I came across a smart post from a couple months ago by Sarah Tavel at Bessemer. Says Sarah: “developers are finally a large enough community with enough purchasing power that you can actually build a company just by selling to developers. I’d love to invest in companies doing just that.”
I’ve been thinking about this concept myself for awhile as well — the increasing viability and growing market for “developer productivity” focused apps, tools, companies (Steve Anderson from Baseline Ventures also talked about his interest in the “developer productivity” space in a Founder Stories interview with Chris Dixon awhile back, when he recounted the story of his seed investment in Heroku).
She talks about this trend in the context of the “means of production being handed back to the masses”. I think this is also in line with a great Forbes piece in April 2010 by John Maeda, currently the President of the Rhode Island School of Design, entitled “Your Life In 2020”, in which he said:
"The software industry is poised to embrace its craft heritage. By 2020 software will return to a cottage industry, with bespoke applications made by many, rather than today’s industrialized, Microsoft-esque mass-production and distribution model. It will be part of a larger world movement to make things by hand, infused with emotion and integrity."
I agree with Sarah that it’s going to be an amazing space to invest in in the coming years, as the definition of “developer” expands, the growth of APIs accelerates, and the emphasis on simplification continues.
Sarah talks about three types of companies in this area that interest her:
(1) Further Democratizing Software Development (starting with Rackspace/AWS on the infrastructure level, moving up the stack to the “platform as a service” companies like Heroku, Force.com, Engine Yard, and looking out to companies like Pantheon and Wix);
(2) ”Developer Components” (e.g., Twilio and SendGrid);
(3) Developer “Picks and Shovels” (web-based tools for devs such as Pivotal Tracker, Flowdock, Koding, Nodeable).
I would think that a company like New Relic (SaaS application performance management) would also fall into one of these buckets. And I’d also be interested in digging deeper on the distinction between her 2nd and 3rd buckets above.
Building for the builders: definitely an interesting space to watch. And so meta.
UPDATE: Another interesting new startup in this general space is ReportGrid (a TechStars Boulder 2011 company), who with their new cloud-based Precog.io product is aiming to simplify developers’ lives by allowing them to build customer-facing big data analytics and reporting into their apps via “zero-configuration” APIs.
UPDATE 2: I’d also add that another reason this is an attractive investment area is that in the context of the current fairly “frothy” fundraising environment, the talk about the “Series A Crunch" and talk about investors fleeing consumer and moving into B2B, companies that are building something that will continue to be needed will experience secular growth, or at least survive any future or pending downturn. Companies creating for the “Developer Renaissance” just have to be in this category, in my view.
I can’t really envision developers tossing out their usage of products that improve their productivity wholesale just because the startup funding environment shifts. Another way of saying this is that “developer productivity” tools can, if done right, create valuable customer lock-in, and even better, with an audience (devs/hackers) that can be rabid about the tools they love.