To startups navigating the economic downturn, venture capitalists’ advice often boils down to: cut costs and raise revenue. But for companies building products for software developers, that conventional wisdom is wrong, says managing director of Heavybit.
Heavybit
Drummond suggests, for example, that instead of maximizing income, some developer tools businesses may be better off offering their software for free. By pouring resources into building a community, the company could experience a ground swell in the long term that could create a larger market than otherwise available. “One of the anti-patterns we see is that pursuit of revenue early on caps the overall size of the opportunity,” he says.
While Heavybit primarily invested at the seed and Series A stages in the past, Drummond plans to use this new fund to invest even earlier, at the pre-seed stage. The San Francisco-based firm is betting, then, that it can extend its Midas touch in spotting startups that will grow after its initial check.
“Reputable, brand name VCs were saying about LaunchDarkly, ‘This sounds like an interesting company, but there aren’t enough people paying for it right now,’” he recalls. “I remember so vividly arguing with investors why that’s actually a good thing—if you’re willing to be patient, the payoff will be much bigger.”
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