The below is a full (unedited), machine-generated transcript of a Youtube session / podcasting episode I recorded in July 2022 with Abhishek Nayak, co-founder of Appsmith. You can view the video/listen to the podcast on Youtube, Apple Podcast, Stitcher or wherever you get your podcasts.
Erasmus Elsner 0:19
Welcome, everybody to another episode of Sand Hill Road. I have a great guest here today who’s taking this wonderful Sunday morning to come on my show. It’s Abhishek and nyac, who’s the CEO of App Summit App Summit. It’s an open source platform built for, for in house applications. It was started, brother recently, only three years ago. And it’s been quite successful. The company has raised more than 50 million so far. It’s based out of India, but it has offices around the world. Now. OSS capital, who was the first guest on my show, Joseph, Texas, an investor. So we’re going full circle here, obviously, check. Happy to have you on where does this podcast find you today?
Abhishek Nayak 1:01
Thanks, Sarah Smith, excited to talk to you about apps map and open source and are funding experience. So I’m based in Bangalore, India, and I’m right now doing the call from my home in Bangalore.
Erasmus Elsner 1:12
Yeah, and thanks for taking the time on a Sunday, I think we had with a different time zones, I think it was the only time we could make it work. And maybe to give the listeners a bit of a longer intro on App Summit. So you started out, I just said it before, three years ago, you raised a small seed from Excel India, a two and a half million seed round, you know, got the MVP going, then really got the users on board that then raced a 8 million series A let but come on, and Bessemer. And most recently, you had a 41 million Series B announced led by inside partners. But most importantly, it’s an open source company, which you’ve built out of India, and there’s more and more companies, open source companies coming out of India. So maybe just give us the cliff notes of what app Smith does and what the journey has been like so far. Sounds
Abhishek Nayak 1:59
great. So App Smith is an open source developer tool. It’s primarily used by engineers when they need to build an application for internal purposes. These could be applications for customer support, finance, marketing ops, but every company, they tend to use Excel sheets, or some of the other admin panel freebook to build applications that you cannot buy off the shelf. Maybe you’re a Fintech startup, which needs to do a particular KYC process, or startup in the E commerce space, which needs to do something particular for the customer support process. So where you cannot buy, you end up you, you can use something like app Smith to build everything that you need. So that’s the core idea behind app Smith. And that’s the EU right? We’ve been around for three years. Now, we started working on this idea of pot time, for about five or six months before we went full time where we were just testing out the idea. And we were just writing a little bit of code. But we did commit to it full time about three years ago. In fact, we celebrated our 30 year anniversary a few weeks ago. And I
Erasmus Elsner 3:01
saw on your LinkedIn that you were actually an entrepreneur in residence at Excel. And so this six month testing and iteration period, this was when you were in EIR Edexcel. Right. We had one dir from Kleiner on before, but every firm does it a little bit differently. What does dir grow look like an Excel.
Abhishek Nayak 3:20
So I was an EIR in Excel India, who they’re based in Bangalore. Now in Excel India, they have been multiple years and every year years experience has been quite different. In my case, I spent most of my initial few months meeting entrepreneurs just helping the investing team as well as talking to the existing portfolio of startups and trying to figure out how could I be helpful. Now, the idea of App Summit explicitly was not mine. It was actually something my co founders are put on the Hill we’re working on already. And during the process of talking to them and helping them out, I realised there’s something that I’m definitely interested in working on. So I ended up joining the six months that I’m talking about. I was an EIR at Excel, and my co founders, they were working at a different startup called cure fit, which is also an excellent yes portfolio. And it offered, which is a health tech startup based in India. They were my co founders, they were focused on product and engineering of different verticals that and one of the commonest problems that they used to run into was they needed interfaces to display certain data. And they needed a way to create visual workflows so that they could run some operation. And so they were working on just building those things inside of it. In fact, your fate ended up releasing an open source UI Builder, which was built for dead purposes. But they ended up open sourcing it, I believe, like about two or three years ago. But it actually never got much traction because it wasn’t well built for external adoption. But these were problems that my co founders were facing as engineers and while I was meeting other startups, I I realise every company has anywhere from, like five to 10% of engineering to as much as 40 50% of their engineering focused on these internal enterprise applications. And that’s where I realised having a low code open source tool could help them a lot.
