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Inside GitLab’s IPO filing
While the technology and business world worked towards the weekend, developer operations (DevOps) firm GitLab filed to go public. Before we get into our time off, we need to pause, digest the company’s S-1 filing, and come to some early conclusions.
GitLab competes with GitHub, which Microsoft purchased for $7.5 billion back in 2018.
The company is notable for its long-held, remote-first stance, and for being more public with its metrics than most unicorns — for some time, GitLab had a November 18, 2020 IPO target in its public plans, to pick an example. We also knew when it crossed the $100 million recurring revenue threshold.
Considering GitLab’s more recent results, a narrowing operating loss in the last two quarters is good news for the company.
The company’s IPO has therefore been long expected. In its last primary transaction, GitLab raised $286 million at a post-money valuation of $2.75 billion, per Pitchbook data. The same information source also notes that GitLab executed a secondary transaction earlier this year worth $195 million, which gave the company a $6 billion valuation.
Let’s parse GitLab’s growth rate, its final pre-IPO scale, its SaaS metrics, and then ask if we think it can surpass its most recent private-market price. Sound good? Let’s rock.
The GitLab S-1
GitLab intends to list on the Nasdaq under the symbol “GTLB.” Its IPO filing lists a placeholder $100 million raise estimate, though that figure will change when the company sets an initial price range for its shares. Its fiscal year ends January 31, meaning that its quarters are offset from traditional calendar periods by a single month.
Let’s start with the big numbers.
In its fiscal year ended January 2020, GitLab posted revenues of $81.2 million, gross profit of $71.9 million, an operating loss of $128.4 million, and a modestly greater net loss of $130.7 million.
And in the year ended January 31, 2021, GitLab’s revenue rose roughly 87% to $152.2 million from a year earlier. The company’s gross profit rose around 86% to $133.7 million, and operating loss widened nearly 67% to $213.9 million. Its net loss totaled $192.2 million.
This paints a picture of a SaaS company growing quickly at scale, with essentially flat gross margins (88%). Growth has not been inexpensive either — GitLab spent more on sales and marketing than it generated in gross profit in the past two fiscal years.
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China roundup: Beijing wants tech giants to shoulder more social responsibilities
Hello and welcome back to TechCrunch’s China roundup, a digest of recent events shaping the Chinese tech landscape and what they mean to people in the rest of the world.
This week, the gaming industry again became a target of Beijing, which imposed arguably the world’s strictest limits on underage players. On the other hand, China’s tech titans are hastily answering Beijing’s call for them to take on more social responsibilities and take a break from unfettered expansion.
Gaming curfew
China dropped a bombshell on the country’s young gamers. As of September 1, users under the age of 18 are limited to only one hour of online gaming time: on Fridays, Saturdays and Sundays between 8-9 p.m.
The stringent rule adds to already tightening gaming policies for minors, as the government blames video games for causing myopia, as well as deteriorating mental and physical health. Remember China recently announced a suite of restrictions on after-school tutoring? The joke going around is that working parents will have an even harder time keeping their kids occupied.
A few aspects of the new regulation are worth unpacking. For one, the new rule was instituted by the National Press and Publication Administration (NPPA), the regulatory body that approves gaming titles in China and that in 2019 froze the approval process for nine months, which led to plunges in gaming stocks like Tencent.
It’s curious that the directive on playtime came from the NPPA, which reviews gaming content and issues publishing licenses. Like other industries in China, video games are subject to regulations by multiple authorities: NPPA; the Cyberspace Administration of China (CAC), the country’s top internet watchdog; and the Ministry of Industry and Information Technology, which oversees the country’s industrial standards and telecommunications infrastructure.
As analysts long observe, the mighty CAC, which sits under the Central Cyberspace Affairs Commission chaired by President Xi Jinping, has run into “bureaucratic struggles” with other ministries unwilling to relinquish power. This may well be the case for regulating the lucrative gaming industry.
