Insider stories from Codex’s NFX-led $5.5M seed round
CEO Brandon Waselnuk on the company's origin story, "wild" dealings with VCs, and impactful journey through Y Combinator.
Codex, a developer tool that allows engineers to share context on the 'why' of code directly in their integrated development environment (IDE), revealed that it’s raised $5.5 million CAD in seed funding and is now in private beta.
The seed round, led by NFX, backed by Y Combinator (S21) and joined by Ludlow Ventures, Emergence Capital, Four Cities, Crossbream, and various operator angels will help the company grow its team and onboard beta users from its waitlist of over 200 companies.
Imagine you’re in an IDE and you don’t understand why a piece of code was written the way it was. Codex allows you to simply select it and then request context by asking a question. Codex then identifies the code owner(s), sources their answers, and shows this rich context to all engineers instantly, and forever.
One way co-founder and CEO Brandon Waselnuk has described the service is like the song lyric website Genius — but for code.
The origin story
Waselnuk and fellow co-founders COO Karl Clement and CTO Saumil Patel started working together in 2015 at CoVenture, an NYC-based venture capital fund that built software for its portfolio companies. While there, they experienced the problem of onboarding new engineers into a codebase. Engineers needed a way to understand why they built software a certain way.
Fast-forward to the trio’s next endeavour, which was a product agency called Dignified, and through the development of 15 products in one year, the team saw the exact same problem. This led to them to create a prototype that would enable teams to add a content layer on top of their code blocks. Although the prototype was unusable, the technical leaders they spoke to saw the potential in the solution they were building, explained Waselnuk in a conversation with Vancouver Tech Journal. “A lot all of them were like, ‘Yeah, can you make something here? You're on the right path.’ Because our prototype wasn't good anyway; you wouldn't actually want to use it. But they saw it, and we talked to VCs and our friends, and they all said, ‘Yeah, so go do this thing.’”
The investment memo story
It’s well-known in business circles that Jeff Bezos forced Amazon executives to write 6-page memos to pitch new ideas or share information at meetings. He said it “forced better thought and better understanding.” In the venture capital world, investors also use memos to share internally and with their LPs the investments they have made or intend on making.
To further test the interest and invest-ability of Codex in preparation for a seed round, Waselnuk (who has venture experience) decided to write an investment memo — and send it to a carefully selected group of investors and operators. At the time, his team was thinking about raising a seed round and applying to Y Combinator. They thought YC wasn’t really in the cards. “We thought we would get rejected from Y Combinator because we literally had a really bad prototype that no one would deploy. We had no customers. We just had people kind of on this waitlist we were building because they were like, ‘Hey, when you have a thing I can actually use, give me it.’”
They applied to YC as a way to think about the business critically and make sure it was a “venture backable business,” explained Waselnuk. “I sort of used that application and investment memo to ask, ‘Do we actually have a strong company thesis that deserves venture scale type things?’” For this exercise, he thought a memo would work better than a deck. “The short answer is: it proved true,” he shared.
One of the people who received the investment memo was one of Codex’s eventual investors, NFX’s Morgan Beller (who, by the way, has one of the most gangster CVs I’ve seen (ex: Cornell, eBay, Andreesen Horrowitz (a16z), Medium, Facebook…)). Waselnuk had actually pitched her one of his previous ventures when she was at a16z.
The YC story
Codex entered YC with NFX’s funding basically locked in. They, of course, also had the standard YC deal of $125,000 for 7% equity on a post-money safe. But what perhaps wasn’t so standard was the level of VC interest the startup received during their YC cohort.
“It was wild,” Waselnuk shared. “People doing weird tactics to get allocation. We had people recording videos… like pitching us on them. It was just a very different process than I'd ever run. Many firms and partners literally pitching us on why they would be the right people to be in the round and take us forward.”
Although people were agreeing to invest after “like eight minutes on phone calls,” the most exciting part for Waselnuk was talking to people with a technical background, he said, because they would be excited too. VCs without an engineering background took longer to understand Codex, he recalled.
The Demo Day story
When startups pitch during YC Demo Day, startups and investors use software which makes it easy for investors to connect with the companies they’re watching. There’s basically a button that sends “essentially like a handshake intro email,” Waseluk explained. “It's just like, “Hey, you know, person A wants to talk to you-Codex about investing.’ You get this email and take it from there.”
The demand for Codex introductions was high, but not only Codex. “A lot of companies got their inbox destroyed,” Waselnuk remembered. “Because when you think about it, it costs the investor nothing to click the button if they want to talk to you.” The presentation is only one minute long, but founders would end it with upwards of 100 emails.
The YC story, continued
Beyond the funding and exposure to investors, Waselnuk believes the impact of YC on him and his company is significant. He shared a few key reasons why. Firstly, he says the YC experience “puts you on the right pattern for US-based investors.” What does he mean by that? A lot of US investors look for patterns when they're making investments, especially the tier one funds, he says. This could be a simple thing like if you graduated from a top school, then you went to a FAANG stock, for example.
So for the Codex team — three co-founders from Canada without any previous exits — going into YC “put us on pattern immediately,” Waselnuk said. In other words, it made them more investable.
From a programming standpoint, Waselnuk said YC builds “incredible founder mentality because they teach you essentially how you should actually think about your business and think about venture and think about raising money and build like your confidence like crazy.”
It was a needed boost, he said. Despite the interest from VCs, Waselnuk admitted that many of the VC firms they spoke with would actually try to convince him that his startup wasn’t as good as he thought (“Maybe that’s a tactic”) and that he needed the venture firm. “They work this weird mental game to get you to either reduce valuation or give them more,” he explained. But when NFX joined, “they actually did the most founder-friendly things I've ever seen,” he shared. “Then when we did YC, and I did that raise, it was glaringly obvious to me because my founder mentality had been like, kind of set appropriately by YC so you could see these people and investors running this game on you, essentially.”
The story today
With the Great Resignation upon us, a lot of companies have senior staff leaving with all this critical context that's never been written down or shared. This leads to teams having to, in the worst case, reverse engineer functionality to grok how it works. “It's crazy how much time is spent on this work today,” Waselnuk noted.
Soon Codex will offer integrations to other modern IDEs so everyone at a company can share context as well as a desktop application that will let engineers author and share onboarding paths through the codebase. “We're out to save engineers time and a lot of headaches by automatically storing and sharing institutional knowledge,” Waselnuk said of his startup’s ultimate goal.
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