Erasmus Elsner 5:16
super interesting. So it’s, it’s really a example of some cross pollination within the XL portfolio. And then also you finding some of your co founders, but talking about co founders, it’s not your first time in the founder seat, it’s already your third time and you’ve been on this journey with one of your co founders already twice, you started out right out of school with gar pay, which was a Sequoia funded company in the delivery space, then you had bicicleta I yc. Batch company, you so you’ve done it a couple of times, now, maybe talk about these first two experiences and how they have shaped your mind and prepared you for this third experience. So you’re
Abhishek Nayak 5:55
right, this is my third stent. And every one of the startups that have done, they’ve all been in a very different space. So the learnings that have taken from one startup to the other have been more general purpose learnings, and not necessarily industry specific. Now, in my first two startups, I always had the same co founded Arpit, who’s also a co founder at app Smith. But we also have a new co founder, Nick Hill, with whom Arpit had worked for a little bit of it. But they were a different departments. So there wasn’t that much overlap. So it was very interesting, working with a new co founder and his experience. Now, from my first startup, the main thing that I learned was, you have to have something that’s very unique in the market, that’s really important. Otherwise, it’s exceptionally difficult to gain any sort of traction. So my first startup, we had a unique product, we were the first company which was doing so they called us cash on delivery, which is a payment method that’s very common in India, where you pay for something only when it arrives at your doorstep, and you’re not pre paying for it. So 50% of ecommerce transactions in India happen on cash on delivery, even today, even though you know you have lots of digital payment methods. And then it means
Erasmus Elsner 7:05
cash, literally cash physically that you give to someone.
Abhishek Nayak 7:10
It doesn’t always mean actual cash, you could be paying online, like by using a mobile payment service, or by swiping a card at the doorstep. So it’s not literally cash. Now 10 years ago, it used to be literally cash. But today, it’s no longer just your cash. Today, I wouldn’t be surprised if it’s at least like half of it, or half of the cash on delivery orders steady. Yeah. So that was the first thing that I learned was your business has to be unique. And because our business was unique, we had good pricing power, we got a lot of organic growth and load of word of mouth love, because we were doing something different and unique. The second thing that I learned in that startup was the kinds of people that you hire, and the culture that you build, they’re quite tightly interwoven. You can’t necessarily always craft a culture if you’ve chosen the wrong set of people early on. So you have to be deliberate about that. So that was a second thing that I learned no from. The other third thing that I learned with that business was, you need to be in a market, which is highly scalable. In our case, 2011 was literally feels like the Middle Ages for venture capital in India and startups in India, it was very rare to find entrepreneurs, I didn’t have a single friend who was an entrepreneur, back then, I we started meeting people after I became an entrepreneur, funding was incredibly difficult to get, I believe we were like Sequoia Capital India’s first or at least one of the first five ever seed investments that they had made. Wow. Wow. So it was like really early, totally different world. Yeah, totally different worlds, the way people looked at things was, again, very different. So the third lesson there was that I need to be good to be good at understanding the bigger market and the bigger picture. In my first startup, I think I was very focused on just running the business on a daily basis. But I don’t think I had a clear big vision, or at least nothing that that, you know, our investors believed was enough for, for a long lasting company. So we did struggle to raise funding after raising two rounds of funding. And we had to figure out an acquisition with a different company. And one of the biggest reasons for that is I don’t think I had the clear vision for where this company would go. Now looking back in hindsight, it does feel foolish because I think we should have just paid and payments and we should have done something that but back then we just didn’t know any better.
Erasmus Elsner 9:30
I heard you talk about this on another podcast that for the first company you felt like if you had just persevered a little bit longer, you could have made it work and you could have really, you know, gotten into this FinTech Bonanza that that happened right after you you sold rent that okay. Yeah, sometimes it’s hard to know when to persevere versus when to give up and you can also struggle you know, for too long with one idea that doesn’t really work and then you’re, you’re in this valley of death. Apparently you can Come up with a startup idea at your wedding. What was all that about?
Abhishek Nayak 10:03
I was working on a startup. And the startup idea of this was when my previous startup, basically, I was not doing so well. We were just trying to pivot and, you know, really, like, throw anything on the wall to make it stick. We were in that stage. So we had built a gate. And we wanted a place to launch the game. And we were trying to figure out, Where can we find a lot of people to do it. And incidentally, I was getting married about two or three weeks after, we had decided we need to launch it in a place. Because Indian weddings are huge, you know, you have like, hundreds of people showing up and they take for a whole whole week, right? So you have enough time to trade I come from a very large family, I have like 41st cousins. So and you know, they’re all married, they have kids. So I thought, hey, can we just take a moment in the wedding reception to talk about my startup idea. Now, we ended up not actually being able to do it, because our app was not ready. And, you know, my then girlfriend was sort of supportive, but I knew she was not going to be happy. So we ended up not doing it. And we launched it a week later at a college festival in India. So that’s when we ended up launching.
