Four years ago, P.J. Hyett and Chris Wanstrath were just scraping by. They'd quit their programming jobs at CNet to become their own bosses--only they didn't so much have a company. Or a regular income. They were consulting part-time--essentially, building websites for Bay Area start-ups--and working on a couple ideas for businesses of their own.
One was essentially a mailing list for easy communication among extended families. Hyett's mom loved it--but it didn't catch on. ("Maybe it was the name," Hyett says. "We called it FamSpam.")
Another, a portal that lets Web developers share and chip away at each other's coding projects, was gaining some traction in beta. Very, very slow traction. A friend and fellow Ruby on Rails programmer who'd helped formulate the idea, Tom Preston-Werner, put in some money he'd made from selling an online avatar technology called Gravatar, and Hyett and Wanstrath remember sinking every cent from their consulting gigs into what would become GitHub.
This was extreme bootstrapping at its finest. Even after GitHub came out of beta and showed promise by making $1,000 in revenue on its first day--in April of 2008--it would still be months before the founders paid themselves salaries. It would be two years before the company moved into its own office.
"It wasn't quite eating ramen and sleeping on the floor, but not far off," Hyett says. "But we'd argue. I think when you're running out of money, you can get more heated--you have a shorter temper. But coming out of that was this incredible feeling, like we've taken ourselves to the brink and came back."
Did they ever. By 2010, the site had half-a-million users; today it has more than 3 million, and is adding 10,000 users a day. GitHub doesn't disclose revenue, but Wanstrath characterizes it as "millions and millions a year," which is thanks to large enterprise clients who pay to use GitHub without open-sourcing their software. In other words, uploading open-source code for the public is free; but many enterprise clients pay to keep their code out of public view; instead it is shared amongst only their own teams. Such clients include Microsoft, Walmart, Vmware, and Lockheed Martin. The U.S. and U.K. governments also use GitHub.
That significant profitability meant that last year, when the founders decided to consider taking a round of venture capital funding, they were in an unusual negotiating position.
"We knew we were able to walk away from the deal if we weren't comfortable with the deal or with the terms," Hyett says. "You can't be in a better position raising money than when you don't need it. That's where we were."
GitHub raised the largest Series A Andreessen Horowitz has ever made: $100 million. Peter Levine, the Andreessen partner who sits on GitHub's board, told Inc. the investment was an attractive opportunity, due to the founding team's technical strength, and GitHub's 300 percent year-over-year growth in a market that had been unchanged for years.
"These co-founders bootstrapped the company from nothing and grew it to a community of millions of developers," he said. "They've been able to derive a very rich revenue stream out of the community in innovateive ways."
With that investment, the founders hope to build a formal sales and marketing team, and bring "GitHub everywhere." Meaning, they hope to make the sort of collaboration available on the site today to adept programmers more accessible to anyone just starting out learning code--or working on projects writing novels, music, or anything else that can be collaborated upon, such as, legal documents.
"We can, with the money, go in unconventional ways that we never would have thought of," Wanstrath says.
Candyland for Code Collaborators
To create their online portal for programmers, the three founders of Github took themselves "to the brink and back." Now they have $100 million to spend.