Investment Flashback - Stackshare
Feb 06, 2023
After the IPO at HashiCorp (where I used to work), quite a few of my colleagues decided they wanted to explore angel investing. I've slowly built up quite a few private investment over the years and so have had quite a few informal chats over the past year about how I got into it, how I've approached it, what's worked, etc.. It's also proven to be a worthwhile moment of reflection for myself.
So before I talk about what's next for me, I thought I might take a few moments to talk about what a bunch of other interesting people have been up to over the past decade. People I've been witnessing to various degrees from the sidelines. It's tough out there for a lot of people right now and I'm hoping this turns out to be useful for at least one person. A reminder to other founders that success rarely happens overnight, and the many years of effort get hidden by the outcome. Maybe it's a new perspective of what at least some investors consider before writing a cheque. If you've recently lost your job, maybe you find a new interesting company in this series that is hiring. If you've lost some of your team maybe you discover a company that can help you be more efficient and solve a problems. Or if you're considering starting with angel investing yourself maybe this convinces you that it doesn't require much more than some spare capital that you're happy to risk and a willingness to say yes to someone. Being a successful investor no doubt requires more than that. Getting started is just money and a yes though.
If you're a founder considering raising money and wanting to speak to some potential angel investors from HashiCorp, or alumni, then you can contact them via HashiAngels.
So over the next few posts I'm going to go through each of the investments in my portfolio that are still in play. They're a mix of direct investments where the founder and I have had a back and forth to make a deal happen, some syndicates SPVs where someone else has led and I've joined in as part of their investment vehicle, and a couple through a crowdfunding-style platform where I've literally never spoken to the founders and just liked the idea of being invested in the product.
I'll post them in no particular order, except for this one. I figured it made the most sense to go back to where it all started.
I was incredibly fortunate to join Heroku at a really exciting time in their growth. The team were just amazing, to date the most inspiring group of people I've had the pleasure to work with. It was a heady mix of believing anything was possible while having the focussed execution to make it happen in an intentional and methodical way.
But in the years after the acquisition things slowly changed. It still felt like anything was possible, but I felt a growing sense that what we'd do in reality was much more Salesforce-centric. It was a perfectly reasonable strategy, it just wasn't one I was personally excited by. And so in early 2014 I handed in my notice.
Having spent most of my time there on the Add-ons team meant I'd spent years thinking about the experience on most of the things that weren't Heroku. Adding a database, logging service, caching layer, SMS, whatever was such a low friction experience. I wanted all apps to have that, not just apps running on Heroku. It also seemed like a pretty good business to be in if you could make it work: it's not an especially tough technical challenge (it sets a configuration value for each service you add) but Heroku took 30% of revenue for that service, in-perpetuity. A clip of revenue for a one-time introduction is pretty nice!
I also knew from watching so many other marketplaces try to challenge us and subsequently fail that it's not as simple as "just build a marketplace", people need some other reason to be using your product. The marketplace should be an emergent property solving some other problem. For Heroku it was that you couldn't run these other things yourself on a dyno. And at some point, quite early in development, you inevitably needed a database or logging or something. And so you found the marketplace.
So I knew if I was going to build a generalised marketplace of developer services I couldn't actually build a marketplace, I needed to solve some other problem and let the marketplace emerge.
Solving the discovery problem
I'd spent years building out what was, at the time, the most successful marketplace of it's type. I knew what worked and what didn't. What people needed. One of the unsolved challenges with the Heroku marketplace was discovering what add-ons existed, and more importantly which one you should use. When there's only a dozen products on offer it's fine to just have a list. As they grow you need categorisation. Eventually that's not enough though. There's five different companies offering Redis as a service, with identical features and comparable price points... which one should I use? If there's an obvious and correct answer to that then why are the other four even offered to people? Why are you letting them make sub-optimal decisions for their infrastructure? What services should I be using? Which ones are most appropriate for my stack? Which ones play nicely with the things I'm already using?
We'd run various experiments of limited success on this over the years, and while I wanted to do more I knew it was one of those areas where the business wanted to focus their energy in other areas. Which meant I knew it was a safe place for me to try and get a foothold. If I could build out a compelling product that helped developers make better decisions about what tools they could or should be using, then I could at in a single click "add this to my app" workflow that gave the Heroku Add-ons like experience.