Erasmus Elsner 11:09
Now let me let me dig in a little bit on App Summit and how it exactly works. So for the users out there, obviously, it’s an open source platform. And we’re going to dig deeper into why it’s open source. And you know, what’s the benefit of it. But before that, I want to really understand how it works from a technical side. So first of all, it’s built for internal facing apps, so deliberately, not for building external customer, or consumer facing apps, which was a deliberate decision to focus on sort of the enterprise suite or enterprise customers, versus, you know, having a low code, and no coach tool, quite a popular vertical. But it’s obviously also much more crowded, talk a little bit about why you went for the enterprise suite,
Abhishek Nayak 11:56
there’s only one reason for that, it’s because we understood the problem ourselves really well. And we didn’t want to get distracted. At my previous startups, we’ve always built some of the other internal application. And we used to use Django admin, sometimes a bootstrap theme, and then, you know, write the rest of the code ourselves. So that’s a problem we understood really well. And when it comes to customer facing products, we had used products like WordPress, or you know, all these other JavaScript frameworks to build customer facing applications. But we just did not feel we could have a differentiated unique product in that space. But having said that, I think the biggest reason was my co founder, or he was very sick and tired of building these internal applications himself. And he just wanted that solved. And he did not find anything that’s open source that’s easy to use. Bank was a more flexible version of the available tools, we did find a lot of proprietary products out there, like OutSystems, Salesforce Lightning platform, Mendax, app, Guyver app sheet, then there’s retool, and a bunch of others new players right now. But back then we didn’t find anything that was open source and realise we should build something that’s open source, because that needs to exist. And that’s probably one of the reasons why back then we did not see any companies adopting low code or no code for their internal applications. It used to be the biggest companies who did it. And the startups didn’t have access to this. So we realised we should do something that’s open source first, so that developers adopt it and liked it. And we can then figure out over time, how to monetize it and build a business around it. That was the main reason why we focused on internal applications. Personal problem, just wanted to get it done.
Erasmus Elsner 13:38
Gotcha. And then from a very practical standpoint, let me imagine your customer persona. It’s a small, medium sized company, it has, let’s say, a Postgres or MySQL instance, where it stores its data, or if it’s a bit larger might have a Salesforce ServiceNow sort of database. And that’s sort of where you start. And from there, I think you you only need to know SQL and a little bit of JavaScript. But the typical customer or buying persona is still the developer, I understand.
Abhishek Nayak 14:11
So a typical user persona is a developer. And this developer might be in small, mid to large companies. We also have very, very large companies using US per day, where they have, you know, 1000s of users using us, but most of our usage still does come from small to midsize companies, which have less than 1000 employees. So that’s most of our use case, the way it works is a company has a lot of SaaS products, and they have their internal databases. And their data is spread across all of these. You might have your customer support data and Zendesk or Freshdesk or Salesforce, you have your actual orders and usage data in your Postgres dB, you have your payments, data somewhere else stripe or anything else that you use for payments,
Erasmus Elsner 14:57
and then how do you sort of from this that initial data set gets to an application that is used in production.
Abhishek Nayak 15:03
Now a company faces problems when they need an application that talks to every one of these, because it’s very easy to build an application that talks to just one of them. But when you have to make a talk to multiple of them, it just gets a lot more complicated because you have to write more integrations. So generally, when people build an application on Abschnitt, they start with connecting it to a single dB. But their intention is to connect it to multiple different data sources, and not just one and over time, we see that happening quite frequently.
Erasmus Elsner 15:31
And that’s when the value really kicks in. And just to understand it correctly, what were people using before they had App Summit? And what are they still using? If I understand it correctly, it’s used to be like, react, or Angular or maybe Django admin board? And what are you exactly replacing within these organisations with epsilon?