For Tencent and other major gaming companies, the impact of the new rule on their balance sheet may be trifling. Following the news, several listed Chinese gaming firms, including NetEase and 37 Games, hurried to announce that underage players made up less than 1% of their gaming revenues.
Tencent saw the change coming and disclosed in its Q2 earnings that “under-16-year-olds accounted for only 2.6% of its China-based grossing receipts for games and under-12-year-olds accounted for just 0.3%.”
These numbers may not reflect the reality, as minors have long found ways around gaming restrictions, such as using an adult’s ID for user registration (just as the previous generation borrowed IDs from adult friends to sneak into internet cafes). Tencent and other gaming firms have vowed to clamp down on these workarounds, forcing kids to seek even more sophisticated tricks, including using VPNs to access foreign versions of gaming titles. The cat and mouse game continues.
Prosper together
While China curtails the power of its tech behemoths, it has also pressured them to take on more social responsibilities, which include respecting the worker’s rights in the gig economy.
Last week, the Supreme People’s Court of China declared the “996” schedule, working 9 a.m. to 9 p.m. six days a week, illegal. The declaration followed years of worker resistance against the tech industry’s burnout culture, which has manifested in actions like a GitHub project listing companies practicing “996.”
Meanwhile, hardworking and compliant employees have often been cited as a competitive advantage of China’s tech industry. It’s in part why some Silicon Valley companies, especially those run by people familiar with China, often set up branches in the country to tap its pool of tech talent.
The days when overworking is glorified and tolerated seem to be drawing to an end. Both ByteDance and its short video rival Kuaishou recently scrapped their weekend overtime policies.
Similarly, Meituan announced that it will introduce compulsory break time for its food delivery riders. The on-demand services giant has been slammed for “inhumane” algorithms that force riders into brutal hours or dangerous driving.
In groundbreaking moves, ride-hailing giant Didi and Alibaba’s e-commerce rival JD.com have set up unions for their staff, though it’s still unclear what tangible impact the organizations will have on safeguarding employee rights.
Tencent and Alibaba have also acted. On August 17, President Xi Jinping delivered a speech calling for “common prosperity,” which caught widespread attention from the country’s ultra-rich.
“As China marches towards its second centenary goal, the focus of promoting people’s well-being should be put on boosting common prosperity to strengthen the foundation for the Party’s long-term governance.”
This week, both Tencent and Alibaba pledged to invest 100 billion yuan ($15.5 billion) in support of “common prosperity.” The purposes of their funds are similar and align neatly with Beijing’s national development goals, from growing the rural economy to improving the healthcare system.
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Serverless Stack raises $1M for open-source application framework
Open-source framework startup Serverless Stack announced Friday that it raised $1 million in seed funding from a group of investors that includes Greylock Partners, SV Angel and Y Combinator.
The company was founded in 2017 by Jay V and Frank Wang in San Francisco, and they were part of Y Combinator’s 2021 winter batch.
Serverless Stack’s technology enables engineers to more easily build full-stack serverless apps. CEO V said he and Wang were working in this space for years with the aim of exposing it to a broader group of people.
While tooling around in the space, they determined that the ability to build serverless apps was not getting better, so they joined Y Combinator to hone their idea on how to make the process easier.
Here’s how the technology works: The open-source framework allows developers to test and make changes to their applications by directly connecting their local machines to the cloud. The problem with what V called an “old-school process” is that developers would upload their apps to the cloud, wait for it to run and then make any changes. Instead, Serverless Stack connects directly to the cloud for the ability to debug applications locally, he added.
Since its launch six months ago, Serverless Stack has grown to over 2,000 stars on GitHub and was downloaded more than 60,000 times.
Dalton Caldwell, managing director of YC, met V and Wang at the cohort and said he was “super impressed” because the pair were working in the space for a long time.
“These folks are experts — there are probably just half a dozen people who know as much as they do, as there aren’t that many people working on this technology,” Caldwell told TechCrunch. “The proof is in the pudding, and if they can get people to adopt it, like they did on GitHub so far, and keep that community engagement, that is my strongest signal of staying power.”
