I’ve been meeting a number of VC firms this past month to see if anything new had emerged in terms of enterprise software and tech service provider trends. Standard topics ranged from Web 2.0, future of SaaS, would Larry continue to be the exit strategy, and whether or not IBM would publicly come out and enter the enterprise apps space to the depreciating dollar, state of the economy and the downfall of Billary. But a few things kept sticking out in conversations on what type of software and service companies were receiving funding. Here are some must have characteristics that bubbled out:
- Payable with a credit card and not require board approval. VC’s like sales models that have a fairly regular and low barrier to entry. Some examples include subscription pricing because it targets operational expense instead of capital expense (i.e. no need to go to the board).
As one VC put it, “If they can’t buy it on their AMEX and run it through as an expense, it’s not worth investing”
- Easy to consume and work like what’s on the web. These new offerings, service or products, must follow more consumer user experience models. Because most of the power in the cloud beats what an enterprise has, users are now more accustomed to paradigms on the web and not the legacy apps they replace. More importantly, they must mitigate IT dependencies in not only decision making, but also support.
A serial entrepreneur stated, “We stopped pitching to the IT user 24 months ago. They remain irrelevant because we target the decision makers who want something working now and have the budget and authority to create change. They then go back and tell IT to go figure it out”
- Drive a sense of community and free user generated content. Content remains king but not if you have to pay for it. The drive towards UGC continues and the more successful offerings have a community component. This also applies to ancillary technology services and related knowledge based companies where the users and their communities create a self service ecosystem.
An Entrepreneur In Residence (EIR) confided with me and said, “These social networks create so much user generated content that we then monetize. Why pay or invest in content when the knowledge is in the community? We just need to put the tools in there and make it easy”
The bottom line.
While we may be in the midst of an economic slowdown and even headed towards a recession, VC’s continue to have faith in models that put more power to an individual user or a small team of users. Lower price points, captivating and easy to use functionality, and thriving ecosystems remain the critical success factors in receiving funding. The era of funding on-premise start ups and large consulting firms may be over. This could explain the great interest in SaaS and of course the tremendous explosion of growth in the upcoming SaaS Con event.
(The personal contents in this blog do not reflect the opinions, ideas, thoughts, points of view, and any other potential attribution of my current, past, or future employers.)
Copyrighted 2008 by R Wang. All rights reserved