Abhishek Nayak 15:51
Yes, so it’s the companies used to use some react admin panel or Django admin or build something in house or use the UI of a bootstrap theme, and then build all the components underneath it. So that’s what people were using. But they were also using Excel sheets, because they often would not have engineering bandwidth to actually convert a process into something that’s running on custom software. Instead, they were using something general purpose like Google Sheets or Excel to get things done. So it gets upset. In a lot of cases, we replace something that is built custom in house, that’s the commonest thing that we replace. In some cases, we have replaced a few SaaS products, but that I would still say is, is rarer than usual. And by SaaS products, here, I’m talking about like a Salesforce application or a SAP application. We’ve seen a lot of cases where we’ve replaced them as well, because sometimes you just need something that’s lightweight and focused, instead of having something that’s very vast and complicated, and is just difficult to maintain. So
Erasmus Elsner 16:51
yeah, I think it’s always good to be able to replace the good old Excel spreadsheets. And a couple of SaaS companies are built around just you know, thinking about where they can do better than Excel. Great see that this is also the case here, maybe talking about features, I think one of the killer features that you have is this drag and drop functionality, which is quite intentionally built a lot of design work to make it seamless and frictionless for the user maybe talk a little bit about this killer feature. So the happiest
Abhishek Nayak 17:19
use of app Smith, tend to be back end developers because of the drag and drop UI building feature. Most back end developers have some understanding of HTML, CSS, but they don’t really like dealing with it. The simple task of centering an input field on a page is not easy today. That’s the problem. And which is why I’m by not easy, I mean, not easy in the traditional web programming, it’s gotten quite complicated. And it continues to stay complicated because of so many libraries that exist. So the fact that it gives us the opportunity to just drag and drop a UI component, position it and wherever you position it, that’s where it stays, it makes it really easy for a back end developer to be very productive as a single engineer, without needing to talk to a front end engineer or to a designer or a product manager to figure out what should the UI look like, what should the flow be? And that’s really loved by people. So that’s definitely one of the first things that people notice about upswept, which is all the UI components and the fact that they’re able to build UI without needing to write any code.
Erasmus Elsner 18:22
We talked about, you know, the typical buying persona, it’s the developer who’s using it. But how did you acquire sort of first couple of developers because developers, they’re a different species, in a sense, they’re very picky when it comes to new product. They love open source, but how did you get to the first 10 users, the 100 users that really love you, that Paul Graham always talks about, and then you know, scale it to now, I think you have more than 10,000 users more than 1000 companies using you. Maybe talk about getting sort of the first traction going there.
Abhishek Nayak 18:55
Today, we have over 10,000 teams that gives us every month. And we launched this project about I believe, around two and half years ago, where we introduced it to a small circle of people that we already knew. And people that we already knew wanted a product like this are early attempts to launch in a small circle kept failing, because the quality of product was just not good. There was promising the idea. So we knew that people were looking for something that’s open source that’s easy to use for this purpose, because there was nothing else like this. That was amazing to see. But they would use it for a few days. And then they would leave because the quality wasn’t so great. So we took our own years from going full time to actually launching in public. And during that entire year, we were hyper focused on ensuring we were testing our product and validating it multiple times with users and paying attention to every little issue that they ran across and just being very quick at fixing it. And there was a point in time where we did some user interviews and they actually could build an app and we saw that They were sticking to it and using it, at least for a few days after we had introduced it to that, which was a big deal for us, because literally people would use it for a day or two, and then just leave, because the quality was poor. So just focused on ensuring that the quality of the product was really high, helped us get to the confidence that, okay, if we launch this, people are ready to download it, set it up and continue to stick with it. So when we finally did a launch, we wrote a blog post, we announced it on Twitter. And we didn’t do anything else beyond that to get our first 30 users to users that very week that we launched. So that’s what we did. And from there on till today, every single content that we write, every single thing that I or my co founders we spend time on, is simply on how do we make our existing users more successful. We don’t do growth, marketing, or anything that’s focused on growth, we are very, very focused on making a product work really well. And creating content that helps new users understand how this product works, so that they get it and providing support to people who run into issues and who don’t understand it. So I totally believe in what Paul Graham says, to get a few people to love you versus a lot of people to like you. And that has been the reason for our organic growth. It’s because we spend all our time on helping our existing users succeed.
Erasmus Elsner 21:24
And treating the loved ones, right. When it comes to that I think you have a discord channel where you have sort of a five to 10 minute response rate, basically, across the day, 24 hours, you’ve sort of managed to get some people in your team to stay awake late at night and another part of your team to get up quite early, to be able to respond quite quickly. If there there are certain problems, questions, certain hiccups, and then made some tweaks along the way to make the product really, really better. And that’s also been probably quite helpful in growing the user base and growing sort of the trust by the users and the quality of the product rent.
Abhishek Nayak 22:00
Yeah, yeah, in the early days, yes, some of us were staying up late and starting our days really early. Today, we do have engineers who are based in the US and in Europe. And India, of course, ends up covering for Asia, where we have most of our team, but we do have engineers around the world. And that really helps support users who are now globally spread. And also, we have a lot of users who help each other out. For example, we have a French channel on our Discord, which is quite active where French users help each other out. We have communities in China, which are focused on using apps met and helping each other out because we were unable to support them, in a lot of cases if they did not speak English. So there are there are community led efforts. And there are company led efforts. But our our big commitment is to ensuring a product is great. And our existing users are incredibly happy. And everything else that happens beyond this. You know, we’re not that greedy for it yet.
