In our last article in this series in 2021, we explained why developer tools were becoming one of the most exciting opportunities in the software space. While the technology market has seen a lot of changes since then, the role, and value, of developers continues to grow.
Just as software was predicted to eat the world, the individuals creating the menu are becoming a significant market opportunity in their own right, in a way that we believe will only become more crucial. Here we examine the key movements in the space and what they mean for the space at large.
Tech stocks continue to show market-beating resilience and growth
GitLab, Hashicorp and Confluent all had exciting IPOs at the end of last year. These all debuted at $10b+ valuations, further proving that developers are critical buyers and that decacorns can and will continue to be built in the space if they solve real, hard tangible problems.
We’ve now seen the stock market correct massively, with tech suffering huge blows. However, high growth developer-led companies have bucked the trend. Many continue to trade well, valued at multiples of 20x+ forward revenue.
MongoDB, Atlassian, GitLab and Hashicorp, for example, are still commanding premium multiples due their impressive growth rates — well over the median multiple of 8.2x in the biggest software companies today, per Bessemer’s Cloud Index. In a turbulent market, these developer favourites have recovered sharply to Jan-21 multiple levels.
On the private side, fundraising momentum continued through Q4 of last year. Snyk raised $530m for its Series F valuation at an eye-watering $8.5b valuation. Meanwhile, Stripe continued to dominate payments with it’s developer-first approach, with the last valuation reaching $95b in March of last year.
The number of developers in the world grew by 20% (again)
When we last wrote our Developer Manifesto, Daxx estimated that there were 19m developers globally. That number has now risen to 23m developers, representing over 20% growth, an acceleration from the prior year.
Europe continues to be home to 7m developers, becoming an ever more important hub for tech companies seeking global talent. This is being accelerated by the shift to remote working as a preference, with more companies tapping into the European talent pool.
With demand still outstripping demand, average salaries for developers have gone up as well, with averages in Western Europe at $62k and US at $110k (source: BLS, Daxx, DevSkiller).
Dawn welcomed even more companies building for developers into our portfolio
Putting our money where our mouth is, quite literally, we’re continuing to invest in companies that are developing solutions that will power the global development community for years to come.
Our newest portfolio businesses in this space are:
- Ably, a platform that helps developers reduce complexity of building and maintaining their real-time infrastructure. Founders Matt & Paddy plan to reach a billion devices in the coming years, and are well on their way to getting there.
- Lokalise, a platform that brings developers, designers and product teams together to collaborate on localisation — the process by which content is translated and customised for different markets. Lokalise speeds up the process by 90%+, and Nick and Petr continue to win exciting logos and grow the team, with strong growth last year.
- Shoreline, an incident automation company that simplifies the remediation of incidents in production cloud environments. For one of our portfolio companies, Dataiku, Shoreline has saved one engineer 10 days of work per month, with comparable results seen across all of Shoreline’s customers.
- Swimm, a code documentation tool that gives developers the ability to quickly understand code they’re not familiar with and start participating meaningfully, all while keeping the code base aligned and staying in sync with the rest of the team. Swimm have just launched their beta product and are already transforming the lives of several developers globally
The market still has significant room for growth in new sectors
As the work of developers continues to define the potential and value of companies in every sector, more businesses are discovering valuable opportunities in the space. Despite rapid developments and the presence of several world leading software businesses built around serving their needs, the market for developer software is very much in its infancy.
Well established industries such as travel, hospitality and entertainment are still seeing new success stories every year as new businesses find ways to address old problems. In development, by contrast, every problem is, by nature, new. What’s more — the future of the industry is being written in real time by the businesses creating the tools, platforms and business models that shape what is possible.
It’s a near certainty that future unicorns will be built around solutions to issues that are yet to rear their heads — in the meantime here are our choices for the sectors that will drive growth in years to come.
Incident management and response
Given the key role software plays in the management of nearly every business on the planet, incidents and downtime are expensive, in terms of capital and customer experience. Catching and resolving incidents, therefore, is ever more important.
The global Incident Response Services Market was valued at $3.48 billion in 2020 and is expected to reach USD 10.13 billion by 2026 as businesses invest in more resilient, agile software processes.
Build automation
Build is one of the most critical parts of the software development life cycle and therefore one of the biggest opportunities. However, the process of building is highly dependent on the build environment, including code volume. As the global code-base grows, businesses will need to invest in solutions that make building scalable, reduce risk and deliver predictable lead times for software creation and deployment.
Next gen cloud infrastructure
Software is only as secure as the underpinning infrastructure. Whereas once the cloud infrastructure that teams used to build, run and manage their apps was considered as a simpler enabler, more businesses are now realizing the potential for infrastructure to optimize the development process itself. The future of value-adding, next generation software will be based around end to end value from idea to deployment.
Developer collaboration in the cloud
In an increasingly global market, the ability of the cloud to connect teams collaborating on products has the potential to transform the development process. 2021 was a landmark year for developers finally coding in the cloud, stepping away from private machines to public collaboration spaces. As more businesses realize the opportunity to expand and optimize their developer network, a new generation of platforms will be ready to connect them.
Downstream real-time applications
For most of us, apps and software are the interface by which we experience the world’s data. But it’s down to developers to build those systems, connecting databases, pipelines and platforms to package information ready for consumption, analysis and distribution. We still see an opportunity to make it easier for developers and data engineers to build internal and external real-time data applications at scale.
Secure cloud pipelines
Hacks and leaks have become common news in an era where the abundance of data has run ahead of some businesses’ ability to store, manage and move it securely. However, despite their ubiquity, best-in-class solutions are only now starting to come into the market, in response to the dire needs of developers for trustworthy solutions. The era of data supply chains is coming and we expect to see a range of businesses guarding this new silk road.
Data for developers
Data driven business intelligence has become table stakes for any organization that wants to optimize its operations, with developers playing a key role in bringing that data together. However, we also see huge potential in applying these same principles to the development processes, storing and analyzing production data to achieve better outcomes.
We’re keeping a firm eye on this sector, but if we’ve missed any trends or sectors, we’d love to hear your insights. Feel free to reach out to Shamillah at shamillah@dawncapital.com and Virginia at virginia@dawncapital.com to share your own insights.
Next time, we’ll be exploring our pick of the businesses you can’t afford to ignore that are pushing the boundaries in the areas above.
