How Gitlab CEO Sid Sijbrandij grew to $634M revenue and 3.6K customers in 2024.

just got done editing this interview you guys are gonna love it before i do that though i want you to know that i'm going to be in the comments for the next 30 minutes or so answering your questions if there's additional questions you want me to ask the ceo next time i interview them leave them below or if you're just loving the data points i get ceos to share click the thumbs up button below that's your way of telling me you're loving this stuff and i'll get you more of it additionally again i'll be in the comments answering any questions you have all right for 30 minutes enjoy the interview hello everyone my guest today is sid c brandi he's passionate about empowering open source enabling great products and evolving global businesses a self-taught ruby developer a commercialized git lab with its creator in 2012 and graduated from yc in 2015. since then gila has grown to 800 remote team members across 55 countries and raised 188.2 million in funding city ready to take us to the top for sure so i always hate celebrating funding because sometimes it just means a lot of dilution and a big zero at the end why do you need to raise that much money to build the business oh yeah i think look you shouldn't celebrate funding or like a high people kind just by itself we raised 268 million dollars in our last round at a post valuation of 2.75 billion so it was dilutive but it wasn't too dilutive and we raised it because we want to make sure that every single part of gitlab gets to maturity we have the best version control the best ci on the planet but we want to make sure that deploying monitoring and securing applications that those parts of gitlab are also best in class now this round uh this was actually just i mean you just closed it earlier this month correct the 250. yes and so you you had just raised prior to that i think about 120 million-ish from goldman and between september and december last year right yes so so what's the thinking behind i mean when i look at a round like this right uh what i think is wow there's a lot of liquidity in the private markets um this is perfect for you it's better than an ipo you don't have to worry about the administrative burden a road show and all that allows you to double down and focus i mean do you kind of view this as this was the alternative to an ipo an easier alternative yes it could be um our plan is to become a public company next year and with this round we kind of have optionality whether we're going to do an ipo or direct listing yep so we structured this round with a lot of different investors in it and with a lot of investors that are very familiar uh in the public markets that are long-term holders so just to repeat what you already articulated you said you raised about 250 and used it was a 2.7 pre-money valuation a post post money okay so you sold maybe a little a tad more than 10 of the company exactly and was they need to go to the secondary or it's all balance sheet this is uh what we're talking about is whole primary oh prior okay that means all to the balance sheet correct correct have you done anything for early folks that put money in including early employees in terms of liquidity or they have to wait until direct listing or ipo we did one at the d round so the previous round and we're looking at another one [Music] based on this run can you explain how that worked in the d round there's a lot of ceos at 60 70 80 million in arr doing these 100 million dollar rounds and they're never quite sure how to structure the liquidity option for early folks how did you structure in your d round to the extent you can share yeah for sure we did it with nasdaq private market it was a great experience and we said you could sell up to 20 of your vested shares both current team members and xt members up to twenty percent so people sold between zero and twenty percent and how did you decide so basically did was it on nasdaq or did you do a 409 evaluation how did you come up with essentially the price uh the price was uh the same as the preferred price of the ramp so this is very rare i talked to a lot of founders where they get in really weird positions when they do these secondaries because you want the maximum valuation from the round but then you're going wait for employees to make the most on the spread between their exercise price right what they got it at many years ago and what they get today you actually want maybe a different potential valuation for tax purposes you just kept them both aligned so we did it's it's market like what does the market want and the market said look we want there was more demand than there was supply so we went it went all the way up to the maximum um it influences the 498 but it's a one-time event um so it it's in having having continuous trading at that price would influence the 409a uh way more than a one-time event yep so of that 120 that you raised in this seat well do you put the 20 from goldman in december and with the 100 million you did in september or no uh no that that was a separate round totally we now raised 400 more than 420 million yeah because you just did 268 million but going back to september what i'm trying to get at that september 19th oh sorry yeah those numbers know the public numbers we always try to talk about the public or the primary fundraise never about the secondary because i think if you talk publicly it's about we raise this money people gonna assume it's the primary fundraise and also that's what people care about people care about are you a sustainable company as in do you have the money to get to a cash flow break even well that's what you're signaling so i i think it's um i think it's better to just talk about the amounts in the primary fund raise when you're announcing a fundraiser what i'm trying to get at sid is how many people decided not to sell versus so took some chips off the table like how much money from those rounds actually went out from people that did decide to sell so all the all the amounts we announced are all primary fundraisers we were not we're not jumbling the secondary into that i see okay so