Erasmus Elsner 23:00
And when it comes to being greedy, I think that’s that’s a good segue to talk about competition. And obviously, you’re an open source company. So there could be competitors out there saying, Oh, we’re just going to rip off the whole open source project and basically build a SaaS layer on top of it, and then compete heads on with F Smith and take these three years of time and customer love they’ve put in and start monetizing on it. But where are some of the big competitors you’re seeing right now? Is it in the open source space? Is it from closed solution? SaaS solutions? Is it from large incumbents? We talked a little bit about Excel, and Microsoft being the biggest competitors internally within the teams. But what are you seeing in terms of competition right now.
Abhishek Nayak 23:44
So talking about the first point, we do have a competitor who’s you know, was funded by KPCB, which has taken the absolute core product and turned it into a proprietary product by adding new features of their own. And we expect more people to attempt to do this. And that’s not surprising in the open source world at all. So so that’s fine. But when it comes to competition, the main thing that we compete with is people not using anything at all people building everything custom. Now, this sounds silly, and probably something that every founder says. But in our case, we see that repeatedly. When we ask engineers, what were you using before? The answer is, hey, we had built something internally, our CTO had built a UI framework. And that’s what we were using. Or we’ve been making do with a mix of Django admin and excel sheets. That’s the communist answer we get talking about Microsoft as a competitor. We actually have lots between 500 to 1000 users inside Microsoft who use App Smith. Even though Microsoft has a product called Power Apps that competes with us. The major reason being AP Smith is just more developer friendly and developer focused than Microsoft’s own own product. So over time, I just see this market being really large and benefiting from a gender The purpose CRUD application builder, like apps. But the biggest competition that I see is the desire to not use anything like this, but build everything on your own by using other open source frameworks like React, Angular, etc.
Erasmus Elsner 25:13
And maybe now talking a little bit more about open source. And on a higher level, it’s a pretty pivotal decision to go open source in the beginning. And once you’re open source, it’s hard to, to move to close down because you have built a community, you’ve built a customer base that wants to use you, because you’re open source, maybe talk a little bit about this initial decision to to go open source versus closed source.
Abhishek Nayak 25:37
So open source was was, I had one of our earliest ideas that this is what we should do with this, simply because we just did not see why we would buy or use a product that wasn’t open source for a purpose like this. Because almost everything that our engineering team uses as a part of their application building stack is open source. There’s, like literally nothing in there, which is proprietary. So that was a default choice for us. We did spend a lot of time figuring out, if we can monetize this, will it ever lead to a very successful venture scale business, if we do an open source project, and then we monetize on top of it. So we spent a lot of time figuring that out. But open source versus not open source was a commitment that we had made fairly early in our journey, it did take us about a year to be completely convinced that this was the right thing to do, maybe what like eight months, seven or eight months, before we were sure, we had enough data that convinced us we can monetize this. And as soon as we knew that, you know, we soon after that, we launched the open source project, it was a very pivotal decision. But in hindsight, it has been the biggest reason why apps net got adopted rapidly across the world. Because developers did not have to go talk to a salesperson or go here, like give their contact details before they could use it. The before app said there was no self hosted internal application builder that was accessible to small teams and small companies. Everything was an enterprise. After we did we saw a competitor retool introduced self hosted for anybody a few months later. And very recently, now, they’ve been doing things to, you know, try and adapt some of the model some of the things that we’ve been doing in our open source model. So we are seeing more competitors do that. But back then it was just like, hey, this has to be open source. And this is the only way that we believe this could succeed. And then we figured out how do we make it work for us so that we could succeed? Very cool.
Erasmus Elsner 27:35
This is just typical, bottoms up, go to market motion that you get from open source that you don’t need to have a quota carrying sales reps, going out there doing product demos, but you get the developers who are your champions within the organisation starting to, to deploy themselves. But nevertheless, I mean, you are a open source application rather than the developer tools. So it’s not the typical, or the most traditional vertical for open source. Maybe talk a little bit about sort of why you thought it would work, nevertheless. And I think you, you also got some inspiration from Sitsit branchy, who was also on my show from GitLab.
