Summer SaaS discussion: an insight into the Technologization of VC
Back in 2020 Flashpoint launched a new initiative called SummerSaaS — an online competition for seed and post-seed SaaS companies. In 2021, we went further and not only repeated the previous event but grew it into a conference with interesting panel discussions around VC topics. The event’s statistics should speak for themselves:
- Over 1000 people registered as attendees, twice more compared to the last year’s event
- over 80 top-tier VCs representing with $10bn+ of AuM,
- 24 selected SaaS companies from Emerging Europe and Israel.
A number of exciting topics were discussed at last year’s SummerSaaS panels including the hot topic of Technologization of VC business:
- Is it enough to use generic software tools that are available on the market?
- At which stages automation matters the most
- How to clean up and verify the data that we obtain?
- Is automation going to replace humans?
Marton Medveczky, Investment Director at Flashpoint, said “As a VC firm we are trying to invest into the technology of the future while using the technology of the 90s” referring to the emails and spreadsheets that are widely used by VCs.
When VCs decide to modernize their approach many start out with off-the-shelf products designed for them. Many have mentioned that they started out with Affinity. To some respondents, this software was enough. Their CRM and their additional API allow them to build customized ways to interact with it, such functionality can be sufficient for some. Others mentioned that it wasn’t enough for them, either it was too slow or it wasn’t versatile enough and therefore didn’t suit their needs. Thus they decided to build in-house software.
However, the software market is expanding and in the future, more companies would be able to use an off-the-shelf solution that fits their needs while companies who have the resources continue to create tailored solutions.
It’s also important to mention that different stages and tasks require different software. Three main fields were identified:
- The general workflow of the company
- Automation of daily tasks
- Ranking of the companies
CRMs are responsible for the workflow of the company, many if not all VCs use them to keep track of companies.
Then the automation of daily tasks comes into play. Such solutions are usually custom-made for the needs of the company: sending personalized emails, fast responses to emails, and identifying companies of interest.
There are also some more advanced things that can be automated.
Gigi Levy-Weiss, General Partner at NFX, gave a great example. His company holds a hackathon each quarter in order to introduce the companies to various VCs when they needed to raise the next round. They came up with a matchmaking system where they could upload the collateral and it would suggest partners that are most suited to that company, send out emails with a personal touch and track them.
Gigi Levy-Weiss said that this automation system saves about 2–3 hours a week.
Automation is used to save time and ensure that nothing gets lost in the process. However, there is an even more interesting use of technology, software, and algorithms to rank companies.
Such technology is ever-improving and the companies are interested in its development because sometimes they can see connections that aren’t evident at first glance. Such ranking systems for now are a guide on prioritizing companies that are coming in or a guide on how to interact with a certain company.
Another interesting system that Gigi Levy-Weiss mentioned involves scraping the data of the internet and finding founders and companies that were potentially missed. Thus discovering new interesting companies. Some of the companies that came out of this system have been already invested.
However, most of the systems that we discussed could not have been built without valid and clean data as was noted by Shmulik Shelach, Research and Technology Director at IVC. He talked about some ways to clean the data. The first is to verify the data to ensure there are no errors in it. Another way is to collect data using automation which removes human error and collects from verified and valid sources.
Similar to automation the speaker mentioned a system that allows the founders to input the structured data which later can be analyzed by the algorithms so that there is no need to extract information from an email or a pdf document.
The question was risen: whether the automation and ranking of the companies are going to replace humans?
Alex George, VC @ Point Nine, brought up an interesting point of whether the startups would be willing to talk to a machine and do surveys and send videos. Some may perhaps like to talk face to face. As well as how would the different VCs stand out if all of them would use similar ranking systems and automated questionnaires. Gigi Levy -Weiss mentioned Y Combinator and noted that if the VC’s branding and popularity are high enough it could outweigh the process that the founders are being put through. For all the troubles that they might have to go through in the beginning they will be taken care of.
Additionally, the interviews would still be held but “only in order to have great meetings rather than lots of average meetings that we are having today”.
Full automation is still in the future and so is more tailored and off-the-shelf software but that future isn’t too far off.
You can see the replay of the last year’s panel here and join us on 9 June 2022, for the next SummerSaaS where we will continue this discussion with Harry Thomas from Berigea, Shamillah Bankiya from Dawn Capital, Dr. Andre Retterath from Earlybird Venture Capital and Anton Ask Åström from EQT Ventures.