The modern investment club – how SaaS platforms are powering a new digital era
The early-stage investment space has been a staunchly traditional one – until now.
Centered around relationships, the long-held assumption has been that digital has no role in play in helping to match investors and growth businesses. The global pandemic, with its restrictions on events and face-to-face meetings, proved this not to be the case.
Angel clubs, family offices and UHNW investors are opening their eyes to the benefits of online investment platforms.
Digital investment platforms are the Amazon of early-stage investing. Always on, they allow investors to discover, evaluate and invest in high-growth businesses – wherever they are, be it locked down at home or on the move.
Investment platforms supercharge the traditional offline experience by removing many of the barriers to deal discovery and evaluation while providing an enriched experience for both investors and the companies trying to woo them.
With deal profiles, secure data rooms for deal documentation and investor/founder online Q&A the experience is faster, more secure and ultimately better than its online counterpart.
For those networks ready to adopt a digital platform, the question is: should you build your own platform or subscribe to a software-as-a-service platform?
In this article, we explore three reasons why, when it comes to a online funding platform, buying is your best option.
1. Technology is not your forte
Malcolm Gladwell popularised the idea that it takes 10,000 hours to be good at something. Here, the use of the word ‘good’ is a liberal one. In this context ‘good’ really means a baseline grasp. In reality it takes much longer to master any skill.
So, if you’re running an investment club or network how many hours will it take you to be good at technology development?
The answer is too many.
You need a host of skills and resources to design, build and run an investment platform.
While you may have an idea of your requirements, transitioning from ideation to MVP to a market-ready, high-functioning product is a gargantuan undertaking.
There are myriad decisions to be made – all of which require specialist expertise. For example, how much of your budget should you spend on design versus build versus QA testing? How can you ensure your platform and all the sensitive data it holds on your investors is secure? What language should you build the platform in? 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.
2. Building a platform is expensive
Software-as-a-Service (SaaS) is a multi-billion-pound industry for a reason. Building and maintaining a software platform is expensive and for most it makes more sense to subscribe to a service than build your own. But perhaps you feel the level of control you’ll get from creating a bespoke system is worth the cost. But how much will it cost? That, of course, depends.
You’ll need a team including architects, software designers, developers, and QA analysts to move from the concept to MVP phase. Depending on the emphasis you wish to put on user interface design, you may also need Ux designers. And the MVP stage is only the beginning.
On top of this, you need to factor in system maintenance. This cost can be considerable. Nothing exists in a vacuum, and you’ll need a resource to help with bugs, outages, security threats and software updates.
3. SaaS is more than just software
Working with a good software company, you will get much more value than just the technology itself. Depending on the partner, you’ll receive support in a number of areas which can benefit your business.
Promoting, arranging and brokering deals are activities regulated under the Financial Conduct Authority. While there are some exemptions, following the baseline rules is prudent as it protects your organisation.
A good SaaS investment platform will have this built in. At a minimum this will include investor self-certification, appropriate risk warnings and audit trails.
On top of FCA regulation, you also need to comply with GDPR, KYC and AML requirements. Again, SaaS products will include this and ensure the system stays current with changing regulatory requirements.
Deal sharing and distribution
Many SaaS investment platform providers enable cross-platform deal sharing. This increases the number of investors who have access to your deals – and thus your chances of closing 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 community of peers
Joining a connected digital network allows for shared learning. 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 promotion, valuation or investor relations.
On top of this, many providers host community events. Again, this allows you increase investor engagement and ultimately the number of people engaging with your deals.
New features, regularly
SaaS providers regularly launch new features. For most this is monthly, while some will do so quarterly. This is a huge benefit of subscribing to such a service. For no additional cost or effort, your platform will get richer and richer with new features. Many providers also encourage customers to submit feature requests and 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 reasonable chance they will be added to the roadmap.
So, while building your own platform might sound tempting, it is much easier said than done. When it comes to delivering a great customer experience, networks are much better off focusing on what they are good at – helping match companies and investors – rather than trying to become tech companies themselves.
Are you ready to take your investment club into the digital era? Find out more about our white label investment platform now.