Abhishek Nayak 28:12
That that’s a good point, traditionally open source has succeeded in in fraud products, and not so much at the application layer. I think the earliest example I can think of is like WordPress, which did succeed at an application level layer. And now you have GitLab, which is another classic example. The the main reason why we were convinced this would work for us was because the users are developers. That’s the main reason. And the second reason was, we knew that they would rather control and understand the source before making this part of their application stack. So because of those two things, we realised going open source should be the ideal case. And did we think we would get as much traction as we have today are definitely not. I remember in our early days, our aim was let’s get to like about 5000 6000 stars, within the first two years, today being nearly 20,000 stars on GitHub and 10,000 plus teams using our stacks. That sounds insane to us to be honest. And do I believe you can succeed with an open source business model or an open source first model for any application? product? I don’t think so. I think that’s difficult. One of the companies that we respect based out of Bangalore is this company called postman. They are an API testing tooling platform. They did start off as open source. But eventually they decided to become proprietary because the customers didn’t care anymore. Postman works really well, when it’s when it’s a cloud hosted product, you don’t necessarily need to self hosted. And even if you run it on your own local machine, you don’t really care about how it’s very taut. How does it work under the hood, so that’s why you don’t care about it too much. But in case of AP Smith, it does make a remarkable difference because some of our users are able to contribute bug reports which can with detailed analysis of where and why is this bug existing in in fewer cases, we also have people who check in code. But being open source has helped us crossed it security checklists really quickly, because people can run their own code evaluation software to understand what’s going on under the hood. So that is that has really helped. And I do believe, for apps but and for the general low code space, which is aimed at developers open source is going to take over a significant portion of the market over the next decade, is it going to be the majority of the market that time will tell, but it’s very clear that this is an undeniable trend. And if you’re not open source, you’re going to struggle to get traction in
Erasmus Elsner 30:43
this market? Yeah, very cool. Also, to see that in India, this, this trend is really taking off in a big way. And I think one of the postman, co founders also invested in your company, which means that he’s sort of recycling some of his gains into building the next generation of open source companies, which is very cool talking about the open core model that you’re adopting. And it’s a difficult one, where you need to always separate you know, what’s the open source version, then what are sort of the features that you want to commercialise for GitLab? I think it’s the access control certain permission rights, that you have, under the commercial edition, maybe talk a little bit about how you think about open source versus commercial edition, because I think in the first one and a half years or so you did not have commercial edition at all. And we’re just fully open source and just getting traction.
Abhishek Nayak 31:31
So when it comes to the open core business model, we are heavily inspired by GitLab, for sure, because the amount of clarity that they have, plus their results in the public market, because they’re a public company proved that it actually does work. So similar to GitLab, we think of our, our user and buyer to be different. The user is an individual developer, and the buyer could be the head of the engineering team, or it could be the head of a business unit or product manager or somebody else. So those are those tend to be our buyers. So our open source features are focused on the developer experience, while our Business Edition, or commercial edition features, they’re focused on the buyers experience, which relates to access control, security, ability to completely white label the product and use it like it’s your own. So those are some of the things that that are in our business edition. And we started monetizing app Smith, just about two months ago. So early days, but revenue traction has made like quite fast and really good. We still have to build a lot of additional features, but once we have a few more features, we do expect our revenue traction to grow even more. And our focus is going to be very much on talking to happy users of ASP NET and convincing them that they should upgrade to our business edition, because the teams are larger, because there are certain things that are better. So that’s going to be a focus. And one of the good things about having something that’s open code is that you can easily move out of the Enterprise Edition and back to the community edition, open source edition, if you’re not happy or you feel you can get what you want with just the Community Edition. So that’s that sort of lack of a login is really great for customers. And I truly believe this is the right thing to do for the success of the company in the long term. Even though in the short term, it might mean we’re not monetizing as much of the value that we are creating, which I think is okay. But I do believe in the long term. It’s just better for customers to use something that’s open core versus something that’s proprietary because they’re completely locked in
Erasmus Elsner 33:45
completely agree. And I think it’s it’s great that you’re not going aggressively monetizing, creating this lock in which eventually you will try to get but you want to get it by, you know, not forcing people into the solution. But really them seeing the value in the in the commercial version. Right. Talking a little bit about traction. And you know, one of the main metrics that venture capitalists look at is GitLab stars. And you mentioned you have 20,000 github stars. But I think you’ve talked about it somewhere else that for you, these GitHub stars stay aren’t the main metrics, because, you know, sometimes you have half baked products, which sound cool, sound interesting, they get a lot of attention on Product Hunt, but they’re half baked. And what you look at is really more the traditional retention rates. And you do that using telemetric data that is triggered back by some of your users, not all users because it’s an opt in model that you adopt there. Talked a little bit about what are the key metrics, the North Star metrics that you look at when you try to understand if you’re growing and if you’re growing in the right way. So the
Abhishek Nayak 34:52
main metric that we look at is retention, retention of the developer retention of the instance, which is an incident There’s basically one installation of ops map. So those are the two main metrics that we look at. The third metric that we look at is the growth of number of users in that instance, which shows that it’s a active product. And it’s actually growing and becoming more important in the company. So these are the three main metrics that we look at, overall, at a global level, we do track installations, we do track overall signups. But at our stage, they always tend to look, you know, append to the, to the right. But if our retention is not improving, then you know that that causes trouble for us in the long term. So the main metric that we look at are really around retention. And all of this does lead to growth automatically. That’s what is amazing about this, if you have happy retained users, they tend to build more with it, if they build more with it, they invite more users to use those things. And if more users are using it, there’s just a higher possibility of word of mouth and organic growth. So it’s a really nice way of growing. Now, at some point in time, we do expect to invest in in organic methods of growth, so that we can reach out to people who’ve never heard of app Smith organically. But even then I believe majority of our growth will come from organic word of mouth.
