Five VCs discuss how no-code is going horizontal across the world’s industries

Few topics garner cheers and groans quite as quickly as the no-code software explosion.

While investors seem uniformly bullish on toolsets that streamline and automate processes that once required a decent amount of technical know-how, not everyone seems to think that the product class is much of a new phenomenon.

On one hand, basic tools like Microsoft Excel have long given non-technical users a path toward carrying out complex tasks. (There’s historical precedent for the perspective.) On the other, a recent bout of low-code/no-code startups reaching huge valuations is too noteworthy to ignore, spanning apps like Notion, Airtable and Coda.

The TechCrunch team was interested in digging in to what defines the latest iteration of no-code and which industries might be the next target for entrepreneurs in the space. To get an answer on what is driving investor enthusiasm behind no-code, we reached out to a handful of investors who have explored the space:

Laela Sturdy, general partner at CapitalG
Raviraj Jain, partner at Lightspeed
Darian Shirazi, general partner at Gradient Ventures
S. Somasegar, managing director at Madrona Venture Group
And, closing notes from an interview with Rajeev Batra from Mayfield

As usual, we’re going to pull out some of the key trends and themes we identified from the group’s collected answers, after which we’ll share their responses at length, edited lightly for clarity and formatting.

Trends, themes

Our investor participants agreed that low-code/no-code apps haven’t reached their peak potential, but there was some disagreement in how universal their appeal will prove to various industries. “Every trend is overhyped in some way. Low-code/no-code apps hold a lot of promise in some areas but not all,” Lightspeed’s Raviraj Jain told us.

Meanwhile, Gradient’s Darian Shirazi said “any and all” industries could benefit from increased no-code/low-code toolsets. We can see it either way, frankly.

CapitalG’s Laela Sturdy says the breadth of appeal boils down to finding which industries face the biggest supply constraints of technical talent.

“There just isn’t enough IT talent out there to meet demand, and issues like security and maintenance take up most of the IT department’s time. If business users want to create new systems, they have to wait months or in most cases, years, to see their needs met,” she wrote. “No-code changes the equation because it empowers business users to take change into their own hands and to accomplish goals themselves.”

Mayfield’s Rajeev Batra agreed, saying it would be cool “to see not twenty million developers [building] really cool software but two, three hundred million people developing really cool, interesting software.” If that winds up being the case, the sheer number of monthly-actives in the no and low-code spaces would imply a huge revenue base for the startup category.

That makes a wager on platforms in the space somewhat obvious.

And those bets are being placed. On the topic of valuations and developer interest, our collected interviewees were largely bullish on startup prices (competitive) and VC demand (strong) when it comes to no-code fundraising today.

Sturdy added that the number of early-stage companies in the category “are being funded at an accelerating pace,” noting that her firm is “excitedly watching this young cohort of emerging no-code companies and intend to invest in the trend for years to come.” So, we’re not about to run short of fodder for more Series A and B rounds in the space.

Taken as a whole, like it or not, the no and low-code startup trend appears firm from both a market-fit perspective and from the perspective of investor interest. Now, the rest of the notes.

Laela Sturdy, general partner, CapitalG

We’ve seen some skepticism in the market that the low-code/no-code trend has earned its current hype, or product category. Do you agree that the product trend is overhyped, or misclassified?

I don’t think it’s over-hyped, but I believe it’s often misunderstood. No code/low code has been around for a long time. Many of us have been using Microsoft Excel as a low-code tool for decades, but the market has caught fire recently due to an increase in applicable use cases and a ton of innovation in the capabilities of these new low-code/no-code platforms, specifically around their ease of use, the level and type of abstractions they can perform and their extensibility/connectivity into other parts of a company’s tech stack. On the demand side, the need for digital transformation is at an all-time high and cannot be met with incumbent tech platforms, especially given the shortage of technical workers. Low-code/no-code tools have stepped in to fill this void by enabling knowledge workers — who are 10x more populous than technical workers — to configure software without having to code. This has the potential to save significant time and money and to enable end-to-end digital experiences inside of enterprises faster.

What other opportunities does the proliferation of low-code/no-code programs open up when it comes to technical and non-technical folks working more closely together?

