Part 1: The LCNC Landscape in 2020
What is the LCNC space and why is it interesting now?
Welcome to the LCNC Landscape in 2020! Start here, then read Part 1, Part 2, & Part 3
Let’s start with the obvious: companies are integrating software into their businesses at unprecedented rates — a trend that is here to stay. As a result, enterprise demand for customized software applications is skyrocketing. People want high quality, feature-rich apps, sooner than ever before and in greater quantity.
So why can’t they have that?
Traditional app development is antiquated. It’s done by the engineering team, thus it’s expensive (problem #1). Hopefully you have enough engineers (there’s a shortage) and they’re good (problem #2). The communication between engineering and the business is always rocky, so the app will fail user acceptance testing a few too many times (problem #3), driving up development time and cost (problem #4). Once the apps are “delivered”, you might find them to be a little more limited than you expected, with more bugs (problem #5). Updating the app is a nightmare.
If this story seems too hypothetical or exaggerated, it’s not. These are all the top five problems with building custom apps the traditional way that companies reported to Forrester in 2018. Plus, it’s the story of every enterprise grade software project, ever.
Enter, Low Code No Code
LCNC tools solve the problems with traditional app development. There is a lot of variety in exact functionality of these tools, but at its core, a LCNC tool is a software product that enables users to rapidly build and deliver custom applications through some type of abstraction layer (think beefed up IDEs or WYISWYG editors).
It’s important to note that not all LCNC tools enable all parts of app development. Some LCNC platforms may only enable app infrastructure like source management, CI/CD, hosting, and testing while others may enable the actual logic building as well. Skip to part 2 for more technical definitions of LCNC.
How do LCNC tools solve those problems?
These tools are powerful because they abstract away the accidental complexity of writing and delivering apps. In fact, these tools reimagine development so much, that some founders think they’ve produced superior coding paradigms. Most of the founders I spoke with rejected “low code” as a misnomer for the space, preferring terms like “better code” or “some code” instead.
The abstraction enables more unique, high quality apps to be built in less time. It allows experienced users to create more and novice developers to be guard-railed. Even business users can participate in the development process in a tighter way than before, thus improving business-engineering communication.
LCNC challenges us to streamline how we develop software and broadens who gets access to software creation. It’s empowerment from citizen to citizen developer as well as developer to productive developer. It’s a win-win.
Where did LCNC come from anyways? Do I know any of the main players?
The most recognized ancestors to modern LCNC tools are early rapid application development (RAD) tools, computer-assisted software engineering (CASE) tools, and fourth-generation programming languages (4GL).
All you have to know about these tools is that they were sold to IT departments in the 1980s and 1990s and they were not good. The tools over-promised and under-delivered functionality, ran poorly at scale, involved manual testing, deployment, & source control, and increased security vulnerabilities. Think IBM Informix or CA-Clipper.
The second wave came in the 2000s. These are the big name LCNC players who improved on the first wave and solidified the LCNC space. Here’s a sample of the top companies in chronological order from founding:
Despite this success, the space was fairly unknown until 2016. A quick Google trends analysis on the topic “Low-code development platform” shows the term’s popularity shot up in 2016 and was steepest in 2019, indicating the popularity growth of the space accelerated this year.
Google conveniently splits the popularity by geographic region, and unsurprisingly, the term was most popular in hotbed states for technical innovation: NY, MA, VA, CO, and CA. The third generation of these tools has arrived and we’re about three years into it!
So why is the LCNC space interesting, now?
What, that very sophisticated (lol) Google Trends analysis wasn’t enough to convince you that there’s movement in the LCNC space? I get it, you’re a tough sell.
It comes down to this: low code tools for software engineers is an untapped market and companies are increasingly desperate to build their applications.
Most people associate LCNC tools with clunky, drag and drop app builders. This is basically what most of the second wave players are and devs are skeptical of them because they have limited functionality, don’t replace software development, and are targeted towards citizen developers.
But with most development work happening in the cloud, there is now an entire emerging class of LC tools built by engineers for engineers. These third-generation tools are focused on abstracting away the accidental complexity that’s ancillary to software development. I’m talking building (CI), regression testing, packaging (artifact repository, pre-deployment staging), releasing (change management, release approvals, release automation), configuring (infrastructure), and monitoring, etc.
These are actual developer pain points. Abstracting this headache away is a serious boost to developer productivity which is worth a lot of money to companies.