Erasmus Elsner 36:17
And it’s interesting, I think, for open source projects and open core companies that over time over the lifecycle of the companies, the metrics you track may change in the beginning of the project, you launch it, you put it out on GitHub, you get a couple of stars. So you look at the stars and sort of the reports from the community, Buck reports, but also commits the number of instances to retention. And then now that you’re in the monetization phase, I think it might be that for the next funding round or next phase of your company, it’s going to transition more into the traditional SOS LTV to CAC ratio metrics, what’s your view on
Abhishek Nayak 36:53
that? Yes, I absolutely agree. Over the next couple of years, revenue growth, and the LTV to CAC ratio will become very important for us, just like it is for any SaaS product. The main thing, though, was for our LTV to be high, and the CAC to be low, it still does require one thing, which is the product has to be so good, that people are able to build more on it. And because there are more people happy with it, there’s more organic word of mouth. And that’s why the CAC is lower. So I believe our product, we’re not gonna eliminate focus on retention as one of our metrics, but we will just add revenue growth and, and the cost of acquiring that revenue was one more metric.
Erasmus Elsner 37:35
Yeah, and the talking about metrics. And that that’s something that many venture capitalists care about. Let’s talk a little bit about fundraising in your fundraising journey. It’s your third time in the founder seat, you’ve you’ve been fundraising for a while you’ve raised from really the best names in the industry, Sequoia XL insight now, talking a little bit about sort of the fundraising environment for the three different companies, and how that has changed over the last decade or so.
Abhishek Nayak 38:04
So the the main thing that I’ve learned about fundraising is that you meet the best investors, when they approach you, because they are excited about your product, because they have a portfolio company that’s using your product. This sounds very simple. But that really is the best way to meet the best investors have a portfolio company of theirs, we been using your product, and therefore they’ve heard about you. So that’s how we ended up raising money for our first startup. In our second startup, which actually didn’t do as well, at all, we had to struggle to fundraise, you know, we did do YC, which did introduce us to more investors. But it was not so straightforward and smooth, as it was, for apps what, for example, well, except for our first investor, XL, who was a seed investor and my previous employer and previous investor of a previous startup, all the other investors, they came in inbound, and they always had a portfolio of empathy using us already. And so that’s where the reference check is what you need to understand the potential of the product. And then it’s just a lot easier for me to come in and pitch to them. Because they’re already sold into the basic idea. I don’t have to convince them that we are solving a real problem. So I would say like, fundraising becomes a lot easier if you do have a loved product.
Erasmus Elsner 39:21
Yeah. Makes a lot of sense. And what’s interesting about your fundraising journey now for app Smith, is you started really, at the beginning of this recent tech Bonanza, right? The seed round, I think in 2019, then the series A in 2021. And now after the whole bloodbath in the public markets, couple of venture capitalists backing away, valuations going down significantly. Everybody going for fundamentals, you know, with every round wanting to get the company to break even, and you were I think when you started raising the series B you were barely monetizing yet. And you’ve announced a So 41 million Series B led by inside just recently, as nobody else is getting their seed round together.
