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Critical path infra for developers with Megan Reynolds from Crane Episode 19

Critical path infra for developers with Megan Reynolds from Crane

Megan Reynolds is an investor at Crane Venture Partners. Crane are an early stage VC who have invested in developer tools such as Gitpod, Encore and Novu.

· 15:12


Jack: Hi, this is Jack and you're listening to Scaling DevTools. This show that investigates how Devs go from zero to one. I'm joined today by Megan Reynolds, who is an investor at Crane,, who have invested in companies like GitPod, Encore and Novu thank you very much for joining us.

Megan : Thank you for having hanging me Jack.

Jack: And we're in the first time we're actually live sitting in the same studio, which is cool.Could you tell us a little bit about crane and then the question on everyone's lips is like, what's going on right now?

Megan: It's a bit mad at the moment. So Crane, we are an enterprise software focused seed fund. We are based in London, but we're investing across Europe. We're investing in enterprise software, but even more specifically, we're investing in enterprise infrastructure. And actually, as you said, what I do is mostly open source and developer tooling. The other core focus of Crane, go to market. We exist to help Product led technical found it, build the foundations of the go to market from seed to series. And so we have a few amazing people on our team that help do that. Rather, for example, build customer success at slack before then, Zendesk, before then Yama has basically been building the function. Given that we are an early stage fund in this market right now, it has been a little bit chaotic.The market's crashed, the public markets crashed. Although private markets are relatively sheltered from that still has a, a compounding effect. when companies aren't able to IPO that really has a trickle down. However, because we're investing in like infrastructure technology predominantly and like enterprise infrastructure technology, usually that technology is like critical path infrastructure.

So for those companies, they are relatively sheltered from the public markets in the downturn, like being struggling in a downturn. I think companies that are kind of slightly easier to rip out have are more direct impact when budgets are slashed teams will let go.

There's a very direct correlation between that and companies struggling. Whereas for all of the stuff that we are investing in, that I'm investing it's open source. It's adopted by developers and it becomes a critical piece of infrastructure where company's software stack.

It's really hard to rip that out when budgets get tight. Usually the last thing to go. And so actually what we're seeing right now, although markets are in chaos, those companies are still doing well. And actually the ones with an open source model are arguably doing even better, but it means companies a little bit less friction for companies to see.Yeah, it's a, it's a weird time, but we feel like we're in a relatively good place.

Jack: Is there something that companies can do to make themselves more part of that critical path? Or is it something that's kind of decided when you start the business?

Megan: I think so, and this is, this is something that when we first met, we were talking a lot about really it's the companies that will do really well. Here are the companies that deeply understand the customer problem that they're solving. So making sure that the use cases they're targeting and the problems that they're solving with their technology are number 1, 2, 3 for the specific user.

So if that user is a developer, or if that customer is a developer, it's like, okay, actually, is this a top five priority for this developer in their workflow? And if it's anything less. Maybe you're focusing on the wrong user, or maybe you're focusing on the wrong customer. And so it's like being ruthless with like finding, we call it like the hair on fire problem, whose hair is on fire right now to the point where you could give them like a brick, like your product as a, as a brick.

And because the hair is on fire, they will like hit their head with a brick to put that fire out. This is like a YC thing. But it's really, it's a really effective way of like, okay, this is really solving a pain point for my. Those, those are the mission critical. Those are the things that become critical path.

Eventually I think companies that haven't found that and haven't, um, discovered that with their customer will have a really hard time.Related to that, what are the kind of things that you see founders struggling with in the defile space?

I think it's kind of, it's very tied to that. Lots of developer first companies have an allergy and I'm sure you see there's a lot and your broad experience there. there's the, there's this kind of sentiment of, oh, you don't sell to developers or you don't market to developers.

And I've heard it from founders often, especially more technical founders where they're like, oh no, you can't sell this developers hate being sold to, and I, and I agree, like I understand what they're saying. Like no one likes to be sold to, but actually the. The core of sales is just listening to customers like understanding the value you are driving and then scaling how you listen to customers and understand their problems.

I think there's like a misunderstanding of what sales means. And similarly in marketing, or especially with market. One of the things I see a lot of founders not doing or ignoring is not having like a really deep understanding of the landscape that they sit in, especially with developer tooling right now, because the landscape is messy and there's a lot of companies out there.

And if you don't deeply understand where your product sets in the landscape, who else is sitting alongside you in the landscape, how those products are. It's really hard to talk about your product in a way that people will instantly understand. And that's the core thing, right? It's like, how do you educate people?

How do you help them understand the value that you'll deliver for them quickly? If you don't understand the landscape. And I've heard this a lot from founders that are like, I don't need to worry about that. Like more products amazing it'll sell itself, but people will just get it because it's really.

But actually, if you can't talk about that in a compelling way, people, people won't get to that point point of realization or developers won't get to that point.

Jack: Mm. Yeah, that makes sense. And I, it seems similar to what super base experience, where they were selling themselves as like real time stuff on top of Postgres. And then as soon as they started. Source fire base. Yeah. It was like, just took off so true. It's just, it's catchy.

Right? You're just like, and when you developer get to that, like buying decision or use a decision of like, oh, am I gonna use fire base? Because you just it's on your mind. It's almost like, oh, this open source fire base so quickly, easily like, yeah. And that's definitely like a hair on fire problem that people have experienced that fire bases like struggles to scale gets really expensive.

Like you're really locked in. Now is like a kind of wild time for DevTools as we've briefly mentioned for everyone. What are the good founders doing? The good companies doing that others maybe could learn from that you've seen?

