Selling to Developers & choosing Seattle as US headquarters | Catching up with Kiwi startup Raygun

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Following the successful Sales and Marketing Jam events we held in April, we have recently run a series of crowd casts hearing direct from founders and how they have built global businesses. The following post is adapted from a crowdcast with John-Daniel Trask, the Co-Founder and CEO of Raygun.

Headquartered in Wellington, but with offices in Seattle and San Francisco, Raygun is a software diagnostics and error tracking platform that acts as a ‘black box flight recorder’ which is used by more than 35,000 developers at over 7,000 organisations worldwide.

What Led You To Found Raygun?

With a passion for technology and business from age eight, JD began programming when he was still in primary school. Studying a Bachelor of Information Science at Massey University, he started his career working at Intergen (another Kiwi company with offices in Seattle) before founding Mindscape, which has rebranded into Raygun. The problem was relatively obvious to JD, who explained “we know error diagnosis is a problem that all developers face, it was something that I ran into a lot while working at Intergen and reflecting how we handled software problems back then. When we started our company we built some other products but I always wanted to build in the ability to report on those errors.”

So What Sort of Companies Use Raygun?

While Raygun is a niche product, the market opportunity is massive and spans an enormous range of industries, with JD explaining “we’ve got a pretty decent range of companies ranging from small independent software developers through to Fortune 500 companies including Nordstrom, Microsoft & Box on the platform. There’s a pretty good chance that our code is running on your cellphone and half a dozen websites that you use every single day.”

A Slower Approach to Raising Money

Moving into international markets is expensive, especially if you move into the San Francisco Bay area. While the opportunities are enormous, there’s also a high barrier to clear regarding finding or raising funding. Raygun took a much slower solution where they bootstrapped the company initially through service work and by building a portfolio of products.

While Raygun has raised a little bit of money (although peanuts by international standards), JD explains that “in New Zealand you only want to raise capital once you’ve got revenue – you need to show that you have got some skin in the game and that you’ve derisked the company.

Because investors in NZ are not bold, you’ve got a higher bar to cross. Raising money on an idea would be hard to do over here. We’ve found with groups of Angel Investors – a lot of people have enough money to be in that category – our lawyers invested with us, we’ve had a whole range of individuals who we have worked with in the past who came in and helped us when we were raising money”.

The Benefits of Building a Sustainable Business

One of the bigger benefits of bootstrapping a business is that you insulate yourself from some of the risks that are prevalent in the tech world – with the recent downturn that hit some of the biggest firms in Silicon Valley quite hard in Q4 2015 and Q1 2016, including Square, Jawbone and Box.

Unlike some startups that are focused on hyper growth and burning through venture capital round after round, Raygun has always been profitable, even while raising money (which JD said ‘went a long way’). While at the SaaStr conference in February, Danielle Morrill (CEO of Mattermark), was saying “ok companies, you need to go and work out what 30% of your workforce you’re going to axe today because the market’s changed.” Rather Raygun looks at the way Bill Gates approached cash management while at Microsoft – with the company having enough money in the bank to run the business for a year without making any money, giving you a huge defensive position which insulates you from any market adjustment.

Building a Product that Delights Customers

Raygun maintains a public feature channel where people can ask for whatever they want. Internally that’s used to determine roughly 75% of new feature development. Then the other 25% or so of what’s developed is internally generated – it’s things the Raygun team want to work on and think would be amazing for the product, and so that delights the customer with things they’ve never considered before.

Marketing to Developers

Developers are hard to reach; they tend to be very cynical of marketing and use ad blockers extensively. Content marketing is a pretty good way to get around some of these blockers – developers read a lot. But the main keys to success for Raygun have come through having a superior product and remembering that software developers always want the shiny new things.

Although developers are hard to get in touch with initially, they’re good once they’re users – they tend to be highly loyal and promote amongst their friends. Raygun has consistently seen their net promoter scores moving up.

Maintaining Personal Balance

On a personal level, JD reads a lot (especially biographies and business books) and runs for clarity – “I should probably do it for health” he notes.

Avoiding the TechPress

JD recommends that founders avoid the hype that comes with obsessively reading sites like TechCrunch or HackerNews – they’ll convince you that your business needs to be worth a billion dollars within twelve months, and anything less is the mark of a royal screw up. Especially when you’re looking at raising money from New Zealand-based investors – the venture capital and investment markets at home are substantially less advanced than Silicon Valley.

Instead, try following some founders ahead of where you are on twitter or linkedIn and keep an eye on what they are doing and the lessons that they learn. Catch up regularly with people building businesses and reach out to other kiwis who have been there and done that. Many people have the answers that you want that don’t exist on the front page of publication.

Choosing a US market

When looking at expanding Raygun to the US, JD decided to set up an office in Seattle. We are noticing this trend where Kiwi companies are choosing to set up shop outside of Silicon Valley; citing reasons such as there being cheaper options, with an equally great community, better lifestyle and less of a barrier to entry to talent. Seattle is looking like a great option as one of these markets.

“Everyone said go to San Francisco, but couldn’t provide a reason why. Just because everyone goes somewhere, doesn’t mean it’s the best place for me or my business.”

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Some of the critical things JD looked at when looking for their US base were:

  • Overlapping timezone with the New Zealand office
  • A place that was a technology hub with a great tech/startup community and ecosystem
  • A place where their customers are located and where they could walk down the road and meet with them.
  • A place where you want to live, as a founder it is so important to have an environment that supports your growth as an individual and also feeds your lifestyle.
  • Cost – it’s cheaper than San Francisco which is a significant value of the company.
  • Seattle, is a growing tech hub where many large companies are deciding to locate, and that continues to grow (Amazon, Microsoft, SpaceX, Facebook, Google).

In Closing

While Silicon Valley is the usual choice for building a global technology business, it is not the only market in the US where you can build a business. JD decided to set up their US office in Seattle, which is where Raygun’s customers are and as a founder has a lifestyle that supports his growth and vision for where he wants to be. San Francisco is very exciting, but make sure it’s the right place for you and your business. Keep in mind that building a business is hard, and overnight success stories are usually many years in the making. Some Silicon Valley companies have unsustainable business models, which are supported by large funding rounds. Access to capital for these firms was easier than it is currently to raise money now in the valley, due to the correction happening in San Francisco. Investors require companies to have a more detailed plan around achieving profitability instead of just requesting more funding for unprecedented growth; this is a welcome change for the market. Businesses and founders with unsustainable models and growth are very exposed to risk when a downturn hits, or a correction as has happened this year with many companies in San Francisco making significant cuts (30%) in their workforces.

Businesses that plan on staying headquartered in New Zealand should consider taking a slightly slower approach to scaling into international markets, particularly if they are taking on local investors. It’s important to think critically about the business you’re in and to avoid the hype that surrounds so much of the tech press.

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JD is an avid founder and investor, a supporter of growing sustainable companies. Thanks so much for sharing your thoughts and experiences with us and being a part of our Kiwi Founder Series, which shares the knowledge of people who are out there ‘doing it’.

Check out the video here:

Post contributors:

Sian Simpson, Sam Marelich, JD Trask.

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