Things that influenced us
Books
- No Rules Rules (Erin Meyer / Reed Hastings)
- Principles (Ray Dalio)
Other companies
- Atlassian – multi product, inbound, dev centric company, totally dominant in their categories, scaled way beyond $1bn
- AWS – multi product, pricing model, UX (!)
- Pager Duty – pricing model, product led growth
- Hubspot – built a $25bn company despite competing with Salesforce
- GitLab – while we run very differently and have a different business model, we were inspired by their transparency
- Sentry – branding and bottom-up approach
- Algolia – developers doing marketing
- GitHub – enterprise go-to-market is 200 developers forcing their company to buy us
Handbook
Like many things at PostHog, this handbook has scrappy origins.
Tim and James were planning on launching on HackerNews, and wanted to look as mature as possible. We felt that few people would want to use a flaky new startup's product seriously. So we asked ourselves: how do we signal that we're mature?
We looked around at some big, boring companies and realized they all had huge footer sections on their websites with lots of links! How do we produce a lot of content to add to our footer when the product, at that time, was so simple? The answer: we should write up how we want to work.
Once we started writing the handbook, we realized it would transform our company. Every team member, and even strangers on the internet, could suggest changes. If you're doing something in public, you're going to think it through better. Ultimately, it made us treat the company as our product.
It's a classic example of getting information by doing, rather than by planning too carefully.
Timeline
January 2020: The start
PostHog was founded by James and Tim on January 23, 2020.
We started working together on a startup in August 2019. Our first idea was to help engineers manage technical debt. It didn't work out, but we realized the power of treating growth as an engineering problem. We also knew that many engineers struggle to understand the impact they have on the people who use what they build.
There are plenty of product analytics tools out there, but all the alternatives are SaaS-based. While they're powerful, they can be frustrating for developers. From our perspective, these tools can be problematic because:
- We don't want to send all our user data to third parties
- We want full underlying data access
- They don't give you choice and control over pricing
February 2020: Launch
We got into Y Combinator's W20 batch, and, just a couple of weeks after starting, realized that we needed to build PostHog.
We launched on Hacker News with our MVP, just four weeks after we started writing code. PostHog was our sixth idea – we had been pivoting almost once a month for half a year. Boy were we relieved!
The response was overwhelmingly positive. We had over 300 deployments in a couple of days. Two weeks later, we'd gone past 1,500 stars on GitHub.
Since then, we've realized we weren't just onto a cool side project, we were onto what could be a huge company. It turned out there were a lot of developers who liked us who wanted a better choice, built for them.
April 2020: $3m seed round
After we finished Y Combinator, we raised a $3.025m seed round. This was from Y Combinator's Continuity Fund, 1984 Ventures.
As we started raising, we started hiring. We brought on board Marius, Eric and James G.
May 2020: First 1,000 users
We kept shipping, people kept coming!
October 2020: Billions of events supported
This was a major update – PostHog started providing ClickHouse support. Whilst we launched based on PostgreSQL, as it was the easiest option to ship quickly, this enabled us to scale to billions of events.
November 2020: Building a platform
We realized that our users, whether startups, scale ups or enterprises, have simple needs across a broad range of use cases in understanding user behavior.
PostHog now supported product analytics, feature flags, and session replays.
December 2020: $9m Series A
We kept growing organically and took the opportunity to raise a $9M Series A, topping our funding up to $12M led by GV (formerly Google Ventures).
Our focus remained firmly product, engineering and design oriented, so we increased our team in those areas.
We now had employees in ten countries, and it still felt like day one.
Everyone takes a mandatory two weeks off over Christmas to relax.
June 2021: $15m Series B
We raised a $15m Series B a little ahead of schedule, led by existing investor Y Combinator.
We're now focused on achieving strong product-market fit with our target segment in 2021.
Our team had grown to 25 people in 10 countries.
September 2021: Product-market fit achieved for PostHog Scale
We achieved product-market fit for our open-source product and PostHog Scale.
Our revenue quickly rose as a result. Now we needed to optimize it.
We were 30 people in 12 countries.
January 2022: Sales comes from our team, not our founders
We hired two Customer Success experts dealing with all inbound requests. We hired two more engineers, since most questions customers have are technical.
December 2022: 6x revenue growth
We had a fantastic year. While the tech market crashed, we grew 6x and reached millions in revenue, with a sub-two-month CAC payback period. We set $10m ARR as our next goal, with a gross margin of 70% – both of which should mean we've got all the metrics needed for the next fundraise.
We optimized revenue growth by implementing a product-led CRM for our customer success team, adding to our marketing team size, and creating a two-person growth engineering team. These teams all make a big difference!
