Why We Invested in Sourcegraph
Today Craft Ventures is excited to announce that we are leading the $23 million Series B in Sourcegraph and I will be joining the board. This is the biggest first check we’ve written in a SaaS company so I wanted to take a minute to explain why.
Sourcegraph is the leader in Universal Code Search, a new category enabling developers to manage code sprawl across repositories, languages, tools, and platforms. This is a large and growing problem for enterprise dev teams because of the proliferation of new technologies.
This is a critical need, but what really caught our attention was the bottom-up adoption by engineers. Our favorite kind of SaaS businesses are ones where the employees pull the product into their company as end-users. This freemium usage enables the SaaS vendor to fill up its pipeline, prove value quickly, and speed up the normally lengthy enterprise sales cycle. I’ve described this as a “best of both worlds” sales motion because it combines enterprise budgets with an SMB-like sales cycle.
Bottom-up models are not just great for the vendor, they’re better for customers too. Freemium usage de-risks the purchase, eliminating the possibility that the software ends up as shelfware. When a VP of Engineering buys Sourcegraph, they can be confident that the tool will actually be used. In fact, Sourcegraph has social-networking levels of engagement, with most developers using it every day. If a VP Eng can invest in a tool that their developers are already using that is making them happier and more productive, there is not much downside.
This unique go-to-market and value proposition have enabled Sourcegraph to grow rapidly across and within marquis accounts:
- 4x YoY growth in ARR
- 0% logo churn (never churned an enterprise account)
- Over 200% net revenue retention
- Amazing enterprise logos including Uber, Lyft, Yelp, Convoy and SoFi
As I’ve previously noted, a good heuristic for founders looking for startup ideas is to find an internal tool that an elite tech company has built for itself and turn it into a product that every company can use. In this case, Google and Facebook pioneered code search and built powerful but proprietary tools. Sourcegraph brings this technology to everyone, helping development teams navigate the complex set of tools, languages, and platforms that all enterprises have adopted.
Not only is Sourcegraph democratizing Universal Code Search, it has pushed the category definition further by attaching new workflows to search, such as the ability to manage code change campaigns. For example, the VP of Engineering can use Sourcegraph to fix a critical security problem across all of their code and make sure it never regresses. This solves an immediate pain point that might be reflected on the VP’s OKR.
Search provides a broad canvas for further innovation. Google has proven that if you can build search for a part of someone’s life, where they didn’t have it before, you can play an increasingly important role in their life. Users keep coming back to answer more and more questions. Great search consumes workflows and becomes the starting point for everything else. It almost doesn’t matter what the system of record is, if you have great search, people will go there first. Sourcegraph is creating that for enterprise devs.
It is rare to find such a strong value proposition, go-to-market strategy, and strategic product that’s loved equally by developers and engineering leaders. That’s why we’re excited to be supporting the founders Quinn Slack, Beyang Liu, and the entire Sourcegraph team.