How To Start A Dev Tools Company | Startup School

[Music] hello my name is Nicola D and I'm a group partner here at YC before that I

was the co-founder and CEO of algolia algolia is a search API used by millions of developers to build a great search experience in their apps and websites

and it's relevant today because today we're going to speak about death tools and how to start a def tools company so here's what we're going to cover first

we'll discuss about the funding team and how to find your idea then how to start the company from the prototype to the

MVP and finally we'll dive into the go to market including sales and marketing for def tools but first what is the def tool so a def tool is software that is

used by developers to help them build product and that includes a lot of aspects from coding testing debugging documenting

deploying running it's all of the gamut of aspects of that job and it's a broad category then you can think about idees

like vscode API like strip twio or algolia my company library and Frameworks like react not GS or longchain or even infrastructure or

cloud services like AWS or vers so and many other tools Docker terraform data dog GitHub you get it it's very diverse

and at YC we've supported many of these Dev tools hundreds of them and we already have two public companies gitlab the open source GitHub and peder Duty

that started as a simple alerting system and now is used by half the 14 500 companies and many others you probably

know about strip Docker Hoku super segment poog Apollo airb and also alonia of course and we've learned a lot from

them so let's dive in and start at the founding stage well first you need a founding team and the key aspect of death tool is that you are going to

build a technical product for developers obviously you need to be a developers yourself most of our co-funding team for Dev tools are all developer teams

and the great thing about death tool is that developers are actually using de tools every day so when you are building a de tool you are basically helping yourself in your action of building a

product so let's take a step back and chat quickly about what are good and bad death tool ideas and as a profess let me start by telling you that with the Advent of llms and a in general it's

actually very difficult to know for sure today what's a good or bad idea the bad ideas the ideas of yesterday could actually be possible to make successful

now thanks to llms some ideas are actually more difficult than others developers every day are going to work on things they are actually not going to like like documentation QA testing and

these become obvious ideas for them to fix for others the problem here is that they are not the only one to think about it and that creates a lot of noise and that's why there are so many of these on

the market do you really want to build the next yet the next QA tool for other developers H I don't know another way to look at it is the difference between

build time and runtime ideas so Doug QA testing all of these ideas are build time ideas things tools you're going to

use when you building the software it happens that these ideas are mostly nice to have you could build your product with them what's more interesting are

runtime ideas why because at run time it becomes really critical it's must have products if you bet on a on API for example you cannot run your own product

if it's down that's why it's more critical and it's way better idea for f tools the other advantage of these

runtime ideas is usage because the more your customers are going to grow usually the more they're going to use your product so your incentives are align

think about stripe for example if their customers sell more product they make more money everyone is happy much better idea another quick category uh that I

can touch upon is libraries and Frameworks these can be greater is usually open source but they can also be very challenging to monetize think about

pandas for example very difficult to make money out of that the one way you can monetize these ideas is by offering a hosting service think about next GS

and Verso for example okay last point I wanted to touch on this idea which is the llm and AI Trend actually with this change in the world there are many new

death tools being created and it's awesome it's so exciting to work on the de tool that's going to help these companies building nlms but it's also a

time where the market is very nent so a obuse great idea is llm observability well uh it's obuse right anyone building with LM they want to know how they are

doing they want to be able to evaluate them guess what many other companies think the same thing and that's why you have dozens if not hundreds of such companies out there it doesn't mean that

it's a bad idea but I think that if you are starting in that space you need to have a clear idea of how you are going to differentiate yourself or are you going to win against all of these

competitors okay which leads me to a few mistakes people often do the first one is waiting for the perfect idea you are going to wait for a very long time let

me go back to this llm observability ideas I would actually encourage you if that's the idea you have just start that's okay even if you don't differentiate yourself right away that's

okay you learn as you go and eventually you'll be able to pull it off or you'll change your idea which leads me to my second mistake sticking with the wrong idea for too long you may not realize

but 50% of the companies in YC eventually pivot from their first idea it's huge and it's also true for death tools

finally last mistake thinking you need a business founder in the team I know that what I start when I created agolia we need up creating agolia with two Tech coers but it crossed our mind hey we

don't know how to sell we need to hire or to find some other co-founder who knows about sell no it's actually ways understand you think to s to learn how

to sell your product actually we check the numbers 74% of YC def tool companies had only Tech co-founders and that's compared to

