There are over a billion websites worldwide, and all of them are competing with each other for attention. On average, a user will spend 52 seconds on a website. The best way to stand out in an ocean of online experiences is to offer each user a dynamic and engaging website to enhance the customer experience. Front-end software developers who build these websites want to have the best workflow and tools to create these web applications efficiently.

In the US there are 218K front-end developers, but the practice of building a website’s front end is growing increasingly complex as participants in the process grow to include product managers, design directors, and more. In addition, 60% of front-end developers believe cross-platform applications are the future of front end. This includes applications that work across different operating systems, and devices. The complexity of that ubiquity drives developers to look for even more simplified solutions that can also promise performance.

Vercel is a cloud-based platform that enables developers to build, preview, collaborate, and deploy user-facing applications. According to Guillermo Rauch, the founder of Vercel, the company’s vision is to become “an end-to-end platform where all software development on the web happens, from idea to production through getting your analytics on what to improve next, to the next idea.” The founding team at Vercel also built Next.js, a React framework that gives developers the building blocks to create web applications. Many of the world’s largest websites use Next.js when building static web applications.

Vercel was founded in 2015. It was initially called Zeit before rebranding in April 2020 to Vercel. The company was founded by Guillermo Rauch (CEO), Tony Kovanen (Vercel’s ex-CTO), and Naoyuki Kanezawa. Prior to founding Vercel, Rauch and Kovanen were the co-founders of Next.js, an open-source web development framework used to build static and dynamic websites. Rauch had also been the founder of Socket, a real-time communication library for real-time web applications, instant messaging, and real-time analytics.

In addition, before Vercel, Rauch was the CTO and co-founder of LearnBoost and Cloudup. Automattic acquired Cloudup in 2013 for an undisclosed amount. Beyond being a major contributor to Socket in 2011, Rauch co-authored mongoose Node.JS in 2012 and contributed to MongoDB, ODM, Node.JS, and MooTools. Naoyuki Kanezawa was a co-founder of Vercel. Naoyuki has worked with JavaScript for over nine years and is a core contributor to Socket and Engine.io. Socket is a powerful JavaScript event-driven library for real-time web applications. Notable companies using Socket include Microsoft Office, Yammer, Trello, and Zendesk.

Tony Kovanen was the CTO of Vercel from its founding in December 2015 to August 2017. Before Vercel, he was a JavaScript Developer at Automattic with Guillermo. After Vercel, Kovanen worked at Iglu, Gatsby Inc., Saulx, and as an independent developer. As of October 2023, he is the CTO of an early-stage startup called Based.io.

Source: Product Hunt

Vercel is built around several technologies that have had significant implications for how web applications are built including JAMstack, edge compute, and serverless technologies. Jamstack is an architecture that aims to make the web faster, more secure, and easier to scale using serverless. Serverless design allows developers to run and build web apps without having to manage the underlying servers.

The standard web development process includes research, design, creating content, development, beta testing, review, quality assurance, launch, and maintenance. Deployment takes ~12 to 28 weeks, or even longer for large sites.

Every website includes a front end and a back end. The front end directly interfaces with the user and leverages the backend for data once the user clicks or makes any request on a website. The backend handles the core data, logic, API, and database architecture. Vercel’s product provides the core infrastructure for the front end, but it also provides the elements required for the back end. Vercel’s product stack can be categorized into three key buckets: (1) develop, (2) preview, and (3) ship.

Develop

Source: Vercel

Vercel provides developers with a development workflow for coding and spinning up a web application. The product provides automatic API handling, built-in images, and performance optimization for code. This product provides integrations that allow a developer to easily integrate any data source like MongoDB Atlas, Excel, or a content management system (CMS) like Magento. Similarly, Vercel provides over 30 development frameworks such as Next.js, React, Vue.js, Angular, and more. Vercel also provides end-to-end testing from caching to serverless functions after the code has been developed

Preview

Source: Vercel

Vercel’s preview product enables development and operations teams to collaborate before every deployment. Teams can natively test changes to their website without complex staging pipelines. If a team wanted to give feedback before a website went into production, this feature enables that collaboration. Vercel automatically generates a shareable live preview site that can allow tests to occur before launching a feature into production.

