Startup Caucus invests in companies building products to help Republicans win elections as our investment thesis states. Founders and investors who are more familiar with the startup world than the political sphere often wonder why campaign tech needs to be partisan. After all, why would you cut your prospective customer base in half?
The truth is, however, that your total addressable market isn’t actually all of political campaigns. There’s a distinct divide between the Republican campaign market and the Democrat campaign market.
During the 2018 election cycle, the top 50 recipients of political spending took in $2.3 billion in revenue. Only $135 million of that – just 5% – went to non-partisan firms. The other 95% was directed towards companies that work explicitly with just one party.
The companies that do receive significant spending from both Republicans and Democrats include Facebook, Google, TV broadcasters, payroll processors, and the United States Postal Service.
Causes for Partisan Differentiation
This partisanship within campaign technology can be traced to three sources: networks, trust, and users.
In politics, as with any business, sales are built on relationships. In the campaign space, there are few opportunities for professionals from opposing parties to interact, and when they do, it’s in the context of competition, like negotiating debate rules or psyching each other out during an event. They certainly will never collaborate on a project together.
Another challenge in relationship-building comes from the temporary and transient nature of campaign work. Campaigns have a definite end date and aren’t built for the long term in the way that businesses are. It’s not unusual for a campaign operative to work and live in multiple states over the span of just a few years.
Maintaining a professional network is difficult when your colleagues change jobs every 12-18 months. Even if networking happened across party lines, the transient nature of the business makes it very unlikely that an operative from the opposing party in one race will also be involved in the next election that one works on.
Finally, loyalty is a highly valued quality within an individual’s professional political network. Unlike traditional corporate structures, political networks more closely resemble families or tribes with the same group of professionals frequently working together on the same campaigns.
These factors combined make it difficult to build a professional network spanning both political parties. Even companies like Google and Facebook hire separate Republican and Democrats sales representatives to navigate the landscape.
As data continues to play an outsized role in political campaigns, its value has increased. Given the liquid nature of data, sharing it with another person or company requires a high degree of trust. A primary concern for technology users is the safety of their data, and that is no different for campaign tech users. It’s an expensive asset, and they don’t want it getting used by someone else.
If your platform works with both parties, the trust threshold becomes much higher, because the possibility now exists that the data could be used against you in an election. No firewalls, security, or privacy policies could fully address a customer’s concern.
The same is true for optimization strategies and best practices. Since campaigns are zero-sum games, campaigns cannot afford to have their competitive advantages wiped out when a company shares learnings about its technology with their user base.
To build a valuable product, you have to know your users. Republican and Democrats are two starkly different types of users – they’re operating in different environments, have different pain points, and are targeting different voters.
On the Right, for example, activists tend to be older than activists on the Left. This means, in general, the volunteers on Republican campaigns are less technologically savvy and prefer software that has a more familiar, simpler user interface. Differences like these crop up everywhere you look.
Understanding your users, building products, and gathering feedback – the core of the lean startup methodology – is difficult enough without having two, possibly conflicting user groups.
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These root causes have surfaced in a few campaign technology companies that have tried to thread the needle and serve both political parties. In each case, non-partisanship has been an impediment for the company’s growth.
NationBuilder is a nonpartisan CRM and marketing platform for campaigns of all sizes. To date, it has raised $24.8 million in investment capital. Over the last decade, the platform has worked with candidates and organizations across the political spectrum around the globe.
NationBuilder’s willingness to work with Republican candidates has drawn criticism from the Left with Donald Trump’s campaign as their most notable user to date. During the 2018 U.S. election cycle, 292 federal campaign committees from both sides of the aisle used the software at a total disclosed cost of $1.7 million.
The company’s site has an entire page devoted to dispelling “myths” about NationBuilder’s partisan affiliations, sharing customer data, and support for candidates. Competitors within the space, especially on the Left, have been successful in sidelining the platform because of its willingness to work with both parties.
While six of NationBuilder’s top ten customers were Republicans, explicitly partisan GOP firms offering similar services captured more revenue overall. Advantage Direct, a software provider for Republicans which counts a number of state parties as clients, saw $2.8 million in spending at the federal level during the same cycle.
Crowdpac began as a non-partisan crowdfunding platform for political campaigns, receiving $13.8 million of venture capital investment. It’s primary focus was helping less well-known upstarts build a fundraising network. But at the federal campaign level, the platform was not a widely used tool.
In 2018, citing the election of President Donald Trump, Crowdpac ousted its conservative CEO and kicked any Republican candidates off of the platform. In June 2019, the website was shut down and the company abruptly suspended all operations. After an acquisition, the site relaunched in November 2019 as a crowdfunding website for Democrat candidates and causes.
Prior to the shift, Crowdpac’s most successful campaigns were for Democrat candidates – who generally raise more money online – meaning most of the individuals making donations on the site were liberal activists. Following Donald Trump’s election in 2016, it was particularly jarring, then, for these users to see pro-Trump Republican candidates fundraising on the site.
