[Music] Hello, my name is Nicolas 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 dev tools and how to start a dev 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 dev tools. But first, what is a dev tool? So a dev tool is software that is used by developers to help them build products, 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 ideas like VS Code, APIs like Stripe, Twilio, or Algolia, my company. Libraries and frameworks like React, Node.js, or

LangChain, or even infrastructure or cloud services like AWS or Vercel. So, and many other tools: Docker, Terraform, DataDog, 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 PagerDuty that started as a simple alerting system and now is used by half of the 14,500 companies. And many others you probably know about: Stripe, Docker, Hoku, Super Segment, Poog, Apollo, AirBnB, and also Algolia.

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 dev tools is that you are going to build a technical product for developers. Obviously, you need to be a developer yourself. Most of our co-founding teams for dev tools are all developer teams, and the great thing about dev tools is that developers are actually using dev tools every day. So when you are building a dev 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 dev tool ideas. And as a professor, let me start by telling you that with the advent of LLMs and AI 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, the next QA tool for other developers? 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're 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 runtime, it becomes really critical, it's must-have products. If you bet on an API for example, you cannot run your own product

if it's down. That's why it's more critical and it's a way better idea for dev 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 aligned.

Think about Stripe for example, if their customers sell more products 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 great, it's 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.js and Vercel for example. Okay, last point I wanted to touch on is this idea which is the LLM and AI trend. Actually, with this

change in the world, there are many new dev tools being created and it's awesome, it's so exciting to work on the dev tool that's going to help these companies building LLMs. But it's also a time where the market is very nascent, so a

obvious great idea is LLM observability. Well, uh it's obvious, right? Anyone building with LLMs, 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 how you are 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 idea. 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 dev tools. Finally, last mistake: thinking you need a business founder in the team. I know that

what I started when I created Algolia. We ended up creating Algolia with two tech co-founders, 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 sales.' No, it's actually way

easier to understand. You think to start to learn how to sell your product. Actually, we checked the numbers: 74% of YC dev 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 are 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 if your initial idea 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 the, 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're 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 you iterate, 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 techies actually introverts 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 dev 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 it but how do you find these users two things outreach and launches let's speak about outreach quickly dev 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 become your champions 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 devs 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 friends, 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

dev tools I would recommend to you is Hacker News. Hacker News is a community of intellectually curious people, many of them are developers, and there is that section in Hacker News called 'Show HN'. That's the perfect place to launch and gather feedback on what you are building.

Again, like when you're writing like kind of this outreach message, 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 haters. Just be classy here. One of the great examples 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 Llama. Llama 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 then

shortly after they launched their product, it completely took off on Hacker News. They got like again hundreds of votes, and they knew they were onto 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 helped them implement their own product

sitting side by side in 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're 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 tech stack because

it's cool because you want to learn it no you should choose 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 build 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-markets for dev tools, and it definitely works as a business model, as many companies have

proven, like DataBricks, Elastic, HashiCorp, GitLab, all some 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's 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 Postman and Amplitude, or Supabase and

Firebase, or Airtable and FiveTran. Great approach. Speaking of Airtable, you could also receive contributions from the community. In the case of Airtable, 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 realm, take the example of Medplum for example, who is building an open source EHR. The fact that they are open

source, I would argue, probably helps 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 versions 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 different license. Common features are typically the ones that are going to to be necessary for Enterprises, like SSO, logs, 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 path 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're usage-based, like APIs, Aloia, 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-led approach. Let's speak about sales. So, as a quick reminder from what I was saying earlier, don't fear Outreach, even if most Dev

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 thumb, I would wait to get to about $1 million ARR 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 sales. Actually, remember our first sales people at Aeolia? They decided to change the title on LinkedIn and instead of like being sales, I can't exactly... they called

them themselves product specialists. And the nice thing here is that they actually had to own that stage. They had to understand the product intently. 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, PostHog. Did you know that team? The CTO is also their sales leader, not a business leader. Their sales leader is also the CTO. He sees sales as a nurturing problem, which is an awesome approach for a dev tool. If you

want to learn more about sales, you should also watch Pit talk about enterprise sales, another Startup School video. So, is it different to sell a dev tool from selling any other product? Yes, it is. You should have built 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 B2B. At Aloia, we didn't have a sales deck before we got to 10 million ARR, so even

our sales, like proper account execs, we are just showing demonstrations, uh, when they were selling and that was working so much better for everyone. You should lean completely into the tech aspect of your product. For example, at Aloia, we sell a lot to

e-commerce players, and what we realized is that when the buyer is not technical and wants a turnkey solution, we always, not always, but most of 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 SaaS tools is that most

of them are bottom-up. What that means is that a lot of people are going to self-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 on 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

Base is doing that once a quarter, burning 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 afterthought for developers, they prefer coding than actually documenting their code, I would

argue that documentation should never be an afterthought, 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 dev tools have really

raised expectations 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 doc was done, and documentation should be written by developers, you know, Algolia even when we Cruise a team and at

At some 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 documentation. 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 and paste the code, it would work right away out of the box, uh, which made the documentation even 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 lead to two great things. One, your users are developers, and when they interact with developers who speak their language, they 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 it 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're supporting them, and that's a great way for them to be better product builders. Taking the example of

Alloy, 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 a marketing team or when should you do that? Well, similarly to sales, I think founders should lead marketing for a long time, maybe forever actually, to be honest. Even at later stage, I don't know a single dev tool company that is

happy with their CMO when they have 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 to. 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 month. A hack could be writing a simple blog post, or could be speaking at a Meetup, or could be building a hack. You know

search all of our best marketing at Aloria 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.

How To Start A Dev Tools Company | Startup School

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