Created

Jan 19, 2023 8:03 PM

The Building Blocks of Tech

Anne Shoemaker is a 20-year-old full-time Roblox game developer. Between March and August, she made $500,000 and now employs 14 people.

Alex Balfanz is a 21-year-old senior at Duke. He’s paying for his degree with earnings from a single Roblox game that he made three years ago. That game—Jailbreak—is one of the most popular on Roblox and has made Alex nearly $10 million.

Roblox is minting teenage millionaires: this year, it will pay out a quarter-billion to its network of 345,000 paid developers.

Only 0.5% of the world’s population knows how to code, and the U.S. graduates only ~150,000 computer science graduates each year. Historically, problems that can be solved with technology have been bounded by the number of people able to code.

In the 1950s, kids grew up playing with Legos; this was a fit for a world centered around manufacturing and industrial work.

In the 1970s, kids grew up tinkering with personal computers like the Commodore 64; this lay the foundation for a generation of entrepreneurs like Bill Gates and Steve Jobs.

Today’s kids grow up building in Roblox, mirroring the rise of low code / no code in the startup ecosystem and signaling how everyone is now able to manipulate and create software. The 12-year-old who spends her free time building games in Roblox will become the 22-year-old who builds her company’s business apps in Airtable.

At its core, software is Legos, composed of computational building blocks. Now, anyone can harness that power to create, stretching from their entertainment experiences to business workflows.

Low code / no code isn’t a new category of startups, but rather a change in how people interact with technology. It’s a change across both enterprise and consumer and, at its core, is about abstracting code from software creation.

This piece is three-fold:

A mini investment thesis on Roblox (an underrated example of this trend),
A look at how the low-code / no-code movement evolved to today, and
A view on where the movement is going and the startups leading the way.

First, let’s look at Roblox.

Why Roblox Is So Compelling

Unless you’re under 18 or have kids under 18, there’s a good chance you’ve never heard of Roblox. Roblox is the most popular internet platform still flying under the radar of millions of Americans.

About 80% of U.S. kids age 9 to 12 have played Roblox. And kids spend a lot of time on it, as this staggering headline shows: “Young People Spent More Time on Roblox than YouTube, Netflix and Facebook Combined.” That headline is from before a global pandemic drove millions of kids to stay home and connect through game worlds.

Roblox has been one of the biggest beneficiaries of the pandemic:

Hours of engagement hit 3 billion in August, up by 100% from just a few months back. Monthly active users have soared to ~170 million.

Below are three reasons why Roblox is so compelling—an abbreviated investment thesis, if you will. These reasons mirror the appeal of the broader low-code / no-code movement.

The numbers below are estimates, based on speaking with gaming executives. Roblox filed last week to go public (at a rumored $8 billion valuation) and I’ll do a deeper dive into Roblox’s numbers when its S-1 filing comes out.

1) Platform Durability & Diversification

It’s important to clarify that Roblox isn’t a game. It’s a game-creation platform. Roblox has never published a single game; rather, its users create games using Lego-like building blocks in Roblox Studio.

Chris Misner, head of Roblox International, puts it this way: “We’re not a game; we’re a platform for creativity and play. We provide tools and support for people to build what their imagination wants. The only limit is their imagination.”

Of the 60 million games created to date, 5,000 have had more than 1 million plays, and 20 have had more than 1 billion plays. Every month, roughly a quarter of Roblox’s top 100 games are new.

According to insiders, Roblox’s most popular game accounts for only ~10% of revenue. Its top 50 games account for ~50-60% of revenue.

This is incredibly attractive in an industry historically beleaguered by an overreliance on hit games. Roblox’s platform approach means that it’s insulated from fad risk.

2) Creator Economics

Creators are the lifeblood of Roblox, and key questions are how creators convert and retain over time. What percent of players convert to Roblox Studio users? What percent of those game developers remain after 12 months?

I don’t know the specific numbers, but I’ve heard that Roblox’s creator economics are improving across the board. As Roblox grows, a higher percentage of players convert into developers. Each successive cohort converts at a higher rate. For example, if 7% of Roblox players became developers in 2019, ~8%+ are converting in 2020.

Developer retention is also improving in newer cohorts, with lower developer churn. If retention is on par with best-in-class consumer subscription businesses, that would mean 60-70% of creators are still around after their first year.

3) Growth Flywheel

More games attract more users. More users lead to more revenue, which leads to more money paid out to developers. This attracts more developers, which leads to more games, and the flywheel spins faster.

This loop is a powerful driver of organic growth. Roblox has reportedly spent little—if anything—on paid marketing.

Other creator platforms have similar creator-centric flywheels. Take Airtable, where I used to work. As more Airtable creators build apps, those apps bring in more users across an organization; some of those users will themselves become creators, and the cycle repeats. More users also means more paid seats, increasing revenue and investments in new product features.

Just taking a quick breather to remind you to subscribe!

The Rise of Creator Platforms

Let’s step back for a minute. The trendiness of “low code / no code” is relatively recent (a Google Trends search shows a 3x increase in the last 12 months), but the democratization of software goes further back.