V has earmarked the new funding to expand the team, including hiring engineers to support new use cases.
Serverless initially gravitated toward specific use cases — APIs are now allowing its community to chime in and it is using that as a guide, V said. It recently announced more of a full-stack use case for building out APIs with a database and also building out the front end frameworks.
Ultimately, V’s roadmap includes building out more tools with a vision of getting Serverless Stack to the point where a developer can come on with an idea and take it all the way to an IPO using his platform.
“That’s why we want the community to drive the roadmap,” V told TechCrunch. “We are focused on what they are building and when they are in production, how they are managing it. Eventually, we will build out a dashboard to make it easier for them to manage all of their applications.”
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GitHub previews new AI tool that makes coding suggestions
GitHub has unveiled a new product that leverages artificial intelligence to help you write code more efficiently. Named GitHub Copilot, today’s new product can suggest lines of code and even sometimes entire functions.
GitHub has partnered with OpenAI to develop this tool. It doesn’t replace developers, it’s just a tool that should improve productivity and make it easier to learn how to code. GitHub frames this new tool as an AI pair programmer.
The model behind GitHub Copilot has been trained on billions of lines of code — many of them are hosted and available publicly on GitHub itself. When you’re writing code, GitHub Copilot suggests code as you type. You can cycle through suggestions, accept or reject them.
In order to figure out what you’re currently coding, GitHub Copilot tries to parse the meaning of a comment, the name of the function you are writing or the past couple of lines. The company shows a few demos on its website.
Image Credits: GitHub
In particular, you can describe a function in plain English in a comment and then convert it to actual code. If you’re getting started with a new language or you’ve been using no-code or low-code tools in the past, that feature could be useful.
If you’re writing code every day, GitHub Copilot can be used to work with a new framework or library. You don’t have to read the documentation from start to finish as GitHub Copilot already knows the specific functions and features of the framework you’re working with. It could also replace many Stack Overflow queries.
GitHub Copilot integrates directly with Visual Studio Code. You can install it as an extension or use it in the cloud with GitHub Codespaces. Over time, the service should improve based on how you interact with GitHub Copilot. As you accept and reject suggestions, those suggestions should get better.
Currently available as a technical preview, GitHub plans to launch a commercial product based on GitHub Copilot. It currently works best with Python, JavaScript, TypeScript, Ruby and Go.
Image Credits: GitHub
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Vercel raises $102M Series C for its front-end development platform
Vercel, the company behind the popular open-source Next.js React framework, today announced that it has raised a $102 million Series C funding round led by Bedrock Capital. Existing investors Accel, CRV, Geodesic Capital, Greenoaks Capital and GV also participated in this round, together with new investors 8VC, Flex Capital, GGV, Latacora, Salesforce Ventures and Tiger Global. In total, the company has now raised $163 million and its current valuation is $1.1 billion.
As Vercel notes, the company saw strong growth in recent months, with traffic to all sites and apps on its network doubling since October 2020. The number of sites among the world’s largest 10,000 websites that use Next.js grew 50% in the same time frame, too.
Image Credits: Vercel
Given the open-source nature of the Next.js framework, not all of these users are obviously Vercel customers, but its current paying customers include the likes of Carhartt, Github, IBM, McDonald’s and Uber.
“For us, it all starts with a front-end developer,” Vercel CEO Guillermo Rauch told me. “Our goal is to create and empower those developers — and their teams — to create delightful, immersive web experiences for their customers.”
With Vercel, Rauch and his team took the Next.js framework and then built a serverless platform that specifically caters to this framework and allows developers to focus on building their front ends without having to worry about scaling and performance.
Older solutions, Rauch argues, were built in isolation from the cloud platforms and serverless technologies, leaving it up to the developers to deploy and scale their solutions. And while some potential users may also be content with using a headless content management system, Rauch argues that increasingly, developers need to be able to build solutions that can go deeper than the off-the-shelf solutions that many businesses use today.
