Why I started Automate Ventures

A New Direction. Founding Automate Ventures.

In my early 20s, I co-founded Papercloud Ventures, the venture studio arm of Papercloud, a boutique digital product development company based in Melbourne with a team of about 25 people. At Papercloud, we provided consulting services to startups and large enterprises, helping them build standalone digital products. As we did this, my co-founder Tomas Spacek and I realized starting vertical SaaS businesses would be a more effective use of our resources. Having ownership in a high margin and recurring  software business was much more compelling than creating custom products for clients. We partnered with experts who had deep industry knowledge and could identify opportunities. We partnered with a doctor to launch HotDoc, an audio visual specialist to create Vivi, and an architect to start Landchecker

Fast forward a few years…

I spent much of 2023 contemplating my next steps. I considered becoming a VC, but it didn't feel like the right fit for me. I realized that I love being hands-on and deeply involved in identifying and launching new early-stage businesses. I also spent time thinking about where the biggest opportunities in the business would be in the future. Like others, I knew that the developments in AI tech were going to have a massive impact on the future of businesses. But I wanted to make sure before acting that there was a clear opportunity in the market to build an enduring and defensible business. 

While listening to a podcast featuring Miles Grimshaw from Benchmark it became clear to me: the future of software and AI will be businesses that offer customers work and outcomes. A position that Sarah Tavel, another partner at Benchmark, goes into in her article "Sell Work, Not Software". Both of these perspectives resonated deeply with me. It was a moment of clarity for my next direction: applying my past experience of running a vertical SaaS venture studio, to create a new breed of AI-powered services targeting SMBs (small to medium businesses).

Introducing Automate Ventures.

I founded Automate Ventures with a core purpose: to create AI-powered services companies that empower SMBs to move faster, grow quicker, and focus on their core business. These companies aim to make high-quality and repeatable services more accessible to SMBs, enabling them to increase their competitiveness and improve their core offering, ultimately benefiting their customers. In some cases, we hope that this also allows SMBs to compete against larger incumbents.

We partner with experts in the fields of professional services and AI to identify opportunities that could be automated using AI. We do this by deeply looking at the commercial viability, market pull, and technical feasibility of the opportunity, over a multi-month period. Then we move to quickly bring something to market to understand market pull and potential scalability of the business. One example of these ventures is an AI compliance manager service for SMBs. The service would remove the need for a business to think constantly about ever-changing compliance requirements, allowing them to focus on their core business.

Reflecting on SaaS vs. AI Services

I’ve spent some time reflecting on the impact of SMB vertical SaaS businesses over the past decade. Don’t get me wrong, while they’re good businesses with high margins and the ability to scale quickly, there are downsides. From a customer perspective, a SaaS product is yet another tool that requires adoption and regular usage to achieve desired outcomes. If those things don’t happen, it can lead to customer churn and loss of revenue for the SaaS business. On the other hand, the advantage of service companies is that customers pay for work and outcomes, with minimal effort required on their part. 

It’s also interesting to take a step back and look at where investment is, as it’s quite staggering to see that globally $270 billion is spent on B2B SaaS each year, compared to the $6,100 billion spent on professional services. This contrast becomes even more compelling when considering the opportunities that AI will bring to this market, as a significant portion of work in professional services is delivered through human labor. 

Building vertical SaaS companies has been an insightful and rewarding journey. I'm incredibly proud of the impact those businesses have made in their industries. Now that I've had the opportunity to step back and identify opportunities, I'm extremely excited about the next leg of this journey.

While the real impact of AI is still being realized, I believe it will have a profound effect on individuals and small teams  - enabling them to make a massive impact in ways we could never have before imagined. At Automate, we want to help make this a reality by creating highly accessible services that empower small businesses to achieve significant scale and impact.

Simon

Simon Holland, Founder, Automate Ventures