Is building on a no code or low code platform an impediment to an exit? To getting acquired?
Does building on low code decrease valuation?
Corollary: is building on code necessary to maximize value?
A scenario - a KYC platform
Let's take building a platform to automate the KYC process for Banks. KYC means “Know your Customer”, and banks must do it to meet regulations. They need to know who you are, where you live, how you earn - to curb activities like money laundering and terrorist financing etc. The level of information required depends on factors like jurisdiction, the financial product involved, the amounts of money involved and can be quite complex. It is an area of specialism.A "full code" build
One founder building a tool to automate this area might decide to build from the ground up. Cloud infrastructure, database provisioning, web servers, all logic written in a programming language like python, the customer facing apps all coded at a similar low level. So this founder will assemble a team of developers and build it all out. The parts involved might look like this:
Billions of dollars of successful exits were created this way, so it has been proven to work.
A low code build
Another founder might say the part of the KYC solution that matters is the management of the rules about what information to gather and when, the ease with which a customer is guided through the application process, and the efficiency of processing the application by bank employees. These are the essential concerns of the KYC solution, the tech is an incidental part. To this founders eyes the above diagram reads like this:
So this founder might choose to focus on the essential by building on no code tools like Bubble, Airtable, Zapier, Glide Apps, Retool, Thunkable etc etc, producing a stack that looks like this:
The exit - comparative valuations
Now let's say that both of these founders meet with equal success in terms of customer numbers and cash flow and are looking for an exit.
Which one will have the better exit?
If we take two tech solutions that automate the KYC processes for organisations, during the valuation process by potential investors, how does the value of the one built at the low level of python, infrastructure as code, from scratch cloud provisioning etc compare to the value of one built on an assembly of no code tools like Airtable, Zapier, Glide Apps etc.
In the former case, it's built from first principles on very common, well understood tech that is easy to hire for. But it involves so many commodity concerns. Provisioning cloud infra, a database, a web server, access control. Boring, dull undifferentiating tech. Yawn. It also carries a daily operational cost both in terms of staff and cash spend.
The valuable part of the KYC platform is the knowledge about what information to gather from a customer for a given product in a given jurisdiction. How an operator configures and manages that knowledge. How well a customer is guided through the process. This is the essential part of the solution, the tech is the incidental part.
You could argue that a founder that opted for a no code build took the wiser choice by focusing on the essential and not throwing funds at building the commodity part. That could make the founder seem more backable to a potential buyer.
But the downside of this build approach is the talent pool that could take on configuring the assembly of no code tools will be smaller than that of the lower level build. And the solution is bound to those proprietary no code platforms.
The low level build will be easier to hire for and more portable across cloud providers etc. But likely also note expensive to hire for. Nevertheless some might view this as the wiser route.
It's a tough choice. What are your thoughts?