Rauch also noted that developers really like Vercel’s ability to generate a preview URL for a site’s front end every time a developer edits the code. “So instead of just spending all your time in code review, we’re shifting the equation to spending your time reviewing or experiencing your front end. That makes the experience a lot more collaborative,” he said. “So now, designers, marketers, IT, CEOs […] can now come together in this collaboration of building a front end and say, ‘that shade of blue is not the right shade of blue.’”
“Vercel is leading a market transition through which we are seeing the majority of value-add in web and cloud application development being delivered at the front end, closest to the user, where true experiences are made and enjoyed,” said Geoff Lewis, founder and managing partner at Bedrock. “We are extremely enthusiastic to work closely with Guillermo and the peerless team he has assembled to drive this revolution forward and are very pleased to have been able to co-lead this round.”
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Iterative raises $20M for its MLOps platform
Iterative, an open-source startup that is building an enterprise AI platform to help companies operationalize their models, today announced that it has raised a $20 million Series A round led by 468 Capital and Mesosphere co-founder Florian Leibert. Previous investors True Ventures and Afore Capital also participated in this round, which brings the company’s total funding to $25 million.
The core idea behind Iterative is to provide data scientists and data engineers with a platform that closely resembles a modern GitOps-driven development stack.
After spending time in academia, Iterative co-founder and CEO Dmitry Petrov joined Microsoft as a data scientist on the Bing team in 2013. He noted that the industry has changed quite a bit since then. While early on, the questions were about how to build machine learning models, today the problem is how to build predictable processes around machine learning, especially in large organizations with sizable teams. “How can we make the team productive, not the person? This is a new challenge for the entire industry,” he said.
Big companies (like Microsoft) were able to build their own proprietary tooling and processes to build their AI operations, Petrov noted, but that’s not an option for smaller companies.
Currently, Iterative’s stack consists of a couple of different components that sit on top of tools like GitLab and GitHub. These include DVC for running experiments and data and model versioning, CML, the company’s CI/CD platform for machine learning, and the company’s newest product, Studio, its SaaS platform for enabling collaboration between teams. Instead of reinventing the wheel, Iterative essentially provides data scientists who already use GitHub or GitLab to collaborate on their source code with a tool like DVC Studio that extends this to help them collaborate on data and metrics, too.
Image Credits: Iterative
“DVC Studio enables machine learning developers to run hundreds of experiments with full transparency, giving other developers in the organization the ability to collaborate fully in the process,” said Petrov. “The funding today will help us bring more innovative products and services into our ecosystem.”
Petrov stressed that he wants to build an ecosystem of tools, not a monolithic platform. When the company closed this current funding round about three months ago, Iterative had about 30 employees, many of whom were previously active in the open-source community around its projects. Today, that number is already closer to 60.
“Data, ML and AI are becoming an essential part of the industry and IT infrastructure,” said Leibert, general partner at 468 Capital. “Companies with great open-source adoption and bottom-up market strategy, like Iterative, are going to define the standards for AI tools and processes around building ML models.”
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SaaS companies can grow to $20M+ ARR by selling exclusively to developers
With more than 200,000 customers, a market cap of nearly $56 billion, and the recent acquisition of Segment for $3.2 billion, Twilio is a SaaS behemoth.
It’s hard to imagine companies like Twilio as anything but a giant. But everybody starts out small, and you can usually trace success back to key decisions made in the early days.
First, you need to have a product that developers can actually sign up for. This means ditching demos for real-time free trials or freemium tools.
For Twilio, a big differentiator was being one of the first technology-focused SaaS organizations that focused on empowering and building for the end user (which in their case is developers) with a self-service function. Another differentiator was, the executive team designed the organization to create tight feedback loops between sales and product with national roadshows, during which CEO Jeff Lawson frequently met with users.
Moreover, Twilio’s “secret sauce” per their S-1 is a developer-focused model and a strong belief in the future of software. They encourage developers to explore and innovate with Twilio’s flexible offering, which led to an incredible 155% net-dollar expansion rate at the time of the IPO.