Furthermore, the growth for second wave companies is limited by their sales staff because they’re top down sellers. A good low code tool that is evangelized from the ground up by developers will have market permeability that will blow the second wave out of the water.
As this grumpy 2019 Reddit points out, 73% of us don’t use low code tools (2019 Forrester thinks it’s 50%), but that’s not because low code is an inherently flawed technology. Rather, developers have yet to see the right application of it. Now is the right time for a company to provide a good, market capturing, low code solution to capture this untapped market. Skip to part 3 to see what else I think constitutes a “good” LCNC tool.
Give me numbers, how much is this space worth?
According to Forrester, in 2018 LCNC had a market size of $4B and is projected to grow to $21.2B by 2022. As you can see in the chart below, they estimate the CAGR will grow to be around 50%.
LCNC is further segmented into tools meant for citizen developers and tools meant for software engineers (skip to part 2 for more technical definitions). Let’s get a rough understanding of the market size just for low code tools for software engineers. There were 21M software engineers worldwide in 2019, according to the Evans Data. LC tools are usually SaaS (or PaaS) businesses that charge per user (engineer). On the lower end, the monthly price per user will be similar to a dev productivity product like Atlassian’s Jira — $15/user/month. On the higher end, the monthly price per user will be similar to an existing LCNC platform like Salesforce — $150/user/month. That leads to a rough potential market size of $3.78B ($15/user/month * 21M potential users * 12 month) on the lower end and $37.8B on the upper end. Not bad for just one segment in the space.
sources and acknowledgements
This investment thesis is an evolving labor of love and I have the following non-exhaustive list of people and sources to endlessly thank. Without them, there would be no thesis. Hopefully this is just the beginning of my exploration of the space and this list will continue to grow. Please reach out if you would like to collaborate!
sources (sorted by relevance) | Forrester 2018: The State of Low-Code Platform Adoption, 2018 | Forrester 2019: Software for Digital Process Automation for Deep Deployments, Q2 2019 | Gartner 2019: The Magic Quadrant for Enterprise Low-Code Application Platforms | Emmanuel Straschnov, Co-CEO and Founder, Bubble, 2015: You Shouldn’t Have to Learn to Code | Paul Biggar, CircleCI, 2016: It’s the Future | Forrester 2019: Predictions 2020: More Changes for Software Development | Quick Base 2018: A Brief History of Low Code Development Platforms | Hackernoon 2016: How it feels to learn JavaScript in 2016 | Quick Base 2017: Myth-busting 4 Common Misconceptions About Low-Code and No-Code | James Currier, Managing Partner, NFX: The Next 10 Years Will Be About “Market Networks” | Declarative Assembly of Web Applications from Predefined Concepts. Perez De Rosso, S.; Jackson, D.; Archie, M.; Lao, C.; and McNamara III, B. A. In Proceedings of the 2019 ACM SIGPLAN International Symposium on New Ideas, New Paradigms, and Reflections on Programming and Software, of Onward! 2019, pages 79–93, New York, NY, USA, 2019. ACM | Paul Biggar, Founder, Dark, 2019: What is Dark? | Steve Krouse 2019: The Whole Code Catalog | Hackernoon 2018: Low Code Like a Pro | Forbes 2017: The Low-Code/No-Code Movement: More Disruptive Than You Realize | InfoWorld 2018: 4 essential features of modern low-code development platforms | BMC Software 2018: Low Code vs No Code: Is it The Future of Coding in the Enterprise? | Appian: Low Code Guide | Ryan Hover, Founder, Product Hunt, 2019: The Rise of “No Code” | Sedat Kapanoglu 2020: How is computer programming different today than 20 years ago? |
acknowledgements | Jeff Bussgang, HBS, General Partner and Co-Founder, Flybridge Capital Partners | Allison Mnookin, HBS, Former CEO, Quick Base | Ellen Chisa, CEO and Co-Founder, Dark Inc | Emmanuel Straschnov, Co-CEO and Founder, Bubble | Jesse Orshan, Co-Founder, WayScript | Patrick Leonard, CEO and Co-Founder, Sopris Health | Kevin Zhang, Partner, Bain Capital Ventures | Ali Rahimtula, Partner, Cue Ball Capital | Virtually every EC in the VCPE club at HBS, countless VC professionals who have come to campus, my one sectionmate who did the same type of VC I want to do, and my sweet family | thank you |
