🧠 JetBrains - Bootstrapping a $400m Revenues IDE
🧠 JetBrains - Bootstrapping a $400m Revenues IDE
Overlooked #148
Hi, it’s Alexandre from Eurazeo. I’m investing in seed & series A European vertical solutions (vSol) which are industry specific solutions aiming to become industry OS and combining dynamics from SaaS, marketplaces and fintechs. Overlooked is a weekly newsletter about venture capital and vSol.
Today, I’m excited to share a collaborative piece we wrote with Marie from Fly. We have been chatting about writing a post together for a couple months. Finally, we found a great “overlooked” European company named JetBrains. It’s an unbelievable story of a startup born in Czech Republic which bootstrapped its way to $400m in revenues by creating tools for developers including the second most popular Integrated Development Environment (IDE) after Visual Studio. Marie was the perfect person to write this piece given Fly’s deep-expertise in AI, developer tools and enterprise SaaS. If you’re raising a pre-seed or seed round in this space, you should absolutely talk to Marie.
VCs often believe that the world revolves around them, and that the only path to building a billion-dollar tech company is through venture capital. This, of course, is incorrect.
This egotistical passion that we have for our own industry may seem a trivial fact, but it actually has two very important consequences:
It skews the focus towards VC-funded companies, while many tech businesses are actually self-funded, or self-funded until a growth round. Self funded companies can sometimes deter talent and media (but oh boy not customers),
In times of scarce capital, it creates massive existential angst in founders who are led to think that their only option is a next round.
Alex and I have a common passion for overlooked companies and business models. Many of these extraordinary companies remain under the radar due to their unique equity story, which often bypasses having Tier 1 VCs in their cap tables, or even any VCs at all. We've been eager to collaborate on a piece together for some time.
One beautiful morning, I came across this market map and found my excuse.
My first thought was: “oh, they forgot Gitbutler, Scott Chacon’s new company”.
However, my second thought was: “oh shit, they actually forgot one of the major IDE software vendors, a $400m revenue company”.
Our collab was all found, we were set to discuss the most overlooked dev. tools company: JetBrains.
[I’ll shut up now, Alex, the floor is yours.]
History
JetBrains was launched in Prague (Czech Republic) in February 2000 by three Russian immigrants called Sergey Dmitriev (CEO until 2012 before becoming president), Valentin Kipiatkov, and Eugene Belyaev (now working on a new company in Germany called Delightex). It debuted its first product in 2001 called IntelliJ IDEA which is an Integrated Development Environment (IDE) for Java developers. To ensure clarity, an IDE is the productivity application used by programmers to write, edit and test software code. In its first decade, JetBrains had a slow growth in both revenue and user adoption.
Between 2010 and 2012, the company reached a tipping point, propelled by three key factors:
In 2010, JetBrains began developing specific IDEs for programming languages beyond Java starting with WebStorm for Javascript, PhpStorm for PHP and Pycharm for Python.
In 2012, JetBrains introduced its own programming language named Kotlin, initially conceived as a concise and secure alternative to Java while maintaining compatibility with Java’s code.
In 2012, Maxim Shafirov became CEO after having worked 11 years in the company as software engineer (2001-2004) and team lead (2004-2012).
Since then, JetBrains has undergone exponential growth expanding its customer base at a 39% CAGR from 59k customers in 2010 to a staggering 3m customers in 2022. Today, JetBrains has 12 different IDEs including 11 IDEs designed for specific programming languages, and Fleet which serves as a multi-language IDE. Kotlin has emerged as the de facto programming language for Android applications development (95% of the top 1K apps in Google Play use Kotlin and 50% of Android developers use Kotlin as primary language) and has been fully endorsed by Google.
JetBrains is used by 15.9m developers (+3.1m new developers in 2022, vs. 28m active developers when Github was sold to Microsoft and vs. 80m active developers Github has today) with 3.6k new daily users. 90%+ of the top 100 global largest businesses are JetBrains’ customers and 392 new organizations become customers every day. JetBrains has also flagship customers like Google, Nasa, Valve, Tesla, Twitter, and Ubisoft.
Financially, JetBrains never raised external capital. It has around $400m in revenue (+11% YoY in 2022). As a comparison, GitHub was doing $200-300m in revenues when Microsoft acquired the company in 2018. JetBrains is also profitable with $200m in EBITDA generated in 2020.
Product
JetBrains offers a suite of products primarily aimed at developers, which can be categorised into three main groups:
Educational products, open-source languages and frameworks in order to generate awareness within the developers community. On the education side, JetBrains has an Academy providing individuals with the opportunity to learn programming languages directly within their IDE. On the open-source side, JetBrains maintains several open-source projects - the largest one being Kotlin.
IDEs in order to be used daily by developers as well as to start monetising with individual and team subscriptions. JetBrains has an IDE-builder that simplifies the process of creating a new IDE for a specific programming language. JetBrains has gained recognition for its individual IDEs tailored to popular programming languages (Java, Python, Ruby, C, PHP, etc.). In 2021, JetBrains took a significant step forward by introducing Fleet, positioned as a next-generation IDE. It has a faster and cleaner text editor. It incorporates additional features to enhance developers’ productivity (project and context aware code completion, on the fly code quality checks, etc). Fleet serves as a multi-language IDE supporting multiple programming languages within a single environment. Moreover, Fleet is designed as a collaborative IDE, allowing multiple developers to work simultaneously on the same codebase.
