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PagerDuty - Alex Solomon Startup Insights

PagerDuty - Alex Solomon Startup Insights

Learnings from a $1.9B YC unicorn

Brian Bourque
November 04, 2023

Happy Saturday to every unicorn in the galaxy.

My sister got married in Cape Cod last week and I was stranded on a fishing boat.

The GOOD NEWS is that I have a TON of awesome content coming your way.

No more lonely Saturday mornings in your future.

Today we’re getting back to our roots:

A deep-dive into a UNICORN’s growth strategy.

I analyzed hours of interviews with PagerDuty founder Alex Solomon and condensed his billion-dollar startup education into the following insights.

PagerDuty is an operations cloud platform that helps tech teams know when stuff breaks and what to do about it.

Here’s what we’re going to cover:

Alex’s founder story
Journey to product-market fit
PagerDuty growth strategies
PagerDuty funding
Hiring & culture
Key Challenges & setbacks
Exit strategy
Alex’s advice to entrepreneurs

Let’s get to it!

Alex Solomon founded PagerDuty to address a critical problem he experienced firsthand - the pains of being on call at a startup. As an early engineer at LiveOps, Alex was constantly woken up at all hours to deal with technical issues. He knew there had to be a better system for managing notifications among teams. After years of tackling this problem during nights and weekends, Alex finally left LiveOps to build his solution.

He launched PagerDuty in 2009 and iterated quickly based on user feedback. The company grew virally as teams invited colleagues to use the platform. Despite challenges with fundraising and scaling, Alex kept PagerDuty laser focused on its core purpose - improving lives through great operations.

He built an enduring culture and processes that allowed PagerDuty to expand globally while remaining nimble. Over a decade later, PagerDuty has become the leading incident response platform, valued at over $1B.

Journey to Product-Market Fit

Since PagerDuty was built to address Alex's own pain points from being on call, it had product-market fit with technical teams from the start. The initial traction came from open sourcing an early version on GitHub and hearing from developers worldwide about the same notification challenges.

After building the MVP very quickly, Alex put PagerDuty in front of early customers like Microsoft and VMware. Their intense enthusiasm and engagement showed he was onto something. He refined the product rapidly based on these early adopter users.

Within 6 months of launch, PagerDuty was spreading virally across teams purely through word of mouth. Alex knew he had achieved product-market fit when users were not only signing up independently, but enthusiastically inviting their colleagues to use PagerDuty as well.

The foundation of solving his own problem combined with rapid iteration based on user feedback allowed PagerDuty to find product-market fit very early on.

Here are some key growth strategies used by PagerDuty:

Viral product design. As mentioned, PagerDuty was designed virally from the start simply by making it easy to add team members. Users could instantly invite colleagues via email. This built-in virality allowed PagerDuty to scale efficiently in the early days without paid marketing. Teams would start using the product, invite their colleagues to collaborate, and it would spread organically throughout organizations and across company networks.

Freemium pricing model. PagerDuty utilized a freemium pricing model, allowing anyone to try the product free up to a certain usage tier. This enabled easy adoption and helped convert freemium users into paid plans as their usage grew. It also increased visibility as teams got started without needing approvals.

Content marketing. PagerDuty invested heavily in content marketing like blog posts and emails to engage users and prospects. Content centered around best practices for incident response and being on call. This strategy generated leads and reinforced PagerDuty's category authority.

Viral loops from integrations. By building integrations with leading platforms like Slack, Jira and OpsGenie, PagerDuty benefited from viral loops when teams used those platforms. Integrations were a growth accelerator.

Expanded use cases over time. After establishing a beachhead in DevOps incident response, PagerDuty expanded into other use cases like IT alerting, security monitoring, and customer service. This increased its appeal across organizations.

Expanded from technical to business users. PagerDuty broadened its audience from just technical roles like developers to business users. Features like business response helped it expand usage more broadly.

International expansion. By expanding globally to Europe, Australia, South America and Asia, PagerDuty significantly grew its addressable market. International proved receptive to its digital-first business model.

Alex bootstrapped PagerDuty for the first year before raising a $1.5M seed round in 2010. With this he built out the team and product.

In 2012, PagerDuty raised a $10.7M Series A led by Andreessen Horowitz, which helped further scale the platform. However, Alex admits he waited too long, over 2 years, before raising PagerDuty's $27.7M Series B in 2014 led by Bessemer Venture Partners. This allowed competitors to gain ground in the interval.

