Editor’s Note: Semil Shah is a contributor to TechCrunch. You can follow him on Twitter at @semil.
During the summer of 2012, while working in venture capital, one of the early-stage companies I stumbled upon was founded by a trio of guys based in Singapore. We met a few times in the Valley and quickly became friends, and I informally helped them, from time to time, navigate the waters of moving to the Valley and getting situated here. I hadn’t talked to them in a while but we recently reconnected, and I thought their journey from starting a company in Asia to raising venture capital in California would be interesting to share with others, not only for those who reside outside the Valley and hope to move here to build their businesses, but also because this team is focused on building software exclusively for developers. This is an interest-area of mine because I’ve found there are some investors who are betting long on developer-focused businesses, while others like them but worry about their ability to scale to venture “size.” Below is an edited transcript of an informal Q&A we all coordinated over email with founders of Nitrous.IO, Arun Thampi, Peter Kim, and A.J. Solimine:
How did you all start the company in Singapore? Describe the tech scene there. Was it hard to raise money?
Arun Thampi: Pete, AJ and I were all in Singapore. The tech scene there is great, and there are lots of great engineers in Singapore. The problem is that it’s still young, and lots of people are still averse to taking risks and settle for jobs at bigger companies. We didn’t actively try to raise money in Singapore, but we spoke early on to Vinnie Lauria and Jeffrey Paine, who are good friends and run Golden Gate Ventures in Singapore. Vinnie runs SuperHappyDevHouse (a hackathon in Singapore), and we won two years in a row (including with Nitrous.IO), and so we knew each other well and he was very supportive of us from the beginning, and committed to invest in Nitrous.IO early on. Singapore is a great place, but in the last week, we’ve had detailed hour-long conversations with developers and software craftsmen we’ve looked up to (like Yehuda Katz and Guido van Rossum) and who’ve given us great feedback and encouragement, and also Joe Stump and Tobias Lütke agreed to be on our advisory board and are rooting for our success. This would probably not have happened had we been in Singapore.
Pete Kim: We decided from the beginning that we’d raise money from investors that had experience with cloud infrastructure and B2D space, and we have realized the investors in the Bay Area were the only ones that fit the bill. We did end up raising a small amount from Golden Gate Ventures in Singapore, because we are really good friends with the great team behind the firm, but we did not engage with any other investors in Singapore. If we did want to raise money entirely in Singapore however, there are various government programs in Singapore with generous matching grants and there are lots of investors willing to invest in startups with huge amount of cash, but we had consistent feedback from fellow entrepreneurs who received funding in Singapore saying that the amount of both technical and entrepreneurial help you get from the investors in Asia is minimal at best.
How did you all end up in Singapore in the first place? Seems like a random spot for the three of you to meet.
Pete: Arun and I both graduated from National University of Singapore and we’ve been in Singapore for over 10 years. We’ve met and worked together in Viki, an Andreesen Horowitz-backed startup based in Singapore that does crowd-sourced translation of international videos and music, where I was working as a lead engineer and Arun was working as a contractor. I first met AJ at a meet-up in Singapore, and worked together in many hackathons. After I have spent some time at Viki, I felt that I’ve learned enough to think about doing my own startup. Arun and AJ were then working together in a startup called Anideo where they were building a mobile video-discovery app called Vidyou, but despite the app being highly polished and feature-rich, it proved to be tough to gain enough traction, due to the highly competitive nature of online video market. The online video space was also riddled with problems that were difficult for a startup to deal with such as copyright issues. Having known and having worked with them with pleasurable results in the past, I’ve approached Arun and AJ and asked if they were interested in working together for a “Shareable cloud-based development environments that can be access from anywhere with any device” idea. They loved the idea having wasted countless number of hours troubleshooting their own development environment woes. They also loved the how the product will enable you to develop even on thin clients like Chromebooks and iPads. The timing was also perfect because they were just about to look for new ideas to work on. We then decided to join forces and started Irrational Industries Inc.
