HN- you are the community that convinced me to get into startups. I wanted to come back and share what the experience of building a company has been like from inception to public listing. I'll be here for a couple hours to answer your questions. Ask me anything.
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Also, congratulations on reaching the rare high nine figure net worth club! :)
Triplebyte made a splash by adopting a very similar policy months later in early 2016 (also discussed heavily on HN [2]) and all YC companies were recommended to adopt this approach off the back of Triplebyte starting from the W16 batch [3]. The rest, as they say, is history.
Many companies on this extensive list of ones with 10-year post-terminiation exercie windows [4] might not have this policy if it was not for this know-how benefitting employees put out in the open - between Amplitude, Triplebyte and it spreading to YC, making this approach table stakes a few years later.
Sir, I salute your for doing this not just for doing this for Amplitude employees (who no longer had a "golden handcuff pressure" after vesting their original grant - which is most companies actually see as a benefit, and a way to "leak" less equity thanks to leavers often not being able to exercise), but for a part in moving the tech industry forward.
Legend!
[1] https://amplitude.com/blog/employee-equity-is-broken-heres-o...
[2] https://news.ycombinator.com/item?id=11198991
[3] https://triplebyte.com/blog/fixing-the-inequity-of-startup-e...
[4] https://github.com/holman/extended-exercise-windows
I'm so glad we did it- so many ex-employees are able to participate and celebrate with us this week because they didn't have to worry about giving up their options after leaving. The arguments for the old method of a 90 day window were so stupid. 1) I don't want to keep someone in indentured servitude if they don't want to be here 2) top talent is very savvy and more attracted to places that don't screw them over.
I hope we can see the same for other innovations like more companies doing direct listings in the future. If you're a YC company figuring out how to go public, please choose a direct listing!
HN is always saying that working for a FAANG is better money than working for a startup even if it IPOs, so my question to you is: How did your employees make out during the IPO? Is the prevailing HN wisdom correct? Did your average developer employee that stuck it through with you on your journey end up with more or less than what they would have made working at FAANG?
I took a look at the initial 4 year option grants for the first 10 engineers (this doesn't count refreshers or other follow on grants). The average value at $50/share (yesterday's opening price) is just over $10M. The group varied in experience from just out of school to a few years working when they joined. I feel we were a good deal more generous than the median company: https://amplitude.com/blog/employee-equity-is-broken-heres-o...
Someone on the FAANG side can figure out what the apples to apples comparison is. There's no question that in 90% of cases FAANG compensation is way better. If you are optimizing for how to make the most money over a few years you should absolutely choose FAANG. The real benefit of startups comes from other forms. If you asked that group of 10 I think they'd respond that being an early engineer at a start that IPOs gives you way more career capital and long term earning potential than FAANG.
Joining a fresh startup as employee #10 (or less) is somewhat of a gamble (even at YC). The following data would put things in perspective:
1. How do the average first 10 employees of a YC startup do?
2. How did the following cohorts in your company do?
I am not trying to be negative here, but trying to put things in perspective. Congrats again!
PS: Definitely a huge congrats on this journey and outcome.
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- Just rewinding back to when you decided to get started - how did you convince yourself to leave a (presumably) comfortable, reasonably paying job to starting your own thing? It's that leap that scares me the most, so curious of your take.
- If you have anything you'd care to speculate, what would be easier and what would be harder about doing a startup now versus when you all kicked off a decade ago?
It was clear the long term potential of positive impact on the world was way greater through building a company than anything else. And if you didn't quit you were very likely to get there. One of the things that most resonated with me was one of the Airbnb founders talking about how they were having the same dilemma as you. But then they saw someone who had started a company and realized the only difference was that they had made the decision to start a company and that's what made them realize they could make the same choice. I wouldn't recommend it if you have other life circumstances like debt or significant family obligations that constrain you. But if you don't have that I think it's a great path.
Better: Markets are way bigger and so the ecosystem has adapted around that. Funding is incredibly abundant (kids these days...). Information on how to start a company is more widely available. There's much more experienced help available. Tooling is much easier. What's crazy is people said the funding market was too hot in 2014: https://techcrunch.com/2014/09/05/its-time-for-vcs-to-run-to...
Worse: Hiring is harder. There is a lot more competition but I think it's outweighed by markets being bigger. I think talent is still the rate limiting factor overall for the growth of the ecosystem.
That pricing structure seems like a very long-viewed approach that could have easily been ruined by short-term product thinking.
Was there ever internal or investor pressure along the way to cut or pare down the free tier?
