India's most valuable SaaS company

August 23

Good afternoon, hope everyone had a great weekend and great Independence day (why we were off last week). There's been so many rounds and new Indian unicorns just in the last couple of week- I'm getting April 2021 vibes (before the unfortunate and deadly second wave) and I can no longer keep track. We got a couple new EdTech unicorns, India's first crypto unicorn and Grofers is also now finally a unicorn. Today we're going to explore one of my favorite Indian companies- Postman and their recent Series D fundraise, which has made them India's "most valuable" SaaS company.

The API company

Postman, the API platform company, announced last week that it had raised $225M in a new fundraising round that values them at $5.6B up from $2B. The round was led by existing investor Insight Partners with participation from Nexus Venture Partners as well. The round also brought in new investors in the likes of BOND, Coatue and Battery Ventures. And to put the round into context, when the company raised $150M last year it wasn't actually looking to raise capital but took on new investors because of the inbound demand. And while I don't know for certain if that was the same for this round, it certainly feels that way given Insight led the round.

To understand what Postman does, let's first expand on what an API actually is. "At its core, an API is a bunch of code that takes an input and gives you an output"- What's an API? (Justin Gage writes a great newsletter explaining technical terms and concepts to a non-technical audience, I highly recommend subscribing to it here →). APIs can be both internal just to a company, a majority of APIs, or could be available externally- companies offering APIs as a service. eg: Stripe offers Payment APIs as a service.

It has been very hard, historically, to test APIs. Developers have used their terminal or other non-intuitive solutions to be able to this. Abhinav Asthana, one of the founders and CEO of Postman, felt this same problem and decided to build a Chrome Extension that let developers test their APIs on a graphical interface in an easy manner. It was available for free starting in 2012 and quickly gained momentum over the next couple of years with several hundred thousand developers using the product (note: Postman at this point was just a side-project and not a company).

By the time the company was incorporated and raised its $1M seed round (2015) led by Nexus Venture Partners, it already had 1.5M developers registered on the platform. Nexus' Managing Director Sameer Brij Verma had coincidentally come across Postman when another of their portfolio companies was using and raving about the product, and he convinced the team to raise venture capital instead of selling the product. Nexus also led the company's Series A in 2016 and had built up a sizable ownership being the sole investor in both rounds (the firm has since invested in every subsequent round as well). In its 6 years of existence as a product, Postman has grown to 15M+ developers using the platform with over 500,000 organizations including Twitter, Cisco, Intuit and Shopify. The platform is so widely known that it has almost become synonymous with anything related to APIs.

As an engineer, I first came across Postman in 2016 in an internship and had no clue that it was a product out of India at that point. And every single company I've worked at since then has used Postman in some way or the other - either a team or the entire company was using the platform on a paid plan, or individual developers used the free plan for themselves. But the kind of developer love Postman receives is unparalleled which is why it makes sense that "98% of Fortune 500 companies are customers".

One of the most acute problems Postman solves is around the lack of documentation and visibility into internal APIs. As engineering orgs scale when startups grow, they become increasingly siloed and it is hard for an engineer on one team to get insight into how another team is designing their APIs. Engineers across the entire org can view, test and collaborate on APIs in a much more streamlined manner because of the visibility that Postman provides. And from here Postman has heavily invested in its product suite supporting features that ingrain the platform deeper into a company's engineering culture. Engineers can design and mock APIs (simulate how the API should behave), test their APIs in an automated manner, and also monitor the performance and health of their APIs all through Postman. As the platform is used by engineering orgs, it becomes stickier and companies are less likely to churn.

The other area where Postman is widely used is by companies building API products for other developers to use. The way APIs are documented play a big part in whether an engineer, or a team, chooses to use it and it is why a lot of the best API companies have great documentation and a great developer experience that goes along with it. Just ask any of your developer friends about Stripe, Twilio or Razorpay. Many API company starts off by building their documentation page on Postman since most developers are familiar with the platform and can start testing and building with those APIs relatively quickly. This is, however, one place where I believe Postman can improve since most companies with the best documentation and developer experience end up custom building their documentation site - Stytch and Duffel are a couple of examples. And the reason why this is important is if Postman can improve the experience of consuming documentation, it can control the entire lifecycle of an API (design → test → release → monitor) while also creating a flywheel of more developers using the product at various points of that lifecycle.

That being said, Postman is well on its way on being an important player in the API ecosystem and its prominence will only increase in the coming decade while parts of software development continue to become componentized and APIfied. This is also why Postman has been able to raise at valuation many times the multiple of it's current revenue (>100x)- as the API ecosystem grows, Postman grows and more companies use the product and integrate it deeper into their organizations. It's an exciting time for all companies building in the space, and the entire country is waiting for a massive IPO for Postman hopefully in the near future.