DevTools — A High Tech Led Industrial Revolution
And How Autogenerated Code Will Accelerate R&D Teams In The Future
If You Have No Past, You Have No Future
The first industrial revolution replaced manual work with the invention of the steam engine while the second revolution enabled mass production using electric energy. The third and most recent revolution brought forth the rise of electronics, telecommunications, and, of course, computers.
As we continue moving through the fourth industrial revolution, we see a shift towards renewable energy, Big Data, AI/ML, and Robotics. The next phase is “Auto Development” — machine-powered autogenerated code, inspired by real human-generated code, allowing companies to choose whether they want to produce more products or produce the same products with a smaller workforce.
In this article, I will take you through the different verticals, the Israeli ecosystem, global investment trends, and tips for building the next big DevTool company.
The economist Joseph Schumpeter called previous revolutions “a creative destruction”
With today’s new development solutions the “HOW” might be more of the same, but the “WHY” and “WHAT” are a human treat machine can’t mimic (yet..).
Pushing forward innovation would still need brilliant scientists and architects to invent new advanced technologies. But product companies nowadays can count on autogenerated code and operations to provide the same deliverables as their R&D workforce.
Enterprises use more mature Auto-Development products (AKA “DevTools”), typically from the data management and production segments (like JFrog) or test-flight new products being pushed by large providers like IBM or Microsoft.
On the other hand, budget sensitive startups are more likely to become early adopters of new technologies driven by the developer communities.
DevTools Segments Explained
- R&D productivity — Companies know how to track issues and manage software projects with Git and Jira, the next step is to take the accumulated data and turn it into actionable insights. Examples: Github Copilot, Swimm
- Data & AI/ML Infrastructure — Products and solutions that help reduce costs and time to insights, from faster processing (run-time) to developing more data flows faster (design-time). Examples: Snowflake, Upsolver
- No-Code / Low-Code (NCLC) — Visual development environments that allow developers to drag and drop application components (visual or conceptual), connect them together and generate new codebases. Examples: Webflow, Google AppSheet
- QA Automation — Helps QA team to automate routine tasks and execute test cases multiple times at a scale by writing code that tests the code. Examples: Jmeter, Postman
- DevOps & Production Management Automation — Task performance with reduced human assistance to advance processes between operations and development. Examples: Kubernetes/Docker, JFrog
- More: There are more segments that accelerate development and I have deliberately neglected such as Product Management Tools, UX/UI, Business Process Automation, the Open-Source movement, Cloud/SaaS products, and software development methodologies.
The Israeli DevTools Ecosystem
What To Expect When Building Your Next DevTool Company?
Read this update from 2023: https://medium.com/@DanielRasta/quick-update-devtools-in-2023-ded874b62138
Fundraising & Trends
- An average time from foundation to seed round is 2 years and the average seed round size is $5M, probably due to the time taken to find a PMF.
- The average time to an exit is 7 years, and you are more likely to be acquired for your technology and community than to IPO independently.
- VC conviction is often driven by enterprises and fortune 500 companies adapting a space. Today, 40% of the companies listed in the S&P 500 already use NCLC platforms.
- Since 2012 most of the capital in this space went to investments in Data Infrastructure and DevOps/production tools, but starting in 2015 there is a slow increase in NCLC companies funding. The years 2019–2020 show investments are trending towards NCLC, QA automation, and R&D productivity tools.
- Israel is competing head to head with the US in the number of companies but is still a third of the capital invested, most likely that the US based VCs will start to take interest in what Israel has to offer in this space.
Tips For Building A Successful DevTool Company
A Very Important Summary
This progress is inevitable. A business-led product supported by technology is better than a technology-led product supported by business.
DevTools are here to bring business and developers closer, not further apart. While in the past developers were engineers and then integrators, in the future they will become operators.
For Founders — Developers will not go away soon, maybe just shift places and work more efficiently together. It’s a longer cycle to an exit, and in many ways, B2D models have B2C challenges and growth pains and B2B check sizes.
For Funders — The time is now to get in, choose the companies you would like to see selling to enterprises in the next 3–4 years before an M&A.
Working on something new in this space? feel free to reach out!