Were you unable to attend Transform 2022? Check out all of the summit sessions in our on-demand library now! Watch here.
When you’re building a new software venture, a key question you face is how to reach users most effectively. Increasingly, especially for startups building software for businesses, a counter-intuitive answer is rising to the top: Leverage someone else’s platform.
A year or two ago, the opportunity to build on top of a third party company’s code and customer base was nascent. Though a couple key success stories had illuminated a path (e.g. building on Salesforce), the consensus was that this strategy was limiting or risky.
Today, it seems as if nearly every IPO-crazed Series D tech company is touting its ecosystem approach and broad array of ecosystem companies. A key example is public-listing-bound Slack, which has spawned a generation of venture-backed companies that probably wouldn’t exist but for the ecosystem opportunity.
Building on top of a demand-aggregating platform is likely to be the way many next-gen business apps will go to market, despite the risks that starting out on a single platform poses. Here’s how to think about the pros and cons.
Pro: You’re fishing where the fish are
Software platforms are increasingly aiming to be demand aggregators. In other words, the key clients you’d want to adopt your product have already made a massive time and capital investment in a platform product and are looking to leverage value from that platform. You can position yourself as one of those ways to derive value from an existing time and resource commitment, potentially resulting in rapid adoption of your product.
For example, products that took an integration-first approach with Salesforce and HubSpot were able to seamlessly reach clients focused on sales and support. And Slack is now where you’ll find demand-aggregation if you’re building internal-facing tooling like expense reporting, project management or people operations. Indeed, Slack’s direct listing materials make clear its ambition to be the WorkOS that all other apps rely on. Tapping into a deeply invested, ready-made pool of clients can be a tremendous leg up.
Pro: No extra login for customers
There has been a rapid proliferation of software in recent years. Estimates put the total number of cloud products per enterprise at more than 1,000. Treating each application in its own context, with its own set of rules, and its own user interface can be really overwhelming. That has led to greater skepticism about the return on investment from adding yet another piece of technology and is a key driver behind the recent rise of ecosystem-centric tech giants. Applications that position themselves as native to a known-commodity product can escape this objection and see frictionless adoption.
Pro: It’s easier and cheaper to get to market
Because you don’t have to build a brand new user interface, you’ll invest less money in front-end developers, designers, and product managers. In a market where these skill sets are in ever-increasing demand, not needing a new UI is cheaper and leads to quicker validation of your idea and strategy. Slack, for example, is launching Block Kit, which is a no-code, “drag-and-drop” way to build apps intended to further the speed-to-market advantage for companies on that platform.
In addition, platforms are investing heavily in supporting their application ecosystems, from investing their own cash as venture capital on-platform tools, to robust developer support resources and intentional community cultivation.
Pro: You’re immersed in the culture of your clients
When choosing to build on top of an existing platform, make sure to choose a platform that shares your values. That might be a commitment to open source, a design aesthetic, brand position, or a customer profile. My startup, Hooky, for example, is focused on company culture and employee development, and the new home for those things is Slack. So developing our application natively in that context helps us better mesh with existing client practices.
Con: Smaller customer pool
Certainly, you’ll need to make sure that the platform you’re selecting has aggregated sufficient demand and that the profile of the companies aggregated matches your target.
For example, Slack’s current customer base is nearing 100,000 companies, many of which are technology startups that look a lot like our beta customer base. You’ll inevitably miss out on deals from potential clients who aren’t on that platform. But you’ll also benefit from a defined customer pool, which narrows your lead qualification criteria and helps startups and growth-stage companies alike avoid a “boil the ocean” sales strategy.
Con: You may struggle for visibility
The platform-centric customer acquisition strategy will change based on the maturity of the platform. Early in a successful platform’s lifecycle, when new companies will be adopting the platform en masse, those customers will be looking at how to quickly level-up with integrations and applications. During this window, which many key platforms are currently in today, companies can achieve hyper-growth in a symbiotic relationship with the platform. Later in the platform lifecycle, like Apple’s App Store, thousands of results populate for every keyword search and the challenge becomes one of results engineering, or “platform SEO.”
Con: You’re at the mercy of the platform
Slack aims to be the “operating system” of the workplace, a horizontal layer between employees and the explosion of technology. This level of ambition makes for an excellent partner, as did iOS when Apple launched the ambitious project of being the store where you engaged with all mobile software. Not all platforms will want to invest in as robust of an ecosystem, and some (Twitter) have even shuttered their ecosystem after a period of time. Make sure you’re choosing a partner who is creating a wave big enough to be worth riding.
Despite these risks, a frictionless, low cost go-to-market strategy offered by building on top of a platform product will be too appealing to pass up for many entrepreneurs. An increasing number of startups looking at today’s ecosystem-heavy tech landscape will see this same opportunity, especially in business software, creating deeper moats for some key platform players.
Andrew Kirchner is co-founder of Hooky, a Slack application for professional development.
VentureBeat's mission is to be a digital town square for technical decision-makers to gain knowledge about transformative enterprise technology and transact. Discover our Briefings.