Sector
TechnologyDbaaSTech - Infrastructure
Background
Ro Nagpal is an investor at Holocene Advisors. We cover Mongo’s creative approach to R&D, learn how database product advantages compound, and look at what protects MongoDB from larger players like Microsoft and Amazon.
Cover
Date
November 3, 2021
Episode Number
33
Key Learnings
- Unique value proposition and ease of use can drive growth: MongoDB has a couple of key differentiators that have helped it gain market share in the new database market. It made an architectural choice to be a document database, positioning it well for the next generation of applications. It is also open-source, allowing many developers to try it out before committing to a significant contract. It has built a reputation for being the easiest-to-use cloud database, a crucial factor in its adoption.
- Customer retention is key in the tech industry: Ro notes that the database market is unique because once an application is built on a particular database, it becomes challenging to move it to another one. This leads to high customer retention, as evidenced by Oracle's low churn rate of 2%. The tech industry, particularly in sectors like databases, customer retention is critical for sustainable growth and profitability.
- Investing in Top of the Funnel Strategy Can Pay Off: MongoDB's investment in a top of the funnel strategy, that involves capturing users early through low-cost or free initial access and then gradually nurturing them into full-paying customers, has proven successful.
- Strategic Use of Open Source: The way MongoDB used its open-source strategy demonstrates that it can be a tool not just for community-building but also for protection against competition.
- Catering to the scarce resource: MongoDB's success is also a result of their deep understanding of their market and customers. They focused on creating a product that developers love to use and made it easily accessible, which helped to drive their growth. Cater to the scarce resource, the scarce resource is the developer and the IT organization. If you make them more efficient, they will love you, and that will lead to a great business.
Key Takeaways and Business Model
- MongoDB, a database software company, arose from an unmet need in the market for agile and scalable database solutions. The founding team, previously at DoubleClick (a large ad tech business owned by Google), were looking for a database system that could handle the complexities and scale of the internet. Today, MongoDB serves over 25,000 customers in 100 countries, generating more than $800 million in revenues and growing at a rate of 40%.
- MongoDB offers a significantly different approach to data management compared to traditional databases like Oracle's relational databases. While traditional databases like Oracle excel at handling structured data, they struggle with scalability and flexibility, particularly when the data parameters change frequently. MongoDB, in contrast, utilizes a "document database" model, which operates much like a Word document where data can be written in any order, offering greater flexibility for developers.
- MongoDB is a dominant player in the emerging database market: Ro divides the database market into mature and new. In the mature market, Oracle dominates with $70 billion worth of on-premise databases. In the new market, MongoDB is quickly gaining ground, taking a large share of new applications being written for the cloud. MongoDB is capturing a significant share of new projects, with around 30% of developers having built something on Mongo in the last 12 months.
- The database market is projected to grow significantly: Ro estimates that the new database market could be worth $100 billion in ten years. This represents a significant growth from today's $70 billion market and highlights the substantial opportunity for multiple competitors, including MongoDB, Amazon's AWS, Azure, Google, and Snowflake, among others.
- Transition to Cloud-Based Service (Atlas) is Driving Growth: MongoDB has managed to transition from a primarily on-premise solution to a cloud-based offering (Atlas), which now represents the majority of the business and is projected to reach $500 million out of $800 million total company revenue this year
- MongoDB's Open Source Approach: MongoDB utilizes an open-source model where it builds the technology and opens it to the public. This allows anyone to use the software without charge but offers premium features and support for commercial users.
- Go-To-Market Strategy: MongoDB has established a successful go-to-market strategy. It offers a low-touch distribution, enabling users to start using their product without having to interact with sales personnel. Product-led growth!
Transcript
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