This is where things get exciting. If you look at large businesses today, IT departments and business units are perpetually out of alignment because IT teams are resource constrained and unable to address core business needs quickly enough. There just isn’t enough IT talent out there to meet demand, and issues like security and maintenance take up most of the IT department’s time. If business users want to create new systems, they have to wait months or in most cases years to see their needs met. No-code changes the equation because it empowers business users to take change into their own hands and to accomplish goals themselves. The rapid state of digital transformation — which has only been expedited by the pandemic — requires more business logic to be encoded into automations and applications. No code is making this transition possible for many enterprises.

Where they are working best, no code platforms completely change the working relationship between IT and the business units by allowing them to co-develop requirements and collaboratively build products and applications together. Enterprise-grade no code platforms also allow IT to retain oversight around the things they care about (such as security and access controls) while simultaneously giving business users the agility to directly modify software and update business logic to fit their needs. This is hugely important because IT departments have historically resisted so-called shadow IT initiatives because of concerns around governance and security.

Many low-code/no-code products today seem focused on helping non-technical teams do more. In time, will low-code/no-code products also target traditional developers as methods to accelerate their work?

No-code and low-code sit on the same continuum; what makes both possible is the abstraction of technical complexity. Different use cases can support various levels of clever abstraction while optimizing for functionality and speed. As such, some tools will be better suited for making technical end users more efficient by only focusing on value-added pieces of tasks while hiding repetitive elements, and some will be better suited for non-technical users by fully abstracting away the technical elements of the workflow.

Retool is a great example of a low-code tool targeted at technical users. They make it incredibly easy to compose a UI in drag-and-drop while still building the rest of the experience with a developer in mind (JavaScript injection, databases, etc.). Many other tools target certain types of technical or business users versus general knowledge workers. For example, Tonkean targets operations specialists within business units, enabling them to organize and automate human-in-the-loop workflows with a drag-and-drop interface. Webflow targets web designers and developers offering them abstractions, sophistication and ease-of-use not available in previous generations of web development software.

Among startups you are talking to lately that fit into the low-code/no-code bucket, is their low-code/no-code product element at the core of the project, or something that operates more as an extension to the product?

It varies quite a bit depending on the use case. We are definitely seeing the emergence of broader automation platforms where no-code/low-code is just one element of the platform that enables an end-to-end digital workflow. UiPath is a good example of this, as many of the most complicated enterprise use cases require RPA, no-code/low-code functionality, AI capabilities, complex integrations, human-in-the-loop capabilities, etc., and that can all be done in one automation platform within UiPath. On the other hand, for many enterprise-grade application development use cases where companies are choosing between custom software development (aka writing code themselves) or using a no-code platform to develop the application, then the no-code product is at the core. Unqork is a good example of this, as they have built customer onboarding apps for banks, food delivery apps for municipalities and policy issuance apps for insurance companies — all enterprise-grade and business-critical apps — completely within the Unqork no-code platform.

A lot of these low-code apps, particularly in the collaboration world, look and feel philosophically similar. Is low-code/no-code going to be particularly susceptible to consolidation and winner-take-all competition?

You’re right: Many low-code apps do look very similar from the outside. We think that the winners will focus on specific functional or vertical approaches early on as a way to differentiate. We believe there is more platform differentiation at the higher end of the market serving large enterprises where security features and platform sophistication is required to get buy-in from IT departments. It is a bit murkier in the low ACV end of the market where there are many collaboration platforms and products claiming low-code/no-code capabilities, but it is harder to differentiate, and these companies will rely on mass marketing channels or organic growth to expand. The other good news for low-code/no-code platforms is that they are inherently sticky given the multiple integration points and internalized business logic.

I don’t think that a monolithic no-code company will “win” the market. That’s part of what makes this so interesting to investors — that there’s opportunity for multiple winners. That said, I won’t be surprised if we see legacy players looking to buy no-code startups and try to accelerate consolidation.

What industries or market areas feel particularly ripe for low-code/no-code software solutions?

We view the most attractive markets as those with an imbalance of supply and demand of technical resources. The biggest opportunities tend to lie in targeting large enterprises in legacy industries such as financial services, where there is a critical need to improve digital capabilities to avoid disruption, but oftentimes a dearth of sufficient internal technical talent available to build needed new products. Other areas where we see opportunity because they’ve traditionally required intensive IT resources include internal tools, business intelligence and middleware.

