Earlier this month, we announced Heavybit IV, our $80m early-stage fund. With this fund, we will invest between $500k and $3m in pre-seed and seed-stage developer-focused start-ups based anywhere in the world. It is important that founders know Heavybit’s basic investment parameters. But more important than how much, when, and where we invest, is what kind of investor Heavybit is. So today I wanted to talk more about what we believe makes for a good investor in developer-first companies and consequently what kind of investor we strive to be.
Good devtool investors are specialists.
Investors influence every company they invest in, in ways that extend far beyond providing capital. Whether this influence is for the better or for the worse depends on several factors but chief among them is how well investors understand the company and market they’ve invested in.
While there are common aspects to building any start-up, the more technical a company’s domain and the earlier the company is, the more important investor specialization becomes. The more technical a company is, the less useful generic advice becomes. The earlier a company is, the costlier the wrong advice becomes.
Building and investing in developer tools companies is hard in part because devtools can be deceptively complex to not only create, but also to launch and bring to market. As such, generic advice from unspecialized investors can quickly go from unhelpful to actively harmful.
As a partnership we’ve seen this pattern from both sides of the aisle - both as investors working with other VCs but also as founders of our owndevelopertoolcompanies. That’s why working with developer tools and bottom-up enterprise software companies is all we do. It’s also why, since we started we have sought to surround ourselves with a diverse group of 650+ proven technical & go-to-market operators as advisors. In an industry that is competitive and always evolving, we built this community to keep founders in sync with the latest evolutions in the market.
In addition to how specialized an investor is and how good their advice might be, there is the separate issue of how involved investors will be. Some people believe the less involvement the better it is for companies, while others believe that more involved investors drive better outcomes.
In any start-up, but particularly in an early-stage start-up, there is more work to be done than hands to do it. Therefore, it would seem to make sense that “hands-on” investors are more helpful. And they are, provided they have good advice. The better their advice – the more sector and stage-appropriate it is – the more benefit companies will get from their involvement and the less chance companies risk being pushed off course by their VCs.
Heavybit falls firmly in the hands-on camp. We started as an accelerator where our offering, and what founders came to know us for, was not our capital but our help. Heavybit helped founders work through their challenges one-by-one, hand-in-hand. We provided a sounding board for founders at a time when it is easy to feel frustrated and isolated. And we continue to provide substantive, highly specialized support today.
Good devtool investors know timing is everything. In more ways than one.
Knowing when to help is just as important as knowing how to help.
That “when” – the timing of investors’ involvement – is one of a thousand instances where timing matters. Timing is, in fact, everything in investing. For VCs (and for founders), being able to time the market, time investments, or time exits separates good from bad (or lucky from unlucky).
Timing (and sequencing – more on that shortly) matters even more for developer tools startups. Developers, themselves, aren’t “a business model” but they can be a path to large enterprise sales. Bridging that gap between developers and the enterprise is hard to get right and is not a process you can rush.
Understanding when to focus on community building, when to build your first developer relations program, when to layer on marketing and content, when to add your first sales hire, when to scale enterprise product development, marketing and sales motions and so when (and how) to cross the chasm are just some of the difficult timing questions for devtools founders.
Timing and planning your startup’s evolution from developer-darling to enterprise juggernaut is the process of knitting together your product development, your team and hiring strategy, and your go-to-market and sales funnel.
And the wrong investors are going to worry about the wrong things at the wrong times. Or worse, they’ll make recommendations about your business model or go-to-community plans that are simply out of step with reality. For example, yes, you can pursue a bottom-up and a top-down business model in tandem, but no, you can’t “back into” developer love later. There isn’t just a time and place for everything – there’s a correct time and place for everything.
At Heavybit we’ve had these timing conversations with ambitious technical founders countless times. We’ve seen many startups try to skip or skimp on important steps in this process to suboptimal outcomes, and often at the behest of their investors. We are patient enough to know that the best practices, developer communities, and companies behind Jamstack, DevSecOps, and Feature Flagging didn’t become empires overnight. Perhaps not surprisingly, they weren't immediately profitable, either. The market didn’t exist for Netlify, Snyk, and LaunchDarkly when we first invested.
Good devtool investors know there’s a lot more to it
There is far more to being a good investor than a handful of bullet points. At Heavybit, we believe that sound bytes are no substitute for sound advice, which is why we offer extensive counsel and mentorship to all our portfolio companies. Good counsel doesn't fit in a single blog post or Twitter thread. I hope that by outlining our guiding principles alongside our investment parameters I have given you a sense of what it’s like to work with Heavybit.
If you’re building a developer-first product and these principles resonate, please do get in touch.