A Blog by Jonathan Low


Feb 9, 2015

Programmers Emerge As a Market And Venture Investors Pounce

There was a time when programmers were anonymous. A few of them like Ray Ozzie attained rock star status within the broader business community, but even then, attention tended to focus on the founders and leaders who could talk to the investors and the media. Individuals facile enough to sell a vision as well as a product. 

But as programming has achieved scale and recognition, the concept of programmers as a market for services and products has also gained currency.

This has occurred to the point where venture capitalists are identifying and investing in enterprises that sell to that influential and potentially lucrative congregation.

The benefits lie not just in the immediate financial potential, but in a connected market for all things technological , their position as a gateway to the companies for whom the work, the clients they serve and the colleagues with whom they interact. It is a potentially rich pipeline to the heart of the next economic opportunity. JL

Yuliya Chernova reports in the Wall Street Journal:

It is only in recent years that programmers really emerged as a distinct market. In earlier days of software, programmers were often siloed off, working for their individual companies. Then came open-source software and collaborations among developers that it spawned.
With its recent investment in Stack Exchange Inc., venture firm Andreessen Horowitz now counts three significant companies in its portfolio that serve the broad and active community of software developers.
Some 18 million programmers, together with another 18 million information technology professionals around the world are creating the technology that is transforming all kinds of industries, according to figures from International Data Corp.
Stack Exchange, which runs a popular question-and-answer board for developers called Stack Overflow, was preceded in Andreessen Horowitz’s portfolio by GitHub Inc., an open-source code sharing platform, and Digital Ocean Inc., a Web-hosting startup geared at programmers.
These companies reach tens of millions of software developers, according to Peter Levine, a general partner at Andreessen Horowitz.
By targeting the developer you are targeting the foundation of all software creation,” Mr. Levine said. He is on the boards of GitHub and DigitalOcean.
For a firm whose founder famously quipped that “software is eating the world,” it seems natural to invest in startups that are providing tools for the developer community.
It is only in recent years that programmers really emerged as a distinct market.
In earlier days of software development, programmers were often siloed off, working for their individual companies, communicating mostly with their co-workers, relying on machines bought by their superiors, and learning from manuals.
Then came open-source software and the collaborations among developers that it spawned. The popularity of mobile apps that could be built by individuals contributed to programmers’ breaking out of corporate shells, as has cloud-based software and services.
Soon enough, companies began offering services that connect individual developers to each other and give tools directly to them.
Now “all the tools and services that developers have used on site are all moving into the cloud,” Mr. Levine said.
The result of the new connections and services for developers is “a far more productive engineering activity,” Mr. Levine said. That, he said, helps propel the entire software market.
Software developers, acting on their own and connecting to each other directly, also has changed how software is purchased. Often, programmers hear from one another about the latest software and tools, start using them on their own, and may persuade their bigger organization to place a larger order.
“It’s a bottoms-up” scenario, Mr. Levine said.
Andreessen Horowitz’s investment in this cluster of companies started with an opportunity, not a theme. Even though the firm often has several companies targeting a similar market, it insists it isn’t a “thematic” investor.
The firm’s first, and perhaps biggest, bet in the space was its 2012 investment in GitHub. At $100 million, it was one of the firm’s largest deals.
That deal spurred a recognition in the firm that there is a lively, important market out there.
“We started to say, are there other complementary tools and complementary companies to GitHub that effectively service the same users,” Mr. Levine said.
Last year came the Digital Ocean deal, a $37 million Series A investment, for a young startup that is trying to go up against behemoths such as Amazon.com Inc. by targeting its virtual-server service to individual developers, rather than corporations.
Finally, in January, the firm led a $40 million Series D round for Stack Exchange, which is focusing on growing its developer-focused job board to capitalize on its reach among developers.


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