AJ Solimine: I was working in New York in the summer of 2009 when the financial crisis hit. I lived down in the Wall Street area and it was getting really depressing. The streets were pretty desolate but the bars were full of dejected, newly unemployed bankers & traders. A friend of mine from college grew up in Singapore, and I mentioned to him one night that I was considering living abroad and he suggested I consider moving there. I really only had a few suitcases and some ikea furniture to my name, so it was a pretty easy jump for me. Upon moving to Singapore, I realized that I knew all of two people in the entire country, so I started attending as many meetups as I possibly could and reached out to a bunch of people to have lunch and coffee. The community is small but pretty tight-knit in Singapore so it was actually easy and convenient to get settled. I met Arun at a Ruby meetup at hackerspace singapore and we kept in touch as we were both starting our own companies. We met up for a beer one night just to discuss our companies and we ended the night 5 hrs and about 20 beers later with a verbal agreement to join forces and start a company together – Anideo, where we developed a video-discovery app called Vidyou. I met Pete at a Pivotal Labs meetup at Viki’s offices, as Pete was working there as one of their initial lead engineers.
What motivated you to come to Silicon Valley?
Pete: It was a no-brainer decision. We are building a “B2D” product, so we just had to be in a place with the highest density of talented developers. Developer evangelism is a key user acquisition strategy for us and we knew there was no place better than the bay area for us to interact with developers. We plan to hold meetups, drinkups, and hackathons regularly in San Francisco. Hiring and getting advice is another reason why we had to be here. While there are some really intelligent engineers in Singapore, many of them lack experience in building a large-scale website, compared to those here. We also realized to form a real relationship with the thought leaders of the industry, we had to be geographically close to them. Eating, talking, and drinking IRL beats Skype calls, hands down.
AJ: It’s a function of velocity for me. There’s no other place where knowledge transfer occurs as rapidly as it does here. Everybody knows you want to “skate to where the puck is going to be”, and the best place to do that historically has always been to put yourself right in the middle of a “hub”. In finance, it’s New York. In healthcare, it’s Boston. In entertainment, it’s LA and in Technology it’s San Francisco. I’m happy that I lived abroad for a few years though. There are a ton of amazing people in the valley, but it certainly feels deserving of the “echo chamber” description. I think it’s important to travel outside of the country if you’re able to so you can gain perspective on the problems that the other 6.7 billion people face outside of the U.S.
We all met back in the summer of 2012, and now in April 2013, you’ve finally moved to the Valley — was it difficult?
AJ: Peter and Arun aren’t U.S. citizens, and getting U.S. visas wasn’t totally straightforward. By the time we decided to move to the U.S., the H1-B quota had already been hit, so we were really thinking we wouldn’t be in the U.S. until maybe October 2013. We did some research and realized that Pete and Arun were eligible for some other less common visas, so we put all the documents together and applied. I think both applications were well over 100 pages including supporting documents. It ended up working out well as they were both approved, but it definitely took up a huge amount of time and energy. Moving itself was pretty fun — we arrived on the eve of the Heroku Waza conference and crashed at a friend’s house in the city for a week (thanks Niles!). We ended up subletting an apartment together down in Mountain View because it was cheaper. The location is great, I love Castro street, but the apartment itself has its flaws.
Do lots of other tech startups in Asia want to move to the Valley? What advice would you give them?
Pete: I definitely feel lots of other small tech startups in Asia want to move to the valley for the same reasons we have stated earlier. However, the visa situation really makes it difficult for most startups. Bootstrapping is virtually impossible since there is no chance that a ramen-profitable startup can qualify for any visa category that would let them stay beyond the typical three-month visa waiver period. Arun and I would not have been able to secure our work visas (we took L-1/O-1 route), had we not raised our significant seed financing. Having felt the pain ourselves (my visa application was 96 pages-long, and U.S. CIS requested for more evidence before finally approving it, followed by a rather unpleasant interview experience), we really feel that something needs to be done about this – afterall, we are trying to build a company and create jobs in the U.S. – and we strongly support recent immigration reform movements like FWD.us.
Arun: For an entrepreneur/developer outside Silicon Valley, moving here is the equivalent of an actor trying to move to Hollywood. We’d decided very early on that moving to Silicon Valley would be crucial to the success of the company – not just for the investors, advisors who’ve been-there, done-that with PaaS/SaaS companies, but also since Silicon Valley probably has the highest density of developers/early-adopters who would put up with the warts of your software but would still champion its virtues. If you’re doing a hyper-local startup or a travel search startup focused on Asia, then it probably does not make as much sense to move here, since your customers and evangelists are probably not located here.
Your company, Nitrous.IO (formerly Action.IO) is in the “B2D” space. How did investors respond to this kind of business?
Pete: Many investors have told us that they don’t like to invest in B2D startups because developers are cheap and they don’t like to pay for developer tools. I am not sure if I agree. Engineers are in such high demand right now, and because they are getting paid absurdly well these days (especially in the Bay Area), every minute of their time is really worth a lot of money. If some service can increase the productivity of an engineer that costs over $100 an hour by just 10%, that’s already worth over $1,500 dollars a month, and if a $50/month service can do that, then it’s really a no-brainer. Perhaps the term “B2D” is not really appropriate since it’s the companies that hire the developers that end up paying for the service, and not necessarily the developers themselves.