Does customer demand for low-code/no-code services match the market enthusiasm we’ve seen for them?

For the most part, yes. But you need to keep in mind that enterprises aren’t trying to buy a shiny new no-code tool; they’re trying to buy a solution to a pressing business problem, such as automating overly manual business processes, digitally onboarding customers, managing internal tools or maintaining web content. If the optimal solution involves a no-code tool, so be it, but they’re not approaching the sales cycle as a hunt for no-code tools.

Over the past few months, there’s been a huge acceleration in market enthusiasm. While modernization has long hovered over many businesses as something they know they needed to but weren’t in a rush to tackle, COVID has made it an urgent necessity. Switching from legacy approaches to a no-code approach is like transforming a toddler into a marathon runner; the improvements to their ability to move quickly and with stability and agility are dramatic.

Low-code/no-code is not a business model. All the same, do companies that have elements of the product type have similar economics/metrics to traditional SaaS businesses?

Absolutely — these businesses look like the end markets they’re trying to replace and tend to be priced similarly to SaaS-based businesses. They also tend to be very sticky and have great expansion properties as enterprises use them for additional use cases. One caveat is that we see many platforms priced based on subscriptions, as well as others that are more transaction-driven and priced on usage.

How has VC competition for access to interesting/enticing low-code/no-code rounds changed in the last 18 months? More competitive? Less? How has this impacted pricing?

Whenever you see the emergence of clear secular trends driving long-term adoption, you’re going to see a lot of investor interest. That typically does drive valuations up. The exciting thing for founders is that since this is still such a new and largely wide open market opportunity, most of the activity is in the early-stage fundings. Those early-stage companies are being funded at an accelerating pace. We are excitedly watching this young cohort of emerging no-code companies and intend to invest in the trend for years to come.

Raviraj Jain, partner, Lightspeed Venture Partners

We’ve seen some skepticism in the market that the low-code/no-code trend has earned its current hype, or product category. Do you agree that the product trend is overhyped, or misclassified?

Every trend is overhyped in some way. Low-code/no-code apps hold a lot of promise in some areas but not all. Just like AI is not a solution for every problem, low-code/no-code is not solving every problem too. It’s also somewhat misclassified; a lot of people consider low-code/no-code to be synonymous with collaboration apps, which is not true. Low-code/no-code is more horizontal, it defines the way in which the user can access/interact with the software to achieve desired outcome. More broadly, it means that users with no special software development skills can also achieve desired outcomes thereby democratizing the process of development.

What other opportunities does the proliferation of low-code/no-code programs open up when it comes to technical and non-technical folks working more closely together?

Finding and retaining technical talent is getting harder and harder with time, even more so for the non-tech companies that are going through digital transformation. It’s unlikely that this shortage will go away anytime soon. As a result, non-technical teams are constantly blocked on their initiatives due to the lack of technical talent to implement them. The only way to drive these initiatives forward is to enable the non-technical teams to build their own products/workflows under the guidance of IT/tech. Low-code/no-code is one of the ways of accomplishing that. In addition, this technology can also provide leverage to the tech teams.

Absolutely, Low-code/no-code is just another term for simplifying and automating any task people do.

Just like great UX has to be the core product element so does low-code, no-code. It’s very hard for that to be an afterthought, although startups/established players will certainly try to add low-code/no-code modules/features to attract customers.

I wouldn’t say it’s any more susceptible than any other space.

Does customer demand for low-code/no-code services match the market enthusiasm we’ve seen for them?

There is a fast-growing market demand for these type of solutions; however, there are a large number of startups with somewhat similar offerings.

Low-code/no-code is not a business model. All the same, do companies that have elements of the product type have similar economics/metrics to traditional SaaS businesses?

It’s too early to tell, but the promise is that it should have better economics/metrics than traditional SaaS because (1) The user adoption curve is shorter, (2) The addressable user base is larger and (3) it lends itself well to bottoms-up adoption.

How has VC competition for access to interesting/enticing low-code/no-code rounds changed in the last 18 months? More competitive? Less? How has this impacted pricing?

While the VC interest in the space is still strong, there is a lot more scrutiny around product usage/adoption than there was before given the large number of low-code/no-code startups in the market.

Darian Shirazi, general partner, Gradient Ventures

We’ve seen some skepticism in the market that the low-code/no-code trend has earned its current hype, or product category. Do you agree that the product trend is overhyped, or misclassified?