just to be clear and this is what you're just trying to explain to me that 468 all went to your balance sheet million you've raised the you you how did you get the money then did you just do it off your balance sheet like where did you get the money from to pay off people that want to sell to 20 of their shares uh additional like investors mostly investors who participated in the rounds got it got it so nasdaq nasdaq essentially put this out there and anyone you didn't have to buy them back as a company anyone could go purchase those that wanted more upside exactly so nessec private market is is facilitates it um it's a bit tricky like we have people in over 20 countries participating so so there's a bit of paperwork there and then we have a couple of investors who said okay we want to buy at this price and maximum of this much they all sign up the people um uh offer their shares up um and then uh you've the transaction closes at the same point yep very good okay so uh just for those of you that might not be familiar with git lab i will tell you what we had sit on uh prior and so said last time we came on this was probably oh about 18 months ago um you obviously shared you founded the company in 2012 but at that point you were serving about 5 000 customers what are you up to now today so today gitlab is used in over a hundred thousand organizations so we got millions of users there's uh 10 000 paying customers it's an open source project so there's different versions and what we do is it's a single application for the devops lifecycle it's everything you need to build software delivered as a single application all the way from planning what you're going to do to securing that monitoring and defending that and if you've seen any patterns in terms of what you're seeing on your average kind of contract value so when you last came on you articulated average kind of acv was around the twenty thousand dollar mark across the full base has that increased or decreased drastically i think we're seeing a major uptick in like you're looking at the largest deals and in the over the last three years the larger seal kind of gone from ten thousands to a hundred thousands you know million plus you're talking about seats uh dollars oh okay dollars so just to repeat that vector you have many customers paying more than a million per year but if you look at your entire base on average is the arpu still about 20 000 a year it's it's about that range but i think that's um it covers a lot it's yeah it's not a good number to look at we could easily make that number higher just for example we have a very hybrid sales model so we do both like small medium businesses mid market and the enterprise market the enterprise market is 72 percent of our arr and those are the bigger deals so what most companies do they stop selling to the smaller companies um we don't think that is fitting for an open core project we think uh those uh we really appreciate smaller businesses also working with gitlab and that brings your uh our average revenue per customer down but i don't think that's a that's a metric we watch uh the metric we watch is just incremental acv and um growing that doubling that and it's good to look at like the biggest deal sizes and seeing those like grown really really fast year over year enterprise market makes up 72 of your total arr are you guys in the what 200 million 240 million run rate range today in terms of total ar we're smaller than that okay when do you think you break 200 can that happen this year is it next year or year after um so certainly not uh this year um and maybe next year feels like a stretch goal or easy to get out next year i have to do some like what we're focused on is not so much ar it's incremental acv like it's how much do we add to the ar so that those are all the numbers in our heads yeah um so let's talk about your let's talk about that then yeah so what do you what are you trying to optimize for there so my thing for growth and growth in our case it can be a couple of things it can be new customer coming in existing customer expanding seat wise so getting more users on the platform existing customer growing in the tier that they have here lab at like buying a more expensive tier and of course producing uh gross churn so making sure that customers renew um those are kind of the four big components and then split up between the between the different kind of types of customers and the different go to market motions we have there so you mentioned last time you were on the show that your gross revenue turn annually it was already about ten percent or less than one percent a month which i would say that's already pretty healthy have you squeaked out additional efficiencies there is it lower than ten percent gross revenue turn annually now no gross retention or gross attention is still about 90 so that's that's kept steady okay and has expansion so when you look at the co or not obviously ignore new customer editions just expansion right revenue has been about what year over year net expansion has been absolutely amazing and it's way north of 150 and 150 percent would already be kind of best in class if you look at public companies so it's been amazing to see for example goldman sachs is a customer and we came in and they said look if if you're doing really well in nine months we're going to be a thousand users and then two weeks later we're 1500 users now there are over 5000 users um it's we have a product that makes it so much easier for the developers the operations people and the security people in the company that we don't have to push it as soon as the company says okay we allow people to use that people flock towards it every company is like they have diy ops we call it they they put together their own platform from all kinds of solutions that are pretty good by themselves but the big problem is integrating all of it if you have an update to your application you don't want to go to 15 tools and take two weeks you want it done in minutes and as soon as they open up that to their people it starts expanding and we get more people in two thirds of the net expansion is driven by higher seed count