Why the biggest winners in no-code have already been built

We’re thrilled to announce this week’s exclusive with David Peterson, operator, investor, and no-code evangelist! Previously served in a variety of GTM functions including Co-founder (Steward), Head of Growth (CompStack) and Account Management (Google), his current role at Airtable focuses on building Airtable for Startups and establishing their global consultant partner network. Having worked with hundreds of early-stage companies, David is also an angel investor & advisor (Levity, Gamma, Oslash, Rocketlane, Deci + more). We were honored to pick his brain on all things cap table related, including:

TCT: You’re a big proponent of no-code (Why “no code operations” will be the next big job in tech), clarifying that “no-code” to you is open-world software, meaning, software that’s designed in 3D, software that trusts its users with the power to build. From an investor’s point of view, what’s the best way to capitalize on this thesis?

My instinct is that the biggest winners in the no/low code platform wars have already been built. These platforms (Airtable, Coda, Notion, Retool, Bubble etc.) may not be ubiquitous yet, but we’ll see at least some of them reach escape velocity over the next few years. That dynamic is laying the groundwork for the next big set of opportunities in the space. Two specific theses that I’ve been tracking:

First, with the platforms in place (even if they aren’t ubiquitous just yet), I’m really excited by companies that turn challenging technical problems into “no-code” building blocks that can be seamlessly added to any workflow. For example, companies like Levity and Obviously.ai are making it dead simple to develop custom machine learning algorithms. These are problems that are too specific or technically challenging for the platforms to solve in-house, but unlock massive value for end-users.

Second, inspired by my colleague Taylor Savage, I think we’re on the cusp of the next SaaS app gold rush. We’ve seen the proliferation of verticalized SaaS software over the past 20 years. My prediction is that the next SaaS explosion will be software built on top of the platforms mentioned above. There are a few reasons for this: (1) upfront development costs have continued to plummet, even more so when building on top of a platform like Airtable which handles a lot of the complexity of building a new SaaS app out-of-the-box, and (2) these platforms are naturally horizontal, leaving vertical feature gaps that can be exploited by developers. I’m not sure if there’s a venture-scale opportunity here, and VCs do tend to shy away from platform-dependent businesses (for good reason), but there’s a lot of money to be made. There are already a lot of consultants in the space, and I wouldn’t be surprised if we started seeing “SaaS app studios” sprout up that are exclusively focused on these platforms in the next 6-12 months.

Every VC wants to invest in the next horizontal platform, but they’re scared. So they all offer the same advice: choose a vertical, prove it out, then expand horizontally.

This is bad advice and a huge mistake.

— David Peterson (@edavidpeterson) January 20, 2021

Can you tell us a bit more about how you’d approach it from the VC perspective and how not to make this mistake?

Okay, so I’ll be the first to admit that this thread missed some nuance :)

First, not all products ought to be horizontal! There are massive vertically-focused companies out there. If you want to build that (or fund that), go for it.

That being said, if the company has made the decision to go horizontal, the reality is that they’ll still need to go after specific use cases to gain initial traction. The challenge is executing on use-case specific go-to-market without undermining the horizontal nature of the product.

I think there are some good examples of different approaches here. One might be the Amazon approach (an “internalized platform”). Start with one vertical (books). Expand by building out business units focused on additional verticals, all plugging in to the central logistical nervous system of the company. Another might be the Salesforce approach (or an “externalized platform”). Build the toolkit, own some high priority use cases yourself, but largely rely on partners to build the vertical-specific solutions on top.

So from an investor perspective, that’s the question I’d dig in to. How are the founders thinking about going to market? If they want to build a horizontal product, do they have a clear idea of their path from early-stage go-to-market (which is more about identifying target use cases and balancing vertical GTM with a horizontal vision) to the broader horizontal play?

You’ve been an active angel investor and advisor (Levity, Gamma, Oslash, Rocketlane, Deci + more) for a little over a year now. How did you get into angel investing, and how did you go about getting the money for your first investment?

I kind of fell into angel investing without planning on it. I’ve always loved brainstorming about early-stage ideas, so naturally started meeting with investors and founders to discuss what they were working on. One time, a founder mentioned they were raising a round, and I was just so bullish on the company, I surprised myself and asked if I could put in a small check. They were nice enough to say yes.

What’s your angel investing due diligence process like, and how quickly do you decide on an investment? 