No, because ultimately enterprises are looking to automate tasks, data collection and workflows. This transformation has been happening for 20 years, and now almost anyone can build an application. Examples of such technologies are Flowdash, working to couple low-code/no-code automation with human-in-the-loop processes, and Memberstack, enabling people to integrate memberships into any blog or content site.

What other opportunities does the proliferation of low-code/no-code programs open up when it comes to technical and non-technical folks working more closely together?

Implementing and operating self-driving cars, automatic check-out stands in retail, drone deliveries, social content moderation and many other billion-dollar industries will create numerous employment opportunities. If we don’t fill these non-technical jobs, self-driving cars and other new technologies predicated on properly labeled data are probably further out than we hope.

Yes. Firebase, for example, has abstracted application authentication, database scalability and application distribution allowing one developer to build a full product without DevOps experience. Expo.io has simplified the process of building native mobile applications for all platforms with one codebase. While in the early 2000s we physically had to install servers, today most serverless development solutions have eliminated the need to think through horizontal scaling when architecting a new application.

We have seen a number of startups in the mid-market RPA space that are extensions on top of Chrome. These solutions are interesting, but it is too early to tell whether they can be market-makers. The most interesting “extension” product I’ve seen in the low-code/no-code space is Include.ai, which provides the ability for anyone to automate tasks in their web browser that would normally require scripting knowledge.

It is unlikely this market is completely winner-take-all because there are many forms of automation and many potential use-cases and customers. However, the closest I have seen to a winner-take-all in one vertical is Streamlit, which has enabled data scientists to share and collaborate on different data science modules/mini-apps. It isn’t fully no-code, but it does enable data scientists to build complex applications without being highly experienced engineers.

What industries or market areas feel particularly ripe for low-code/no-code software solutions?

Any and all.

Does customer demand for low-code/no-code services match the market enthusiasm we’ve seen for them?

Yes. Many of the solutions built by system integration firms or other service providers can be automated with low-code/no-code tools — either by the customers of the SIs or the SIs themselves using these low-code/no-code tools as foundations for the applications they build for customers.

Low-code/no-code is not a business model. All the same, do companies that have elements of the product type have similar economics/metrics to traditional SaaS businesses?

There’s a mix of subscription revenue plus usage-based revenue models in this space. Typically, you see that the tools to create applications are a SaaS base fee, and then there’s an ongoing usage fee. Many companies in this space are still figuring out how to charge customers, and it will be interesting to see how the public markets eventually value these hybrid models.

How has VC competition for access to interesting/enticing low-code/no-code rounds changed in the last 18 months? More competitive? Less? How has this impacted pricing?

Startups in the low-code/no-code space have gotten more attention lately, and valuations in some cases have been driven up. However, the number of companies entering the space have been proportionate to the number of use cases. I do think the community of investors watching this space is limited right now, but I expect that to change as these companies continue to grow.

S. Somasegar, managing director, Madrona Venture Group

We’ve seen some skepticism in the market that the low-code/no-code trend has earned its current hype, or product category. Do you agree that the product trend is overhyped, or misclassified?

Low-code/no-code is a bit like the “cloud” or big data hype. The opportunity is real and meaningful but how you classify which products and companies fit varies broadly. Low-code/no-code is an important feature of many products but it isn’t the only purpose of it. The unifying feature of products that fit this term is their approach to empowering a broad set of users to create their own solutions, in essence believing in and creating a maker generation. If you use the YouTube analogy, making and sharing videos was difficult and then YouTube and the iPhone came along to change that. And now we have TikTok and other solutions that make it even easier. Low-code/no-code opens the world of software application/designing workflows up to a broader set of makers who are looking for ways to design their work and personal lives.

Low-code/no-code is already a feature of popular software and infrastructure services in offerings from big companies like Microsoft as well as emerging startups including UiPath for Process Automation and Fauna for databases. Developers should only need to write that unique piece of code. Bringing autocomplete and code snippets into the vernacular of developers has been a big step in in the low-code/no-code direction. This is also not new; in previous generations we talked about democratizing software development. This topic has been around for 10-20 years!