Most of the money in SaaS is in large clients in the enterprise. Almost all large SaaS businesses have been built that way (Salesforce, Adobe, ServiceNow, Workday). Once you figure that out monetizing smaller companies goes way down in priority and it's a better strategy to give your product away for free.
For us in particular: 1) It was a great way to grab attention from Mixpanel and others in a crowded market. 2) A lot of those companies become large customers over time when their needs become bigger and more complex. Doordash, Instacart, and Rappi all started out that way and are now huge customers. 3) A lot of those companies and people at those companies get acquired by larger companies over time. Under Armour, Capital One, and Twitter were all companies where Amplitude was brought in through acquisition of a smaller company. 4) It's not that expensive relative to your overall cost base. I believe 8% or so of our server costs go to our free plan, which is significant, but worth it.
We've never received pressure to do that, our venture capital shareholders are very aligned towards winning the market over the period of decades. We did get some stupid (IMO) questions about gross margin as we went public but no one ever gets down to the level of messing around with your pricing plan and free tier. If we were owned by private equity though it'd be a very different story. Those guys are experts at wringing blood from a stone.
Amplitude, from the moment I was aware of it, was more about productizing the Facebook/Zynga style product analytics approach.
I left Zynga for an early startup in 2011. At that time, I tried to use Mixpanel for acquisition and retention analysis - it fell woefully short. I wasn’t able to use any of the built-in reporting.
Meanwhile, I have been a mega fan of Amplitude from the first time I ever used it. It was built for the “product data” use case first, not as a Google analytics replacement. That positioning made it easier for them to demand premium pricing.
I've been working quietly on a project which I hope to turn into a product. When I speak with potential customers and users, they're very excited, but when I work with VCs, I receive the tired argument of "but XYZ incumbent pretty much dominates the market."
That's fine, and I feel that I am differentiated enough, but I'd love to hear how in the early days of Amplitude you battled the "okay but what about Mixpanel" conversation?
I'm fine with not raising cash for a while. I'd much rather put something out there and then have my user growth speak for itself.
Raising our seed round was brutal. It took 6 months end to end and was one of the lowest points for me personally. I was trying to scrape together $1M in $50k chunks from any angel who would give us money. We ended up having to lean on our background as founders (MIT engineers, winners of the Battlecode programming competition) to convince the first set of VCs to come in.
Once we started showing traction (0-$1M in ARR in 9 months) we went like hotcakes in our Series A and beyond.
The real test is do customers buy. If you can show that everything will follow. VCs are weak predictors of market success. There's some signal, but they get it wrong almost as often as they get it right. If you close 3-4 paying customers I guarantee you they will change their tune. The incumbency argument is pretty weak IMO, particularly in B2B. Markets are so massive these days it's easy to carve out a large niche. For example, Freshworks went public last week even though Salesforce "dominates" cloud CRM.
I assume investment banks were trying to convince you to do a traditional IPO instead of a direct listing, so they could collect some fat fees. What were their best arguments?
The fees are actually the same between a traditional IPO as well as a direct listing. We ended up paying $15M or so all in between everyone. The reason some banks push you to a traditional IPO is that their real clients- public market investors like hedge funds who to repeat business with them, get a good deal on your stock.
I heard all the expected ones: not having control over your price, wanting a monotonically increasing stock price, having the price trade up on the opening for good press. It's all bullshit, if you read any of the coverage on Amplitude we were able to achieve all the goals we wanted to: https://www.google.com/search?q=amplitude&tbm=nws
My absolute favorite argument was that if you price too high, you price out people who will stick with you, and that will cause your price to be lower in the future than it would have been otherwise. Luckily, I did a year in the finance world in high frequency trading so they couldn't pull this one on me. That logic is the opposite of how pricing in a market works. High prices now are a signal that prices in the future are expected to be higher. If you want your price to be higher in the future, having it be higher in the present will increase the likelihood of that outcome. The thinking reminded me of Yogi Berra's famous quote: "Nobody goes there anymore. It's too crowded."
I know a bunch of other companies planning to go public were watching our direct listing to see if it was a viable path and I hope our results convince them. Please reach out if you're a CEO and trying to figure this out!
They also use restricted supply to keep the price high. Everyone’s locked up, no supply, it’s no wonder the price often jumps.
Curious what you would say about pricing startup raises? There’s a line of logic which says don’t price too high, you never want a down round and that keeps the risk low.
Oldest landing page I can find is https://web.archive.org/web/20130529150217/https://amplitude...