Selling to developers is no longer a sure path to insane valuation multiples – Marketingwithanoy

The company of building for and selling to developers is high. Startups around the world are creating new developer-focused — or at leastforward — solutions at a rapid pace.

The “developer tools” tag on Marketingwithanoy has been busy this year. We’ve covered recent news in the space from Hardhat, CodeSee, Harness, and Gadget, to share a few individual items.

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The concept of selling to developers is attractive. Many startups build API-first, creating tools and services that software engineers can connect to their existing products or workflows. This creates a dynamic where sales are often self-service and pricing is based more on usage than the per-seat model that has made SaaS ubiquitous.

Investors also get excited by building things for developers and selling them directly to their end user. Data indicates that more than $37 billion was put into developer tool startups last year, a huge amount for any category.

The space we describe is broad, including companies like Hashicorp, which went public last year and build developer tools related to infrastructure and security. GitLab also went public last year on the back of its git-like code repo service for developers. And Samsara went public as 2021 drew to a close, selling IoT solutions to developers, including an API.

You might think that with the venture capital piling up in the technology business model category and a number of recent IPOs to reference, the market for such work would be hotter than ever. And yet.

Boldstart Ventures’ Ed Simo noted yesterday that public, developer and infrastructure-focused startups have seen their valuations plummet in recent quarters:

This, of course, got us thinking, as the venture capital surge in 2021 raking in the developer’s first products was based in part on that year’s public-market valuations. And they have fallen dramatically. The trend is not exactly new, although recent data makes this very clear.

It’s worth mentally going back to the late 2020 IPO. The company’s growth story was a bit odd and the pricing was seemingly a bit rich. Then it shot out the gates of the public market like a racehorse, pushing its appreciation into the stratosphere. Since then, however, things have changed.

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