In a recent Tweet, I mentioned my distaste for software that is built (or markets itself) for venture capitalists. I’ve echoed the same sentiment to many fund managers when they ask how they should set up their tech stack. That’s why you won’t find tools like Affinity, Carta, or anything with “Fund” in the name in the Emerging Manager Toolbox.
And while I do love to throw unsupported hot takes out into the ether and let them sizzle, I care enough about this topic to back it up a bit.
As the venture capital industry has risen to prominence, there has been a rise in software created specifically for the industry. From specialized CRMs to deal sourcing, due diligence, and portfolio support - there’s an app for that. And perhaps the most alarming thing about these tools are the bold claims that they will not only do your job for you, but they will do it better than you can. While CRMs touting the power of AI and “relationship intelligence” is nothing new, it just doesn’t sit right in the context of venture.
I remember an old adage from my time as a Salesforce Admin: “If it’s not in Salesforce, it doesn’t exist.” We used this refrain to encourage salespeople to enter all of their meetings and deals into the system. I’m reminded of it whenever I see software that claims to generate dealflow, surface valuable relationships, or even emphasize the supposed meritocracy and transparency of the venture industry. A database of any type is only as good as the data that is put into it, meaning that these tools only serve to redirect your attention back to your own network. With the best of intentions, they nevertheless exacerbate the insularity, homogeneity, and herd mentality of venture.
All that said, I see a glimmer of hope when I come across VC software that is built API-first.
What’s an API-first company? It’s pretty simple:
“An API-first company essentially abstracts away the complexity of a whole best-in-class company, giving clients the full output of a highly-focused org by typing a few things.”
Perhaps the most straightforward argument in favor of API-first tools is their flexibility. Generally speaking, modern day tech buyers have less patience for compromises forced by overly prescriptive and restrictive software. In times of yore, operations professionals may have looked to software to dictate their processes through frameworks or playbooks. Today, there is an increased demand for flexible systems that allow companies to mold software to fit their process. Just take a look at this thread started by Packy McCormick discussing people’s least favorite software. Common complaints include the terms “inflexible,” “unintuitive,” “clunky,” and “slow.” Today’s tech buyers don’t have to accept these compromises.
API-first tools are also inherently dynamic, meaning they are better suited to meet the changing demands of a fast-growing startup or emerging venture fund. In the past 3 years, we’ve seen an explosion of no-code tools that allow for expanded capabilities via API access. Tools like Airtable, Zapier and Troops allow non-technical employees to test and iterate on new workflows without a major upfront commitment of time, money, or training. These tools are open systems, able to ingest and interact with data from a variety of sources. They offer suggestions (in the form of templated workflows) rather than prescriptions.
In the VC space, I am excited about companies like Paperstreet and Visible, which are built with APIs at their core. They augment a fund manager’s productivity, but they never claim to do the hard work of deal sourcing or relationship building. They are invisible force multipliers. They put the power -- and the responsibility -- of building a truly inclusive network back in the hands of emerging managers and associates.
The calls for VCs to open their networks to new connections and their minds to new worldviews are getting louder. API-first tools are not a simple cure for a venture ecosystem with a woeful track record on diversity. But they make it viable for venture investors to actively choose a different path.