Always-on, digital investment platforms allow companies to easily promote their investment opportunities to investors who, from the comfort of their home, can discover and evaluate deals. These platforms remove many of the barriers and challenges that offline promotion presents while enriching the experience for all through a host of features including secure data rooms for deal documentation, investor/founder online Q&A and online pledge tracking.
During the pandemic there has been an increase in adopting digital in the early investment space.
For those networks now ready to move a digital platform and offer an enhanced experience for both their companies and their investors, the question demanding an answer is: should you build your own platform or buy one?
Let’s look at the key reasons why the option to buy may be the best way forward.
a) Your speciality is not technology
There is a principle popularised by Malcolm Gladwell that it takes 10,000 hours to be good at something. It is generous, in this context ‘good’ means a baseline grasp. In reality it takes much longer to master any skill.
So, if you’re an investment firm or an accelerator, how many hours will it take you to be good at technology development?
The answer is too many.
You need an array of skills and resources to design, build and run an investment platform.
While you may have an idea of your requirements, turning that into a high-functioning product is a difficult task. There are myriad decisions to be made – all of which require subject matter expertise. For example, how much of your budget should you spend on design versus build versus testing? How can you ensure data security? What language should you build the platform in? How can it be future-proofed? These are all questions technology businesses have the answer to but, starting out, you’ll have to learn as you go and that will be both expensive and time consuming.
b) A technology platform is expensive to build
Building a technology platform is expensive. If it weren’t, surely Software-as-a-Service (SaaS) wouldn’t be a multi-billion-pound industry? But perhaps you feel the level of control you’ll get from creating your own system is worth the cost. But how much will it cost? That, of course, depends.
You’ll need an expert team of software designers, developers, and QA analysts to turn your concept into a Minimum Viable Product (MVP). Depending on the emphasis you wish to put on user interface design, you may also need to bolster that team with Ux (user experience) designers. The MVP stage is only the beginning. Once you have a functional product, you need to go through a process of user testing and refinement before you’ll have a product good enough to launch.
On top of this, you need to consider system maintenance. This cost can be considerable. Nothing exists in a vacuum and you’ll need a tech resource on call to assist with bugs, outages, security threats and software updates.
c) SaaS provides you with more than just software
Working with an expert software provider, you will get much more value than just the technology itself. Depending on the partner, you’ll get additional support in a number of areas which can benefit your business.
Promoting and brokering deals are activities regulated under the Financial Conduct Authority. While there are some exemptions, it is a good idea to follow the baseline rules where possible to protect your organisation.
A good off-the-shelf investment platform will have this built in. Typically, this includes investor self-certification, appropriate risk warnings and audit trails.
You also need to comply with GDPR, KYC (Know Your Client) and AML (Anti Money Laundering) requirements. Again, off the shelf products, will include this and ensure the system stays current with changing regulatory requirements.
Deal sharing and distribution
Many of the SaaS investment platform providers include options to share your deals with other networks on the platform. This offers myriad benefits in terms of increasing the number of investors who have access to your deals – and thus your chances of closing a round of investment. You also have the option of accepting deals from other networks to share with your investors. This can reduce the burden of sourcing deals and provide a mechanism to keep investors engaged.
A ready-made community
Being part of a connected digital network allows for shared learning and resources. In addition to guidance on how to launch your digital platform and on engaging investors, you can benefit from shared knowledge. Whether that be on deal marketing, setting valuation or investor relations.
On top of this, many providers provide community events. Again, this allows you increase investor engagement and eyes on deals.
Features will be added on an ongoing basis
SaaS providers regularly roll out new features. For most this is monthly, while some will do so less frequently. This is a huge benefit to subscribing to such a service. For no additional cost or effort, you will find your platform getting richer and richer with new features. Many will also allow customers to request features and good providers will dedicate a percentage of all development time to implementing customer requests. Of course, your specific requests are not guaranteed, but if your ideas gain traction with other users there is a good chance they will be added to the roadmap.
As mentioned above you might like the idea of the control building your own system will give you, but this will be a complex and costly project. Keep using your hard-won expertise to work with companies and investors and let the technology experts provide your digital investment platform.
Chantelle Arneaud is from Envestors. The company's’ digital investment platform brings together entrepreneurs and investors across geographies, communities and sectors – creating the single marketplace for early stage investment in the UK.