A U.K.-based open-source startup is launching its first commercial product with the support of one of Silicon Valley's most prestigious venture capital firms.

On Monday, Pydantic introduced an observability platform named Logfire, following a five-month open beta trial, and announced it has secured $12.5 million in Series A funding led by Sequoia.

While the company is primarily recognized for its namesake Python library and open-source data-validation framework, created by U.K. developer Samuel Colvin in 2017, the project has seen significant growth. It is now utilized by developers at some of the largest companies in the world, including Meta, Nvidia, Netflix, Google, and OpenAI.

Pydantic is deployed in applications requiring verification of user-entered data. For instance, if a form requests an email address and a user mistakenly enters a phone number or leaves the field blank, Pydantic checks the input and provides a user-friendly error message. Essentially, it validates data structures to maintain integrity and has numerous applications.

One notable example is that OpenAI, the creator of ChatGPT, integrated structured outputs for its API in August, utilizing Pydantic in the process. If a company wishes to develop a chatbot that collects user information and presents it in a structured format for easier processing, it would rely on Pydantic.

“Pydantic is exciting because it serves as the default method for validating responses from an LLM,” Colvin shared with TechCrunch in an interview last week. “If you want to achieve structured output, that’s the way to do it.”

Colvin established Pydantic as a commercial entity in 2022, coming out of stealth mode 18 months ago with $4.7 million in seed funding from Sequoia. Now, it appears to be time for the company to start generating revenue. Colvin mentioned that they are effectively looking to “cash in on our credibility and our brand name,” using Pydantic as a lure for other products instead of solely expanding on Pydantic itself.

**Tried and Tested**

The typical trajectory for a startup building an open-source business usually follows this pattern: Create an open-source product that addresses a real problem; the product gains traction with developers, becoming an essential tool in their stack; the startup then develops commercial services and features on top of the core open-source project to enhance its utility.

While this is a tried-and-true model, many businesses are increasingly retreating from open source in various ways. Some, like Grafana, are transitioning to less-permissive licenses, while others, such as HashiCorp, are abandoning it altogether. The common thread behind these moves is the desire to protect the company’s bottom line and prevent larger corporations from exploiting a product's open-source nature.

A new licensing paradigm is emerging to address the “use and abuse” problem in open source. For instance, the billion-dollar developer tooling company Sentry is advocating for the concept of “fair source,” which aims to align with “open” software without fully committing to open source. “Open source isn’t a business model — it’s a distribution model and primarily a software development model,” said Chad Whitacre, Sentry’s head of open source, in a recent TechCrunch interview.

While leveraging open source to build goodwill with the developer community is not a new idea, Pydantic takes a slightly different approach by using its open-source project entirely as a marketing tool. Rather than trying to evolve Pydantic itself into a commercially viable product, the company is relying on the project's reputation to promote other, indirectly related products, such as Logfire.

“Instead of creating a hosted version of Pydantic, the library, we’ve developed Logfire, the observability platform,” Colvin explained. “The trust we’ve built with the Python community is on a different level compared to many other companies. We attended PyCon US this year right after announcing Logfire in beta, and our booth attracted a crowd all week because people recognized the library and were familiar with us. If we had shown up as a brand-new observability company, we would have been overlooked. Pydantic is a better-known brand than almost any other in the Python ecosystem, aside from the major players like AWS and Google.”

Logfire is essentially a competitor to Datadog, designed to provide developers with insights into their software's performance. However, Pydantic aims to simplify the entire observability process. As Colvin noted, they want to be “to Datadog what Vercel is to AWS.”

“AWS has an overwhelming amount of functionality and is incredibly complex to navigate,” he explained. “Similarly, Datadog is also a highly complex tool. Our goal is to create a more straightforward experience for developers. In the long term, we envision Logfire being a viable alternative to Datadog, but in the medium term, we want to be that simpler solution for smaller teams.”

This strategy presents an intriguing approach to building a business. The startup essentially uses Logfire to address a different challenge for the same audience that utilizes Pydantic.

“They are different products, but they overlap in that all the users of Pydantic, the validation library, also need observability,” Colvin stated. “So we’re focusing on providing a solution for the same user base.”

**Show Me the Money**

In the early days of Pydantic, Colvin secured substantial sponsorships from some of the framework’s largest corporate users, including Salesforce, which donated $10,000 in 2022, while AWS and GitHub contributed $5,000 and $750, respectively.

However, as the business has expanded and venture capitalists have become involved, corporate donations have become less common.

“We received fairly generous sponsorships when I was working solo,” Colvin remarked. “But now that we’re backed by Sequoia, companies seem less willing to open their wallets!”

With Logfire now generally available, Pydantic aims to build on the over 2,000 developers and 150 companies it attracted during the beta phase, with a particular focus on AI companies.

In addition to lead investor Sequoia, Pydantic’s Series A round saw participation from Partech and Irregular Expression, along with angel investors like Logan Kilpatrick and Jason Liu. Colvin indicated that the new funding would primarily be allocated for salaries and to expand its current headcount of 13, which is distributed across the U.S. and Europe.

“We’ll use the funds mainly for hiring, particularly developers,” Colvin said. “We may hire for sales at some point, but for now, our focus is solely on engineering.”