Last week, Postman raised $150MM at a valuation of $2Bn and entered the coveted unicorn club. Joining the league of Indian SaaS unicorns like Freshworks and Druva, Postman has been the fastest to get here, taking just six years.
Open the Bridge
They say startups emerge from founders’ personal pain.
In 2009, Abhinav Asthana was interning with Yahoo where he worked on a project with Ankit Sobti. They were building a front-end architecture of an app.
At that time testing APIs (Application Programming Interface) was a pain. There were a lot of communication issues with different teams and it exposed the inadequacy of existing API tools.
APIs were a relatively new concept then, but what did APIs really do?
You can imagine APIs as bridges which connect different islands in the digital ocean. These islands, or systems, are protected by a moat built by the companies to ensure security.
These bridges can be connecting any two, or more, systems as part of a solution.
For example, when we use the Uber app, it creates a bridge with Google maps to discover our/ and the driver’s location by calling Google maps API. Another bridge, which is an internal API, is made between the Uber database and the app screen, showing all relevant information.
These bridges were sprouting up, and the duo struggled to find tools to manage them.
Having experienced the problem first hand, they thought of finding a solution but being first-time engineers they didn’t work on the problem then. Not at least for a few more years.
After completing his engineering in 2010, Abhinav went on to found his first startup, TeliportMe, that built applications. It was built on a single API that powered all these applications from the backend.
Here again, Abhinav faced the challenges of standardization and automation around APIs. He realized that the problems existed across the board from small startups to bigger tech giants like Yahoo where he had interned earlier.
It was around this time in early 2012 that Abhinav decided to try to build something that would be more convenient, reliable, elegant and flexible to solve a pain point he himself felt.
Inspired by the HTTP Request method POST which was core to the bridges, Postman was born.
By 2012, there were close to 2000 downloads on the Chrome webstore.
Finding that it worked well for himself, Abhinav had decided to put this on the Chrome webstore as an open-source tool to help other developers facing similar problems with APIs.
For Abhinav, who was working with TeliportMe, it was a side project and people were still using it as well as posting few requests for feature development.
By 2013, Abhinav decided to move out of TeliportMe and took on a few consulting assignments.
Postman was still running without any monetization. During this whole period, both Abhinav and Ankit were in touch with each other.
As Abhinav decided to move out of TeliportMe, he discussed the idea around Postman and the duo kept working on it on a part-time basis.
This time, Abhinav was cautious and did not want to rush. Before deciding to take anything more seriously on a full time basis, he wanted to have co founders who share his vision and are equally passionate about the problem he wanted to solve.
For Abhinav, Ankit Sobti, who by now had completed his MBA and was posted in Mumbai, was an obvious answer. This made Abhinav frequently commute between Mumbai and Bengaluru. It was around this time that he reconnected with Abhijit Kane.
Abhijit Kane, who had interned with TeliportMe and was Abhinav’s junior from college. He was working with Walmart Labs and shared with Abhinav that several people at Walmart were using Postman.
This news was exciting for the trio, who realized that they had scratched the surface of something big. Abhinav, Ankit & Abhijit began to see this as more than a fun, open source side project that was getting organic traction from such reputed names.
However, a bigger validation for product market fit was yet to come.
Not Resting on Laurels
It was during this time, Google Chrome Developers approached Abhinav.
Abhinav was pleasantly surprised to know that developers at Google were also using Postman. This prompted him to build a new version of the app to incorporate the requests that were flowing in from developers.
Soon the new version of Postman went out as a featured app in the Chrome Webstore. Organic growth of the app simply kept increasing and compounding without any marketing push.
Don’t forget that this was still a side project.
At that time, there were a few 100,000 active users for Postman. A new version of the app was launched. Soon it hit 500,000 users.
But, there was still a question before this could be turned into a company, would users pay to use Postman?
Postman was never launched with the immediate goal of monetizing it as it was solving a very simple problem at that time. The focus was on making the product as effective as possible.
But the community was so excited to have this product, that a team from the US sent $500. This was the first time Postman made any money.
Based in Bengaluru, Postman was officially launched as a company in March 2014, through a post on StackOverflow.
This post on POST by Postman remains one of the largest sources of referrals for them.
Solving Composite Problems of Scale
As Postman started getting traction, there were two key challenges in front of the team.
The first was limited use cases and the second was to get a monetization model in place to make it a viable business.
Postman, which initially helped primarily with API testing, soon saw collaboration was a key issue. It rapidly built collaboration into its offering.
Being a product first company which places users over buyers, Postman soon launched some paid features or a subscription service, with many features still free.
Their freemium model was kept friction-free.
While their new SaaS business model was yet to get fully tested, the trio was ready to make Postman more professional. One interesting story in the journey was designing their logo.
With limited cash, Abhinav hustled to connect with Aditi-an accomplished designer and persuaded her to create a logo for Postman. Keeping the Postman’s fun and geeky image intact, a flying superhero was finalised.
