But on the other hand, we have the phenomenon we’ve outlined in this post, where the cost of cloud “takes over” at some point, locking up hundreds of billions of market cap that are now stuck in this paradox: You’re crazy if you don’t start in the cloud; you’re crazy if you stay on it.

And so, with hundreds of billions of dollars in the balance, this paradox will likely resolve one way or the other: either the public clouds will start to give up margin, or, they’ll start to give up workloads. Whatever the scenario, perhaps the largest opportunity in infrastructure right now is sitting somewhere between cloud hardware and the unoptimized code running on it.

Software is eating the world. Software now defines the speed of innovation and continues to differentiate the winners from the losers. Digital transformation continues to be key to survival for established companies. The winners don’t just need to be capable of building software; they need to be exceptional at it. Software development consistently requires more scale and more speed. Today, over 70% of DevOps teams release code as frequently as once a day, up 11% from 2021.

DevOps is a cultural shift that touches a variety of steps within the software development lifecycle. There currently isn’t a single all-encompassing platform to cover the entire scope. DevOps teams usually put together a customized toolchain to connect the various people and workflows that consist of open-source and vendor tools. The output from one is an input for another, and so on. That leads to a very fragmented vendor landscape.

Software, overall, has become increasingly fragmented as users take advantage of the opportunity to test out best-in-class solutions. As the speed of software production cycles increases, the need for a seamless toolchain has become increasingly important. Determining which DevOps tools an organization will use can be complex given the multiple stakeholders involved. Executives want to ensure uptime and control costs, while developers are focused on performance and ease-of-use.

s cloud computing emerged, so did GitHub, which has become the largest cloud-based platform that extends the benefits of Git.

As cloud computing emerged, so did GitHub, which has become the largest cloud-based platform that extends the benefits of Git.

As DevOps becomes the de facto methodology for producing software, more players have looked to extend their platform. GitLab has held a unique position in the market by clearly stating early on that they were trying to build an open core platform to extend across the DevOps lifecycle.

HashiCorp pitches all their products as multi-cloud, which positions them favorably for developers and engineers who have to deploy across multiple different cloud providers. Similar to GitLab, HashiCorp makes its code viewable to their open-source community, which has a number of benefits including enhanced security (i.e. bugs are found quicker) and higher quality software that will benefit from continuous improvement. Thousands of developers have contributed to its development and will continue to look to optimize the code.

CircleCI is one of the only CI/CD tools to get certified by FedRAMP. It supports isolated execution environments including Docker, Linux, macOS, Android, Windows, and self-hosted runtimes.

Developer productivity has been placed front and center as the speed of deployment has increased. Every company feels resource-constrained when it comes to developers’ time. Adding more software engineers isn’t a scalable fix, and we’re also seeing demand exceed supply. Some sources estimate the shortage of software engineers will reach over 80 million by 2030. Companies are doing everything they can to increase the capacity of their developers.

GitHub, Atlassian, Microsoft... They’re trying to get everyone to adopt a unified tool system. But most people still go with best-of-breed, as far as tools go. The idea, though, is that some people will eventually go with more of a “you can’t get fired for buying IBM” approach, where you buy everything from a single vendor."

With the advances in [ML-enabled software development], we believe that programming should become a semiautomated task in which humans express higher-level ideas and detailed implementation is done by the computers themselves.”

Up to this point, cloud computing has been the key to unlocking rapid software development. Access to the very best tools and resources has increased developers ability to build exceptional software, and to do it quicker than ever. Those same capabilities, however, have also led to dramatic complexity in the development process. DevOps is the solution to the problems that speed without infrastructure created.

The future of DevOps is the future of software development. Last year, VCs invested $37 billion into companies building developer tooling. The demand for software, and for software developers to build that software, is only going to increase. A massive opportunity exists for the platforms that can become the central building blocks of that increasingly important process.

Software companies founded today are competing less with pen and paper than with other Internet-first incumbents. Put another way, as happens in every maturing industry before it, Internet company revenue will become zero-sum. As a corollary, the time between founding years of software startups and their competitive incumbents is shrinking:

When the ecosystem-level diseconomies rival the company-level economies of scale – “first to scale” may become “first to fail”. Unit economics matter more than ever. Carefully measured growth will win.

Relative to the R&D-driven growth of early Internet companies, SG&A will become the primary growth vector in the 2020s.

Paul Graham tweeted that “a visitor who walks around and is impressed by the magnitude of your operation is implicitly saying “Did it really take all these people to make that crappy product?”” But this observation is fixated on a world where R&D dominated Internet startup headcount, and small teams were preferable.

As Alex Danco highlighted in his recent article Debt is Coming, it is clear that recurring revenue securitization – the notion of selling your future ARR bookings at a discount – is the future. The biggest barrier to adoption is cultural: the stigma that “venture debt is like a delicious sandwich that only costs ten cents, but occasionally explodes in your face” is deeply tied to the predatory reputation of old-school venture debt lenders. Companies like Pipe and Clearbanc are already starting to destigmatize securitization, and it will only become more culturally normalized in the coming years.

Once Sand Hill Sachs exists, it will become clear that VC dollars should be reserved for R&D, not S&M or G&A.

For startups taking R&D risk in new technological areas, the founding team may look like something we can’t pattern match to historical successes. Maybe it’s a scientist in his garage who escaped the tendrils of academia. Or your first hire for the founding team is no longer your college roommate, but an expert in your startup’s industry.

There certainly will be $10 billion dollar companies started within segments slow to adopt technology: legal tech, construction, agriculture, and mining are all prime candidates for massive new technology entrants. But new $100 billion dollar outcomes are less likely to come from pure Internet companies.