Provided here is our redacted investment memorandum, detailing our rationale for investing in and leading Launchable’s Series A in 2021.
COMPANY OVERVIEW
Launchable is building the intelligence layer for all software testing, allowing companies to speed up their test runtimes, free up developers time, and save money on cloud cost. As CI adoption has grown, companies' test suites have grown in size, leading to very long testing times and high cloud spend. Launchable’s product uses machine learning to predict which subset of all tests is going to give the team enough confidence, while also shortening run times. Launchable was founded by Kohsuke Kawaguchi, CTO of Cloudbees and creator of Jenkins, and Harpreet Singh, VP Product at Cloudbees and Head of Product for Bitbucket at Atlassian.
KEY HIGHLIGHTS
- Category design in an interesting market: The “testing intelligence” category is being evangelized by the founding team, and could be a multi-billion dollar category at scale, similar to what happened in the “Continuous Integration / Continuous Delivery” category in the last decade. We cover this in depth below.
- Strong technical team: The founders of the company have an outstanding track record in the developer tools category. Kohsuke is the creator of Jenkins, the most popular open source CI tool. Kohsuke then served as CTO of Cloudbees for 9 years, which commercialized Jenkins en route to building a $100M+ business. Harpreet was VP of Product and Design at Launchable, spending 8 years at the company before becoming Head of Product for Bitbucket at Atlassian.
INDUSTRY OVERVIEW
In the last decade, the “Continuous Integration / Continuous Delivery” category has been created by Jenkins in open source, as well as Cloudbees, CircleCI, TravisCI, and more on the commercial side.
The value of “Continuous Integration” is simple: rather than manually testing your software after each change, you could create a suite of tests that would automatically check for potential defects. This would lead to shorter and more confident release cycles. In the last decade, the CI market has been growing very rapidly: in 2014, Cloudbees started focusing on offering an enterprise version of Jenkins to customers. Kohsuke, co-founder of Launchable, was CTO of Cloudbees through this growth. CircleCI raised a seed round in 2013, and is now valued at $1.7B.
If we look at the open source world, testing frameworks have also seen fast adoption by the community. For example, RSpec, Ruby’s testing library, was downloaded 600 million times. Python’s PyTest library was downloaded 1 million times just last week alone. Mocha, one of Javascript’s most popular testing frameworks, is downloaded almost 5 million times a week on average. This shows how important testing has become for almost any developer out there.
As the market has grown, so has the complexity of it. One of the downfalls of automated testing is that software doesn’t have the intelligence to figure out what has been changed, and only test the necessary parts. Instead, it runs every single test that has ever been written, many of which aren’t related to the change the developer has worked on. This creates a large loss of productivity, as well as increased cloud costs due to longer runtimes. Up until today, this piece of the stack hasn’t been tackled by any startups, as the CI market wasn’t large enough to sustain a venture-backed company focused solely on intelligence. This has changed in the last decade, with the term “DevOps” becoming mainstream, and the adoption of CI platforms growing very quickly.
Below you can see the graph of Jenkin’s GitHub stars growth superimposed over AWS’s revenue growth. The CI market lagged the cloud computing boom ~6-7 years; AWS was launched in 2006, but Jenkins didn’t see meaningful growth until early 2010s. Launchable was founded in 2019, 7 years after Jenkins started meaningfully growing. We believe the timing is right for this product to be built.
The other main driver is the increased focus on developer productivity, which we described in our Engineering Value Chain Revolution investment theme we penned a couple years ago. As software becomes more central for small and large enterprises alike, developer productivity will be one of the main drivers of capital efficiency.
Stripe’s “Developer Coefficient” surveyed thousands of C-level executives and developers; 96% of respondents put increasing developer productivity as a medium to high priority.
When looking at how developers spend their time, ~17.3 hours a week are focused on maintenance. That’s almost half their work week for a standard 40 hours week; in top tech hubs, we can expect an average salary of $100k for an engineer; that means that almost $50k/yr of engineering time go to fixing issues, rather than furthering your product.
This is due to the fact that as of now, it’s hard to catch a lot of errors and bugs in the development process. Tests take a long time to run and are usually seen as a bottleneck, but we believe that Launchable can change this by making tests feel like an enabler by shortening time to value for developers. They should then be able to capture a meaningful percentage of the lost productivity value they give back to companies.