45% for all of the other companies okay so now that you have a team and an idea where do you start well there is only two things you have to do build and talk

with users there is no specific order you can actually start by talking with users because they're going to help you figure out out if your initial IDE is good or you can start by building a prototype so you can get easier feedback

from users let's speak about that prototype the most important thing here is not to over engineer it you should do that quick and dirty and I know that it

can be very difficult for some developers out there especially for experienced Engineers who Pride themselves on robustness and scalability of their code but the truth is that the

most important thing at that stage is to iterate as fast as you can all of th I would assume that you'll throw away 90%

of all the code you write so your goal at that stage is just to identify the 10% of what you building that's actually valuable as fast as possible and then

later on you can refactor this 10% only and avoid wasting a lot of time as youate of course you'll want to speak with users and get feedback it's completely okay to show them a prototype

please don't wait to have a perfect product just show them a prototype and start Gathering feedback as early as you can and that will eventually lead you to

an MVP a minimal viable product and this word the V is important valuable you need to provide value to your customers

it's much better to be 10x better on a very tiny thing for someone who cares about it well working for a niche is completely okay once you have real

customers who love your product it will be very easy to expand from there let me give you the example of algolia well today algolia is a very broad large like

full featured search engine right but when we started to be honest it was just a glorified autocomplete very minimal but that product was so much better than

whatever else was available at the time that some people cared enough about it and when when we started demonstrating it we didn't have much to show actually

I still remember our first customer that first meeting when I did demo using a command line to index uh content uh we didn't have any API client yet we didn't

have any admin UI yet just a command line and then a very simple web page to show the search that was enough to close a $2,000 a month contract okay you have

built something you can show users so the next step is to talk with users I know that many developers many techers actually introvert and they don't like

speaking with users or with customers like they don't like sales well you may not realize but as you are building a death tool you have a huge Advantage you

know your audience you are your audience you are a developer yourself you speak the language of your customers you are uniquely qualified to understand them so you'll see it actually will be way

easier than you think please don't wait wait for the product to be ready you want to learn ASAP right away if you are solving a real problem then people will

be ready to pay for but how do you find these users two things outre and launches let's speak about Outreach quickly death tool co-founders often

plan to have a bottom up adoption model where individual developers are going to come inbound try the product and convert or maybe becom their Champions U at

bigger companies well I have some bad news for you nobody knows you yet so to get there first you need to get people to know about you and there is no other

way to do that than outreaching and finding them yourself but you need to be smart about it start with your network your previous colleagues or classmates and then you expand from there um

friends of friends you can leverage LinkedIn you can find like specific HS over there but please please personalize your messages

like don't copy what you can see out there sent by marketers actually your developers I'm sure you hate these messages so don't do the same just ask

yourself would you be excited to open your message then ask your co-founder ask other developer friend would they be excited to open your message and then read your email and then possibly act on

it well you simply iterate until they do now let's speak about launching you can launch many times and that's what you should do here to get more

attention the best place to launch for death tools I would AR you is Hacker News Hacker News is a community of intellectually curious people many of

them are developers and there is that section in hacka news called show Eden that's the perfect place to launch and gather feedback on what you are building

again like when you we writing like kind of this Outreach messages please don't do marketing don't try to sell your product just explain plainly and simply

what's new and interesting in what you are building that will be very engaging for the community and they'll share comments to you engage with these comments don't let them unanswered try

to engage with people asking questions some of them are going to be haters and be rude well you should engage with them too but your goal is not to convince them it's just to convince any other

readers who are going to read how you reply to these haers just be classy here one of the great example here is segment um they simply did an experiment by

launching their next idea on Hacker News and it blew up they got hundreds of votes and so many comments that they knew they were onto something and that

became their idea another example is AMA olama helps companies run llms on their own machines well it started as a comment on a comment on another post on