The twist to the logo was, to match different sizing challenges across favicon, desktop, mobile apps etc, it was decided to resize the logo differently.
It was done with a fun little detail where the space hero gets smaller and younger as the app icon scales down.
For a product growing so fast organically, monetization or funding was never a challenge. In the go-go years of 2014-15, the Indian startup ecosystem was flush with funding.
Postman raised a $1MM seed round to expedite their journey to become a collaboration platform for API development.
But why was API development, and its management, becoming so important?
Taking APIs Public
In the early 2010s, the world was seeing an explosion of digital islands, floating, and needing more bridges.
API usage was triggered and brought mainstream by Amazon. When Amazon decided to build for scale by designing products which can integrate using APIs, the curve of API adoption slowly started steepening.
The introduction of iPhone heralded a fresh boost to the API adoption process. More connected devices meant more islands, and therefore more bridges.
Smartphone revolution required apps to have APIs running in the background. Instead of writing dedicated code that ran inside mobile phones, APIs could be written which would interact with mobile phones and websites.
As IoT devices and mobile phones became more mainstream, APIs started playing the crucial role of facilitating the interaction of the device with the user.
The problem of API management crept in, which went unheeded. The explosion of distributed servers or the “cloud” only exacerbated the problem.
For most companies, 99% of the APIs are proprietary. They are not exposed to external consumers, or made open source. Internal APIs are very transient, which change every time, leading to frequent front-end crashes.
Developers would go back and forth over API production and development, resulting in a lot of time taken to ship the product. APIs built out would not have proper documentation.
Even though connected devices communicated with each other using advanced tech, developers had to rely upon emails and chats to communicate within the developer community.
Emails, chats and source control were rudimentary, not designed to be API use case friendly. Postman aimed to supercharge a developer’s productivity while developing an API.
In-line with the bridge analogy, Postman was walking on their bridges as they helped build them. When compared to some other great developer-first companies, parallels appear.
GitHub was started because its founders, developers on the Linux platform, had a hard time working in collaboration. Slack was initially an internal chat tool made by game developers Tiny Speck for their creation named Glitch.
The founders realized that they had managed to make simple tasks like moving rocks seem entertaining through an engaging communication platform.
If you want to sell something, you should love using it first.
Building for Internal Service
Postman immersed itself into the process of identifying inefficiencies that it saw in its own usage.
The team deep dived into the issues and inconsistencies that existed in the backend work – with regard to design, development, testing, monitoring, and documentation.
The backend process was overhauled wherever the existing tools of development workflow did not integrate well. Focussing on the people working on the product itself led to more traction. This developer first mentality was the secret sauce that drove the company’s product-market fit.
There were 10 million internal APIs in 2016. Postman was the only company which had pioneered API management.
There was no one else solving this problem.
By 2016, Postman had 3.5 MM dedicated users, 1.5 MM MAUs and 30K companies using the product. Even today, Postman’s major product updates are driven by engaged customers who feel the need for a new feature and trust that the platform will be able to deliver.
With a ‘Build in India, Sell to the World’ strategy Postman had hit the growth pedestal.
The company raised a $7M Series A round in late 2016. By early 2017, 61 Fortune 100 companies, 9/10 top cloud services, 9/10 top retailers and 6/10 top manufacturing companies had adopted Postman.
The market was waking up to its potential.
It also started an office in San Francisco. Interestingly its most devoted customers became its early employees in the US. With the majority of its customers based in the US and Europe, having a sales and marketing team in the US also improved customer responsiveness.
The company was reaping the benefits of a scalable product market fit in full force by mid of 2017 as it scaled to 3M+ developers worldwide. Solving for the core pain point, it was helping developers build connected software with ease.
The API explosion was only helping it.
65%,of global infrastructure service providers revenue will be generated through API enabled services, up from 15% in 2018.
As more companies save and access data on the cloud (buoyed by the shift to AWS) API collaboration will become increasingly meaningful in the cloud-driven era.
The enabler of these bridges being built rapidly, efficiently, collaboratively would be Postman.
Selling Golden Soap
In Mar 2018, the company launched Postman Enterprise to cater to growing demand for it.
Postman added features such as Single Sign On, Audit Logs, Static IP for Monitoring and Extended Support and Billing for its enterprise customers.
It closed 500+ feature requests in 2019 alone.
Keeping simplicity as the central premise, keenly listening to its users, baking insights back into the product cycle to innovate and improve overall Postman experience has helped it maintain a clear dominant lead.
The journey has had its fair share of challenges. Some of the biggest problems have been confronting a large user base and the information overload to juggle in the head at all times according to its founder
Ultimately the biggest win for the company has been to make the API development process so simple that non-techies now use the tool with ease.
In a 2019 survey, Postman found that for the first time non-developers formed a majority of those using its platform to work with API’s.