Most importantly, Twilio put the product in the hands of teams before the sale happened, standing by to answer hard questions about how Twilio would fit into their infrastructure. This was pretty rare at the time — sales engineering resources aren’t cheap — and it was a strong differentiating factor. So much so that when the company went public, they were growing at 106% annually.
Twilio sells to developers at large enterprises by solving a problem that developers come up against regularly: Getting in touch with customers.
But as more successful public software companies emerge, it’s clear that Twilio’s secret sauce can and will be replicated.
Why traditional marketing doesn’t work on developers
Before I started looking at successful developer-focused businesses, I understood the developer-focused playbook to look a little like this:
- Don’t hire marketing (or sales, either). If you do, hire someone super experienced from an enterprise sales background. And then fire them within three to six months.
- Just hire someone who’s passionate about the product to “manage the community.” What is community management? Lots of swag. Cool meetups. Publish 1–2 articles as a stab at content (bonus points if they’re listicles). Oh, wait. How can we show the ROI here? Make the community manager do that until she quits. Repeat.
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Cycode raises $20M to secure DevOps pipelines
Israeli security startup Cycode, which specializes in helping enterprises secure their DevOps pipelines and prevent code tampering, today announced that it has raised a $20 million Series A funding round led by Insight Partners. Seed investor YL Ventures also participated in this round, which brings the total funding in the company to $24.6 million.
Cycode’s focus was squarely on securing source code in its early days, but thanks to the advent of infrastructure as code (IaC), policies as code and similar processes, it has expanded its scope. In this context, it’s worth noting that Cycode’s tools are language and use case agnostic. To its tools, code is code.
“This ‘everything as code’ notion creates an opportunity because the code repositories, they become a single source of truth of what the operation should look like and how everything should function, Cycode CTO and co-founder Ronen Slavin told me. “So if we look at that and we understand it — the next phase is to verify this is indeed what’s happening, and then whenever something deviates from it, it’s probably something that you should look at and investigate.”
Cycode Dashboard. Image Credits: Cycode
The company’s service already provides the tools for managing code governance, leak detection, secret detection and access management. Recently it added its features for securing code that defines a business’ infrastructure; looking ahead, the team plans to add features like drift detection, integrity monitoring and alert prioritization.
“Cycode is here to protect the entire CI/CD pipeline — the development infrastructure — from end to end, from code to cloud,” Cycode CEO and co-founder Lior Levy told me.
“If we look at the landscape today, we can say that existing solutions in the market are kind of siloed, just like the DevOps stages used to be,” Levy explained. “They don’t really see the bigger picture, they don’t look at the pipeline from a holistic perspective. Essentially, this is causing them to generate thousands of alerts, which amplifies the problem even further, because not only don’t you get a holistic view, but also the noise level that comes from those thousands of alerts causes a lot of valuable time to get wasted on chasing down some irrelevant issues.”
What Cycode wants to do then is to break down these silos and integrate the relevant data from across a company’s CI/CD infrastructure, starting with the source code itself, which ideally allows the company to anticipate issues early on in the software life cycle. To do so, Cycode can pull in data from services like GitHub, GitLab, Bitbucket and Jenkins (among others) and scan it for security issues. Later this year, the company plans to integrate data from third-party security tools like Snyk and Checkmarx as well.
“The problem of protecting CI/CD tools like GitHub, Jenkins and AWS is a gap for virtually every enterprise,” said Jon Rosenbaum, principal at Insight Partners, who will join Cycode’s board of directors. “Cycode secures CI/CD pipelines in an elegant, developer-centric manner. This positions the company to be a leader within the new breed of application security companies — those that are rapidly expanding the market with solutions which secure every release without sacrificing velocity.”
The company plans to use the new funding to accelerate its R&D efforts, and expand its sales and marketing teams. Levy and Slavin expect that the company will grow to about 65 employees this year, spread between the development team in Israel and its sales and marketing operations in the U.S.
