“During the gold rush, it's a good time to be in the pick and shovel business.”
Mark Twain

At Polychrome, we believe in the value of the B2B Software-as-a-Service (SaaS) Market. Over the last decade, all three of the partners at Polychrome worked as operators to help grow B2B SaaS companies like Twilio, Amplitude, Optimizely and Returnly. We’ve seen the ins-and-outs of the SaaS business cycles, different models and where certain technologies are an ideal fit for the model. The space has grown considerably over that time, just take a look at the growth of SaaS companies over the last 10 years:

Company data from Crunchbase

That chart is great validation of the opportunity in SaaS, but it is also an overwhelming number of companies. We realized that, at least initially, we needed a more narrow thesis in our approach to finding investment opportunities. One area that we dug into was the developer tools space. We started meeting with different developers and asking them about the tools they used; which ones they love, which ones are mission critical, which ones their whole team uses. Then we mapped out companies in the developer and devops space that had come up in interviews or were successful or rising challengers in the space. What we found is a space that has long been dominated by a few major players (Microsoft, IBM), but is seeing an explosion in new and game changing companies. These are some of the companies that have defined the last few years of IPOs (Atlassian, Datadog, PagerDuty) and often come along with great reputations and financial metrics. It’s a smaller count of companies vs. the 17,000+ SaaS companies, so a bit more manageable and a very interesting group.

Company data from Crunchbase

As the developer tools space as a focus area became a theme, it made us think about the Mark Twain quote “During the gold rush, it’s a good time to be in the pick and shovel business.” This refers to the 1849 gold rush in California, when the most successful people were not the miners, but the suppliers of auxiliary goods. Sure, you could recall George Hearst, the single most successful miner of the gold rush, but he’s remembered for a silly castle. Instead, let’s recall Levi Strauss, a dry goods supplier, whose name lives on over 100 years later as one of the most iconic clothing brands ever. Perhaps as software eats the world there is a similar dynamic at play. A few companies will strike gold inventing or reinventing businesses in software, but finding that one company to invest in carries a lot of risk. Instead, investing in companies that provide tools to those prospectors will likely produce more consistent returns, and even longer lasting success.

This has crystallized into a sub-thesis that we plan to watch closely here at Polychrome. As we do, we thought it would be fun to share and allow our readers to follow along by creating two developer tools indices. So step aside BVP, and welcome everyone the Polychrome Developer Tools Public 20, and the Polychrome Developer Tools Private 30. Both will follow leading emerging companies in the developer tools and developer-oriented software space. We will update the values quarterly and the lists annually.

Our goal with this blog is to help founders build their companies. With that in mind, we will be writing follow-up posts in this series diving into the metrics of these companies and the space as a whole. We hope it inspires and educates. Have fun following the indices!

Polychrome Developer Tools Public 20

This list is the most valuable 20 developer tools companies, by market cap, which have initially listed their stock publicly within the last 10 years. Some day we hope to make this the Public 30, but the bar is high, so we are starting this year with 20.

Polychrome Developer Tools Private 30

This list is the 30 most funded developer tools companies, by dollars raised, which remain private.

If you have any questions, feel free to reach out!

Thanks,

Alex Boswell