Hacker News and just from that they got a few people interested and and then shortly after they launched their product it complete took off on Hacker News they got like again hundreds of H

votes and they knew they were on do something and they didn't stop there they launched again and again every few months each time they had like new things to share and that continued to

fuel their growth uh creating a lot of excitement in the community Hacker News best place to launch the last thing I wanted to touch upon here in that

section is you should do things that don't scale so again you're here to learn as fast as possible from your users what they like or not about your

product a great example of a team that did things that don't scale is stripe early on the stripe team were going to their customers small startups and they

help them Implement their own product sitting side by side front of the computer coding with them that was not only a great way to make sure that users were going to be satisfied we going to

be actually excited about what they were building but it was also a great way to gather invaluable feedback very early from their users so it's completely okay

to do things that don't scale if they lead to faster learnings okay and here are a few mistakes to avoid so remember the goal is to go fast and trade fast so

please don't choose a text tag because it's cool because you want to learn it no you should took it because of your expertise with it so that you can iterate as fast as possible other

mistakes we we touch not talking with users please get that feedback as fast as you can which also means avoiding overbuilding before getting that

feedback maybe a small thing here be careful about that feedback be careful about not misunderstanding some of the developer feedback back for example they may share they may tell you how you

should beat your product you don't care you just want to know if they would use your product or not and why or they could tell you hey you know what I could build this in a week I don't need it

well guess what you just build it yourself in a week you you should not mind about that just move on and continue improving the product last mistake some teams do is hiring too

early very early on you don't even know if your product uh is providing value please don't hire anyone until you have convinced yourself you're working on the

right idea let's now talk about go to market and the first question you should ask yourself about go to market is your business model what explicitly should

you be open source open source has become one of the main go to market for death tools and it definitely works as a business model as many companies have proven like data breakes elastic ashic

cob gitlab all aome great companies I would argue that you must be open source if you are working on things like a library or framework that's what today expecting for the market developers

wouldn't Implement on top of a new framework that is not open source you should also be open source if you are dealing with data especially sensitive data a new database would need to be

open source or an API connecting with sensitive data in a CRM or maybe an EHR needs to be open source you could be open source but probably don't have to

be open source if you are working on other things like an API or maybe an application like a butt cracker maybe in that case it's not as important but still could be your differentiation open

source has quite a lot of benefits your customers are developers well as you know already developers prefer working with open source tools it's also going to help you create more awareness

through the community it can be also your differentiation like you could be the open source version of X think about post and amplitude or super base and

Firebase or airb and five TR great approach speaking of airb you could also receive contribution from the community in the case of airb they got a lot of connectors contributed from the

community but I would be careful on that one most cases you shouldn't count on them because the quality of the contribution may not be up to your standard and then you have to deal with

the contributors and that could be more actually more difficult than you think but in most cases I would say that you should not count on them good contributions are actually pretty rare

and last benefit but not the least is the trust and it's actually very important for large Enterprises in the Enterprise real take the example of met

Plum for example who is building a open source EHR the fact that they are open source I would argue probably help them shorten their sales cycle with

Enterprises by a year or more there is one thing you need to think about however when you are creating an open source project maybe not at the start but pretty soon it's

monetization if you cannot monetize your product you don't have a company at some point even if it's later in the life of the company you need to earn money there

are many variants out there but it's good to look at the common approaches some of the common ones are hosting having a cloud offer so your customers may use your open source free

self-hosted but they could also pay for you to host it so that they don't have to maintain it sometimes Cloud version also have like some additional features like Team Management another one is

being open core in that case you usually have a a special offer typically an Enterprise offer that have advanced features that are not in the open source version or maybe they're on a def

license common features are typically the ones that are going to to be necessary for Enterprises like SSO o lugs Disaster Recovery slas these kind

