How Langfuse pivoted and raised $4M after leaving Y Combinator

Jan 22, 2024

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Each month, we speak to a team enrolled in PostHog for Startups about the way they work. This time, we spoke to Langfuse, an open source observability platform for LLMs, about their Y Combinator experience.

For the team at Langfuse, the past 12 months have been a blur of activity and highlights. After completing Y Combinator’s W23 batch they’ve earned over 1.5k GitHub stars, won Product of the Day on Product Hunt and raised a $4M seed round backed by Lightspeed Venture Partners.

“We’ve been very lucky,” says Langfuse co-founder Marc Klingen. “Not only have we had the support and encouragement of Y Combinator, but we’ve also benefited from the surging popularity of the LLM community too. There are so many teams solving problems with AI at the moment — it’s been a big plus for us.”

Langfuse's success is attributable to more than just good luck and the rise of AI, however. They’ve also succeeded by taking advantage of the opportunities available to them and applying some hard-learned lessons from their time in Y Combinator...

Know when, why, and how to pivot

Like PostHog, Langfuse originally entered Y Combinator with a different product idea to the one it eventually launched. Initially the team planned to build a billing tool for SaaS companies and had applied to YC with a basic prototype that demonstrated their vision — the idea for Langfuse only actually came together towards the end of the batch.

“When we got to YC we realized that if we wanted to grow our user base then we’d have to accommodate for a lot more edge cases than we originally thought,” says Marc. “That made us want to pivot just three weeks into the YC program, and we spent the following month figuring out what to do next.”

While searching for ideas the team started building new prototypes with LLMs and it was only through this process that they started to notice how hard it was to scale LLM products and arrived at the idea for Langfuse.

Putting it into practice: Pivoting successfully depends on finding a problem that is both solvable and worth solving. We know. We did it six times.

Take advantage of the Y Combinator community

Among the many perks and benefits which are available to teams in Y Combinator are regular office hours and group sessions with partners and other founders. These are completely voluntary, but invaluable for collecting product feedback and advice.

“Those sessions were super helpful because we got the advice we needed and learned how to interpret signals from our users,” says Marc. “The whole community was helpful, actually. If there’s one thing I wish I’d done more of then it would be taking more time to connect with other founders in the batch.”

“A lot of the content you get in Y Combinator is just available to everyone on YouTube. But the community and the connections you make with other founders? You can only get that in the batch. It’s important to make the most of it.”

Putting it into practice: In addition to connecting with other founders it’s worth keeping an eye on Bookface for exclusive offers. Like this one.

Go where you have the home-turf advantage

Although Y Combinator takes place in San Francisco, Langfuse’s founding team are all from Berlin. They relocated to the USA for the duration of the batch, then returned to Germany once the batch was over.

“We are always debating moving back to San Francisco,” admits Marc. “But at the same time, we’re just very productive here. We know good engineers here and, while we could get by remotely, we want to build the initial team in an office. We go back to San Francisco from time to time to meet users there instead.”

Moving away from Silicon Valley may sound like an odd move for a tech startup, but Marc believes it’s been for the best and has helped the team gain a home-turf advantage.

Putting it into practice: Regardless of whether you prefer an in-person or a remote environment, it’s important to get everyone together at least once or twice a year.

Build open source to reach enterprises

One of the best early decisions the team made was to make Langfuse completely open source where possible. This helped the team not only benefit from external code contributions, but also avoid scaling up sales functions prematurely.

“Open source is a great way to get more enterprise adoption,” says Marc. “We wouldn’t have expected to reach large Fortune 500 companies without a dedicated sales team, but we’ve since realized that teams in those companies frequently adopt open source tools because they give them more visibility and control over data.”

When it comes to tracking their own data, Langfuse is similar. They use PostHog because it too is open source and gives the team all the information they need to build better products — and they recommend it to other startups regularly.

Putting it into practice: Want to try PostHog for your startup? If you’re less than two years old and have raised under $5M in funding then you’ll qualify for $50,000 of free credit!

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