Tyto: How a bootstrapped, global and profitable venture got created around an open source project
Whenever there is a web application under development, one will need periodic testing to verify functionality. Given the speed at which development happens, it is necessary to speed up this testing and this is where automation helps. Sahi is an automation tool focused specifically on web application testing. Browsers are not easy to automate; however, web technologies and browsers are evolving at a rapid pace and Sahi makes automation of these technologies possible and easy on all browsers and operating systems.
These were the technical details around the product, here's the story.
V Narayan Raman is a seasoned professional who had his first brush with entrepreneurship back in 2003. That startup bombed and he move on to work for ThoughtWorks in Bangalore in 2005 where he was dabbling with open source. He started working on Sahi, an open source web automation tool focused on testers. Sahi was well received and seeing the traction, he started Tyto as an organization providing commercial support for Sahi.
Since I was the almost the only contributor to Sahi, ThoughtWorks graciously allowed me to own the copyright to Sahi. Eventually we moved to Sahi Pro, the commercial offering of Sahi.
The initial days
Tyto was registered and Narayan decided to dive full time in January 2009. The initial model was providing commercial support for open source Sahi but he soon realized it will not work as a long term revenue model. "Since I already had a working product, I spoke to some of my users whether they will be willing to buy the product if I added a few specific enterprise features. When some of them agreed, I worked on getting a version out," says Narayan. Meanwhile, he had hired another developer and they provided integrations with another tool from which they got working revenues. "We did not try to get more customers till we were comfortable with the stability of the product. However we did get traction from the already existing open source product," he adds. Tyto hasn't done much of marketing but the product is so solid that when users switch jobs, they tend to take along the product into the new organization. And that is a contributing factor in how Tyto ahs grown.
Growth and the revenue model
Tyto has been trusted by a large number of enterprise customers of all scales and has more than 200 enterprise customers in total.The interesting thing about Tyto is that it hasn't raised funding and has been profitable from year one. The launchpad that ThoughWorks provided certainly played a pivotal role in making this happen. "We have been profitable from the first year. We do run our business very frugally. Our revenue model is based on sale of Sahi Pro licenses which is priced presently at $495/user/year (changing to $695 from October 14). We have had 100% year on year revenue growth and 80% of our customers come back for renewals and for more licenses," says Narayan.
The team has also grown and the current strength stands at 14 people. Tyto has 7 developers, 3 support engineers, 1 tester, 2 marketing/sales people and 1 office admin. "There is not much hierarchy and all of us pitch in where needed. The products team (Narayan himself and Srinivasan Venkataraman) and Anuj Khanna in marketing have almost 15 years of experience each and are very capable executors," says Narayan.
There is a lot of competition in this area. There are open source tools and commercial tools. Talking about the subject, the founder says, "Sahi has been acclaimed as a technically solid yet easy to use tool. Given the complexity of the field however, not many tools have gotten it right. We currently have the technical and design pieces right. But we lag in our marketing and this year we are trying to bridge that gap. Competition is good according to me. It keeps us on our toes and forces us to innovate. There are always multiple ways of solving a problem and some may like your way. Dealing with them gives a mutually beneficial business."
Thoughts on open source
Sahi is a great example of how open source and a commercial model can co-exist. We asked Narayan on how this came to be and he had this to share with respect to Sahi:
- Open source tools targeted at non developers do not receive much contributions. The reason is that non developers may be able to find pain points in the product but will not be able to fix it and contribute back because they do not have the development skills to do so.
- As a conscientious developer who is proud of his work, it is not easy to leave around bugs in the code for long. If you do not have bugs your customers would not need support. Which means that you do not have a revenue model. It also means that the product will die when the developers lose interest.
- Improving and advancing a product needs active development and support. That costs money and it makes sense to have the product generate that revenue. We launched the Sahi Pro version to align our end users and our interests.
Learnings from the B2B space
- Businesses need continuity and the assurance that the product will work for them for the foreseeable future. They are willing to pay for it.
- Most organizations are ethical. Tyto has a trust based licensing system and organizations lets them know what their real usage is.
- 80% of Sahi's customers are outside India. For the 20% in India, there is confusion on whether VAT/CST should be applied over Service Tax. Tyto currently applies VAT on (basic + ST). This leads to uncertainty and unnecessary back and forth conversations with Indian customers. (we'd appreciate comments on this point)
- Whatever the pricing, there will always be people who want it cheaper. But most real businesses understand ROI and if your product does not deliver ROI quickly to a customer, your product is not a fit for that customer and there should be no effort to sell it to them. Tyto extends trial licenses and support till the user is convinced. It is okay if they do not want to buy at the end.
The road ahead
Tyto is currently raming up its marketing to broaden reach and on the product side, they are moving to native mobile and native desktop application space. So far the growth of Tyto could be attributed to the strength of its product including that derived from its open source version. "In the near future, we have a new version coming up which has incorporated a lot of customer feedback. We are working on highlighting our customers’ success stories especially in BFSI, retail and product companies, to other prospects in various verticals and show how they can save time, money and effort by using our solutions," says Narayan.