While AI coding startups like Cursor raise impressive funding rounds after barely three years, Replit’s journey to a three billion dollar valuation has been far from swift. For CEO Amjad Masad, who has been building tools to democratize programming since 2009, it is a story of pushing through multiple failed business models, years stuck at the same revenue level, and a reckoning last year that forced him to cut half of his staff.
That makes what happened next even more remarkable. Earlier this month, the Bay Area-based company closed a 250 million dollar funding round led by Prysm Capital, nearly tripling its valuation from 2023. This raise followed unprecedented revenue growth for the company, from just 2.8 million dollars last year to 150 million dollars in annualized revenue in less than a year. For Masad, this moment represents more than just financial traction; it is the culmination of a sixteen-year obsession.
“Our mission has always been the same,” Masad stated. “Initially, we said we want to make programming more accessible, and then we upped the ante a little bit. We said we are going to create a billion programmers.” This goal is purposely audacious, but it is something Masad, a Palestinian Jordanian, has worked toward for his entire career. He came to the United States in 2012 after his open source coding project gained attention, including from the New York Times. He had been making programming more accessible since building his first online coding experience in 2009, with his work as an early engineer at Codecademy kicking off what became the massively online open courses revolution.
Turning that vision into a viable business of his own proved much harder than anticipated. Replit was founded in 2016, and for eight long years, the company struggled to find product-market fit. The company had reached 2.83 million dollars in annual recurring revenue back in 2021 and then hovered around the same revenue for four or five years. Replit tried selling to schools, which Masad noted was incredibly difficult, and cycled through different business models, each one stabilizing at the same modest revenue level.
Along the way, Replit built sophisticated infrastructure for cloud development environments and multiplayer coding, a collaborative editing feature similar to Google Docs but for programming. However, this technical achievement did not translate into revenue growth. By last year, with the company at 130 employees and burning through cash, Masad had to make a painful decision. He looked at the burn rate and the lack of progress on revenue and concluded the business was not viable. Replit cut its headcount by fifty percent, bringing it down to around sixty to seventy people.
Then came the breakthrough. Last fall, Replit launched Replit Agent, which Masad calls the first agent-based coding experience in the world. It can not only write code but also debug it, deploy it, provision databases, and act as a true software engineering partner. Soon after, in January of this year, he announced that Replit was abandoning professional developers as its core market. While this move made some in the tech community unhappy, Masad has not looked back. The company completely moved away from competing in the crowded market of tools for professional developers to instead focus on creating a billion software developers from white-collar employees with no technical background.
“The idea of making programming more accessible to the average individual, to the knowledge worker, really, that is where we think our market is,” Masad explains. “It is a fundamentally new market.” That bet now looks very smart. Numerous reports this summer said that revenue at Replit had grown to over 150 million dollars in annualized revenue, and Masad hinted it is now even higher. He also said that unlike many AI-powered coding companies, Replit is gross margin positive. On enterprise deals, which make up an increasing share of revenue, margins are eighty to ninety percent according to Masad.
Replit’s market position received validation when Andreessen Horowitz released its first AI Spending Report in partnership with fintech firm Mercury. Analyzing transaction data, the report tracked the top fifty AI-native application layer companies that startups are spending money on. While OpenAI and Anthropic took the top two spots, Replit landed at number three, outranking every other development tool. Profitability is rare in AI coding because many competitors face what Masad calls the negative gross margin trap, where serving professional developers with AI assistance is compute-intensive. Counterintuitively, Replit’s focus on nontechnical users works in their favor for enterprise customers like Zillow, Duolingo, and Coinbase, which pay one hundred dollars per seat plus usage-based pricing.
This new path has not been without missteps. In July, a venture capitalist went viral after the newest version of Replit’s AI agent deleted his production database. The agent fabricated fake records and later admitted it panicked, a failure mode in AI agents called reward hacking. Rather than becoming defensive, Masad and his team owned the problem. Within two days, they rolled out an automatic safety system that separates a user’s practice database from their real one, walling off the production database. Masad said the incident ultimately put the company on stronger footing by forcing it to solve hard safety and security problems quickly, which he believes creates a technology moat. The venture capitalist has since become a super user of Replit despite having no technical background.
Even now, Replit is not out of the woods. Its success has painted a target on its back. The company, which now employs 110 people, still faces an existential threat from the AI labs whose models power its platform, Anthropic and OpenAI. Both companies have launched their own coding tools that compete directly with Replit and Cursor, and these foundation model companies can afford to subsidize their tools and optimize performance in ways third-party platforms might struggle to replicate.
Replit’s advantage, according to Masad, lies in targeting nontechnical users and the sophisticated infrastructure around deployment and database management that it has built, which foundation model companies do not currently prioritize. Plus, Replit has another unusual advantage for a startup: a 350 million dollar war chest. Despite raising 100 million dollars in 2023, the company had not touched those funds by the time it raised this latest round. The company is capital efficient by design, though Masad joked that as an entrepreneur who grew up watching his refugee father struggle, he needs to learn to be less frugal and start spending money.
Whether that edge keeps Replit ahead of competitors is an open question. The current plan is to scale operations, accelerate product development, and pursue acquisitions, including both acqui-hires and companies working on agent automation in specific verticals. For Masad, who appeared on a major podcast in July and has seen his company’s fortunes transform, the moment is bittersweet. When asked how it feels to receive so much attention and a three billion dollar valuation, he invoked the adage that this too shall pass. He noted that while bad situations pass, so do good ones.
It is a stoic response from someone who spent the better part of a decade working at the same revenue level, convinced that AI agents would transform programming but unable to prove it to the market. One major difference between Replit and the wave of new AI coding startups is that Masad has lived through multiple hype cycles and has emerged with something relatively differentiated and reportedly profitable. “I have learned to be a little stoic,” he said. “What matters is for us to do the right thing, be principled, and move forward.”