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Cased announces $2.25M seed round to help developers work in production environments
An issue every developer faces is dealing with problems on a live application without messing it up. In fact, in many companies such access is restricted. Cased, an early stage startup, has come up with a solution to provide a way to work safely with the live application.
Today, the company announced a $2.25 million seed round led by Founders Fund along with a group of prestigious technology angel investors. The company also announced that the product is generally available to all developers today for the first time. It’s worth noting that the funding actually closed last April, and they are just announcing it today.
Bryan Byrne, CEO and co-founder at Cased says he and his fellow co-founders, all of whom cut their teeth at GitHub, experienced this problem of working in live production environments firsthand. He says that the typical response by larger companies is to build a tool in-house, but this isn’t an option for many smaller companies.
“We saw firsthand at GitHub how the developer experience gets more difficult over time, and it becomes more difficult for developers to get production work done. So we wanted to provide a developer friendly way to get production work done,” Byrne explained.
He said without proper tooling, it forces CTOs to restrict access to the production code, which in turn makes it difficult to fix problems as they arise in production environments. “Companies are forced to restrict access to production and restrict access to tools that developers need to work in production. A lot of the biggest tech companies invest in millions to deliver great developer experiences, but obviously smaller companies don’t have those resources. So we want to give all companies the building blocks they need to deliver a great developer experience out of the box,” he said.
This involves providing development teams with open access to production command line tools by adding logging and approval workflows to sensitive operations. That enables executives to open up access with specific rules and the ability to audit who has been accessing the production environment.
The company launched at the beginning of last year and the founders have been working with design partners and early customers prior to officially opening the site to the general public today.
They currently have five people including the four founders, but Byrne says that they have had a good initial reaction to the product and are in the process of hiring additional employees. He says that as they do, diversity and inclusion is a big priority for the founders, even as a very early stage company.
“It’s very prominent in our company handbook, so that we make sure we prioritize an inclusive culture from the very beginning because [ … ] we know firsthand that if you don’t invest in that early, it can really hold you back as a company and as a culture. Culture starts from day one, for sure,” he said.
As part of that, the company intends to be remote first even post-pandemic, a move he believes will make it easier to build a diverse company.
“We will definitely be remote first. We believe that also helps with diversity and inclusion as you allow people to work from anywhere, and we have a lot of experience in leading remote-first culture from our time at GitHub, so we began as a remote culture and we will continue to do that,” he said.
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1Password acquires SecretHub and launches new enterprise secrets management tool
1Password, the password management service that competes with the likes of LastPass and BitWarden, today announced a major push beyond the basics of password management and into the infrastructure secrets management space. To do so, the company has acquired secrets management service SecretHub and is now launching its new 1Password Secrets Automation service.
1Password did not disclose the price of the acquisition. According to CrunchBase, Netherlands-based SecretHub never raised any institutional funding ahead of today’s announcement.
For companies like 1Password, moving into the enterprise space — and managing corporate credentials, API tokens, keys and certificates for individual users and their increasingly complex infrastructure services — seems like a natural move. And with the combination of 1Password and its new Secrets Automation service, businesses can use a single tool that covers them, from managing their employee’s passwords to handling infrastructure secrets. 1Password is currently in use by more then 80,000 businesses worldwide, and a lot of these are surely potential users of its Secrets Automation service, too.
“Companies need to protect their infrastructure secrets as much if not more than their employees’ passwords,” said Jeff Shiner, CEO of 1Password. “With 1Password and Secrets Automation, there is a single source of truth to secure, manage and orchestrate all of your business secrets. We are the first company to bring both human and machine secrets together in a significant and easy-to-use way.”
In addition to the acquisition and new service, 1Password also today announced a new partnership with GitHub. “We’re partnering with 1Password because their cross-platform solution will make life easier for developers and security teams alike,” said Dana Lawson, VP of partner engineering and development at GitHub, the largest and most advanced development platform in the world. “With the upcoming GitHub and 1Password Secrets Automation integration, teams will be able to fully automate all of their infrastructure secrets, with full peace of mind that they are safe and secure.”
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