and we're really proud of that um what's the other third is it a utility based upsell or it's it's an upsell based on features uh we have a what we call buyer-based open core model um we have certain features aimed at for example executives and if you want those features you pay a higher price per user per month interesting now you said last time on the show your expansion revenue was about 85 on 10 gross revenue churn so your net revenue retention there was about 175 percent i put that definitely in world class are you still about 175 today yeah we're we're now saying we're north north of 150 and i heard you say that i wanted to push you a little bit harder there sid yeah you heard it you heard me exactly um we expect the number to come down so i'm not going to give the number today because we're doing a better and better job as landing a bigger initial deal yep so our getting more experience yeah exactly but it would be a good thing because and we're more aligned from the start with the customer it's more realistic expectations that the number is kind of too high and we want it down but people regard it as a good number and any time a good number comes down and that's seen as something yeah but 175 i mean i would say you are an anomaly right i rarely see above 140 right and i've done 3000 of these interviews i mean 175 would have to come down over time as you get more market share there's just no way we we expected it to come down it hasn't come down yet but we'll we'll keep trying better at landing that initial deal not a bad statement to make talk to me about cac when you look at obviously your different cohorts i don't want to talk on a dollar basis because obviously they'll vary widely based off the code you're selling in your sales motion but when you look at the payback period you're optimizing for in each of your cohorts is there a typical month range that is consistent across all of them it's um our goal is to make sure that as soon as the customer pays their first invoice which is like uh a month or two after after we signed the deal that we get back the customer acquisition costs so that's like a magic number of one 1.0 and i think we've uh sometimes you hit that and sometimes we don't and it really depends if we're in expansion mode with our sales force like we're growing we were kind of behind hiring sales people so you do a great you hire a lot of extra sales people and then it dips below 1.0 and then because they have to ramp up they have to hit up the quota exactly they have to ramp up there's about eight to nine months ramp up time where they uh where they go from zero to a hundred percent of quota uh per month and is there or is the kind of average news sales rep that has a quota is the bookings are our target north of a million bucks so average is a really um your new hire new hire and an enterprise cohort yeah in enterprise cohort because we got like we got inside sales people et cetera so quotas are all the way from 300 000 to 2 million based off which code they're selling in um yeah what is their what is their geo how experienced are they etc uh so we really differentiate there but yeah for an enterprise salesperson making uh making like a quarter of a million or more uh it's uh it's it's north of a million dollars yeah incremental acv and so is that really what optimizing for if the full ote is going to be 250 000 base plus commission you want to see at least 5x that in terms of what the booking target is so you have 5x salesperson profitability no matter the cohort we don't think in it like that well um so we'll be like 4x to 5x but we don't think of it like that what we want to do is we want to pay a competitive wage we want to make sure we can attract people we want to attract and i want to make sure that it's realistic we want our goals of 80 of our sales people on 100 or more of quota that's good so those are the two things how many quota carrying reps are you at now today i think native quota carry i'd have to look that up so you can you can what you can do is google get lab team and you get to a page that lists our entire team and you can slice and dice it exactly how you want it so i see that just now we have 900 team members this page is like old updated updated multiple times per day um so is 900 accurate yes this is the most accurate number we have um and then i'm going to go to sales native quota carrying that's 55 people there you go and how many engineers let's see if we make that assortment um engineering function is 393 people and 143 vacancies there you go so so folks they're hiring right there you go we're hiring areas everywhere we have over 200 total vacancies yep uh sid last question i've got for you obviously you're driving incredible growth the economics make a lot of sense so you could argue that a lot of burn is is a healthy thing for you right now because the economics pan out but at some point it does become a little uncomfortable right so what's that breaking point for you are you comfortable burning you know 10 million a month [Music] i don't think it's about the absolute dollar amount i think you want to stay on the healthy side of the rule of 40 and you want to make sure that your ebitda combined with your with your growth rate is north of 40 we decided last year after the last fundraise to invest heavily in product we're the leading provider of like a single application devops tool we want to make sure that we capitalize on a giant market opportunity but i think a year two years from now we want to stay north of that rule of 40 and and keep driving that we don't have an absolute percentage in mind and the other thing of course is don't run out of cash so always make sure that you can get back to cash flow break even with the cash you have in the bank it's never depend on a future fund raise when you look at your growth rate over the past 12 months top line what was that are you guys still at 100 year-over-year no you're too big to be doing that now um i think last time we talked we were closer to 200 percent um and i think we're at 140 today now last time we spoke and this this number can't i don't think is is accurate i must have captured something