We Completely understand Why Postman is Allegedly Preferred by Enterprises-Why more businesses should probably listen to their lessons as well

While there are other third-party API platform tools like Runscope, 3scale, APImetrics, Sentinet, and Hapi, which are direct competitors of Postman, they are much smaller in scale and scope. They are also, at best, a 10th of its size, making Postman an overwhelming market leader, and potentially one of its kind as far as acquisition targets go. The acquisition price in such an exit scenario would unlikely be based on a revenue multiple.

The rise of the maker generation

By one estimate, there are currently 13 million professional developers in the world. If Postman’s claim of having 11 million developers is accurate, it represents both a strength as well as a weakness. A strength in that it already has peak penetration with little room for competitors; and a weakness in that there is little headroom for further growth within the existing core market.

Of course, it could hope to increase the percentage of paying customers from within the current user base and it could add more professional developers who enter the market.

But that is only one dimension of growth.

Potentially a much bigger vector is the new emerging market beyond professional developers. Hobbyists and other folks who are now part of what is being referred to as the “ no code” movement. Admittedly, this term is more marketing than being technically correct (just like Salesforce’s “no software” movement that kicked off the SaaS revolution).

But the wider imperative of allowing anyone to develop applications is a big secular shift—one that is still in its infancy but will take wings in the years to come. By one estimate, there are already more than six million hobbyist developers today, and that number is expected to rise sharply in the near future. In a 2019 survey, Postman found that, for the first time, non-developers accounted for a majority of those using its platform to work with APIs, providing an early signal towards this evolution.

The WFH shift

The WFH shift

The final vertex of this triad is more proximate—the pandemic-induced shift to work from home. While teams are located in the same physical location, they can probably get away without formally documenting and sharing internal APIs. But when team members work remotely, the need for formal documentation and collaboration is much higher. If remote working becomes a more abiding facet in a post-pandemic world, solutions like Postman are likely to find wide appeal.

All these factors put together make it a perfect storm for Postman. At US$30-40 million revenue, it’s clear that this is not a revenue multiple bet. Instead, it factors in a market position premium. A decade or so ago, this market would have been considered as small and niche, far from being a VC-fundable business. But markets today have grown so big that even an erstwhile niche like this can now attract hundreds of millions in investment and merit billions of dollars in valuation.

In the final analysis, this funding round is a bet on a new vision for the future of work. It should come as no surprise that Postman’s US$2 billion valuation closely tracks that of other enterprise startups like Notion and Figma from across the globe. They also have a US$2 billion valuation despite being in the same, relatively-early ARR boat as Postman.