And I figured I was pretty uniquely positioned to make this happen. There's only a few people who'd successfully done anything like this to date, and the rest of them were still at Heroku. Unfortunately I had a non-compete clause and so needed to bide my time (12 months to be precise) before I did anything that would be such a direct competitor to anything Heroku was doing. That was fine, we were moving our lives and new family from the US back to Australia anyway so I had time. While almost all of our belongings were in a shipping container slowly crossing the Pacific, we spent a few months traveling Europe. My mind constantly wandering to how I was going to tackle this challenge, what I needed to build, what was important to do differently.
The competitive landscape
In the midsts of all that dreaming I started looking for products, either still functioning or now defunt, that were on the periphery of what I wanted to do. In the process I came across a neat looking product that had already implemented some of the early ideas I had. It looked quite slick too! I reached out to the founder to have a chat. Given my experience at Heroku, they were really excited by the prospect. For my part at the time this was entirely an attempt to understand who I might be competing with when I launched a similar thing. At the time the product was called LeanStack, but people know what it's become now as StackShare
I still remember that first call with Yonas. With a sleeping newborn on our bed, I'd been kicked out into the hallway to chat with him so I didn't wake up the baby. I started the call smug and full of confidence about how uniquely smart I was about this whole domain, and I ended it humbled and questioning everything I was doing. Not because it was confrontational or aggressive, far from it. Yonas has been one of the most humble, generous, and personable founders I've worked with. Over the course of that chat though it became clear I didn't know shit. Or at least nothing special. He'd worked it all out already. The mistakes we'd made at Heroku, he'd spotted them to. The bits that were missing he knew they needed to be filled. Whatsmore, he had a significant headstart and I already liked the visual aethetic of what he'd built better than what I had in my own head.
Yonas and I spoke a couple of times over the coming days and it became clear that if I thought this was a problem worth solving it didn't make much sense for both of us to be doing it. We we're already on the same page with so much stuff that we'd end up building near replicas of each other's stuff. I came clean about my original intentions. Rather than worrying about having to setup a company, hire some engineers, and start building some things when I got back to Australia why don't I just give him some money instead and extend my holiday? A signed term sheet later and I'd suddenly made my first angel investment.
Problems & Solutions are rarely what they first appear
There's a lot I've learnt and continue to learn from this first investment in Yonas. For a start and on reflection, it most definitely was an investment in Yonas. It might have started with a particular problem I wanted to solve. I probably even told myself at the time that's what I was investing in. However the reason things even progressed to that point was that first phone call. Where I suddenly realised he was so much smarter than me. He'd worked it all out without the advantages I had from my position inside Heroku. The actual cheque itself was an admission, because he was smarter, he'd be a better steward of that money than I would.
I said earlier that success rarely happens overnight, and so it's true here. It's been fascinating to watch the evolution of both StackShare and the market around it. If there was a window for my "generalised developer marketplace with Heroku Add-ons like experience" to exist I think it's long closed now, or only availble to just a handful of encumbents to pursue successfully. Meanwhile StackShare has uncovered those whole other problem I'd never recognised even though I've been subject to it myself on multiple occassions: when you've got multiple teams the question of "what tool should I use?" can also be a version of "what tool are we already using to solve this problem?". Companies inadvertently add new tools or approaches to solve problems they'd already solved elsewhere. Standardisation and communication is a real problem. It becomes a huge mess pretty quickly. A huge expensive mess because the extra complexity, inefficiencies, and wasted extra licensing all quickly add up at scale (also, if this all resonates you should check out StackShare Enterprise. It's free to sign up!). All this is stuff I simultaneously knew but overlooked back then.
Returns aren't always financial. I hope for the entire StackShare team's sake that at some point in their future they have a liquidity event. For me though I already consider my investment in Yonas to have had a very high positive return. Somewhere between three to five of my next investments were from direct referrals by Yonas. Either founders he thought I should speak to, or founders who'd discovered StackShare and reached out to him asking for an intro to their investors. Given the nature of what StackShare does, and Yonas' immense ability to network, there's been more than a few occassions where he's been able to open a door for me into another company I wanted to speak to. Most impactful of all though has been the career credibility it's given me over the years. Being an "angel investor" requires nothing my than money and to say yes. Again, that doesn't mean you'll be successful! It's opened so many doors and opportunities for me though. There's no chance AWS would have wanted me to join their Startup Team without having that experience on my CV. There's so many doors that have opened purely on the basic of people seeing me as an "angel investor". It's not a real job! It just means I can spend money. I sometimes wonder if it'd be a cheaper way to buy credibility that getting a university degree.
Previously I led the Terraform product team @ HashiCorp, where we launched Terraform Cloud and set the stage for a successful IPO. Prior to that I was part of the Startup Team @ AWS, and earlier still an early employee @ Heroku. I've also invested in a couple of dozen early stage startups.