Airplane’s co-founder and CEO, Ravi Parikh, captures how the current predicaments, however concerning they might be for late-stage companies, are, in fact, a monumental opportunity for early-stage startups. (Source: Airplane)
To be clear–this is not a great time for growth-stage startups or big tech companies. But for early stage, pre-product market fit startups, there are several structural reasons why companies founded today are setup for success. I'll explain why below.
Seed and pre-seed capital is still abundant
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There are tons of overvalued companies that are finding it basically impossible to raise right now.
However, seed rounds are an exception. Seed rounds are still getting done at a high rate. It's something of a perfect storm for seed fundraising: tons of investors raised massive funds over the last couple years.
They're unable to deploy that capital responsibly at later stages, but they still have to put that money somewhere. Seed-stage companies are one of the only places you can put money right now and still expect a good return.
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You'll get higher-quality customer feedback
Startups have to make stuff that people want. This is harder to do when money is abundant than when it's scarce. Let's say you're selling a SaaS product: in a world where every startup has tons of cash, they can buy stuff just to try it out without worrying too much whether that product solves a real need.
Or, you might have customers who are continuing to pay every month on a credit card despite not using it, and the company they're at has sloppy financial controls and forgets to cancel.
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We launched Airplane last year and started charging for the product in September 2021. Since then, we've had strong paid customer growth and close to zero churn. I'd like to think this is the sign of a great product, but if I'm being honest, there are probably a few customers for whom we're a "nice-to-have."
It’s very possible that our churn rate will increase in the next few months. While I of course don't want that to happen, I welcome the opportunity to get meaningful feedback and force ourselves to make the product even better.
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You were going to experience a downturn at some point. Doing so early sets you up for success
There are plenty of tech startups that were founded in 2011-18 that have operated for their entire existence in a bull market. These are 1,000+ person companies that have never been through a downturn.
At that size, there is a massive amount of inertia around your operating model and the fundamental assumptions of your business. These companies' assumptions around customer acquisition costs, capital efficiency, fundraising prospects, etc were all formed in a very different environment than today. These companies will all need to course-correct quickly.
By contrast, your 2 person startup has none of those issues. You can operate identically to how you would have last year: build cool stuff and talk to customers.
Most importantly, startups founded today will be forged during a time when they'll learn to be scrappy and capital efficient. It’s much easier to start efficiently and increase spend later than to spend a lot from day one and scramble to figure out how to cut costs later on.
#2: “Our biggest competition is our own open source product” — dbt Labs’ founder and CEO, Tristan Handy, probes some of the defining tenets of their persistent, 6x-in-a-year, open source flourish. (Source: Wynter)
The size of our community, our user base, relative to essentially all alternatives put together, there’s far more people using dbt than all the alternatives put together.
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I think it is because of the fact that we got there early on and we also were open source since the very beginning. Open source is very challenging to compete with because it’s free. And because there’s this dynamic of the community that ends up being not only a source of growth but a source of product improvement.
Every time we release a new version of dbt, there are a dozen plus members of the community who literally contributed code to that release. So this flywheel continues to accelarate. As the product gets better, as the community gets bigger, there’s this ever-increasing moat.
You can see this in other leading open source solutions. It tends to be that once an open source tool wins a category, it just continues to be very dominant there. Which is nice for the ecosystem because it allows subsequent innovators in the space to build on top of that stable foundation.
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It’s such a different business model. So if your business model is, ‘I write code and then I charge people for that code,’ that is the model that typically SaaS companies take.
Our model is, ‘our core IP is yours, you can have it, you can literally use it to compete directly with us.’
What we’re selling you is a set of cloud services that makes it easier to use, easier to productionize. I think that this is a model that’s becoming increasingly common in software that’s sold to software engineers but we’re maybe a little bit unusual in that we’re taking this open source model and broadening or selling it to data people as well.
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I think there’s a tremendous amount of latent demand in our open source ecosystem. If you go and talk to VCs about how they value businesses. You’re talking about a straight up SaaS business. They value that in a certain way.
And there’s now an emerging viewpoint in the VC ecosystem around how do you value an open source company. Because open source companies don’t actually show revenue much further into their trajectory. As first you have to build the open source product, which, by its very nature, is free.
So you go through that period for 2/3/4 years and only then you start to commercialize. But once you commercialize, there’s this deep group of humans who’re ready and banging on your door to buy something from you…
Our revenue numbers looked like a SaaS company that had been active for two years, but really we are an open source company that’s been active for almost six years now.