Megan: So for the kind of companies that we're investing in within developer tool, infrastructure software for those companies, although they might start open source or might start, uh, developer up motion in the end, most of those companies are enterprise software. They will need to transition to an enterprise sales motion.

And so timing is very important with that. I think companies that have tried to do that too soon and have tried to go top down Excel top down too soon, it's caused problems with the product it's caused problem community. So I think one of the things that some of the best developer tooling companies do really well is manage that transition.

So manage that transition from focusing on the community, building an amazing product that both individual developers and teams also love. And. But then using the learnings from that community, using the feedback that they've got from having that love to then transition into enterprise. So I'll use an example to make that more concrete GitPod, uh, who we invested in couple of years back, they had built the best product for kind of building developer environments cloud, and their entire focus for the first few years of that.

Was making sure their product was the best and really serving customers to the point when we invested, we spoke to their community, they were like, I will never go back. Like, this is the most amazing product. Like they just tapped into something that a very specific group of developers loved and they've built that really successfully.

And then over the last year or so, they started getting interest from larger companies, some really specific use cases. How they would use skip PODD internally for their teams and actually the way that get PODD have transitioned. The love of the community into building champions within enterprise has been really successful.

They have a, they have a specific case study that maybe we can link one of their enterprise customers, factorial, just an HFR company. And the, I think he's like the director of developer experience. It's just the biggest fan of GitPod. And it's amazing to see cuz he has a funny story about him playing, playing a gig with his band and he loves GitPod so much internally within factorial that his team like came to this gig with like GitPod posters and like kind of sh lifted up these like GitPod signs at his gig.

It's just the way that they've like built their community. The team that manages that community is just like engender, this, this. And also the power of the product being so effective that it's just, it's just a great story for how you can like build ad advocacy, even in large companies. And like, rather than alienating the community, they're actually like bringing that community into, for sales, which is so effective.

Jack: That's such a powerful point. Think there's like the misconception in that, like a lot of what you're doing in sales at enterprise level is like just finding the people internally, helping them sell.

But then when you've got someone who actually is selling it internally knows, knows how things work. It's essential pretty much

Megan: So powerful. Like the core message is basical. For founders or for companies that are very good at building communities, it actually makes you very good at [00:11:00] doing enterprise sales and not in a shoving your product on people kind of sales way, but in a really authentic journey, creating value for people in an organization.

And those are the kind of companies that we love to invest in at crane. And that I kind of found us that we love to invest in making that transition.

Jack: Could you give us an example of a company that you invested in and why you invested then in them?

Meganb: Absolutely. So it's actually my latest investment is a company based in Israel called Novu is building open source notification there's a few reasons to we invested in this company. My reason is the team they're exceptional built companies, but what really captured us about this investment is that as a team, they had gone through the pain. Of building notifications software, like notification infrastructure, every company that they built and they were building it, not only again and again, when they built a new company company or a new application, but they were also when those companies scaled having to rebuild it.

And so it's the Superman pretty boring development work. And they realized they were just doing the same things. And so the core of no view was. No one should have to build these systems over and over again, it's tedious and that's not what developers love to do when they're building applications. And so they build it as an open source project.

We invested shortly after they built the open source project to help them then build out the company. And essentially what they're doing is bringing the power of a notification system from a company like slack or Microsoft. And they're giving that to any developer from scrap. So you don't have to build it again.

From the earliest day.

Jack: Yeah, that makes sense. I've built notifications, with fire base where it's like more or less, you do everything, all the logic. And I know there are like providers that I have used forgetting the names of them, but they weren't open source and it felt slightly opaque about how things work. Yeah, I can see that. That's an exciting one.

Megan: So the core, the other core thing that captured us was actually there were a few companies building, like similar, a similar kind of notification product software product, focusing on product teams. So they're like general consensus until this point has been actually notifications are a product problem and that's for product managers to figure out, okay, how are users interacting with our.

Actually, what know if you saw was actually, this is an engineering problem because they're the ones that they're building this. And actually with the rise of companies, Twilio, that infrastructure is becoming much more complex, especially with Twilio and more channels. And so they were like, maybe this is an engineering problem it's for us.

And they kind of put a few posts out and some content out. And the reaction to that content was overwhelming from developers going, yes, like this is actually a big problem for me. And I'm the one in the. I'm the one at the end is responsible. So that was like, and so therefore going open source, making it easy to adopt, building the community around, that's been really successful for.

Yeah. That's really interesting. There's a company. You probably know them. I forget the name, but they're like kind of an open source mix panel . And I think they came, they had the same logic where it was like, developers are the ones that always have to play around with this. Always get asked to implement everyth.

But this whole product is built for product managers. And so they're just like building much more like developer for full product. That's open source makes it easier to go into enterprise, all this kind of stuff. It's very interesting. Yeah. So, yeah, and this is really one of my core like investment thesis and I'm gonna make a shout out here. I would love to see more.

This is exactly what I wanna invest in infrastructure, self targeting developers, enabling developers to build applications more easily, especially where current approaches are focused, product or marketing. Interesting. So find Megan on Twitter and, uh, sending a pitch me up. Hit me up.

Jack: Thanks so much for joining Megan. Um, it was really awesome speaking. And where can people learn more about you and about crane?

Megan: So about crane, you can find us @crane_vc and for me, the easiest way to follow on Twitter at @meganreyno.

Jack: Yeah, we'll put it in the show notes. Thanks so much for joining and we'll see you again soon.

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