COMPETITIVE LANDSCAPE
YourBase
Total Fundraising
- $5M from Lightspeed, Unusual Ventures
Product
- YourBase has a very similar product to Launchable, which focuses on speeding up test suites. It seems to only support Python at the moment, and the docs don’t show a very good developer experience. For example, you have to manually turn it off through environment variables rather than using a different command, like Launchable would do.
Founding Team
- Yves Junqueira (CEO): previously at Google for almost 10 years as an SRE. Previously started a company in Brazil for 7 months around Linux hosting.
- John Ewart (CTO): John worked at many places for less than a year, including Chef, Goodreads, and Egencia. He also spent overall 4 years at Amazon / AWS in different roles
CircleCI
Total Fundraising
- $215M from Sapphire Ventures, IVP, Scale Venture Partners, SV Angel, Baseline Ventures, DCVC, Eric Ries, 500 Startups, Heavybit Industries
Product
- CircleCI is a continuous integration platform. It isn’t competitive with Launchable, but it might decide to expand more in this direction in the future. CircleCI hasn’t historically shown signs of product innovation, so this is probably not an issue in the short term. They could actually be a great channel partner to Launchable.
Founding Team
- Paul Biggar (Founder): Paul founded CircleCI just a couple years into his career. He has a PhD in computer science from Trinity College in Dublin, and spent a little over a year at Mozilla before starting CircleCI. He also spent 3 months at Lookout before that.
Incredibuild
Total Fundraising
- Bootstrapped since 2002, $140M buy out by Insight in 2021.
Product
- Incredibuild also focuses on test acceleration, but rather than using machine learning to create more efficient suites, it focuses on using tuned hardware to speed up run times. While this also solves the same problem, it’s a much less capital efficient way to go at it, as it reduces gross margins.
Founding Team
- Uri Mishol (CEO): Uri spent 6 years in the IDF before joining Itemfield, which was subsequently acquired by Informatica. He founded IncrediBuild in 2002 with Uri Shaham.
- Uri Shaham (CTO): Similarly to the CEO, Uri also spent time in the IDF before joining Itemfield before the acquisition by Informatica.
MARKET SIZING
As Launchable is defining a new category, it is challenging to conduct a true market sizing. When thinking about market opportunity, we looked at two dimensions:
- Jenkins installations: Jenkins has been growing 24% YoY, and should have around 350,000 installations worldwide today. We believe all of those are addressable customers for Launchable; if a company is sophisticated enough to choose Jenkins instead of an off-the-shelf product like CircleCI, it means they likely value their CI process. The market opportunity in just Jenkins optimization would be $3.5B.
- CircleCI / Cloudbees user base: CircleCI, which recently raised a $100M Series F at a $1.7B valuation, has around 30,000 customers and 800,000 developers on the platform. Cloudbees, a provider of hosted Jenkins, is over $100M ARR. Given that these are still fast growing, venture-backed companies, we can expect them to be at still ~10-15% market penetration. That would imply a market size of at least $1.5-2B.
To give us some room for error, we have looked at what % of Jenkins and CircleCI customers are addressable, and based on that how the market size changes based on ACV. We expect this market to be above $1B in most cases.
TEAM OVERVIEW
SUMMARY OF MANAGEMENT TEAM
The company was founded by Harpreet Singh and Kohsuke Kawaguchi. The founders currently hold the titles of co-CEO. The two have known each other for over a decade, and spent around 9 years working together at Cloudbees, where Harpreet held the title of VP Product, and Kohsuke was CTO.
Kohsuke is also the original creator of Jenkins, one of the most popular open source projects ever created, and the category leader in the Continuous Integration market. He’s one of the most prominent open source developers.
TEAM STRENGTHS
The team has a very strong product and engineering DNA. Kohsuke has seen Cloudbees’ engineering team scale from start to almost $100M of revenue while serving as CTO, giving him great insight into structuring teams both the early stages as well as how to help them make the jump to a growth stage company.
After serving as the VP Product at Cloudbees, Harpreet was also Head of Product for Bitbucket at Atlassian. Having experience with two large developer tools platforms gives us confidence that he can help Launchable both in building the first product, as well as expanding it in the future.
Another key strength of the team is the ability to evangelize a new market. In the early days of Cloudbees, “Continuous Integration” wasn’t a common theme. Kohsuke and Harpreet gave many talks on the topic, wrote articles, participated in the open source community, etc to evangelize the market and positioning their product as a leader.