Traction Watch: Forward thinking and a growing market helps Puppet Labs enjoy impressive growth

By pouncing on the opportunity, the Portland startup is racking up the sales and new customer acquisitions. In a comparison between April of 2015 and the same month last year, Puppet Labs grew by 325%. And now more than 25,000 companies including Twitter, RedHat, Salesforce, and Bank of America use their service to automate infrastructure tasks. According to the Deloitte Fast 500, they are experiencing a three-year revenue growth rate of 3,832 percent and rank at number 42 on the list. New bookings based on this massive growth, also known as a run rate, are right around $75M.

Of course, most of this rising wave is related to the massive growth of the market itself. IT wants to become much more reliable and reduce failures rates; in some ways, it is becoming the utility that should be as reliable as the power or heat in your home. Wiley Research estimates that 70 percent of IT outages are caused by configuration issues that could be resolved by more automation. IDC estimates that downtime in IT costs Fortune 1000 companies about $2.5B in total each year.

As with any hot startup, Puppet Labs took advantage of the exceptional market growth in a few important ways. One was deciding to delay their own profitability. They acquired new investment capital to the tune of $86M from firms like Kleiner Perkins, Caufield & Byers, Google Ventures, VMware, Cisco, and True Ventures to pull far ahead of current revenue streams.

While they were growing rapidly for four years straight, the CEO and founder Luke Kanies says they would have grown much slower otherwise. “This [investment money] allowed us to build product faster, hire more salespeople, do more marketing, and much more,” he says.

Puppet Labs also went into talent acquisition mode. They now have around 360 employees. They focused on the community of developers who support the platform.

“We built many network and platform effects into how we work,” says Kanies, “For instance, the value of Puppet’s language increases with the number of people who know it, so that encourages people to train large teams on it; this really increased our rate of growth, because people didn’t have to do as much on their own.”

It’s a good lesson for any new company: invest, hire, and tap your community. This year, Puppet labs is gaining new customers as fast as the market itself is growing.

Note: Traction Watch is a new column focused obsessively on growth, and is a companion to the DEMO Traction conference series, which brings together high-growth startups with high-potential customers. The next DEMO Traction will take place in Boston on September 16, 2015. Growth companies can apply to present, or those similarly obsessed can register here to attend.