of features and finally some open source companies charge for support and services but I would actually discourage you to follow that monetization pass

because your incentive becomes to build the most complex product possible so you can charge for support and services which is a bad incentive and if your product doesn't need too much support then people are going to turn and not

renew their support contract and what if you are not open source well for these Dev tools they are usually following one of two approaches either they usage

based like apis aloia too stripe and so they charge based on the usage their customers do uh possibly they have a volume discount or Enterprise specific

options that are on the side and the second approach is having some specific plans typically like a good better best approach good is going to be the self

serve option um that's going to solve the problem of Developers for a very low price for the better options usually are going to be interacting with engineering managers who are going to care about

collaboration that's going to enable teams still can be self- served and the best option is higher up you are talking to the CTO it's all about security audit

logs Disaster Recovery SLA and in that case it's usually a sales Le approach let's speak about sales so as a quick reminder from what I was saying earlier

don't fear Outreach even if most death tools are going to end up being bottom up and rely on inbound really heavily no one knows you that first and so you need

to start with Outreach that period of founder Outreach is how you start as you get more well known that's when you'll get inbound usually you are going to

have at that point more Self Serve leads and then eventually you end up hiring a sales team to sell to bigger icons Enterprise so should you hire a sales

team well I would argue that you should wait as long as you can start by selling yourself don't delegate away the truth is that you are the only person in the

company today capable of selling your own product if you as the founder cannot sell your product nobody else can as a

rule of Thum I would wait to get to about 1 million AR before hiring your first salesperson and even then try to

hire people who are technical or at least understand developers because developers don't hate speaking with salese actually remember our first sales

peoples at aolia they decided to change the title on LinkedIn and instead of like being sales I can't EXA they called them themselves product specialist and

the nice thing here is that they actually had to own that stages they had to understand the product intely so it was kind of like a great incentive for them to be better at product and a great

way for them to open doors with developers who don't want to speak with sales another example post hog did you know that team the sto is also their

sales leader not a business leader their sales leader is also the CTO is see sales as a nuring problem which is an awesome approach for a death tool if you want to learn more about sales you

should also watched pit talk about Enterprise sales another startup school video so is it different to sell a de tool from selling any other product yes

it is you should have build a sales deck developers like don't want to waste their time reading through a sales deck you should show not tell just two

demonstrations I think that's the best uh sales approach you can do for de to at aloia we didn't have a sales deck before we got to 10 million AR so even

our sales like proper account exacts we are just showing demonstrations uh when they were selling and that was working so much better for everyone you should lean completely in

the tech aspect of your product for example at Alia we sell a lot to e-commerce players and what we realized is that when the buyer is not Technical

and want a turnkey solution we always not always but most of the the time we actually lose the deal but when the buyer is technical or if tech has a lot

of influence in the decision we win way more often so we realized by leaning into that aspect of our product we are an API we are not like a turnkey

solution well we ended up like finding our ICP and having better success selling okay and the last thing that is also true in with inev tool is that most of them are bottom up what that means is

that a lot of people are going to s serve even within Enterprises so instead of going top down just pitching your product directly

sales should also check if some of the Enterprise employees are already using the product and they should then focus on helping management understand what

the product is already doing for them and how much more it could help them if they were to pay for more like new seats or features or additional usage okay so

the last uh topic I wanted to touch in this video is developer marketing your goal is to create a lot of awareness for your product because you want inbound

the first thing you should do is find your community so it could be Hacker News or some subreddit or some Discord out there that is related to what you're

working on but be careful your goal is not to sell your product just yet here just be helpful just establish yourself as the expert and of course people are

going to start knowing you and trust your brand your company that will help you down the line uh people will think about you when they have that problem

launch of that's very important we discussed about uh the example of AMA before uh but that should also be done for the life of your company some

companies even do launch weeks and have been very successful for that it works great for open source for example super Bas is doing that once a quarter buring

all their news in one week a quarter to make as much noise as they can other things you can do make your documentation a first class citizen

documentation is often an after start for developers they prefer coding than actually documenting their code I would argue that documentation should never be

an after it should be part of the product documentation is marketing that's how people are going to interact with your product that's actually the first place people are going after your

homepage and maybe the pricing page stripe and other de tools have really raised expectation there developers have become very demanding that something you

should invest in at algolia we decided that the feature was not ever done until the dock was done and documentation should be written by developers you know

