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The Speedinvest SaaS & Infra Team: Investment Thesis

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SaaS & Infra Team

September 20, 2022

Invention, it must be humbly admitted, does not consist in creating out of void, but out of chaos  - Mary Shelley

SaaS is here to stay

30 years after “information wants to be free” became an iconic statement, it is clear that Brand was right. The cost of information has plummeted and, while Moore’s law may be slowing down on the physical miniaturization of transistors, we have other breakthrough technologies (e.g. Quantum computing) lurking. This means that exponential growth may well be here to stay. Software companies continue to eat their way into all sectors of the economy and at Speedinvest we have been supporting the founders behind those companies for almost a decade. 

One (not so secret) learning from this experience has been that SaaS and, more broadly, cloud software is consistently outperforming most other businesses. In public markets alone, cloud companies have doubled their market cap since 2020 to two trillion dollars. As such, it was probably about time that alongside our Deep Tech, Fintech, Marketplace & Consumer, Health and Industrial Tech practices, we dedicate a separate team to them. Introducing: The Speedinvest SaaS & Infra team.

Our thesis explained

It is impossibly hard to predict the future, but we try to see the present as clearly as we can. The software market is an ever-growing pie that is constantly re-sliced. Our thesis is simultaneously crisp and broad: We invest in the building blocks for modern software companies along the entire stack. 

To visualize this, start at the top. The application layer is where B2B software encodes domain specific knowledge ranging from carbon intelligence (Sylvera) to CAD software (Shapr3D). We then move all the way down along everything needed to build, run, deploy, maintain and monitor software. We have invested in automated dev environments (Gitpod), WebAssembly runtime for super lightweight containers (Wasmer), and tools for effortless code deployment (Qovery). We also have a special passion for API plays that digitize old-school markets (Impala, Gigs) as well as opinionated ways to measure product outcomes (June). In conclusion, if your company either encodes domain-specific knowledge in a software application or used to build, run or secure modern software applications, we will probably want to talk to you. 

Feeding the feedback loop of great companies

The cloud economy’s growth rate over the past five years has been stunning, but we believe it is far from over. One way to look at it is to think of the layers of our above stack and their respective components as two adjacent arrays. The frontier for what is humanly achievable is shifting outwards as the result of their sum product. 

Each new application accelerates the rate at which other applications can be built. With the cost of storage, computing, and energy decreasing, we want to back the founders in the second array in ultimately increasing the outcome for everyone. Like a recursive loop, we believe that backing those who are bold now will benefit the whole ecosystem. As a pre-Seed and Seed investor, we especially want to fund those who are unproven as first-check investors in order to start new loops.

API Layer

Investing in APIs

Ultimately, APIs are a big part of why SaaS works as well as it does. APIs have transformed how we do business, allowing ease of interoperability, frictionless integrations, and the delivery of new services at unprecedented speeds. The ease of service extension to third parties creates broader use cases, added value, and network effects, leading to a stickier community of users. 

Read more on why we think that API-first adoption is crucial for SaaS success.

Application Layer

B2B applications that encode domain-specific knowledge

SaaS applications have truly come of age in the past few years and have demonstrably shown that they make perfect venture cases. Once you reach scale, you will command a significant advantage over the income share based on high gross margins and recurring top line. This is one of many reasons why SaaS has always and continues to excite us. As a first-check investor, we believe that it is presumptuous to try to predict the future. That said there are a few megatrends we are seeing within SaaS. 

Read more about the five general themes in which we are observing software.

The new HR SaaS Stack

In an increasingly competitive market, the HR function had to step up its game. In order to stand out and differentiate yourself as a company, there’s a whole new stack of tools available at any founder’s disposal. This vastly improved HR stack can make the difference between success and failure.

Read more about the SaaS tools founders use to find, win, and retain talent.

Software Infrastructure

Blurring borders between tooling, infra, and applications that are built on top

The definition of what infra is keeps expanding. While it’s almost impossible to come up with an exhaustive list, the common theme is that great infra bundles up complexity and increases developer productivity.

Read more on how we look at infra and a speed-run through the space, all the way from low-level infra, over end-to-end-platforms, infra-as-APIs to crypto. And don't forget to check out our deeper dive on crypto.

Security

Investing in the identity verification market

As hackers become more sophisticated, so too must our software solutions. Across various industries, businesses tried to own the IDV processes. These processes are extremely fragmented, leaving room for many errors and can cause lengthy delays to be verified.

The value proposition for online businesses and consumer apps is exceptionally powerful thanks in large part to ever-growing privacy requirements. This is where the identity verification market (IDV) comes into play and that's why we're closely looking at this evolving space and looking to work with founders who are targeting the technical problems associated with IDV solutions.

Read more on our guide to the current identity verification landscape

Developer Tools

The rise of the developer class

The software industry has been massively transformed by an underlying shift in its infrastructure. Cheap cloud and horizontal big tech platforms have been acting as enablers. Also, the number of developers has been growing at a high rate over the past decade. Today, developers are the ones making purchasing decisions, deciding over a company’s technical architecture.

As a result, the market for developer tools has grown tremendously over the past 10 years, along with the acceleration of software development cycles. The need for a new breed of development tools has emerged focusing more and more on abstraction of complexity and automation.

Read more on the market for developer tools and the importance of understanding developer needs.

We are experienced nerds with a common goal

We think, as VCs, that intellectual curiosity generally goes further than deep domain expertise. That said, we try to combine our learnings along the entire entrepreneurship journey to be the best sparring partners we can be. A small overview of who we are: Dominik is a lawyer-turned developer who built a leading open source sync tech. Audrey is a trained Neuroscientist who worked for the European Investment Bank. Markus, Fred and Michael all started, ran and sold (to varying degrees of success) venture-backed businesses. Yang is a huge automation nerd who honed his craft at a hedge fund before changing over into venture.

You’ll be hearing more from us. We want to hear from you.

Over the next few weeks, we will deep-dive into some of the aspects of our thesis and the software stack, as well as showcase some of our existing portfolio. We also want to start a conversation with any founders out there who didn’t know us as SaaS investors yet. The easiest way to get in touch is to either reach out to saas@speedinvest.com, find us on Linkedin or Twitter (@fredhgnr, @DominikTo, @smi, @AudreyHandem, @YTR4N_ and @markus0lang).


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