- Short Description:
- Build Software is the strategy of creating software for founders or startups to get startup leads or build your brand. Examples of software categories include helping with fundraising or forecasting cashflow. Software that has some network effect or virality may be the most helpful in generating low-cost leads and getting greater coverage. The Build Software strategy is a rare one yet offers real potential for those that can do it well.
- Benefits:
- Unique Positioning: You can stand out from the crowd with this strategy.
- Deeper Intelligence: If you build the right kind of software, you can have a deeper insight into the market and into particular companies. For example, you could use it for benchmarking or to see activity levels in different sectors or geographies.
- Give Value First: If you give away the software, you contribute to the ecosystem. Giving value first builds a reputation beyond direct leads gathered via the software.
- Trade-offs:
- Technical Expertise Required: Few firms have the expertise to build software. To do it well you may have to hire new people. Do you do that out of management fees? To afford it, you may have to lower salaries for partners or do more deals per partner. If this sourcing strategy is successful, then more deals per partner may be achievable.
- Building Trust: It can be hard to build trust. The most useful software will ask management to share sensitive data about the company, the team, or other investors. For example, if you are helping with fundraising, the founder may not want your firm to know the list of potential investors. The design of the software, the promises you make, and the way you use the data will all contribute to building trust.
- Examples:
- NFX (The Brief, Signal and VC Match)
- Long Term Stock Exchange (not really VC)
