Software is Eating the Enterprise: Why We Invested into RhodeCode

Posted by Paula Darlison, 11 Nov 2014

Today, RhodeCode, Inc. announced that DFJ Esprit and Earlybird led the company’s first investment round of $3.5M. Everyone at DFJ Esprit is absolutely delighted to be working with RhodeCode to build a world-leading enterprise software company right in the heart of Berlin.

What does RhodeCode do?

RhodeCode has created RhodeCode Enterprise which is an enterprise-grade source code management and collaboration solution that supports Git and Mercurial repository systems. It helps bridge the gap between the requirements enterprises have and the flexibility and ease of use that developers increasingly expect. Enterprises require security, role management, audit, control, and extensibility. Developers expect ease-of-use, beautiful UI, collaboration, and integration of their preferred plugins and issue trackers. RhodeCode Enterprise enables the best of both worlds to co-exist – and that’s a big deal.

So why did we invest in RhodeCode?

Team with deep domain knowledge. Sebastian and Marcin, RhodeCode’s co-founders, are intimately familiar with the enterprise software production environment and the needs of developers. They are true domain experts – having worked for large enterprises and startups alike. (It’s worth noting that this first bullet point on RhodeCode is the same as it was for my previous investment in Crate, which just won TechCrunch Disrupt last week. It’s safe to say this is a theme: when it comes to enterprise software, there is no substitute for domain knowledge.)

Connects with a megatrend: software is eating the enterprise. Mark Andreessen famously wrote that software is eating the world. He’s absolutely right, of course, and – on the way to eating the world, software is going to devour the enterprise as well. This means that large organizations will increasingly measure the value they create as a function of the software they create and maintain. This holds for financial institutions, product companies, retail environments, government organizations, militaries, and basically every form of large organization. As a result, the willingness to spend on tools to improve productivity and enhance management capabilities when it comes to software products (an area known as Application Lifecycle Management) is set to increase massively in the coming years – and the winners in this market have the opportunity to be a very large global companies.

Enterprises have been largely left behind in the move to distributed version control. Even as the importance of ALM is increasing, significant technological change is shuffling the cards. For many reasons, we are in the midst of a broad shift away from centralized computing and toward distributed computing. This is impacting source code control as well – with Git & Mercurial leading the way. Enterprises have tremendous reason for adopting distributed source code management systems, but the tools currently available to them make this difficult or even impossible. RhodeCode Enterprise has cut through this Gordian knot, building an enterprise-grade distributed source code management system from the ground up.

Founded in the garage, guided by customers. RhodeCode began as a side project that Marcin was building because he needed a solution like RhodeCode Enterprise but couldn’t find one anywhere. As he began to release it, more enterprises kept reaching out to him and guiding him in the development of the software. Soon enough, feature requests were flowing in from major corporate users of the platform. The result is that RhodeCode Enterprise benefits from years of customer-guided product management. It’s no wonder that new enterprise customers love what they see when they discover RhodeCode.

Massive market pull that signals the scale of the pain. When I first met RhodeCode, they had over 100,000 downloads of their software. That’s over 100,000 downloads of an enterprise tool from a company that had only two people, no investment, and no marketing budget. That kind of massive adoption meant that RhodeCode was already touching a nerve, and that word of mouth was starting to have an impact in a meaningful way.

Lean startup, enterprise-grade customers. Perhaps the most significant factor driving our investment was the sheer tenacity of the founding team at RhodeCode. Sebastian and Marcin – working entirely alone and without any investment at all – built an incredibly valuable piece of software, built a brand, reached over 100,000 downloads, managed to penetrate world-class organizations such as Cisco, Samsung, Hitachi, CA, Raytheon, and several very large government and military organizations, and even managed to close significant paying enterprise accounts. They did all of this on their own. They didn’t wait for the VC community to understand what they were doing – they just went out and did it. They pivoted and adjusted until it started working. This is the definition of lean startup – and it’s even more significant in the enterprise environment – one in which RhodeCode’s customers will cut them no slack. Winning significant enterprise customers is no small achievement for an early-stage startup – and RhodeCode did it authentically and organically in the most difficult conditions.

DFJ Esprit and Earlybird are absolutely thrilled to be part of the RhodeCode story. We’re delighted to be able to provide Sebastian and Marcin with the capital they need to take this to the next level – and we can’t wait for what’s next. We are also excited to help prove what we’ve known for a while now – that world-class enterprise software companies are getting starting right in the heart of Berlin.

If you are building a company like RhodeCode, I hope you’ll reach out.

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