Postman is a platform for API development created by programmers for programmers. By providing an efficient and versatile API testing tool, they have developed a platform that can simplify each step of the API lifecycle and streamline collaboration among your team or organization.
Since most of the features Postman offers are free, people are left with no choice but to wonder how does it make money? What exactly is their business model, and how many revenue streams does it have? That’s what this article aims to answer.
Postman makes money using a freemium business model. The basic service is free to use but paid plans are available for organizations that want access to advanced features.
Postman offers a four-tier subscription plan geared toward drawing businesses and corporations to its platform. These plans range from free to enterprise and scale easily in either direction.
Postman is an API development software as a service (SaaS) application that provides its users with a single platform on which to design, develop, and test APIs.
The foundation of the business model of Postman revolves around charging small teams and businesses for platform subscriptions. It also generates income by selling additional server calls to its customers.
Founded in 2014 in Bangalore, India, Postman continues to grow in success. The company’s Series D round valuation came in at $5.6 billion.
How Postman Works
On August 18, 2021, Postman overtook BrowserStack as the highest valued venture capital (VC) funded SaaS startup in India following a $225 million fundraising push in its fourth round.
Postman, a five-year-old startup, has raised more than $430 million in four funding rounds.
If you only know of the company’s introductory level, free product, you might wonder why heavy hitters like Nexus Venture Partners and CRV invested long ago and continue to do so, as well as Insight Partners, which led the most recent round.
You also might wonder what attracted BOND, Coatue, Battery Ventures, Gokul Rajaram (DoorDash product leader), and Girish Mathrubootham (Freshworks founder).
This quick-growing company held a value of $350 million in 2019, but its Series D round valuation came in at $5.6 billion.
Business Model of Postman
The Postman business model remains a straightforward undertaking of a SaaS that helps developers by providing an integrated area for the design, development, and testing of APIs.
Developed for teams of all sizes, Postman starts with a free plan that lets up to three team members collaborate on API development, followed by three higher levels of product that expand team size.
Each increase of plan offers many added perks, the most essential of which is speed. Higher plans increase usage limits, so you can more efficiently and effectively test your APIs.
These plans include free, team, business, and enterprise, and the company has already attracted most of the Fortune 500 companies as clients.
Postman provides an all-in-one API development and testing platform, aimed at providing developers with a fully-featured design and development space that saves them from needing to purchase and implement their own equipment.
Some of the most popular features include:
- Single Sign-On (SAML) for developers,
- Automated Provisioning and Deprovisioning (SCIM),
- Domain capture,
- Pay-as-you-go additional server calls.
The Enterprise Strategy Group (ESG) released the Postman ROI Report which covers its early success in attracting its target audience and their engagement with the company’s products.
After a thorough review of the Postman platform, ESG researchers validated the Postman API platform to be an advanced toolkit that makes it easier for organizations to generate critical business insights. This accelerates the development, collaboration, delivery, and maintenance of APIs with faster time to value and quicker resolution of issues
With regards to its forecasted expenses, Postman required an infusion of funding to grow its staff. The fourth round of funding provided the funds to recruit new talent.
The company has seen unprecedented growth and needs to expand its staff in core departments. With its products taking off and its pricing structure developed, it required funding to expand.
Postman focuses its business model on helping developers scale to reach the enterprise level. While its founder remains committed to keeping the entry-level free account offering, it focuses most development on its Business and Enterprise plans.
Its utility as an organization tool provides its most powerful benefit to businesses and its main draw. The all-in-one tool makes it easier for an individual, team, or firm to develop APIs since it provides the governance for the developer to use.
Certainly, individuals and businesses could purchase their own servers, set up their own workspaces, and create their own methods of organization. But laying it all out for developers reduces their work time and lets them fill in the blanks, so to speak, on the administrative side of things. This leaves them to focus solely on development, testing, and improvement.
Free Starter Plan
You register, so you and two colleagues can use the platform to develop APIs. The free option lets students use it for free while in college and get hooked. This lets IT department heads try before they buy.
It allows independent developers to use the same program the major companies do. They use the same platform as the higher levels do, but higher levels get higher usage limits and more integrations.
Postman remains affordable as your team grows. Its team tier provides everything free does but times ten. It ups your limits for integrations and API testing, for your $12 per month per user on the annual plan or $15 month-to-month billing.