AJ: Investors have sometimes been critical of the “B2D” market because they don’t think developers will pay for tools. We don’t really think of Nitrous.IO as a developer tool, but as a productivity platform for individuals and businesses. We save time for people who want to code and provide them with multiple ways to connect to a development machine. Marc Andreessen said recently that “software is eating the world.” Everybody knows this is true–even in financially turbulent times, the need for optimization is compounded and technology is the basis of almost all optimization. So software is the brain behind everything, but writing software is still not the most accessible or simplest of processes. You actually need to be pretty smart just to *start* coding. Our goal with Nitrous.IO is to reduce the friction of getting started with a new technology, whether it be a new programming language or a new combination of technologies when you’re working on an application (often referred to as a “stack”). The important thing that helped with investors was communicating that Nitrous.IO isn’t just a developer tool, but a full-fledged platform that helps businesses and individuals streamline their entire development workflow. We’ve had over 6,000 development environments created in our private beta, which took a total of approximately 17 hours to create on our system. If the developers were creating them individually, it would have taken well over 10,000 hours. Imagine how much more software can be written in those 9,983 hours =)
How did you find the investment climate for your startup?
Arun: We’d decided early on that we weren’t going to follow a “spray-and-pray-strategy” with investors in the Valley. AngelList was actually a great resource for finding investors who’ve invested in companies similar to ours. We knew that trying to explain a PaaS solution to an investor whose speciality is consumer/social would be a waste of both of our time and theirs (even if that investor was a “celebrity”). That is also when I’d noticed that you (Semil) had blogged about the B2D space and were making great observations about the enterprise software segment, and got in touch with you (through all places – Highlight!). You confirmed our thesis that there is no point trying to meet random investors, and made some great introductions to people (who we are still in touch with, as informal advisors). This is just an observation based on anecdotal evidence, but it seems like a few Valley investors have social/mobile fatigue – and unless social/mobile is part of a bigger play (for e.g. Github is social around developers, and we have a mobile component as part of our strategy), investors are tired of hearing the same thing over and over again. That’s where I think we had an advantage, because the idea in itself was interesting and game-changing, and we’d executed well and had a beta product ready before we began pitching.
Pete: New to the valley, we definitely lacked the social connections necessary to start talking to investors right away, and we were told by many that cold-emailing investors was a no-no, as it is highly unlikely for them to hear you out and once they say no, you have already ruined your chance. However one surprising thing we’ve discovered here is that other people in the startup scene in general are super friendly and willing to help. We’ve connected to lots of people whom we had absolutely no connection whatsoever previously over random channels, such as Highlight, AngelList, and Twitter, and more often than not, people were willing to meet up for coffee, hear our story and our pitch, and make intros if possible. That was also how we connected with you (Semil) and many others, and with lots of people following us in AngelList which got us in the “Trending Startup” list, we could slowly infiltrate and implant our names in the investors’ heads.
What are your plans now, Valley or City? How do you turn a million bucks of venture capital into a real business?
Pete: We’re currently based in Mountain View, but that is because we are currently working out of a great office space provided by our lead investor, at no charge (see picture above of the team in the Bessemer offices in Menlo Park). Once we have an external hire, we plan on moving to San Francisco, because that’s where all the cool developer gatherings and conferences are held. In San Francisco, if you really wanted to, you could probably attend a developer event every evening.
Arun: Long-term wewant to move to the city, there is an incredible amount of energy in the city, and with all the developer meetups and drinkups that happen, it makes sense for us to be there. Our immediate goal is to get to public beta and we have some awesome products and featured lined up which we are confident, will entice developers to pay for our service. We’re looking for a couple more engineers (http://nitrous.io/jobs) to help us get to that point and we have bigger plans for world domination once we hit general availability.
AJ: One of the most important things we’ve done to begin to transition to a true business is to engage with our users. I think this is where a lot of startups go wrong — they don’t think about which users are willing to pay them and what exactly they’re willing to pay for. Often, startups think about those things, but they’re usually just guessing and aren’t going on real data. We’ve had 1-on-1 conversations with over a thousand of our users, and are always surprised at what we learn from those conversations. The next hard part is using all the qualitative data we’ve captured to create a valuable pricing model for our customers.