Personal blog of Yzmir Ramirez

The once-polarizing world of open-source software has recently become one of the hotter destinations for VCs.

As the popularity of open source increases among organizations and developers, startups in the space have reached new heights and monstrous valuations.

Over the past several years, we’ve seen surging open-source companies like Databricks reach unicorn status, as well as VCs who cashed out behind a serious number of exits involving open-source and dev tool companies, deals like IBM’s Red Hat acquisition or Elastic’s late-2018 IPO. Last year, the exit spree continued with transactions like F5 Networks’ acquisition of NGINX and a number of high-profile acquisitions from mainstays like Microsoft and GitHub.

Similarly, venture investment in new startups in the space has continued to swell. More investors are taking shots at finding the next big payout, with annual invested capital in open-source and dev tool startups increasing at a roughly 10% compounded annual growth rate (CAGR) over the last five years, according to data from Crunchbase. Furthermore, attractive returns in the space seem to be adding more fuel to the fire, as open-source and dev tool startups saw more than $2 billion invested in the space in 2019 alone, per Crunchbase data.

As we close out another strong year for innovation and venture investing in the sector, we asked 18 of the top open-source-focused VCs who work at firms spanning early to growth stages to share what’s exciting them most and where they see opportunities. For purposes of length and clarity, responses have been edited and split (in no particular order) into part one and part two of this survey. In part one of our survey, we hear from:

• Vas Natarajan, Accel
• Stephanie Zhan, Sequoia Capital
• Tomasz Tunguz, Redpoint Ventures
• Deepak Jeevankumar, Dell Technologies Capital
• Anna Khan, CRV
• Peter Levine, Andreessen Horowitz
• Ilya Kirnos, SignalFire
• S. Somasegar, Madrona Ventures

  

Postman, a five-year-old startup that is attempting to simplify development, tests and management of APIs through its platform, has raised $50 million in a new round to scale its business.

The Series B for the startup, which began its journey in India, was led by CRV and included participation from existing investor Nexus Venture Partners . The startup, with offices in India and San Francisco, closed its Series A financing round four years ago and has raised $58 million to date.

Postman offers a development environment which a developer or a firm could use to build, publish, document, design, monitor, test and debug their APIs. Postman, like some other startups such as RapidAPI, also maintains a marketplace to offer APIs for quick integration with other popular services.

The startup was co-founded by Abhinav Asthana, a former intern at Yahoo . Asthana was frustrated with how APIs were an afterthought for many developers, as they usually got around to building them in the eleventh hour. Additionally, developers were relying on their own workflows and there was no organized platform that could be used by many, he explained in an interview with TechCrunch.

Even big software firms have not looked into this space yet, and many have instead become a customer of Postman. “We are solving a fundamental problem for the technology landscape. Big companies tend to be slower as they have many other things on their plate,” said Asthana.

Five years later, Postman has grown significantly. More than 7 million users and 300,000 companies, including Microsoft, Twitter, Best Buy, AMC Theaters, PayPal, Shopify, BigCommerce and DocuSign today use Postman’s platform.

The modern software development relies heavily on APIs as more businesses begin to talk with one another. According to research firm Gartner, more than 65% of global infrastructure service providers’ revenue will be generated through services enabled by APIs by 2023, up from 15% in 2018.

Asthana said Postman intends to use the fresh capital to scale its startup, products and grow its team. “We are scaling rapidly across all dimensions. There are many use cases that we still want to address over the coming months. We will also experiment with sales and invest in improving user experience,” he added.

Postman offers some of its services in limited capacity for free to users. For the rest, it charges between $8 to $18 per user to its customers. That’s how the company generates revenue. Asthana declined to share the financial performance of the startup, but said its customer base was “growing phenomenally.”

Postman said CRV general partner Devdutt Yellurkar has joined its board of directors.

Kong, the open core API management and life cycle management company previously known as Mashape, today announced that it has raised a $43 million Series C round led by Index Ventures. Previous investors Andreessen Horowitz and Charles River Ventures (CRV), as well as new investors GGV Capital and World Innovation Lab, also participated. With this round, Kong has now raised a total of $71 million.

The company’s CEO and co-founder Augusto Marietti tells me the company plans to use the funds to build out its service control platform. He likened this service to the “nervous system for an organization’s software architecture.”

Right now, Kong is just offering the first pieces of this, though. One area the company plans to especially focus on is security, in addition to its existing management tools, where Kong plans to add more machine learning capabilities over time, too. “It’s obviously a 10-year journey, but those two things — immunity with security and machine learning with [Kong] Brain — are really a 10-year journey of building an intelligent platform that can manage all the traffic in and out of an organization,” he said.

In addition, the company also plans to invest heavily in its expansion in both Europe and the Asia Pacific market. This also explains the addition of World Innovation Lab as an investor. The firm, after all, focuses heavily on connecting companies in the U.S. with partners in Asia — and especially Japan. As Marietti told me, the company is seeing a lot of demand in Japan and China right now, so it makes sense to capitalize on this, especially as the Chinese market is about to become more easily accessible for foreign companies.

Kong notes that it doubled its headcount in 2018 and now has more than 100 enterprise customers, including Yahoo! Japan, Ferrari, SoulCycle and WeWork.

It’s worth noting that while this is officially a Series C investment, Marietti is thinking of it more like a Series B round, given that the company went through a major pivot when it moved from being Mashape to its focus on Kong, which was already its most popular open-source tool.

“Modern software is now built in the cloud, with applications consuming other applications, service to service,” said Martin Casado, general partner at Andreessen Horowitz . “We’re at the tipping point of enterprise adoption of microservices architectures, and companies are turning to new open-source-based developer tools and platforms to fuel their next wave of innovation. Kong is uniquely suited to help enterprises as they make this shift by supporting an organization’s entire service architecture, from centralized or decentralized, monolith or microservices.”