Moving to Postman’s Business tier enables rapid development of API by increasing platform speediness and usage limits by one hundred times.
At this level, the company adds workflow management, the ability to set basic roles and permissions, and the aforementioned SAML.
Customers pay a per-user cost of $24 per month with an annual subscription or $30 to pay month-to-month. While this might provide enough for many companies, some firms require much more speed, so they scale up to the enterprise plan.
Postman’s secure environment for developing APIs draws many customers with its $69 per user per month option.
The Enterprise plan caters to organizations needing to conduct large-scale API development. It significantly adds to the speed of the Business plan by enabling testing at five times the speed of the next lower plan. It also increases API usage limits one thousand times.
Besides secure management of API development and testing, moving to the Enterprise plan adds reports and analytics to the Business plan as well as user groups, domain capture, and Automated Provisioning and Deprovisioning (SCIM).
Essentially, Postman has created a massive space for API development that even those who need a free product to start with can afford. It scales with the user as they grow their company.
A company or team developing and testing APIs on its can consistently grow and expand without worrying that they will outgrow the platform. They can also grow without needing to purchase their own expensive equipment and bandwidth.
How Does Postman Make Money?
When analyzing the company’s profitmaking potential, Postman seems set to succeed.
Its founder identified a product that every API developer needs whether independent or on staff at a major corporation. It has already penetrated its chosen target market, attracting 98 percent of the Fortune 500 companies.
Postman makes money via a freemium model (which is increasingly common in the SaaS world), with three paid plans: Team, Business, and Enterprise. All these plans are subscription-based, so the users are charged monthly recurring fees.
API Monitoring Add-on
Postman API Monitoring makes continuous testing simple with the ability to review your responses, availability, and performance.
To ensure that APIs continue to operate correctly, developers need to regularly monitor their availability and performance. This add-on service provides detailed information and comprehensive reports so that developers can easily track your API access at any time.
Mock API Server Add-on
When building production-ready APIs, developers need a lot of tooling.
Postman’s mock servers help developers quickly design and test their API without the overhead of setting up a backend database. Postman can build mock servers for any stack, including NodeJS, .NET, Java, Go, and Python.
The mock API servers provide a rare opportunity to test the application’s user interface directly against the API to be delivered in production. Behind the scenes, Postman is using real data. In other words, users will be talking directly to live data.
Thus, Postman’s mock servers provide a simple way to test and display the responses of APIs without having to create a real production environment.
Postman Funding, Valuation & Revenue
The company has attracted more than 17 million developers so far, providing a decent customer base.
According to their website, 98 percent of Fortune 500 companies already use the Postman API Platform. A total of 500,000 companies currently use Postman.
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Is Postman Profitable?
As per co-founder and CEO Abhinav Asthana, Postman is not profitable yet. He noted that reinvesting in the business for growth halts profitability.
With a focus on attracting large businesses to its business and enterprise subscriptions, the three founders plan to leave the free plan in place in perpetuity.
The business’s estimated annual revenue is $53.4 million. According to their website, more than seventeen million developers currently use the service.
The feisty startup continues to grow, and the most recent round of funding provides salary money. The firm will use VC funds to hire new personnel in engineering, marketing, product, and sales.
Hiring in these four areas signals a huge growth push. Engineering and product expansion get the business ready for the new customers, while marketing and sales put together the campaigns that land the new customers. That translates to a growth push.
A goal of 750,000 or one million customers would make sense since the company has already achieved the 500,000 customer mark.
The company also enjoys the stability of its three original founders, Abhinav Asthana, Ankit Sobti, and Abhijit Kane.
Asthana began Postman to create a tool to make the API testing process easier. When the tool took off, he brought in two former colleagues, Sobti and Kane.
Five years in existence with no adverse leadership changes places it ahead of many startups by showing that its leadership prioritizes collaboration for business growth over personal ego.
Conclusion: How Does Postman Make Money?
We’re finally at the end of this article. We hope we were able to provide you with an insightful look into Postman’s business model and helped you learn how it earns its revenue.
Overall, Postman does a lot of things right. They have been in business for years, they have an excellent product and are marketing it really well. Considering the value that their tool provides to its users, their pricing is quite cheaper. This makes Postman a great solution for both individuals and businesses.
We tried to write this article to the best of our knowledge and hope it was useful for you. However, if you want to know more about them, you can always visit their website for more resources.
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