For nearly as long as the Internet has been around, there have been startups making it possible for everyday people to harness the power of software.

💈 Websites & Online Stores

First on the scene—back in the Web 1.0 era—were website building platforms like Squarespace (2003), Wordpress (2003), and Wix (2006). Suddenly—with no coding skills needed—every barber shop, bodega, or local restaurant could create its own website.

Next came online storefronts for commerce, led by Shopify (2006).

Bessemer recently released old investment memos, including memos for both Wix and Shopify. Both memos were prescient, foreshadowing what would become a secular trend of more flexible, consumerized software.

From the Wix investment memo, written in October 2007:

“Wix addresses an acute need of consumers who wish to create professional grade rich media easily and quickly. Aimed to be as powerful as Flash, yet as easy as PowerPoint, their mission is to become the default destination and application for consumer-created rich media content.”

And from the Shopify investment memo, written in October 2010:

“Shopify is a SaaS application for setting up and running an online store. In many ways, its strength lies in its simplicity, which is ideally suited to small businesses. A non-techie can start taking orders from a professional-looking online store in a few hours after sign-up.”

🎮 Game-Creation Platforms

Next came game-creation platforms. On the high end, game engines like Unity and Unreal (Epic Games’ engine) emerged for more advanced games. A professional game developer can use Unity’s engine, for example, to automatically program the physics of an arrow shot from a bow—without Unity, every developer would have to individually program those complicated physics into each individual game.

On the “low code / no code” end came Roblox and Minecraft. Both target younger users and allow users to build and create within the game. We covered Roblox above. Minecraft is its closest analog, but with some crucial differences.

First, Minecraft costs $26.95 to play, while Roblox uses a freemium model: Roblox is free to play, but players pay microtransactions to buy in-game items. Minecraft’s business model means that it holds the title of “bestselling video game of all-time” (passing Tetris last year with 200 million purchases), though Roblox recently passed Minecraft in monthly active users.

The second key difference is in how players engage with the game worlds. Roblox is intuitive and approachable for new players; Minecraft is notoriously difficult to play. One analogy would be that Roblox is “no code” and Minecraft is “low code”.

Here’s one example: A Minecraft player is in combat with another player, and he types a command to give himself a better weapon: “/give AdventureNerd bow 1 0 {Unbreakable:1,ench:[{id:51,lvl:1}],display:{Name:“Destiny”}}.” That command gives a bow-and-arrow weapon to AdventureNerd, his avatar; makes the bow unbreakable; endows it with magic; and names the weapon Destiny.

That player needed some coding knowledge, and Minecraft’s level of complexity means that there’s a vast network of online discussion forums run by professional programmers. One Minecraft handbook outsold nearly every major bestseller of the past decade, and “Minecraft” is the second-most-searched term on YouTube after “music”, as players look for tutorials.

💼 Business Apps

Minecraft and Roblox offer a good analogy for low code vs. no code, but it’s worth offering rough definitions:

Low Code is designed to serve both everyday users and professional developers. It’s more powerful and customizable than No Code.
No Code is built for everyday users—so-called “citizen developers”—who don’t have any coding knowledge. Platforms typically use a visual application system, like drag-and-drop, to make it intuitive.

Traditional app development is riddled with problems. It’s done by the engineering team, which makes it expensive; there’s usually a shortage of good engineers; and there’s often communication breakdown between engineers and the business side. Low code / no code solves this problem by freeing up engineering talent and letting non-technical people create their own software.

Over the last decade, there’s been a proliferation of startups designed to help workers build business applications.

💻 Big Tech

In recent years, Big Tech has entered the fray.

Amazon launched Honeycode in June, allowing customers to build powerful mobile and web apps;
Microsoft launched Power Apps on Azure, a low-code platform; and
Google bought AppSheet in January, which has helped Google Cloud build out its no-code platform for cloud-based business processes.

Big Tech wants a piece of the fast-growing market:

Within the next three years, there will be 4x as many citizen developers as professional developers, creating half a billion business apps. As the market becomes more lucrative, the competition among tech giants heats up.

🛒 Marketplaces for Creators

Roblox is a guidepost for all Creator Platforms:

Platform Durability: The best platforms enable a wide range of applications, each accounting for a low concentration of revenue;
Creator Economics: The best platforms convert users to creators at improving rates, then retain and increase engagement among those creators;
Growth Flywheel: And the best platforms have virtuous loops in which more creation drives more revenue and a better product.

As creator platforms mature, they get more complex. At this point, a marketplace between creators can unlock additional value:

Roblox Marketplace allows developers to sell in-game items that they built—like cars or houses—for other developers to incorporate into their own games.
Airtable Marketplace helps the creator community share apps. A salon owner may build an app to help her track appointment times. She can sell it through Marketplace to the 88,000 other salon owners in the U.S., earning income.
Shopify’s App Store allows store owners to easily add apps like shoppable videos that are built by third-party developers.

Less-skilled creators lean on more-skilled creators. This isn’t dissimilar to Minecraft’s informal marketplace between players and professionals on discussion forums.