We really see that there are three major types of low-code/no-code applications — there are horizontal applications that solve a particular pain point, horizontal applications that are approaching a full-stack solution and there are vertical solutions that target specific industries. The low-code/no-code element is an aspect of these products and it’s likely a selling point for users, but it’s not the reason the product exists — it is filling some hole, creating a new way of working or addressing modernization challenges of older industries.

Given the appeal of this approach across all industries — from finance to manufacturing — we don’t see a winner take all approach making sense. We fully believe that applications will become more flexible so end users can create the view they want, build a solution they want — all within their vertical are of expertise. But it is hard to imagine a world where there is a generic and dominant tool that works across every industry.

What industries or market areas feel particularly ripe for low-code/no-code software solutions?

Industries that are suited to these low-code/no-code solutions are broad — everything from office productivity to financial services to e-commerce. Specific industries where we see a lot of opportunity are:

E-commerce — Building an e-commerce site is too complex, we believe a modern low-code/no-code solution would have a lot of opportunity for expansion here. Shopify leads this market currently but there are many industries not really served by the Shopify experience.

Data Science and Machine Learning — So many opportunities to simplify the interpretation of data, from helping data scientists with data wrangling to helping end users manipulate data to address business problems such as fraud detection or churn prediction.

Infrastructure — These tools are focused on developers, and on the tasks that are transferable from industry to industry, such as setting up authentication, connecting disparate systems, basically anything “as a service.”

Does customer demand for low-code/no-code services match the market enthusiasm we’ve seen for them?

Yes. We are seeing incredible growth for companies like Zapier, Airtable, Notion and Coda, and we are excited to continue funding companies in this space.

Low-code/no-code is not a business model. All the same, do companies that have elements of the product type have similar economics/metrics to traditional SaaS businesses?

Yes — many of the companies in this space charge per seat, although over time, we think many more software companies will move toward usage-based models.

How has VC competition for access to interesting/enticing low-code/no-code rounds changed in the last 18 months? More competitive? Less? How has this impacted pricing?

Rounds have gotten more expensive and competitive, and this has driven up valuations as well.

Rajeev Batra, Mayfield

Instead of our usual written Q&A (ever popular given that it allows time to think), Batra asked to chat in real time. For a change of pace, we were game. Alex has known the investor since his Crunchbase days, making it a good exception to our usual process. (Alex owns shares in Crunchbase from his time as an employee there, Batra’s firm is an investor in the startup.)

Doubly so as Batra’s firm, Mayfield, had recently doubled-down on Turbo Systems, a company that is focused on building a no-code platform that lets teams build business apps. Discussing the investment and startup, Batra said something interesting about how startups in the current no, and low-code world can do more than before:

This idea of having these low-code, no-code platforms to democratize coding has always existed. They used to be called 4GLs at one point, or fourth generation languages.. And they’re making a resurgence now in the cloud world, in this new metaphor that we’re seeing. I’d say either [no, and low-code] companies are saying, ‘I’m going to allow you to do very specific simple utility-like things,’ so that people can do things like Airtable, or integrations. And, companies like Turbo Systems are trying to say is, ‘yeah that sounds great, but what about for people who want to build full, richer, enterprise-grade applications? We need to give them a platform, and take a low-code, no-code approach to that as well.’

This part of our chat about the ecosystem stuck out as it implies that what is possible with no, and low-code models today is rather generally large, the Turbo Systems example to one side. If it is possible today to create systems and platforms that really can allow regular folks to build business apps that will pass user and IT muster, we’ll be in a new world.

Adding to the idea, Batra used an analogy to explain how the world might look when there are more app-building services available in a no, and low-code world, helping keep pace with the idea that software is going to eat the world:

Isn’t it time now to really provide an advanced set of Legos? So Lego is the primitive [concept] right, like Legos are the way to think about it. Everybody understands how to put Legos together. But instead of doing a simple Lego [pack] that’s got like, you know, 200 pieces, it’s the same metaphor of assembly, but you can do more complex things, more interesting things. […] If software is going to eat the world, the rate at which people have to be able to develop code has to keep pace, it has to go faster.

This is a valid way to consider the low, and no-code world from a long-term product perspective. Many low, and no-code solutions will instead be rather smaller, and simpler. But from the most primitive, to borrow a word from Batra to the most advanced, it seems that the tide is shifting in terms of giving more power to non-developers than ever before, and that the trend is accelerating.

At least if the above investors have a say.