inaccurately but it sounded like you were around 100 million bucks in arr about a year and a half ago is that accurate no that was not that was too high yeah yeah okay good all right um so 200 year over year growth from 2017 to 2018 140 year over year growth 2018 to you know finishing out 2019 here so on that growth rate what you're basically telling me is you're happy and comfortable spending up to um you know well basically negative 100 ebitda margin because 100 negative 100 plus 140 is puts you above e40 correct uh yes and we're not even uh yeah that will be the conclusion and i'm gonna i'm gonna guess here you're about to say you're not even close to that uh how what what's the ebitda margin right now i i think we're we're more like working on that uh longer term um so i don't view it as such like we we want to make sure that um so software is a funny business and the the questions we ask ourselves when we invest is like are we going to see a return on this investment the capital is relatively affordable to get right now are we going to see a return and this fiscal we're spending 50 million dollars in development costs like engineers shipping more functionality in the product and our question is okay are we going to see a big multiple on that and so far the answer seems to be yes our customers really need this functionality and they need it yesterday so that's our reason for uh investing in it and as we come closer to becoming a public company and eventually being one sid before we wrap up with the famous five again you just closed 268 million right in your series e was there a general target in terms of your you know you made that you raised that money and you're planning for 18 months of burn or 36 months of burn or six months of burn what time frame were you raising for would you say we raised a round that would be comparable to the amount we would raise if we would go public next year that was the goal but what does that mean i understand that but what does that mean in terms of runway you're buying yourself to keep driving growth a year i i'd like to say infinite runway because you always make sure we can get back to cash flow uh break even based on the money we have so every time we've raced it wasn't it wasn't to like make sure we expand our runway the runway is always infinite we always make sure we can get back um so every time you raise it's like wow that we we see a really high multiple unlike the features we ship on our r d investments so let's raise more money and invest more in r d uh so it's it's not a runway conversation and is the market rewarding you so if you raise it at a 2.6 sorry 2.6 billion dollar valuation in terms of valuation multiple on revenue i mean it sounds i mean north of 20x yes very good all right so let's wrap up the famous five number one favorite business book still high output management you have good memory number two is there a ceo you're following or studying just so many great uh ceos name an off the record one not a traditional one no no not a traditional one um maybe it's it's it's not so much off the record but uh i think austin from lambda school is doing an amazing job are you an investor i'm not but uh i um i gave money to them you're hiring i was going to say you're hiring from them no i gave money to them i gave a million bucks to him just to donate kind of yeah there's no tax benefit for you to doing that it's just kindness of your heart well well it's it's it's never kindness but what it is is i had the same idea for uh a remote education um but i f with one twist to it i think also people should get paid to follow an education because there's very few people who can take forego nine months of income so you should get paid to do lambda school and um so i'm talking to him like i said you look you're doing exactly what i thought i should be that should exist in the world and i thought i had to do it can you please do the stipends as well he's like well we need money for that we need to hire a cfo and need some money kind of to to to take that risk i said okay i'll supply that money it will save me a lot of time not having to do that myself so he did it and uh he's they're now doing that they uh they do more than two million in stipends uh this year i love that um so and he's an amazing ceo so it's it's great to see that and it's very exciting to think about what this could mean in the world in in in generating more income for people i mean i always say when i'm on these cable stations debating the future of work and i say what's you know how do you solve student debt i say it's lambda school that's how you solve student debt it's lambda school exactly number three what's your favorite online tool for building your company all right gillam gilbert uh slack assume and google docs number four how many hours of cp and every night uh seven to eight okay and what's your situation married single kiddos maybe no children okay and how are you 40 40. last question what do you wish your 20 year old self knew it's all gonna be okay guys there you have it gitlab has raised 468 million dollars last last round 250 million at a 2.6 2.7 billion dollar pre-money evaluation more than a 20 x multiple on their ar this sets them up to either do an ipo or do a direct listing as soon as next year uh they also offered us obviously secondary is via the nasdaq private market where folks could sell to 20 of their vested shares but most importantly they're investing 50 million dollars in pushing additional code value to their customers now over 10 000 customers hundreds of thousands of companies millions of users sid thank you for taking us to the top um thank you and just to be clear the secondaries there is no public secondary market for gitlab and people are not allowed to sell outside of the people we invite we're not soliciting any investments and uh please don't trade talking talk about to be public said things again thank you these ceos rarely give these kinds of interviews i hit them hard i get the data and i want to do it more so if you want to get more of this stuff make sure you subscribe up here and then additionally go check out one of my other ceo interviews right now