The earliest website creation platforms, like Wix and Squarespace, today rely heavily on marketplaces. Marketplaces mitigate complexity in a mature creator platform. Wix Marketplace, for example, helps no-code creators connect to low-code (or even full-code) creators and is the fastest-growing part of Wix’s business.

The Future of Creator Platforms

At their core, creator platforms make it cheaper and faster to create.

Earlier this month, I wrote about Lil Nas X. Lil Nas X was able to dramatically lower the cost and effort of song production. He bought Old Town Road’s beat for $30 on BeatStars, then self-released the song on SoundCloud. BeatStars’ CEO says: “Probably one of the biggest moments in the transformation of how music was made and sold has been the evolution of the accessibility of hardware and software tools. Producers and artists can now create a hit song in their bedrooms.”

Just as technology has made music creation cheaper and easier, TikTok has democratized video creation. TikTok’s content creation tools are sophisticated, yet accessible to any smartphone user. Creator can use features like Sounds, Duets, and Green Screens to quickly create high-quality content.

The challenge for enterprise-focused creator platforms is to make their tools intuitive and consumer-friendly.

At Airtable, we struggled with the high hurdle rate for the product: unlike SaaS products like Zoom, Dropbox, or Slack, Airtable’s product is incredibly complex. That Airtable has had such strong bottom-up adoption for such a horizontal, versatile product is astonishing. A key challenge for Airtable and its counterparts will be how to communicate to everyday workers the depth and breadth of use cases.

Creator platforms are emerging across both consumer and enterprise:

Low-code / no-code startups are on pace to raise $500 million in 2020. Here are interesting startups roughly bucketed into consumer and enterprise:

Consumer

Enduvo lets anyone create and distribute interactive, immersive experiences—often in virtual reality and augmented reality. Users primarily use its low-code platform for building VR / AR experiences in education and medical training.

Universe is website creation built for a mobile-first world. Using Universe, users can launch a website for their business, sell products online, and manage inventory—all through only a smartphone.

Manticore Games is, in some ways, Roblox for adults. It makes Core, a digital playground that it hopes will “radically lower the the barriers to game making and publishing the same way that YouTube revolutionized video creation.” Manticore is built in Unreal Engine and its investors include Epic Games.

Enterprise

Hevo helps non-technical workers connect and manage vast amounts of data. A marketing team, for example, might have data about social media ads, but not know how those ads drove purchases. Hevo lets the marketer connect those two data sources without bothering the data team.

Voiceflow allows anyone to make voice apps without coding. The idea was born when the founders wanted to build a voice app offering interactive children’s stories for Alexa, but found the creation process slow and cumbersome. They built Voiceflow with an intuitive drag-and-drop interface and hope to build a “YouTube for voice” so that anyone can build for Alexa, Google, and other burgeoning voice platforms.

Webflow untethers website production from engineering: at one customer, marketing was able to take over the site, freeing developers to focus on the most important work. At another customer, Webflow lets one developer do the work of three developers while still shaving 2-3 months off of website redesign work. This unlocks productivity. Webflow’s CEO, Vlad Magdalin, first conceived of the idea for Webflow in his college senior paper, studying how building drag-and-drop design into back-end code could lower the barrier of entry for new entrepreneurs.

Final Thoughts: Unlocking Productivity & Creativity

In the next 5 years, people will build 500 million apps—more than were built in the last 40 years. One Microsoft VP says, “450 million apps have to be built with a low-code tool. There are not enough humans to code fast enough to build that many.”

Low code / no code isn’t the future of code. There will still be strong demand for programmers and a persistent supply shortage. But low code / no code is exciting because it makes the power of technology accessible to everyone. Think of the problems that can be solved with billions of people building and innovating with software, rather than the millions today.

Low code / no code unlocks productivity and creativity.

During the Covid-19 pandemic, Frontline Foods—which supplies meals to frontline health workers—used Airtable to build a custom app matching hospitals with nearby local restaurants.

In Gaza, community members use Minecraft to build virtual models of how they want their neighborhoods to look. Then, local organizations turn those virtual models into physical realities. Citizens have built parks, beaches, and streets this way.

When the Covid-19 pandemic shut down schools, students quickly rebuilt their schools in painstaking detail within Minecraft and Roblox. When Wuhan erected hospitals during the outbreak, players quickly replicated them in virtual worlds.

Whether it’s building Roblox worlds, TikTok duets, or Airtable apps, anyone can use the power of software to be more productive and creative. This cuts across enterprise and consumer, across our work lives and our home lives.

One teenage Minecraft player said of the game: “It’s like the earth, the world, and you’re the creator of it.”

Today—equipped with a new generation of tech products—everyone is a creator.

Sources & Additional Reading

Check these out for further reading on this subject:

The Minecraft Generation | NYMag
Gamers Are Logging Millions of Hours a Day on Roblox | The Economist & Matthew Ball (who has lots of great content on Roblox and gaming)
The Rise of No Code | Ryan Hoover

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