We deepened all of our product areas significantly – we frequently win deals as a standalone session recording, feature flagging or experimentation tool. Session recording usage started to match product analytics usage.
Our infrastructure is far more stable and scalable – much more of it runs as code. We can now offer EU- or US-based hosting for our customers' data.
We're now 38 people in lots of countries. We're not adding lots of headcount over the next 12 months, though. We're staying lean and letting revenue continue to rise rapidly.
February 2023: Focus on mass adoption
We're doing well at monetizing high-growth startups due to our optimization work, averaging over 15% MoM for the last six months.
We've decided to double down on mass adoption of the platform in high potential startups instead of focusing on enterprise. Simply, this will better help us increase the number of successful products in the world. As a result, we've removed support for paid self-hosted deployment and are doubling down on our open source and cloud projects. We have released a free tier of PostHog.
In the product, we're working on making the experience slicker, and we have plans for a standalone quality CDP in Q2.
March 2023: Decided to ship a warehouse
For a long time, we were happy competing with lots of $1-2 billion companies, each providing point solutions. We felt our market was just the sum of all of theirs.
But we kept seeing companies streaming their PostHog data to a warehouse - such as BigQuery. We even lost our then-largest customer for this reason - where their source of truth became their warehouse instead of PostHog.
So we decided we would ship our own warehouse, enabling us to remain the source of truth for customer and product data. This would let us offer a better integrated service to our customers, and meant we could work on a bigger challenge.
August 2023: Growth continues
We've doubled revenue so far this year without any increase in headcount. We've hit 15.7% MoM for the last 12 months. Our CAC payback is now just five days. Our numbers are exceptional. We even discounted several of our products. We've added ten extra roles and will be profitable in around a year.
We have user surveys and the data warehouse in private beta.
Our infrastructure has become pleasingly stable. The biggest challenge is scaling our data pipeline, and making sure we give as much responsibility as we can to each small team owning each product for their own pipelines, where rational to do so.
January 2024: Well, that was good
That was quite the year.
We wound up quadrupling our revenue, but only increasing our net headcount by three people in 2023. Last year, we validated that we could get multiple products to product-market fit.
April 2024: We're now the default for startups
54% of the first Y Combinator batch this year adopted PostHog.
Tim and James turned up to talk at batch events and we were surprised at the number of groupies wearing PostHog merch – our merch is really cool now, we've gone way beyond the logo-on-a-black-t-shirt standard.
As far as we can tell, we're in the top three products used by YC companies.
July 2024: Price cuts ftw
We cut pricing by up to 80% for our two most popular products, including for our existing customer base. This was popular with users and led to faster growth.
We've started doing growth reviews for almost every product we have. We run through each product's metrics (revenue/usage/support/performance) and feedback / reasons for any churn that has happened, so we can truly treat each small team like a startup. This session is designed so the engineering team leads may choose to reprioritize work, or not.
October 2024: 100,000 customers, and speeding up – more products and more people
We hit 100,000 customers either paying or free, and over a quarter of a million users. We've started hiring a lot faster as growth has continued this year. We're now 65 ish people with ~9 products.
We've added some people in sales, but it is strictly (i) sales assist, talking to people that have asked to speak to us, and (ii) cross sell to existing customers.
We do not do outbound, so we can remain efficient and either hire more engineers or cut our pricing for our customers so more of them recommend us!
We've hired a sales engineer super early (Mine, she's awesome) and we're really working on the culture in this team proactively.
Strategy-wise, we're just leaning into our basic three principles, which we're seeing more and more evidence are working well:
All the tools in one – We want to go wider still. We think we can provide every piece of SaaS that startups use, starting with those closest to customer data. We want to expand to a customer support product, the marketing and sales stack of tools too.
Get in first – Don't go upmarket. We're closing enterprises regularly, but we're not trying that hard here. We're trying to stay away from complex migrations for users who use many products already.
Be the source of truth – Our own data warehouse is now available and very popular.
Revenue is in the low $10s of millions of ARR. We're very strongly default alive and will struggle to not end up profitable next year. Every time we get close to being profitable, we start speeding up hiring.
Revenue growth is fast enough and we're getting so many unprompted offers for investment (that we aren't taking) that money isn't really a meaningful constraint any more. Whilst we have a great grip on each product's individual performance, our understanding of cross sell is a little weak, so we're working on that now.
Our marketing is getting weirder. It's more and more fun. We've commissioned a puppet, coming in January. Watch this space. Our newsletter, Product for Engineers, now has 20,000 subscribers and it's growing fast.
We're realizing that the more ambitious we are, the easier it gets – customers get excited, investors get excited, employees get excited. We can now see a real path to being a $100bn+ company and changing how software teams work industry-wide.