There’s been a growing amount of attention paid recently to the surge in interest by startups in working on enterprise-grade products and services rather than the quick-to-market consumer and web applications that for so long seemed to dominate pitch contests, accelerator program cohorts and media attention.
“Enterprise is getting sexy,” Kevin Rose of Google Ventures said recently. Bernard Lunn has done a 180 on his 10-year-old requiem for enterprise software, saying it didn’t die, it just went into a coma from which it is now recovering. Enterprises, Lunn said, “cannot simply empower every employee with consumer web type tools and hope they all pull together to grow the profits.” Jesse Rodgers wrote recently about the allure of building enterprise products, saying that opportunities in the enterprise are being driven by the BYOD movement that is requiring IT departments to deliver better tools, a higher expectation of a better user experience than that delivered by stodgy old enterprise software, and an easing of the once-onerous burden associated with the enterprise sale.
I think there’s another huge factor at play. Far too many consumer and web applications have an opaque path to revenue. They might be cheap to produce and launch but they’re devilishly fickle when it comes to generating profits or returns for investors. Even most of the runaway superstars, like Instagram for instance, made money for their investors because of crazy acquisition valuations and not because they worked hard, as John Houseman used to say with such plummy emphasis in his Smith Barney ads, “They make money the old-fashioned way. They earn it.”
It’s this recognition that an enterprise play might be a lot more hard work than a disposable consumer app but that there is a far greater potential of a real and sustained payoff that is driving a resurgent interest. And that’s a good thing for both entrepreneurs and investors.
So it wasn’t a big surprise that all five of the companies presenting at the National Angel Capital Organization’s summit in Halifax recently were enterprise plays. Even angels, who you don’t usually think of as backing the long development cycles and even-longer marketing and sales cycles of an enterprise product startup, are getting in on the action. (I wrote a brief item on each of the five in a summit preview article a couple of weeks ago.)
There weren’t a lot of other surprises at the summit, either. Angel investing continues to be the purview of iconoclastic individuals with pocket books and interest levels deep enough to get seriously involved with the companies they back. Although angel groups are proliferating, the number of angel investments that involve syndicated deals is still a tiny fraction of the total, according to numbers bandied about by summit panelists. And yet, as we have regularly written here, this investment class is a critical step in the growth of so many young companies and it deserves greater attention and organization and an injection of professionalism that is beginning to happen.
Even in a series of debates at the conference — hosted by the genial Frank Peters, a sometime contributor to our blog – there was little real disagreement. The one exception was in one exchange about crowd funding, with long-time angel and venture capitalist Catherine Mott seeing little value for angels in the push to open up startup investment opportunities to retail investors. Brad Ross, a Kingston-based angel and co-founder of Entrust, told me in a corridor conversation afterwards that all the objections raised over crowd funding are straw-man arguments. Effective crowd-funding schemes have been introduced in other jurisdictions, he said, avoiding most of the pitfalls that critics here in Canada cite. I have asked Ross, who is working on the crowd-funding file with the Canadian Advanced Technology Alliance, to write a post for us on the subject. Keep your eyes peeled for that.
Perhaps the highlight of the summit was a keynote lunchtime speech by Mark Tewksbury, multiple Olympic medalist and chef de mission for Canada at the 2012 games in London this past summer. In a passionate talk driven by highly infectious emotion, Tewksbury drew obvious but effective parallels between an entrepreneurial pursuit and the quest for an Olympic gold medal. “Someone has to win this race tonight,” Tewksbury said he told himself on the day he qualified for the finals in what would ultimately be his sole Olympic gold race. “Why not me?” The same question can be asked and answered by entrepreneurs.
Tewksbury also cited the Own the Podium program that funnelled athlete support dollars to those individuals and sports that had the best chance of actually winning a medal. This was a sharp departure from the standard, very Canadian and egalitarian model of dividing up dollars “one for me, one for you, one for me, one for you, one for me-diocrity.” We need to identify and back our business winners in the same way, he said.
If that means backing those with the best chance of generating real profits and real returns, and building real and long-lasting companies, then Canada’s own the podium program for startups needs to focus on the enterprise.
Francis Moran and Associates is an associated team of seasoned practitioners of a number of different marketing disciplines, all of whom share a passion for technology and a proven record of driving revenue growth in markets across the globe. We work with B2B technology companies of all sizes and at every life stage and can engage as individuals or as a full team to provide quick counsel, a complete marketing strategy or the ongoing hands-on input of a virtual chief marketing officer.