Vercel enables these features through its native integration with Github and Gitlab repositories. Vercel makes a single shareable URL preview, which eliminates the use of separate servers for developing and staging live websites before they are ready. Airbnb’s engineering team, for instance, provided this example of how they use Vercel’s preview product:

Ship

Source: Vercel

Vercel leverages serverless, edge computing, and Next.js to deliver fast performance for end-users once the code has been deployed. This feature also allows a website to be deployed globally and updates can be made in 300ms. The Ship feature also enables teams to analyze logs, and understand traffic patterns and usage on their web application. Ship helps teams easily optimize applications without extra tooling necessary.

Analytics

Source: Vercel

In October 2022, Vercel announced the acquisition of Splitbee, an analytics and conversion tool that enables customers to understand the site experience their users go through. The product and team were added to Vercel’s existing Analytics product. Because Vercel is managing the website, the analytics platform doesn’t require third-party scripts or cookie tracking.

Website optimization is a critical category for measuring website performance and making improvements. Products like Google Optimize and Optimizely have acted as standalone products to serve this function. In March 2023, Google announced it was sunsetting Optimize as a product. In April 2023, Vercel announced it had made Analytics available to both free and paid users, with custom events being available for Pro accounts.

Storage

In May 2023, Vercel launched a number of back-end service options such as Redis and PostgreSQL databases. It also announced an object storage service, built in collaboration with partners like Upstash, Neon, and Cloudflare. The company’s four new storage options (Vercel KV, Vercel Postgress, Vercel Blob, and Edge Config) make it easier for developers to build their entire application on Vercel. These tools help developers scale their data management and increase their workflow by integrating back-end and front-end services in one place.

Customer

Source: Vercel

Vercel makes products for front-end developers working at agencies, SMBs, and enterprises. The company’s customers create apps while working with non-technical stakeholders. Before using the platform, deploying websites was burdensome and required uploading a large number of files. With Vercel, developers compile all their code into a single file. The increased simplicity saves developers time. One customer of Vercel described it this way:

In terms of large enterprises, Vercel powers the websites for companies like Walmart, Apple, Nike, Netflix, TikTok, Uber, Lyft, and Starbucks.

Market Size

The projected market for application development software in 2022 was $153 billion and is expected to reach $217 billion by 2027. In markets like the US, 91% of people use the internet and engage daily with online applications. In less internet-penetrated markets, like Asia Pacific, the number of internet users is expected to see a 21% increase, up to 62% as of 2022.

Adjacent markets for Vercel, like the serverless market, are also expected to reach $36 billion by 2028. As the popularity of Vercel’s frameworks increases, Vercel’s position as a de facto tool will also increase.

Source: Star History

Front-end developers can leverage a number of different tools to create their websites. For static websites with incremental updates, people will often use no-code website builders like Webflow or Squarespace. But for dynamic applications that are more complex, and require a developer to be able to more closely manage scaling, performance, and updates, web developers focus on front-end platforms instead.

Vercel, Netlify, and Gatsby Cloud help web developers create dynamic websites more quickly. Jesse Martin from Hasura has shared the following perspective on the competitive landscape:

There are also differences in programming languages accepted by front-end platforms. Developers value flexibility and Vercel is the most extensive in accommodating Node, Go, Python, and Ruby. Netlify allows for Node and Go, while Gatsby only allows for Node.

After launching its suite of backend products in May 2023, Rauch described how these tools differentiate Vercel from other vendors in the severless space as it allows customers to not just “scale the compute” of their operations but also “scale the data part” in one place. As of October 2023, Vercel is the most searched term on Google. In February 2023, Netlify announced it was acquiring Gatsby.

Vercel has both a freemium and an open-source business model. It monetizes by offering a hosted serverless platform for front-end applications. There are three key primary product categories:

1. Hobby: They have an open-source software named “Hobby” which is a free product they use to acquire customers to test the platform.

2. Pro: These are subscriptions which are $20 per user/month. This is their premium core offering

3. Enterprise: These are custom solutions and pricing for larger enterprises which is not public, but they provide companies with more cybersecurity features and advanced speed capabilities.