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One of the things that’s unique and challenging in the open source context is that you have to create two products. You have to create the open source product, but then you also have to create the commercial product.
And the challenge with creating the commercial product is that everyone else in the ecosystem can also build on top of your open source product.
So there’s this deep history of, especially the hyper-scale cloud providers, taking successful infrastructure projects and just rolling out versions of them that are integrated into the cloud product.
Maybe they aren’t the best way to do whatever it is, but simply by virtue of being distributed by the hyper-scalers, it’s a very compelling open to many folks.
Our community had reached a level of visibility where we were very realistic about the idea that these companies might use a similar playbook that they had many times in the past.
So now, it wasn’t good enough that we were the dbt company, we also had to have the best, not just the only but the best commercial version of dbt.
It’s not unique to us. Every open source company out there is mindful and worried about this exact threat.
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Our biggest competition is our own open source product….If a company wants to do this kind of work, they’re going to use dbt to do it. So over time the thing that I’m focussed on is how do we make sure to see the next set of challenges that our ecosystem as a whole is going to have and push the product forward in those directions.
#3: The case against (and sometimes for) the “10x/hero developer” — Jellyfish’s co-founder and CEO, Andrew Lau, assesses the startup fixation on certain engineers and lists why that’s mostly worrisome and yet, in a few rare cases, absolutely critical. (Source: ELC)
This generally shows up more with founder CEOs, in the sense, where they harken back to a time when they actually knew all the engineers. When they knew said Sandy [an exemplary hero developer], when Sandy was that hero who did a lot of things.
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[Sometimes CEOs] fundamentally believe that the way forward is that all things are about Sandy. There’s something they want that isn’t getting done, so their magic solution is just calling back, ‘3-4 years ago, this is what we did.’
It’s not just romanticizing. They’re trying to problem-solve…
To be clear, I’ve worked with many people [who’d fit that 10x description] and are much more prolific than others. There’s many reasons why. It could be skillset. It could be just nature/history of the codebase. There’s all these reasons behind those things.
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I’ll just speak for things that scale. One might have an amazing developer. We’ve all worked with an amazing developer before. Maybe you’re lucky to be one in the past. But at some point, as your business grows, it will go beyond that person’s skill.
No matter what you do, even if they’re the best, at some point, I don’t care if they’re better than 10 people, at some point you would cross a threshold where you have to rely on more than one hero.
It just has to be. And I’m not going to pick the threshold for any individual company because I don’t know them, but there will be some point where that’s the case.
And so it’s about the team, the process and how we can actually go beyond that. Because if you’re stuck behind one person then your company will only scale as far as that person can go.
And they’re a human, no matter how prolific they are.
They’ll hit some wall at some point….
Part of the [engineering leader’s] job is to get the business to realise that conclusion. To get the romanticism out of this individual’s head. Or it’s never going to get past this. To be blunt.
Systems do matter. Teams do matter at a certain scale. That’s the reason why things need to be spread across multiple people. And that’s why we need to get around the corner on these things.
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Now I’m going to take a quick moment and flip this the other way. And actually be the CEO for a quick second around what sometimes is lost.
Sometimes, there is this really company lynchpin thing that has to happen. It is a thing that’s non-linear. ‘Get this customer over this thing! We will literally close this account. Revenue goes up. We’ll get that funding round!’
All that stuff is lynchpinned on this thing. And it is disjointed. It is not the same as every other feature. There’s something here that people aren’t realising. If we lose this account, if we don’t get this thing shipped by this day, we’ll lose all kinds of things.’
Some businesses aren’t the best at also expressing such situations either. And so it’s possible that maybe in this one time, even though we have a hundred people, that Sandy does really need to do this.
Because she is the only person on this thing. While it will be great if Douglas and the rest of the team learned how to do this, to make them productive in six months, but maybe there’s this one time thing that has to happen here.
We need to get Sandy on and it needs to happen being so important. And the engineering leader doesn’t get this. This is above and beyond any system sustainability answer here.
It’s existential, we have to do this.
Sustainability be damned, we need to be able to do this one thing.
[On the other hand] if a CEO thinks every freaking thing is that one thing, well, then, it’s not a one thing then. That’s the unpacking of this stuff. Which, again, goes back to sussing out what is it we’re trying to do and why is it so important that we want to throw out all other things for, and really sussing that part of it out.
Until next time,