I committed to explaining openly why I have invested in a company. The intent is to build transparency about our Connect thesis and to clarify what we look for, how we pick deals and in general how we think about things. We believe that this will be of use for the founders who will look at Connect as their potential Seed investor.
My first post was “Why we invested in EduMe”. Most readers appreciated the explanation about our investment thesis and why it is the fabric of the whole Connect strategy. Some of the feedback I received from that post was to provide more context and storytelling about our overall SaaS investment strategy.
So here it is.
I love SaaS
With my first company Neo Network — a mobile messaging startup I co-founded back in 2001— it took me over eight years to ramp up to $25m in annual revenues. Furthermore, most of those revenues were services-based, had long sale cycle and low margins, and above all, were non-predictable. At the opening of every year, we rebooted the revenue-o-meter and started from scratch. It was so damn hard. Like in surfing, when you need to paddle out every time to take the next wave. But, unlike surfing, it wasn’t cool.
So it’s not a surprise that once I turned investor, SaaS was love at first sight. Since co-founding Connect in 2012, I’ve had the privilege to back some great SaaS companies. I have been learning a shit load whilst serving great product founders and working next to some of the best European SaaS investors: Neil Rimer / Index Ventures, Christoph Janz / Point Nine Capital, Itzik Parnafes / Battery Ventures, Evgenia Plotnikova / Dawn Capital, Thibaud Elziere / eFounders, Jean de La Rochebrochard / Kima Ventures.
The SaaS market is an ocean with thousands of amazing startups sailing off every year. To navigate through it I needed a compass. The compass that worked for me has been our core investment thesis combined and intersected with specific points of view: strategic frameworks and themes we are passionate about. Three examples we have applied to date:
1) The power of exceptional design and user experience
First and foremost, our credo is in the power of superior design and world-class user experience to drive bottom-up customer adoption. We religiously believe in the so-called Consumerization of B2B Software. That is, business software doesn’t have to suck anymore and a user-centric approach is the trademark of the SaaS industry. This point of view led to our investments in Typeform, Marvel, Infogram and Charlie.
2) The rise of API-based SaaS
Secondly, our conviction in the exceptional benefits of building and consuming API-based products drove our investments in TrueLayer (Banking API), Forest (Admin interface API), Moltin (e-Commerce API) and TimeKit (scheduling API).
3) “Future of Work”
This is a theme we are very passionate at Connect.
In particular, we have formed our point of view about two related issues. One revolves around the impact of Artificial Intelligence. We believe in the adoption of machine learning in SaaS product for augmenting human capabilities via automation and personalization, rather than for the full replacement of human intelligence. This thesis has guided our investments in companies such as Kheiron, GenieAI and Stepsize, where machine learning algorithms work alongside humans professionals (i.e. radiologists, lawyers and developers) to augment their abilities and performances. We will dig into these investments in future blog posts.
The second issue is around the profound change in the structure of work. There is a progressive shift towards new distributed and decentralised work models.
- First and foremost Remote Work. Remote is the key change to empower the next 50 years of global growth. While this is not controversial, less obvious is the lack of the enabling infrastructure. A new layer of culture, software and financial services is necessary to empower this shift.
- Secondly, the rise of the freelance generation. This inevitable paradigm shift towards flexible jobs is causing millions of workers now operating as freelancers outside the conventional employer perimeters, with no access to a full range of software and services. The list is long, and it includes software for communication (email and DM), for training and L&D, for HR and engagement, for expense management. And services like tax filing, pension schemes, corporate payment cards, insurance, privileged access to credit.
We believe that this transformation represents a formidable opportunity for the creation of a new layer of innovative products that, leveraging software, can empower these new work models. With tremendous benefits for both the employers and the workers.
I am thrilled to back the founders leading this revolution and creating new categories in work-tech.
This thesis has guided our investments in Side (on-demand platform for temporary jobs), Soldo (smart payment cards for the field workforce and the self-employed), EduMe (micro-training mobile for the frontline workforce), Accountable (Tax and accounting automation for freelancers) and more recently an HRIS platform to fix for good one of the bigger blocker of distributed work: international hiring and payroll.
We continuously re-assess formed point of views and add more. Two more frameworks I look for are:
The future of Business solutions to me. A sort of T-shaped products combining a horizontal software tool superpowered with a vertical something: a professional service, a marketplace, a financial product. Come for the something, stay for the tool. Or viceversa. Great examples in our portoflio of Super SaaS are
- Side, which offers temp workforce Marketplace + HR Software.
- Lanes&Planes: travel booking Service+ expense and HR Software.
- Soldo: Banking Products + accounting Software
I am very bullish about this combo to create tremendous value for every business, from small to large enterprise.
Products using technology innovation like Machine Learning or regulatory macro shifts like Open Banking to rethink entire workflow and industry practices (Migacore, LifeBit, TrueLayer).
If you are a founder building a SaaS (or a Super SaaS™) product that people love and you share one of these theses, we would love to talk to you. And we are very much open to learning original thesis from you, Founders. You are far better than us to imagine the future.
In the second part of this post (available here), I will dive into the Accountable case and explain why we believe this company is a great opportunity and a fantastic fit to our thesis.