How does a company translate loyal customers into revenue generating customers? This is where the beauty of Postman’s tiered pricing and solution offering comes into play.
Broken down into four tiers, the company offers companies increasingly advanced levels of functionality, starting from a free solution that lets you build 3 APIs to a customized enterprise solution with close to no restrictions on your ability to create, monitor, and deploy APIs.
This a-la-carte SaaS offering is built to create a funnel for developers to go from first trying the Postman service (the free tier) to becoming paid users.
Before we jump into estimating Postman’s revenue, and understanding its valuation, it’s important to note another aspect of high growth SaaS businesses.
Within the first year of operations, Postman had 500K customers. It is fair to assume that at the start, most of those users could have been free users just trying the platform.
As product-market-fit was found and improved upon, more of these developers started to become raving fans of the Postman platform and realizing that their companies could benefit from this solution.
As Postman grew from 500K users to 11MM users, it is safe to assume that a lot of this growth came from paid users.
Using Slack as a benchmark (16% of Slack users are paid users) and adjusting for the fact that Postman is a developer tool as opposed to a consumer tool, let’s assume that 10% of their 11MM users are revenue-generating users.
Further, let’s assume an average revenue per developer of $10 (perhaps a conservative estimate given that Postman does not disclose pricing for Enterprise customers, who might be higher), we arrive at a 2020 annual revenue run rate of $100M+
Given their immense user growth over the past 6 years, low customer acquisition cost, and satisfied customer base, their recent valuation of $2Bn
In the process, Postman has become an Indian company uniquely pioneering a technology gold standard.
Principled Use of User Experience
As the first company to identify difficulties in building APIs, Postman has become a complete API development environment.
This claim is strongly backed by the half a million companies and the eleven million developers using the product.
Their all inclusive toolset to support the complete API lifecycle allows developers to not only test, monitor and publish APIs but also design and document; all in one place.
The guiding principle behind any product-led company, to design for the end user and not the buyer, is exemplified in the interface of the Postman product.
The company follows two key design principles which helped the product grow to where it is today, and become the universal standard for all API’s.
Postman’s rise to be a gold standard arose from following its two core principles of being user first and highly engaged with the community.
If a developer uses Postman to send a request, it should happen within seconds without writing a bunch of code, leading to that all so important first unit of value.
Once a user is hooked on to the simplified and sleek interface, while getting things done in seconds, there is then a seamless transition from using the tool for one of your tasks to setting it up for your entire workflow.
From a community standpoint, Postman itself arose from Abhinav’s own needs as a software developer, suffering from the inadequacy of API based tools.
Within two years of its launch on the web store, there were five lakh developers using and talking about Postman, a strong indication of the need for such a product. Building a strong user-driven feedback loop into the product, it allowed for understanding of what users are doing with the product and then developing additional flows to enhance or introduce new features.
Postman was initially designed to solve a basic test flow, a fraction of what it does today in the complete API ecosystem.
Postman truly delivers on its promise of providing support for the entire API lifecycle, and it has evolved sticking to its core principles.
Remote Procedures to Build Bridges
Anyone tracking Postman’s growth since inception would be quite amazed by what the company has been able to build in its short history.
For the company’s leadership however, the journey is just beginning.
On both the API producer and API consumer side, problems continue to exist. Problems that the Postman team is hard at work solving.
For developers, the API landscape lacks visibility and interoperability, and it is hard to produce reliable and high quality APIs. On the consumer side, the lack of documentation and easy-to-use APIs makes the experience more challenging and leaves plenty of room to improve.
Postman sits at the intersection of these improvement vectors, and is perfectly positioned to take advantage of it. The virtuous cycle of developers using Postman and publishing public APIs through their platform will lead to a broader use of APIs in an API first world.
Postman is not only an enabler of APIs, but is also an educator of using APIs. It is apparent when the company says the world is moving to be API first from being code first.
To build this new software-defined ecosytem, Postman is not only aiming to become the bridge that connects the API world. They also want to be the starting point for all things API, putting on the hat of both Microsoft and the Apple of the API world through what they call the API Network.
As the pandemic accelerates digital usage, more systems will come online and onto distributed servers. More floating islands, in a bigger ocean, all across the world.
These will all need highways, bridges, roads, trains to take information from one place to another. The enablers for all this building will be none other than erstwhile plugin on Google’s Chrome Store.
The tailwinds for Postman are driven by digital adoption, and the requirement of software that talk to each other.
10 years ago, Marc Andreessen dropped his essay ‘Software is Eating the World’. Today, APIs are the waiters in the restaurant where Software continues to have its meal.
Postman is helping build bridges from India, connecting the software world.
Audio Version: Behind the Scenes with AJVC
On request from the community for an audio version, we have done a behind the scenes format. This was done with Abhinay, Keshav, Raghav, Raj, Shiraz and Aviral.
Tune in below: