Beyond Low-Code: Exploring the Future & Going Public
The TechCrunch Exchange: Q2 Earnings and Startup Trends
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As the Q2 earnings season progresses, our team has been engaging with CEOs of numerous public companies to identify key trends and insights. Today’s focus will be on Appian, Paycom, and BigCommerce.
Following that, we’ll explore new data that complements our recent investigations into the BNPL sector and startup competition. This issue presents a diverse collection of topics, hopefully filled with valuable information!
Appian and the Evolution of Low-Code
Let’s begin with Appian. Our familiarity with the company grew during the pandemic, as many organizations utilized its low-code technology to rapidly build applications. At that time, Appian’s valuation was approximately half of its current worth. (The company’s Q2 report is available here.)
Since then, Appian has prioritized its cloud strategy, gradually reducing services revenue in favor of higher-margin SaaS income. This transformation is mirrored by other companies. However, we want to examine what happens after the initial low-code implementation that gained prominence in 2020.
Process Mining: Uncovering Automation Opportunities
Appian recently announced the acquisition of process mining firm Lana Labs alongside its Q2 earnings release. What exactly is process mining? It’s a software technique designed to identify processes within organizations that are suitable for automation. Investing in RPA solutions is beneficial, but without knowing what to automate, the full potential may not be realized.
This acquisition is significant for Appian, as it now offers process mining, RPA, and low-code tools within a unified platform. These components work synergistically: process mining identifies automation candidates, which are then implemented through RPA and other automation methods – including AI and human intervention – to optimize operational efficiency.
Appian CEO Matt Calkins clarified the relationship between workflows and applications, stating they are fundamentally the same. This perspective simplifies the understanding of the low-code landscape. I’ve often questioned the number of applications corporations truly require. However, the question of how many workflows companies need to automate feels significantly different, suggesting a larger total addressable market (TAM).
This dynamic leads me to a more optimistic outlook on low-code software, particularly when it focuses on digitizing operations and automating routine tasks rather than simply creating more applications.
BigCommerce: One Year Public and Growing
Turning to BigCommerce, the open-SaaS e-commerce platform has demonstrated strong performance in recent quarters, with accelerating revenue growth despite Shopify’s increasing market presence. The company recently celebrated its first anniversary as a public entity, prompting a discussion with CEO Brent Bellm about his learnings and the value of going public. (The company’s Q2 report can be found here.)
He affirmed its positive impact, outlining two key benefits that contribute to faster growth at BigCommerce. Bellm cautioned that isolating the growth attributable to these factors from other contributing elements is challenging.
Here are the primary reasons to consider going public:
- Enhanced Credibility: Publicly traded companies with transparent finances inspire greater confidence in the market. Startups are prone to failure, while public companies exhibit greater stability. This increased trust can lead to more deals and partnerships.
- Increased Visibility: The branding impact of an IPO is substantial, but it extends beyond that. Bellm explained that any company action now receives attention from the analyst community, ensuring BigCommerce remains in the public eye more easily than it did as a private startup.
Bellm described the experience of going public as “overwhelmingly positive” for his company. Unicorns should take note.
Paycom: Talent Acquisition and Retention
Our conversation with Paycom centered on talent acquisition in two key aspects. First, Paycom faces the same competitive tech talent market as other companies. However, it’s experiencing a shortage of qualified candidates despite not being located in traditional tech hubs. Paycom is based in Oklahoma.
This talent market dynamic is also impacting Paycom’s business: the HR-tech company’s software assists organizations in attracting and retaining talent. According to CEO Chad Richison, these businesses are benefiting from companies prioritizing employee retention after investing in their recruitment.
Interestingly, the labor market now mirrors the venture capital market. Richison noted that today’s hiring decisions require a swift response – within days of an interview – compared to the more deliberate pace of the past. This parallels the current VC landscape, where investment decisions are made in days rather than weeks or months.
A hot economy, indeed.
The Emerging BNPL Landscape for Startups
Despite increased competition, optimism persists for startups operating within the Buy Now, Pay Later (BNPL) sector, according to Brad Paterson, CEO of Splitit.
Splitit distinguishes itself by enabling customers to utilize their existing credit lines for installment payments, effectively bridging the gap between conventional credit and modern BNPL services. (Further information about Splitit can be found on their Crunchbase profile.)
Navigating a Competitive Market
Paterson generously offered insights into the current state of the BNPL market for startups.
Following discussions surrounding the acquisition of Afterpay by Square, a key question arose: how can smaller companies maintain viability amidst the entry of larger, more established players?
Factors Supporting Startup Resilience
In a written statement, Paterson posited that several variables will safeguard profitability within the BNPL space.
These include elements such as the average purchase price, the duration of installment plans, and the specific industry sectors served.
He further suggested that the potential for BNPL solutions to facilitate transactions beyond smaller purchases will create opportunities for startups to thrive.
The Broader Potential of Consumer Credit
A more pertinent inquiry may be the extent of ongoing innovation possible within consumer credit and the checkout experience.
This area presents a seemingly limitless scope for development, extending far beyond the confines of BNPL tooling alone.
Startup Competitive Dynamics
Further to previous discussions concerning competition faced by startups, Elizabeth Yin from Hustle Fund provided a valuable set of observations that are worth sharing. Our earlier conversation centered on the significance of achieving a dominant position within specific markets for new companies, with a primary focus on marketplace models.
These marketplaces typically involve facilitating connections between distinct groups. For example, in the ride-sharing sector, this means linking drivers with passengers.
Food delivery services represent a more intricate example, encompassing delivery personnel, end consumers, and the restaurants themselves. The core concept remains consistent: connecting different parties through a digital platform.
According to Yin, accepting a secondary market position is “typically quite challenging.” She elaborated further on this point.
Yin also addressed our inquiry regarding the tendency for startup marketplaces to consolidate around a limited number of dominant players. This often results in a scarcity of viable competitors, as smaller companies struggle to gain traction and are ultimately forced out due to insufficient market share.
She offered a compelling insight into the role of financial resources in shaping these outcomes. Capital investment can significantly influence the competitive landscape.
This perspective provides a nuanced answer to the question of influence within the startup ecosystem. While venture capitalists don’t always directly determine winners, the availability of capital can demonstrably alter results, particularly within marketplace dynamics.
However, it’s important to note that this doesn’t necessarily validate all investment strategies, even those employed by large funds! 😂
Best regards, and please prioritize vaccination.
Sincerely,
— Alex
