One in three small firms build software to fix gaps

Emergent has published research showing that one in three small business owners on its platform built software to solve problems not addressed by existing products. The findings are based on interviews with 300 operators and a sample of more than 50,000 live applications.

The San Francisco-based company says the study points to a shift in how smaller firms use artificial intelligence tools. Non-technical founders and owner-operators are building software for day-to-day business needs instead of relying on outside developers or standard software subscriptions.

Operators who sought quotes from development agencies for a basic custom build reported a median cost of USD $20,000, according to the research. Some said they were quoted as much as USD $100,000, with delivery timelines ranging from several months to more than a year.

Cost was the most frequently cited barrier. Many business owners abandoned plans to commission software and continued without a dedicated tool until newer AI-based building platforms lowered the barrier to entry.

These applications were not simply experimental tools, the report found. One in four takes payments directly, one in three sends transactional email and one in three runs on a custom domain.

Roughly eight million people use the apps included in the sample, spanning 28 industries including healthcare, retail, construction and poultry farming.

What users replaced

Interview data suggests that, for one in three operators, the software they built replaced nothing at all. They were not moving away from spreadsheets, agencies or software subscriptions because no suitable product existed at a price they could afford.

A further 33 per cent said they replaced a software subscription, while 21 per cent retired a manual process. Another 13 per cent said building their own system reduced their dependence on developers.

Only one in seven operators interviewed felt well served by existing software, the findings suggest. Among the rest, 33 per cent said no available approach solved their problem, 27 per cent relied on manual processes, 27 per cent used software that did not fit their needs and 12 per cent had paid for custom development.

The report notes that the sample was drawn entirely from Emergent's own platform. It also says the interview findings describe people who had already chosen to build custom software and should not be taken as representative of small businesses more broadly.

Funding backdrop

The research comes as Emergent expands rapidly. The company recently closed a USD $130 million Series C funding round at a USD $1.5 billion valuation, taking total funding to USD $230 million.

Emergent says it has more than 10 million users across more than 190 countries, and that more than 11 million apps have been built on its platform in the past 12 months. It also says it generates about USD $12 million in monthly revenue, putting it on a run rate of around USD $150 million in annual recurring revenue.

The broader market points to growing interest in building software internally rather than buying packaged tools. Research from Retool found that 35 per cent of enterprises had replaced at least one software subscription with something built in-house, while 60 per cent of respondents said they had shipped software without IT sign-off in the past year.

Emergent's data focuses on a different part of the market: smaller businesses with little or no dedicated IT function. The company argues that these firms are using AI tools not just to automate routine work, but to create bespoke systems for niche operational problems.

That matters in the UK, where AI adoption among smaller companies is rising. Research by the British Chambers of Commerce and Atos found that 54 per cent of UK firms were actively using AI, up from 35 per cent a year earlier. The same study found that 60 per cent cited limited AI skills as a barrier and 71 per cent said they could not identify a clear use case.

Globally, small and medium-sized businesses account for about 90 per cent of businesses and more than half of employment, according to World Bank data cited in the report.

Mukund Jha, Co-Founder and Chief Executive at Emergent, said: "The number that stayed with me is the one in three who had nothing to replace. We assumed we would mostly be looking at people swapping out a subscription. Instead, a third of them were solving a problem that no product had ever been built for, because their market was too small or their problem too specific for a vendor to chase. That software was never going to arrive. It only exists because the person closest to the problem finally had a way to make it."