Why this recent VC craze for No/Low-Code startups?
A start-up, according to “Lean start-up” theorist Steve Blank, is a “temporary organization in search of a business model that can be industrialized, profitable and allows for growth”.
In essence, it is the novelty of the value proposition, the business model and/or the user experience that makes the start-up a risky model.Validating market hypotheses is a step that can be costly in terms of resources and time for a young start-up.
Indeed, 18 months of fundraising is a real race against time.
But, unlike so-called “hardware” start-ups, software project launches need fewer and fewer significant resources to develop products, iterate the viability of their model and this marks a real break with yesterday’s world.
The resources of a VCs funding do not burn at the same speed if the capacity for action and iteration is 10 times higher.
Three major revolutions:
In the last ten years or so, we have witnessed three major technological changes:
- The democratization of Cloud servers such as Amazon Web Services (AWS) drastically reduces the cost of data hosting ;
- The increase in the number of APIs (Application Programming Interface) allows start-ups to connect their software to an unlimited number of third-party data sources, such as online mapping (Google Maps) or powerful emailing systems (SendGrid, Sendinblue or Postmark) without having to redevelop them internally.
- The maturity of No/Low-Code technologies, also known as “visual programming platforms” (such as Bubble.io or Webflow), allow you to automate repetitive development tasks (via workflows) to focus on real value-added code (via plug-ins) and have only one developer working on a full-stack environment, saving a specialized technical team. According to Vlad Magdalin, CEO of Webflow, “5 years ago, developers’ response to these new technologies was very negative; they were afraid that we were encroaching on their territory. But now they understand that it allows them to concentrate on more complicated tasks that really interest them.” Indeed, as you can discover in our article “Visual programming (low-code) does not mean the end of developers”, No/Low-Code in no way means the death of the developer as “at least some programming is necessary to deliver solutions” according to John Rymer, analyst at Forrester.
With a lower overall hosting cost, an unlimited ability to fetch data without reinventing the wheel and a significant reduction in development time for web applications and/or Progressive Web Apps (PWA), the launch of software projects is less and less burdensome for investors to finance.
No/Low-Code editors have attracted investors…
Funded by significant seed money, No/Low-Code editors Bubble.io and WebFlow recently raised $6.5M and $72M respectively, and are seeing the number of users grow rapidly and their infrastructure get stronger every day.
We have also observed the impressive $170 million raised for the Airtable database management tool (used by WeWork and Netflix, among others), which is fuelling the momentum around these new publishing platforms.
And now it is time of No/Low-Coders start-ups !
By ricochet effect, as investor’s eyes are more and more focused on the sphere of No/Low-Code editors, they are also focused on the start-ups using them.
Indeed, this wave of investment brings with it an increasingly attentive look at start-ups that choose No/Low-Code to launch their product. In the US market alone, the sums invested in this sector have increased from $114M to $529M between 2014 and 2019 according to Pitchfork.
Arun Mathew, VC of Accel Partners and a stakeholder in Webflow’s first round of financing, said in Les Echos that 7 to 8 of their partners “look at start-ups in this sector”, and they are not the only ones like Google’s CapitalG or Benchmark.
As the legitimacy of visual programming grows, choosing this IT stack will soon no longer be seen as a “technological gamble” but as a real “economic necessity” to derive, design and develop the first phases of a software project.
Many Y-Combinator start-ups such as Dividend or Qoins, but also French start-ups such as Comet, have notably used the No-Low-Code Bubble.io editor to develop and improve their first product, quickly iterate and gather metrics to justify significant fundraising:
- Dividend (offers clean energy home financing), raised $365M in venture funding.
- Comet (curates agile freelance IT talent), raised $13M in venture funding.
- Qoins (helps repay loans and debt automatically, raised $750K in an angel round.
But why this craze?
As we briefly mentioned it at the beginning of this article, having the ability to quickly test your market, iterate your value proposition and/or software product in a flexible and less expensive way is a necessity: this is the promise of No/Low-Code technologies.
Since the first steps of a start-up or an innovative project are strewn with failures, the resources of a VC funding do not burn at the same speed if the capacity for action and iteration is 10 times higher.
Yesterday, when a start-up designed and developed a first MVP in 3 to 4 months in a rigid way, it is now able to do it in 3 to 4 weeks in a flexible way. That is to say, the ability to create 2 to 3 iterated versions over the same period of time as for the launch of a single one traditionally.
This is a paradigm shift that is changing the way of approaching the launch of an innovative software project and therefore the world of venture capital.
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