Minimal, at best! I don’t have a big pile of cash I’m trying to deploy, so I’m not actively hunting for new companies to push through my pipeline. Really I’m just looking for founders and products that I’m unabashedly excited about. The two questions I ask myself are:

If the answer to both of those questions is yes, I’ll try to get a small allocation…and then wrack my brain for ways to be as useful as I possibly can be.

How do you stay organized for your angel investments (managing notes, SAFEs, performance, pipeline, etc?) 

Shameless plug for Airtable here :) 

I’ve created a combined CRM, dealflow tracker, and portfolio tracker. The number of investments and contacts are low enough that I don’t need a very robust system. This lets me keep track of everything that I really care about (contacts, docs, notes, performance over time) in one place. 

David’s Simple Angel investor CRM:

It’s pretty simple, but given the impressive systems I’ve seen some investors build with Airtable, I know it will scale up easily over time.

There’s a handful of options for angel investors looking to get on the cap table (crowdfunding, syndicates, SPV’s, and direct allocations). Which option would you recommend to first-time investors and why?

I think that depends on your goals with angel investing in the first place. If you’re just looking to get exposure to the asset class, investing in a rolling fund or as part of a syndicate is an easy, low friction way to get started. Personally, my goals are to be directly involved and do whatever I can to make these companies I’m betting on be successful. As a result, for me, direct allocations (however small!) make a lot more sense. 

What’s your secret for getting on the cap table?

I wouldn’t claim to have any special secrets, but here are two things that have worked for me.

First, assuming you’re already connected with the founder and excited about the company, just ask! Even if it’s a tiny check that won’t materially impact the company, don’t be shy. Express your excitement, pitch how you can be useful, and hope for the best. 

Second, what if you’re not connected with the founder? If you use the product and you genuinely love it — send a note to the founder offering your thoughts (and maybe some virtual high fives to the team for a job well done)! Worst case, your authentic excitement just gave that team a little pick-me-up. Best case, maybe there’s some way you can help and now you’re on the founder’s radar.

Do you have aspirations for investing full time? What milestones would you need to achieve in order to pursue this?

At this point, no. Though definitely not ruling it out. 

I’ve loved the little bit of investing that I’ve been able to do as an “operator.” Because I’m still in the weeds at Airtable every day, I feel like I’m able to offer (somewhat) useful operational advice based on my experience. I think you lose a bit of that when you start investing full time. Also, let’s be honest, it’s much easier to convince a founder to take a small angel check vs. letting you lead a round. So I’m wary to even compare the two.

That being said, as somebody who enjoys project-based work and going deep on a wide variety of topics, I can absolutely see the allure of investing full time.

Candidly, something that I think is critical to being a good investor, but I’m not sure I have yet, is muscle memory for a good deal. I don’t think you develop that muscle memory without making a lot of bad investments, or missing out on a lot of great investments, or both. You need to take enough swings that you get a feel for what matches your style and intuition, and what doesn’t. So I’ve got some work to do in that department.

What are you passionate about outside of work?

I find myself drawn to anything that lets me work with my hands, so more recently that’s been baking and cooking. My dream is to go spend a few months at a nearby bakery (I’m in London, so have my eye on E5 Bakehouse), put myself to work carting some bags of flour around, and learn whatever I can. We’ll see if I can convince them to take me on as an unpaid flour hauler/apprentice.

What’s the state of no code in 2030?

I think this is a classic case of that William Gibson quote which is all too popular in venture circles: “the future is already here, it’s just not evenly distributed.”

Through my work at Airtable, I’ve seen companies that have built amazingly impressive systems — essentially company-wide, fully custom ERPs — using only no/low-code tools. These systems easily rival, and more often than not replace, the SaaS applications these companies were using before. These systems, in my opinion, are the future.

However, from an outsider’s point of view, it’s easy to discount them. They’re not feature complete. They’re easily broken with an errant click or inadvertent deletion. They’re complicated and hard for anybody but the original builder to understand.

But I think they’re disruptive, in the true Christensen sense of the word. Yes, they’re worse in countless ways, but they make up for it by being powerful, flexible, and fast. As I’ve written elsewhere, when the person who feels the pain is also empowered to build the solution, the result is magical and utterly unique. Mass market software forces users to conform to a specific way of working. With no-code tools, people can build the solution that matches how they actually do their work. That’s what’s disruptive.

What does that mean? In the coming years, my bet is many SaaS tools are going to lose significant market share to these homegrown systems. And in 2030 “no-code” won’t be a category. We won’t even talk about it as such because it will be everywhere. It will just be...software.

Follow David (@edavidpeterson) for more insights into no-code, startups and angel investing!

Sources: Crunchbase, LinkedIn, Twitter