As a matter of strategy, going all-in for their most active users was the right move. With Crowdpac’s original assumption – that Americans were eager to donate to centrist candidates – proven incorrect, the company pivoted to focusing on its most profitable users: enthusiastic grassroots liberals willing to donate to political candidates.
Hustle was the first peer to peer (P2P) text messaging platform for politics. It was first used at the federal level during the 2016 election cycle and counted a handful of Republican clients, but in 2018 after raising $30 million for a Series B round, the company made the decision only to work with Democrats and liberal groups.
Lessons for Entrepreneurs
The track record of campaign tech startups failing to straddle the partisan divide should be evidence enough to dissuade a founder. It’s not impossible to build a successful, non-partisan campaign tech company, but it’s much more difficult than building a company that works with just one party. Given the challenges every startup founder faces, why would you add walking a tightrope trying to maintain non-partisanship to your plate?
But it’s not all bad news. Startup founders who understand the political technology marketplace and commit to one side can tap into a high profile market with unique, real-world use cases. Building a network in politics also opens up doors to future commercial opportunities as well.
Startup Caucus helps entrepreneurs looking to build and grow a campaign tech startup better understand how they should approach partisan politics.
Be Realistic About the Political Factor
Working for candidates, organizations, and causes you support is one of the most rewarding aspects of building campaign technology. But don’t think for a minute you’ll be embroiled in any high political drama. If your work does become the focus of mainstream political coverage, something has gone horribly, horribly wrong.
Political professionals spend their days engaged in the day to day tactical execution of a campaign. That includes earning votes, getting attention, raising money, and upsetting opponents. In fact, it’s unlikely that as a political technologist you’ll have any direct interaction with candidates, but rather the staff and consultants they rely on to run their campaigns. Politics in real life is less West Wing and more Veep – more of a comedy of errors and less of a high brow exchange of ideas.
Still, you will encounter political strategies, policies, and messages from your users that you may personally disagree with, and politics, as they say “ain’t beanbag.” You should, of course, have your own moral and ethical framework in place to define limits of what campaigns you will and won’t support, but it’s rare that these criteria become factors.
Where is Your Market?
Republican and Democrat campaigns resemble Darwin’s finches – they evolved separately to solve different problems. This reality extends to their technology as well. The software you’re building may be more critical on one side than the other.
Before you enter a market, take time to study your competitors. And what’s not there is often just as important as what is. Let’s say you want to build an app that helps activists better organize in-person protests. It’s clear that such a product would see wider adoption on the Left where campaigns are more issue and coalition driven than on the Right where campaigns follow a more top-down structure.
Simply looking at the market data, you might be tempted to assume that if there exist a handful of solutions on the Left but none on the Right, there’s better opportunity where less competition exists. In reality, your customers on the Left are more primed to look for products that offer better pricing or more features.
Where is Your Network?
If your personal and professional networks are mostly contained within a reliably red state, it will be difficult for you to develop the contacts you need to succeed on the Left. In an industry dominated by trust and loyalty, investors, advisors, and users all need to be aligned politically and each can help you with the other. The Startup Caucus network is one of the most valuable assets we provide to our companies.
Harness the Competitive Drive
While it can be difficult at times to introduce new technology to the political space, the competition is fierce, so each side is always eager to keep pace, tactically speaking, with the other. If one side has a tool, “Where is our version of [software name]?” is a frequent refrain.
Entrepreneurs building campaign tech must harness this partisan divide to drive adoption. The task is made even easier given that campaign spending is public information, so you can let prospective customers know exactly what their opposition has invested in similar technology.
American politics are partisan, there’s simply no getting around that fact. Entrepreneurs building campaign technology must acknowledge this reality in order to be successful.
Trust and loyalty are highly valued attributes for any political professional. It’s difficult to grow these with one end of the political spectrum if you’re frequently collaborating with the other side – their opponents.
Further, the practical challenges Republican campaigns face are different from those faced by Democrats. Getting close to your users, understanding their unique problems, and articulating a solution is essential for building useful software. It’s hard enough doing that for one user base, let alone a completely different one on the other end of the political spectrum.
Perhaps most importantly, sales are driven through individual networks, and the stark divide between the professional classes of each party limits the possibility for cross pollination.
So while technology itself isn’t partisan, the political space is, in fact, two separate markets. The handful of companies who have attempted to bridge the gap have not been successful in doing so.
Successful campaign technology entrepreneurs will have realistic expectations about the role politics plays in their company, understand which side of the partisan divide they will best serve, and follow the political alignment of their own networks.
Should you compromise your own values? Absolutely not. In fact, the satisfaction that comes with helping causes you support is one of the most compelling benefits of working in political technology. But, startups require founders that go all in if they’re going to be successful, and in a partisan space, that means picking a side and sticking with it.