PagerDuty went on to raise over $173M more over 4 rounds before going public in April 2019. Their IPO opened at $24 per share, valuing the company at $1.3 billion.

Alex learned fundraising too conservatively early on potentially slowed their growth trajectory.

Hiring & Culture

Hire slowly and carefully to maintain high bar. Alex took hiring very slowly, prioritizing keeping the talent bar high over growth speed. He wanted to avoid layoffs seen at fast-scaling startups. This discipline allowed PagerDuty to preserve its culture and productivity.

Obsess over cultural fit. In hiring, Alex looked for intrinsic cultural fit over skills, which he felt could be learned. He wanted to bring on people committed to PagerDuty's values. This focus on culture fit helped sustain the company's ethos through rapid growth.

Create space for innovation outside core product. PagerDuty Labs gave engineers time to experiment outside the core product roadmap. This protected innovation time maintained engagement and creativity as the company scaled.

Build replicable processes to propagate culture. To scale its culture with growth, PagerDuty methodically built playbooks and processes around people practices. For example, the rigor of their interview process allowed them to train new employees to live the culture.

Maintain open dialogue and transparency. Regular all-hands meetings and an active internal community enabled transparency as headcount grew. This openness was vital to preserving cultural hallmarks like candor during scaling.

Create opportunities for gatherings and connection. PagerDuty facilitated community building through events, offsites and meetups to sustain connections despite rapid employee growth. Alex sees real-world interactions as the glue to retain culture.

Key Challenges & Setbacks

Difficulty fundraising and scaling. Alex admits he had challenges raising new funding rounds, especially after the Series A. He attributes this to his own naiveté about financing and investing. There were periods where he struggled to fund PagerDuty's growth.

Executive team challenges. Alex said he initially gave executives too much autonomy, leading to fragmentation. He learned the importance of alignment across the leadership team and keeping the reins tighter as CEO during scaling.

Focus spread too thin at times. With growth, Alex said PagerDuty sometimes lost focus by expanding the product roadmap too broadly. He had to re-center the team around the core customer value proposition. Staying focused was an ongoing struggle.

Professionalizing process and communication. As headcount grew into the hundreds, Alex found they needed to professionalize internal process and communication. The informal style that worked early on wasn't effective at scale. It took work to implement things like OKRs.

Technical scaling issues. PagerDuty encountered challenges scaling their technical infrastructure to support rapid customer and data growth. Alex had to build new teams to engineer the platform for scale. This was uncharted territory for him as CEO.

Alex said he started PagerDuty with the goal of building an independent company, not to sell or go public. However, as growth accelerated he began to see the benefits of a liquidity event.

He realized capital from an IPO could fund growth without dilution. There was also employee consideration around liquidity. While not initially focused on an exit, Alex ultimately saw the benefits of going public.

He advises founders to keep an open mind to possible exits that may emerge as priorities shift with scale. PagerDuty's 2019 IPO proved beneficial in funding their continued growth as a public company.

Alex’s Advice to Entrepreneurs

Solve a critical problem experienced firsthand. Alex built PagerDuty to scratch his own itch from being on call. Build something you personally need and well understand. Your intimate knowledge helps ensure product-market fit.

Get a working prototype out quickly. After deciding to build PagerDuty, Alex launched their MVP incredibly fast. Get a minimum product out early to validate and start gathering feedback. Don't get stuck in development cycles.

Iterate rapidly based on user feedback. Alex credits their relentless iteration based on user feedback for PagerDuty's success. Continually improve your product by listening closely to real customer needs. Let that drive development.

Stay laser focused on delivering core value. Despite distractions, Alex kept PagerDuty focused on elegant notification routing before expanding use cases. Nail your core solution first before getting fancy.

Hire carefully for mission alignment over skills. Alex believes hiring for cultural fit is crucial. Skills can be learned but values matter most. Getting the right team is everything. Move slowly and keep the bar high.

Build processes to scale culture and values. Deliberately build playbooks and processes to institutionalize culture as you grow. Things like hiring, onboarding and communication processes propagate values.

Create space for innovation and creativity. PagerDuty Labs gave people room to experiment outside the core product roadmap. Protect time for innovation - it's vital to long-term success.