Alia even when we Cruise a team and at some point Point uh we created that documentation team their role was not to write the documentation for the developers they were here to help

developers write better documentations for example they built a tool where it would automatically insert API keys for people who would be logged in so that

when they copy pass the code it would work right away out of the box uh which made the documentation ever more useful for our customers speaking of things that developers should do I would

include support there you should make support a huge part of your marketing your users are developers right

developers hate speaking to these Level One support people who don't know anything about the product they are supporting Engineers should do support

and that's going to to lead to two great things one your users are developers and when they interact with developers who speak their language are going to be way more satisfied actually I have examples

where someone would reach out to support and then the developers like the person doing the support was able to actually fix the bug and deploy in production in like 20 minutes and so that kind of like

blew the customer away like they were so impressed so excited about the product and two it's going to help your own developers much better understand your

customers needs because they're going to face the pain as they supporting them and that's a great way for them to be the better product taking the example of

aloya again we actually waited until hundreds of employees before we built a dedicated support team and then we actually asked our best engineering

manager to build that team support was never a second class citizen for us so developers are doing documentation developers are doing support all of that is your marketing should you even hire

marketing team or when should you do that well similarly to sales I think founder should lead marketing for a long time maybe forever actually

to be honest even at later stage I don't know a single death Tool company that is happy with their CMO when they have a a traditional marketing background why

because traditional marketers they don't really understand the Persona they don't really understand developers only other developers do and developers really hate

being marketed that please don't insult their intelligence you know that because you are developers right well early on at aloria we were actually asking every

single engineer in the team to do what we called a marketing hack every single months a hack could be writing a simple blog post or could be speaking at a

Meetup or could be building hack new search all of our best marketing at aloya was done by developers I would encourage you as you build your marketing team to make sure that you

have a lot of developers in your marketing team because they are the ones who know how to speak to your customers you may ask what about Dev advocate well I love the idea because that means

having developers in your marketing team but it's also a very IL defined role with often a lot of very fuzzy expectations so it's difficult to

measure difficult to build accountability for so my recommendation here would be to wait and first leverage

your existing engineering team and ask them to do some form of marketing or Dev advocacy and probably at Ser day or later it start to make sense to hire

dedicated Dev Advocates even then think about hiring from within or from your committee for example if your open source could be contributors or active

or helpful Discord members these are the best Dev Advocates candidates to join you so let's wrap up and recap what you said here start now please don't wait

for the perfect idea because as you are going to build your product even if it's not the perfect idea you'll do the Reps you learn and that will lead you to the best idea if you don't start you'll

never get anywhere build quickly please please don't over engineer you need to have that very fast iteration Pace where you can learn from your users as you are

building crappy quick and dirty is completely okay early stage and then you refactor what actually matters spend time with with your users like there is no way you're going to learn if you

don't speak with your users learn from them do things that don't scale go to their office spend time with them launch early you might have seen many of our videos where we say there is no shame in

launching early people won't remember you if it doesn't work out but you could get invaluable feedback that will lead you to work on the right product to

build the right thing that people need as you are building a de tool you should consider open source as your Market observe the market observe other players

how they build their product and figure out if open source is the right thing for you but don't dismiss it think about it add before making a choice don't forget you are the best sales person for

your product no one else is going to know your product or your audience as well as you do learning to sell is way easier than learning how to speak with a

developer and finally you are also the best marketing person for your product you know the language of developers you know how to speak with them you know where they're spending their time the

community you know how to access this uh audience okay that's wrapped up for me today thanks for watching the video and if you are building a Dev tool don't

forget you can apply to YC anytime [Music]