Leaving $1.5B Startup Behind for AI's Next Wave | Neon, Nikita Shamgunov

1. 0:00 – 1:20

   Intro

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      The world changed, and the reason is AI. Ignoring that change and saying, "We set out to do this, and therefore we're gonna do this" just makes no sense. And it's good to be honest with yourself when you're changing the plan. Communicate this to your investors, board, employees, and then to yourself when you look at yourself in the mirror, that the plan is now a new plan. And that's okay. Understand how the world changes around you to take advantage of those opportunities. Now, how do you take advantage of those opportunities? The thing is that... My name's Nikita. I'm CEO and founder of Neon. This is my second company. So my previous company, uh, SingleStore, at peak it was valued at $1.5 billion. Neon is a database company and a developer platform. Where do people get databases today? They either download them and install them themselves, but Neon says we're serverless Postgres. We're saying, "Don't worry about servers. Here's just a URL, and the URL is all you need to know to build your application." Neon is expanding its mission from being a database as a service to platform as a service or backend as a service. [upbeat music]

2. 1:20 – 3:02

   1. Left $1.5B, Start Again

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      I'm building databases all my life. So at Microsoft, I joined the team called SQL Server. So when I joined Microsoft, first of all, it's an incredible team, but it's also a very, very old and stable product. I joined in 2005, and by the end of 2005, Microsoft released the product SQL Server 2005. The previous release of that product was 2001. During that time, there were people that would come to Microsoft, work on the product, leave Microsoft, and never ship software at all. At the time, I had a, you know, phenomenal offer from Facebook, and then took a Facebook offer, offer and moved down to the Silicon Valley. At Facebook, culture was very different from Microsoft, and the speed at which things were happening was absolutely insane. A lot of people just committed to the Facebook mission, that engagement was a lot higher. And once I experienced it, I realized that this engagement exists in startups and it does not exist in larger companies naturally. I was very susceptible for entrepreneurship. And then when my co-founder, Eric, was like, "Well, you should apply to Y Combinator," and we got accepted. So my previous company, uh, SingleStore, at peak it was valued at $1.5 billion. You know, I spent there 10 years. When I took over SingleStore, we were probably at a 7 million run rate. I took it to north of 20. And then for the first time in my life, the amount of operational work reduced temporarily. I'm not the most important layer, right? So you can just remove me from the organization, and the organization will probably do just as good. And then added this to the craving of learning breadth and made the plunge, started another database company, uh, which is Neon. That's why I left SingleStore, and it kinda panned out.

3. 3:02 – 5:03

   2. Don't Launch Yet, Show Them First

   1. UHUnknown Host3:04

      You know, it doesn't matter how good your technology is if there's no market fit. Do people want your stuff? The best feedback, of course, is people are willing to buy this product, right? But even before that, you kinda want to, to throw it out there and see that this product is needed by the world, and then you put all this energy to making that product and making it a high quality product. You wanna validate this hypothesis. How can you do that, and how can you do it as earlier in the startup cycle as possible? We started to do those things. Open source is one. Then we put together a website. We were building in the open. All the code was available on GitHub. And moreover, all the code was available on GitHub with a very permissive license. And then about, about 11 months in, our, the number of GitHub stars on that product started to go vertical, meaning if you, like, plot them on the line, the, all these people starring our repo, which means they're kinda interested in what we're doing. And, and that was our first product market fit signal. And then we put the website out. We didn't put a password on it, and we thought we were gonna launch in about two months. But between that time and the launch, somebody leaked our website, neon.tech, on Hacker News, and there was a lively discussion. You can go and find that. People going and saying, "Well, this is a good idea," or, "This is a bad idea," and whatnot. You know, think about a product and a company like you creating a movie, and then your website is a trailer, right? And that's how you kinda know if a movie is gonna be well-accepted by the audience or not, because the trailer's out and you're starting to collect very early signal about the interest of an audience to that particular product or service. I think .tech is one of the many, not that many, good choices. And .tech I think is fairly new, and that's why a lot of them were available, and Neon was available as well. So we bought that one. As an advice for future entrepreneurs, don't worry about it until your product hits product market fit. Notion was SO for a long time, and then now about, now everybody uses Notion.

4. 5:03 – 7:10

   3. Kill Your Original Plan

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      Here's Silicon Valley. It's littered with technology that nobody wants or needs, and that's totally fine because when you start, you just don't know. And it's good to be honest with yourself when you're changing the plan. Communicate this to your investors, board, employees, and then to yourself when you look at yourself in the mirror that the plan is now a new plan. And that's okay. The world is is what the world is. And if the world changed, and in technology the world changes quite often, ignoring that change and saying, "You know, we set out to do this and therefore we're gonna do this," just makes no sense. But being formal about the steps that you're taking and the whys behind those plan, that I think is a very useful and important thing to do, and I kinda strongly recommend everybody who's doing that to be formal or semi-formal. And it doesn't mean that you need to, like, write six-page documents. It could be as simple as, like, one, two, three. Kinda like Tesla, right? I'm gonna build a Roadster and then I'm gonna build a Tesla S and then I'm gonna build a, a mass market Tesla 3. It could be as simple as this. But then the world changes and then introduces for Tesla the opportunity to create full self-driving, and that becomes kinda like a huge emphasis for the whole company. So not only you need to be formal, not only you need to be executing very, very fast, you need to look around the corners and then understand how the world changes around you to take advantage of those opportunities. Now, how do you take advantage of those opportunities? When you have your one, two, three plan, you architect your team against your one, two, three plan. And then the world changes and something in this world becomes more important or becomes an opportunity. And then because the team you build is the company you build is another thing that Vinod Khosla says, you might even not have the capacity to understand how to change the plan. And even if you do, you might don't have the capacity to evolve the company into that direction. And therefore, I think you must bring people from that world that you're lacking. And if the world changing in a particular direction, try to get the people who are experts in the direction that the world is heading. Because if you don't have the right people around you, you won't come

5. 7:10 – 9:15

   4. The Only Way Out is Up

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      up with a good plan. The hardest things are about people. The other hard things are when things are just not working. And when the things are not working, you spend an extraordinary amount of energy to make them work. And then they work for a period of time, and then they stop. And they stop because either you don't have enough product market fit or your technology is not good or competition's kicking your ass, and so you're burning a lot more money to make it work. And it takes the high quality team to work through those moments. Ideally, you work through them without losing your cool. That's when then the stuff is tested and people lose patience, people quit, blame each other. We had it all. You know, living through this once, uh, hopefully it made it a better founder. And compared to SingleStore, Neon seems like a lot smoother sailing. There's the length and then there's the growth. It only feels long if the growth slows down or stops, and then you start looking in the mirror and asking yourself, is that what you signed up to do? Is, like, is this grind is ever gonna stop? Or it's growing, and in this year we grew over six times in revenue. And when you look at this and it's like, whoa, like, the scenery really is changing, and the stuff that we're doing now is, like, not the stuff that we were doing in the beginning of the year. As long as we're in that state, it's forever. The fog of war usually clears as the company goes along, and right now it's pretty thick with Neon. You know, the company's clearly working. There's product market fit. Our customers love it. More and more of them coming every day onto the Neon platform. We reaching to things that we almost didn't think we would even consider in the AI space and in the broader platform space and then back into the service. It's when the growth slows or the world moves on in a different direction or a competitor kicks your ass, that's when the music stops playing. As long as the music keeps playing, I think it's, it's just a lot of fun to keep dancing to this music. [upbeat music]

Episode duration: 9:16