Source: Vercel

In a June 2023 interview, Guillermo Rauch shared that Vercel grew in revenue from $1 million in 2019 revenue to $5 million in 2020. It then grew its revenue to $24 million in 2021. As of June 2023, the company was at $50 million in revenue. At the announcement of its Series C funding round in June 2021, Vercel had seen significant growth in traffic to all sites and apps on its network, nearly doubling from October 2020. The number of sites among the world’s largest 10K websites that use Next.js grew 50% in the same time frame between 2020 and 2021.

Given Vercel’s management of the Next.js framework, Vercel sees an increase in growth when more developers use Next.js. From April 2020 to May 2023, the number of websites powered by Next.js has grown from 35K to 4 million including the websites of companies like Walmart, Apple, Nike, Netflix, TikTok, Uber, Lyft, and Starbucks. As of June 2023, Vercel’s technology is downloaded 200 million times per week and is managing 30 billion requests per week. In 2023, the company has also partnered with numerous leaders in the serverless and digital experience spaces, such as Neon and Sitecore.

In November 2021, Vercel raised a $150 million Series D at a $2.5 billion valuation led by GGV, bringing the company’s total funding amount to $313 million. Previous investors included Accel, Bedrock, GV, Greenoaks, Tiger Global, 8VC, and individual investors like Nat Friedman (CEO of GitHub), Jordan Walke (Creator of React), and Matias Woloski (Founder/CTO of Auth0). Based on the company’s reported 2021 revenue of $24 million, Series D would represent a 104x revenue multiple.

Expanded Infrastructure Product Suite

In October 2023, Vercel announced a spend management product to help developers track how much they spend on infrastructure. Serverless infrastructure provided by Vercel can scale up and down depending on the applications needed, but this can often exceed the available budget of the customer. This additional functionality allows customers can take more control over their own infrastructure.

Similarly, in May 2023, Vercel announced Vercel Firewall and Vercel Secure Compute to expand the platforms’ capabilities in terms of ensuring the security of a customer’s websites. Additional security and cost management features allow Vercel to build a more expansive set of infrastructure offerings. As web development continues to move towards scalability, performance, and cross-platform, the ability to bundle as much infrastructure in one platform as possible can be a critical opportunity for Vercel.

Serverless Computing

Guillermo Rauch, Vercel’s CEO, pivoted from using servers to serverless computing to remove complexity and simplify developers' work. Serverless allows developers to build and run code without managing servers and paying for unused cloud infrastructure. In addition to cost savings, serverless makes it easy to scale applications without developers making extra configurations, compared to Platform-as-a-Service (PaaS). Cloud service providers like Amazon Web Services (AWS Lambda), Microsoft Azure (Azure Functions), Google Cloud (Google Cloud Functions), and IBM Cloud (IBM Cloud Code Engine) now offer serverless offerings.

Developer Framework Preferences Move Away From React

Full-stack web frameworks like Django and Ruby on Rails were popular before front-end frameworks like React and Vue.js took over. React gained popularity in 2017 due to its simplicity and flexibility. The growth of Vercel is dependent on the growth of the React framework Next.js. If developers begin favoring a simpler alternative to Next.js, it would be a negative for Vercel.

Source: Google Trends

Competition From Netlify

Netlify is Vercel’s biggest direct competitor. In 2021, Vercel raised $150 million Series D at a $2.5 billion valuation and Netlify raised a $105 million Series D round at a $2 billion valuation. Netlify offers a development platform that includes build, deploy, and serverless backend services for web applications and dynamic websites. Netlify is also open-source and provides many of the products that Vercel offers. Netlify invested $10 million into its Jamstack Innovation Fund and $1 million into open-source tools for the ecosystem. Vercel approaches web developers by building or acquiring the tools to attract them. Vercel is primarily focused on front-end development, meanwhile, Netlify extends into a broader surface area within software development.

Vercel’s growth demonstrates open-source influence over developer tool adoption. Developers like Vercel’s ease of website deployment and maintenance using Git. Vercel’s and Netlify’s CEOs are well-respected among the developer community. Neither platform is the established market leader. Netlify is funding projects within the Jamstack and open-source ecosystem to gain users. At the same time, Vercel is acquiring users by building an easy-to-use end-to-end platform. Vercel’s focus on building its own platform may be enough to establish itself as the dominant player in the front-end developer market.