How we raised $3M for an open source project
For those not familiar with Posthog, it's open an open source product analytics tool. That means you install some javascript on your website. It then collects information on what features people are using on your website and let's people run charts and graphs to ask questions about feature engagement and product usage.Product analytics is a pretty large space. The three main existing product analytics tools are Mixpanel[0], Amplitude[1], and Heap[2] (I used to work at Heap). Notably, Mixpanel was valued at $865MM as of 2014 and Amplitude was valued at $1B as of two weeks ago.Posthog is an open source competitor to these tools that you are able to self host. This is interesting for several reasons. If you don't feel comfortable sending data to third party tools, you control the data yourself. In addition, existing product analytics tools can get expensive. After you get off the public pricing, you will likely find yourself paying >$12k/year for one of these tools.There are also challenges I see for them going forward. In my experience, the person who makes the decision to buy a product analytics tool isn't in engineering. It's usually a product manager or sometimes a marketer. I imagine the fact that it's open source is less interesting to one of the traditional product analytics purchasers. Compare this to a company like Gitlab where the end users are engineers.Scaling these tools is also a huge challenge. My job at Heap was to basically scale Heap. If you want to self-host a product analytics tool, you will basically be responsible for scaling the system. On top of that, because each Posthog instance is isolated from each other, Posthog won't be able to take advantage of the shared compute power. Imagine a product analytics tool that has 100 customers and 100 servers. If the compute power was shared, each query would make use of all 100 servers. If the servers were isolated from each other, each query would only be able to make use of 1 server. That's basically a 100x slow down in performance. Posthog does sell a managed version which in theory shouldn't have this problem. It will be interesting to see long term whether that's a big driver of revenue for them.[0] https://mixpanel.com/[1] https://amplitude.com/[2] https://heap.io/