Abhishek Nayak 40:07
So for a seed round, I had to mostly convince Excel that this is a worthy of a seed round investment. That took us a little bit of time. But because we had a older relationship, and she called the partner had seen all the work that we had put in, we could raise that, when it came to the second round, it was inbound, there was inbound interest, we ended up speaking to a bunch of investors and raised from there at all of these rounds. We were never, you know, in the higher tier of valuations, we were always in the lower tier of valuations. So at no point in time, we were feeling like we were getting the best possible valuation, definitely not. In fact, in our second round, we did have a term sheet that came in, but the investor ended up lowering the price after they did their due diligence, that was a really interesting experience. And I do believe we got discounted quite a bit because we are based in India, and people just did not think we can compete at a global scale. So they did discount us quite a bit, which I think is completely fine. Because ultimately, we have to win in the long term. And it doesn’t matter so much what your early valuation is if you have a great business, because I know a lot of people are very focused on personal ownership and equity network of yourself during this process. But here, what I do do is I have to run the business for the next 2030 years, how long ever it ends up succeeding for. And during this entire period, I will succeed if I’m setting the foundation, right. And to set the foundation, right, you need to have the right alignment with your investors. If you’ve raised it at a crazy valuation, you do have a misaligned team member and investor who’s unhappy with the Venetian that they’ve given, they’re having second thoughts and buyer’s remorse about it. So I’m honestly okay with with slightly lower valuations, if it means we are all aligned in the long run. And if we can get through difficult times together. The third time when we were fundraising, which was Series B. Again, it did start with inbound interest. We didn’t need to raise because we had not even touched our Series A money because a seed round lost it for a really long time, the amount of capital that we were spending, but we decided to raise because the market was getting worse. And we didn’t know, recession is a great time for people to begin to look at. Where are they spending their engineering bandwidth, and how much are they allocate into their engineering resources. Something like apps matters, like cold water and desert, because you just don’t need so many engineers anymore, you can get it done with a fewer things and succeed at the goals that you’ve set for yourself. So we did know we have to get aggressive in this market. But we also knew we have to be ready for a very long recession or a very long funding winter. And if you didn’t raise, it would be difficult for me to convince like a fortune 500 company to bet on this platform. Because they would not be sure if we would survive this funding winter bandwidth open source project where we are maintaining and writing most of the code is really essential for our company to be well funded so that we can support the project. So even though it was difficult to raise the third round, I think we could convince people because we had such great traction on an open source edition. And these are all like there were lots of very, very large companies using gauze. And they clearly had a budget. They were just waiting for our enterprise edition to go live
Erasmus Elsner 43:29
love it, you’re selling cold water in the desert into a budget at large corporations. That’s everything that I did a SaaS investor likes to hear. And I also love that you didn’t touch the series a money there. I think WhatsApp was also sold raising two funding rounds from Sequoia without touching any of the Sequoia money. It’s interesting that you said you got discounted because he were based out of India, I heard sits branchy when he was on my podcast saying that he was discounted because he was a remote first company. And I love those kinds of founders who arbitrage the system, and actually managed to build something much more meaningful, maybe not in the midst of Silicon Valley hiring the million dollar engineers, but rather, you know, finding the right people who are motivated who fit into a smaller organisation, and then built them up. And to wrap it up here. Talk about your advice for other founders open source founders based out of India,
Abhishek Nayak 44:25
for open source founders based out of India, I think the main advice I would give them as it’s going to be a pretty long journey. So don’t be impatient. And don’t compare your journey with somebody else’s, because these are totally different circumstances. So that would be the main thing. I think doing an open source project first and then trying to monetize it is definitely not a get rich quick scheme. But you know, if you’re getting into it because you believe it’s going to lead you to have a much higher valuation very, very quickly, then you’re in for a very rude shock. It’s going to be the reverse of You’re going to struggle to fundraise in most cases, so I’ll just say do it because you, you’re truly passionate about making it an open source project and contributing to the world. And you’re passionate about making stuff accessible to people. And eventually you will be able to monetize and make a really good business, because you have such a large base of users. And so that would be my main advice.
Erasmus Elsner 45:23
So, Abhishek, thanks for coming on the show your call to action? Where can people find out more about App Smith about you what you’re up to what the next sort of stages of your company are? Get in touch with you, you can
Abhishek Nayak 45:34
find absolute on App smith.com ABP smi D s.com. And you can find me on Twitter, you can just search for Abishek Nya and you should find my profile. I don’t tweet that much. But it’s definitely one of those places where we do talk about AP Smith quite a bit.
Erasmus Elsner 45:50
I will check. Best of luck, continued success on your journey, and I’m looking forward to talking soon. Oh,
Abhishek Nayak 45:56
thank you so much. It was just lovely talking to you. And I’m grateful for the opportunity to be here.