How VCs can attract devtools startups to take their money?
Note: The environment has ofcourse changed over the last 12 months, but good deals are still hard to come by and are quite competitive. And markets change often, just like this one will. So while the urgency might not seem as bad as 12 months ago, a lot of these inputs are still quite valid, and a lot of firms are still VERY actively deploying capital, but just a little more cautiously.
As some of you may know, I joined Appsmith in 2021 and started angel investing in SaaS and developer tools startups a little while back via a syndicate. Over the last couple of years, I've spoken to more than 2 dozen VC firms in India, US and Europe about early-stage startups and invariably we end up discussing a lot about how they could potentially attract devtools startups since this is a space they find exciting.
Here are some ways in which they can attract these startups, beyond $$$
1) Hiring Devrels and other hard to find roles
A lot of funds help their portfolio hire talent. Do you know what talent is hard to find for devtools startups? Developer Advocates / Developer Relations. If you come up with a pipeline of quality devrel folks, you are already HIGHLY differentiated.
Why? Because no one is doing this and this is a hard frigging role to hire for. Startups will figure out a way to hire developers, PMs, digital marketers. But they struggle to find good devrel folks. One reason is probably because AWS, MSFT, Github and now Netlify and Vercel are hiring away every single one of them. The other reason is that there aren't that many good folks here because this is a new and emerging role. Though here's a nice nuanced take on the history of modern devrel from Brandon West, who's now at Datadog.
Other challenging roles at devtool startups in the early stages are technical writers and PMMs.
A lot of VCs (esp in non-Bay Area markets like Europe, India) still don't fully grasp this. Next time you're fighting for allocation in a devtools startup that Sequoia wants to invest in, try this: connect the startup to 1 good technical writer and 1 good devrel, and see the magic.
Even better, if you're REALLY serious about it, set up a program to scout and train good devrel folks akin to what 8VC or KPCB has done with engineers.
2) Developer Angels
Build a strong network of technologists or functional experts in developer-focused companies, and invite them to invest alongside you. This is again a no-brainer for emerging market VCs, but also for VCs in the Bay Area. Countries like India haven't had many devtools success stories, and so when you invest in devtools startups, bring on folks that have seen it before or are going through the same journey to invest alongside you. They will act as a great source of pipeline, as well as a support system to the startup. The amount they invest isn't important. And it's definitely much more valuable than a random syndicate that can cough up $150,000. Especially in these uncertain times.
I feel sad that Heavybit has gone down the path they have. We at Appsmith would have LOVED to be part of their program. But now they're a fund. And they don't take too many intakes. Just look at the breadth of content they've put up. There should be a more universal Heavybit. VC firms serious about devtools, should put together a list of playbooks that are relevant. Actionable stuff for devtools startups. Here are some example:
- How to use Github to get early and ongoing traction
- How to use communities to spur PLG and bottom up growth.
- How to create a world-class support org (devtools support is different from SaaS support) [this is the Customer Success equivalent in devtools, you will need it much before sales scales up]
- Actionable insights around how to do well on HackerNews (though dang has already covered a lot of it).
- Pricing and business models, positioning, when to go OSS (if at all)
- Structuring your docs to keep up with your product
4) Devtools operators in your investment team + Strong Advisory Network
Bring a strong devtools operator or entrepreneur into your fund as a Partner. Nothing will scream "we're serious about devtools" more. I'd wager that unless you're a Tier A VC firm, this would be even more impactful (if one had to choose) than having a devtools focused thesis.
Too unsure about this? Then start off with a strong Venture Partner who has technical chops and has made numerous angel investments in this space. Even better if they come from open source.
The idea is to give tech advice, but also to mentally help technical founders commercialise their minds.
Now towards the advisory network: You want to build a strong domain specific advisor network with genuine access to them. You want to access a devops expert as your scale? Here's the Head of Infrastructure at TikTok. You want positioning advice? Here's the brand and product marketing expert from Twilio (or even better, here's a founder who figured it out). Want to figure out which open source license to go after? Here's Heather Meeker's protege (coz well...Heather's taken)
5) And ofcourse the time tested way of just introducing to early customers. But a lot of firms do this. However, at the same time it's incredible how many firms don't do this after saying they will do this. You can't say "How can I help?" and then not actually help.
Thanks to Will and Abhishek on inputs on some of these points.
Have I missed anything? Feel free to email me (first name).(last name) at gmail.com and I'll add it to the post.
p.s: It's ironic that the Unplash image that I finally put in this post is called "design meeting"