Team developers tools and broader collaboration tools aimed at monetising organisations more effectively. JetBrains has always built collaboration tools and developers tools going beyond its IDEs. In 2006, it introduced a CI/CD product called TeamCity. In 2009, it launched a project management tool named YouTrack. More recently, in 2019, JetBrains went one step further launching Space, an all-in-one team collaboration platform. It directly competes with Slack and Asana. It has gain traction being used by over 50k organisations. Space is natively integrated with JetBrains IDEs and provides developers with various tools including Git hosting, code review, CI/CD and package management. On the collaboration front, Space combines elements of popular products such as Slack (chat functionality), Google Drive (document storage), Notion (workspace centered around notes), and Trello (project management).
When taking a step back, there are several interesting insights regarding the evolution of JetBrains' product suite and monetisation:
JetBrains is 100% focused on building the best products for developers prioritising their satisfaction as end-users over optimising for monetisation.
It does not push hard on sales and marketing contrary to competitors.
It goes to the point that their IDEs have an innovative, very dev-friendly perpetual fallback license model in which developers have perpetual access to the version they purchase when they start subscribing. For instance, if their IDE is upgraded from v1 to v2 and they stop paying, they will always have access to v1.
JetBrains managed to expand its usage beyond the developer persona with collaborative products such as Space, YouTrack or DataLore. For example, Space aims to become the OS for developer-centric organisations providing collaborative tools that enable developers to collaborate not only with other developers but also with colleagues in different functions (design, product, etc.) as well as with customers. JetBrains has been increasingly targeting the data-science persona. It began with PyCharm which is an IDE for Python and more recently introduced DataLore which is a collaborative data science platform with features like notebook creation and sharing as well as a business intelligence apps builder.
TL;DR: Developers are actually happy to pay - evangelist customers lead to very capital-efficient dev. tools empires.
[Alex hands over the mic to Marie]
Jetbrains is not the only developer tool that managed to scale immensely with zero capital. This industry’s structure makes it actually possible to build giant companies based on positive word of mouth and customer evangelists, provided the company is customer obsessed and the products are very well executed.
GitHub, the leading version control and collaboration platform has a very similar story.
GitHub was started in 2008 by Chris Wanstrath, Tom Preston-Werner, Scott Chacon, and PJ Hyett. It was self-funded for the major part of its history and well beyond the inflection point.
However, in 2012, it raised a $100m Series A from a16z, and three years later a $250m series B from Sequoia. GitHub was then acquired $7.5bn by Microsoft in 2018, to the discontent of the developer community at the time. Like JetBrains, the team was obsessed with the developer experience, and the product became quickly the preferred solution for a majority of developers.
In the end, JetBrains and Github have similar scale, with Github having 3x of the revenues and 4x the user base of the IDE vendor. In today’s current multiples, JetBrains would be probably worth $2-3bn in the public market as it is profitable and growing over 10% YoY.
Datadog is another example of a capital-efficient dev. tool company powered by an incredible product (I’ll assume everybody heard of this one). It IPOed in 2019 at $333m ARR, having burnt less than $120m.
So, are all dev tools capital efficient?
Yes and no. It is very true of JetBrains, Github or Datadog. The three of them are closed-source developer tools that rely on a PLG motion leading to big enterprise deals, and have (from my understanding) managed to build products that are no-brainer to their customers.
But it is not correct for all dev tools. Hashicorp or Gitlab for instance have a very poor capital efficiency. Hashicorp for example, the maker of IaC Terraform, which is category leader with something like 90% prevalence was not capital efficient with an 0.5 ratio of ARR/Capital spent. (To be fair, we’re still not to the degree of something like a Deliveroo).
A few hypotheses here:
Although they benefit from a great user community, open source models are usually harder to monetise,
Specifically for Gitlab: they were copied early on by Github who offered a similar tool (GitHub Action),
The reason I chose to believe is: People actually have a love/hate relationship with their products (or just plain hate). If you type in Google “I hate Gitlab/Terraform” you end up in an infinite tunnel of Reddit forums and medium posts telling you why it sucks. Or like my friend software engineer at Dataiku summarizes it “Oh it was hyped for a while and then nobody cared”.
On the other hand, if you type “I hate Datadog”, people go out of their way to explain why although atrociously expensive, they love the products.
What’s Next for JetBrains?
So, should tech growth funds actively seek to invest in JetBrains?
JetBrains gets a lot of love from developers due to its IDEs’ focus on enhancing individual productivity. Features such as automated code refactoring and the ability to revert to previous code states are highly acclaimed in JetBrains’ IDEs.
In this context, the advent of GitHub Copilot and numerous startups aiming to 10x developer productivity by leveraging GPT4 pose a potential threat to the IDE vendor. Can JetBrains also introduce not only provide marginal improvements to its products but seamlessly integrate the incredible capabilities offered by LLMs?
I’ll let you scroll back to the map at the beginning if you want a good list, but some serious candidates have already emerged:
GitHub Copilot claims to have garnered over 20m users and to have increased productivity by 50% (ps: VScode the #1 IDE is also owned by GitHub).
Replit secured a $80m round at $800m valuation (yes) to build an IDE naturally collaborative and powered by LLMs (think Google Docs vs. Microsoft Word)
The former CTO of GitHub departed to build a LLM agent that would autonomously function as a junior developer (ish) and raised a $23m seed round. Additionally, select startups with top AI researchers on their team are also pursuing this opportunity like Magic.dev backed by Nat Friedman.
Scott Chacon, GitHub co-founder, and Kiril Videlov, Codeball’s founder, launched Gitbutler. This product is similar to Rewind but specifically tailored for developers and closely integrated with Git.
…!
Obviously, JetBrains is actively riding the wave and has already announced LLM powered features including generated functions, documentation and commit messages (+ a tool to write in CLI for you, because who does not hate regular expressions?).
So are LLMs an extinction event, or JetBrains' chance at building even better products? We will see!
[**mic drop**]
Thanks to Marie for collaborating on this piece and thanks to Julia (🦒) for the feedback! Thanks for reading! See you next week for another issue! 👋