How software testing startup Cypress.io went from nearly broke with no revenue two years ago to winning big customers like Disney, Shopify, and Slack, with $40 million in fresh funding

  • The open source testing automation startup Cypress.io announced Wednesday that it closed a $40 million Series B round led by OpenView Venture Partners.
  • In 2018, Cypress nearly ran out of cash, but it was able to find investors that had experience working with open source software companies. 
  • Now, companies like Disney, Slack, Shopify, Wayfair, and NBA use Cypress for software testing.
  • Visit Business Insider's homepage for more stories.

In 2014, developer Brian Mann was working at industrial inspection company InspectAll, feeling frustrated by the state of software testing. He believed there had to be a better way for developers to quickly see if the features they were building worked correctly or not, so he decided to quit his job and work on a solution. 

His launched a company, Cypress.io, with the aim to automate software testing. Mann already had many fans in the open source community because of education courses he'd created around the programming language Ruby on Rails, and Cyprus quickly picked up a following, too. 

The company, however, struggled. By April 2018, it only had 45 days of runway left before it ran out of cash. Drew Lanham, who joined at that time as its new CEO, says it was clear that the idea had real potential, even if it hadn't figured out its product-market fit or business model. 

"They had no customers and no revenue, but the developer love was so significant, and it was on a global basis," Lanham told Business Insider.

At the time, Cypress only had six employees and a beta version of its product but Lanham started reaching out to investors, trying to convince them to provide bridge funding before money ran out. In particular, he looked for investors with experience in open source software. 

"We found investors that understood and saw the same promise that I did," Lanham said. In 2019, he helped the company raise a $9.3 million Series A. 

Now, two years later, Cypress is far from the brink of failure.

It has gaining traction outside the open source community and has won over big-name customers, including Disney, Slack, Shopify, Wayfair, and the NBA. And on Wednesday, Cypress announced that it closed a $40 million Series B funding led by OpenView Venture Partners. With the fresh funding, Cypress is now valued at $255 million. 

Cypress sought out investors with more experience in open source software

Cypress currently competes with an older open source testing framework called Selenium and Microsoft's open source automation project Playwright. Still, Lanham says Cypress is easier to use than its competitors. 

Compared to competitors, Cypress's product is better at helping developers become more productive, as they can get insights on how to debug their application and what went wrong, Lanham says. 

"It's the out-of-box experience. It's the 'wow' moment a developer has immediately," Lanham said. "Other people had built an engine, and Cypress had built a car. We're able to toss the keys to the developer, and they get in, and they're very successful almost immediately. It's a wonderful out-of-box experience."

Plus, it's a large market and Cypress is growing fast, he says. 

The company wanted to bring on more investors that had experience with open source software: Between the Series A and most recent Series B round, Lanham says he had 120 different discussions with venture firms to really see which would really be a good fit.   

OpenView partner Blake Bartlett says he was impressed by the growth of Cypress's open source software, as well as the variety of industries and companies using it. 

"You can go on GitHub and see the most popular projects and repositories," Bartlett told Business Insider. "Cypress is not only at a high level, but the trajectory it's on is very important and impressive."

Previously, Cypress significantly invested in its product but had to forgo investments in other areas like sales, marketing, developer experience, and community support, Lanham said. With the new funding, the team plans to focus on those areas, as well as improve its dashboard to make debugging and testing easier. 

"We have a really healthy and robust open source community that we want to do as much work as we possibly can," Lanham said. 

Because Cypress served an important function for developers, most customers continued buying its software during the pandemic, even as IT budgets were getting slashed. In addition, the company is based in Atlanta, making it cheaper for it to operate, Lanham says. 

"We have a price that's very easy for the developer to accept," Lanham said. "When budgets were getting slashed, we were so far down the list. We weren't the target."

Read more: Commercial open source software startups will thrive during the coronavirus crisis, VCs say. Here are 31 they believe are poised for success

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