Everyone warns you to not construct on high of another person’s platform.
When I first began in VC greater than 10 years in the past, I used to be advised by no means to put money into a firm constructing on high of one other firm’s platform. Dependence on a platform makes you vulnerable to failure and caps the return in your funding as a result of you don’t have any management over API entry, pricing adjustments and end-customer knowledge, amongst different reliable issues.
I’m certain a lot of you recall Facebook shutting down its API entry again in 2015, or the uproar Apple precipitated when it determined to alter the fee it was charging app builders in 2020.
Put merely, founders can now not keep away from the decision round platform dependency.
Salesforce in some ways paved the best way for giant enterprise platform firms, being the primary devoted SaaS firm to surpass $10 billion in annual income supported by its open software growth market. Salesforce’s success has given rise to dominant platforms in different verticals, and for founders beginning firms, there is no such thing as a avoiding that platform decision nowadays.
Some factors to think about:
- Over 4,000 fintech firms, together with a number of unicorns, have built their platforms on high of Plaid.
- Recruiters might complain about the price, however 95% nonetheless make the most of LinkedIn.
- More than 20,000 firms belief Segment to be their system of report for buyer knowledge.
- Shopify powers over 1 million companies throughout the globe.
- Epic has the medical data of nearly 50% of the U.S. inhabitants.
What does this imply for founders who determine to construct on high of one other platform?
Increase pace to market
PostScript, an SMS/MMS advertising platform for commerce manufacturers, constructed its platform on Shopify, giving it fast entry to over 1 million manufacturers and a direct buyer acquisition funnel. That has allowed PostScript to seize 3,500 of its personal clients and efficiently shut a $35 million Series B in March 2021.
Ability to deal with core performance
Varo, one of many fastest-growing neobanks, began in 2015 with the precept that a financial institution may put clients’ pursuits first and be worthwhile. But with a view to ship on its mission, it wanted to grasp the place its clients had been spending their cash. By partnering with Plaid, Varo enabled greater than 176,000 of its customers to attach their Varo account to outdoors apps and providers, permitting Varo to deal with its core mission to offer extra related monetary services and products.
