“In software, companies selling to IT have raised the most capital, then marketing, then HR, which is close consistent with software outcomes.”
At $13.4 billion in 1,020 deals, the first fiscal quarter of 2015 clocked in the most first-quarter funding since 2000. Investors threw 26 percent more money into deals than they did in the first quarter of 2014.
How much of that is software and tech?
The funding software companies received compared to startups in other sectors has doubled in the last decade, from 21 percent in the first quarter of 2006 to 42 percent in the first quarter of 2015. The second-biggest sector for deals was biotechnology, with $1.7 billion going into 124 deals.
The single over-arching theme is this idea is that one should not compete, one should try to differentiate really hard. You want to do things that are one of a kind, you want to do something like a monopoly. You don’t want to do things that put you in cut-throat competition, like opening a restaurant.
More for the “tech world is not normal world” files.
WTH: How do you see the path towards the software-defined Data centre?
AB: What I believe is driving this trend is that developers and organisations are looking to move extremely fast. Developers are getting used to the paradigm of going on AWS (Amazon Web Services) and getting resources immediately instead of weeks/months of provisioning time. That is the benchmark against which they are now holding their internal IT organisations.
They are benchmarking their IT organisation against AWS in terms of ease-of-use, agility and price. I think that is the fundamental macro trend that is driving the desire for the software defined data centre.
That feels right, and is probably missing some tricks (doing better analytics, new end-user devices, etc.), but hey, like I used to say cloud == speed.
If it weren’t for these thumb-fingered rich idiots destroying technological development, we’d be sipping champagne on Mars right now.
I like this post on what filling up the deal-flow pipeline for VCs looks like. For example, a good bozo bit heuristic:
One of the reasons that a meeting doesn’t go well is that the founding team will say they expect $50 million in revenue in 5 years, but they have difficulty articulating how they’ll get to their first $1million.
Having worked on the buy side of the table (when I was in corporate strategy, working on M&A for software and cloud at Dell), there’s a similar story for what the exit looks like.
When you’re on the buyer side of the table, you see an equally large number of pitches, but also from investment bankers (i-bankers) with their fancy banker books. They try to reverse engineer what your strategy is (briefly: what your motivations, hopes and dreams are [hopefully revenue!]…your criteria for buying companies) and present a good analysis and story for companies you should buy.
Companies themselves visit you a lot and pitch everything from partnerships, to investing in them, to the allusion of being bought. It’s sort of funny, very rarely does a company ever come to you and say: you should buy me!
Just as with VCs, because of the high volume of incoming meeting requests, you develop a set of criteria for bozo bitting companies, fair or not.
The whole process is an annoying poker like process where each side is trying to bluff about how much it’s bluffing. In theory, the numbers your shown are good and genuine – but that all mostly relies on trust based on relationships and body language, early one, before lawyers and fine print gets involved.
Anyhow, one day I hope to write-up more deeply what it’s like being on the buy side of the table: that really doesn’t get addressed enough. There’s lots, and lots of bonkers stories and principals to extract.
The influx of cash in technology is largely the result of the low interest-rate environment, Bill Gurley, a partner at venture firm Benchmark, said in a March 12 interview on Bloomberg West. Yields on 10-year Treasuries have hovered below 3 percent since 2011.
“There’s a lot of capital searching for a home,” said Gurley.
For me, it was a bunch of numbers. You can convince a bunch of VCs with numbers. The churn was low. The revenue was up. Talking to the customers, the sentiment was that this could grow within their companies. There was a huge market with cloud-based file sharing with both consumers but also enterprises.
And, on pivoting to “enterprise”:
In 2007, the consumer market was still the target at Box. But by 2008, individuals were using Box’s file storage and sharing services for business. In 2009, groups started using Box products within their companies. In 2010, Hamid said that “whole departments moved onto Box,” with entire businesses joining in more wholeheartedly in 2011. By 2012, the CIOs finally realized (or admitted) that hundreds of employees were using Box, essentially forcing their hands to get involved.
The technology industry is in the business of creating products and services that either enable new activities or make existing activities less expensive. Venture capitalists are in the business of funding entrepreneurs who run experiments to try to create these new products and services. I believe the only way the technology industry can offer meaningfully improved financial services is by building new services that don’t depend on incumbent companies.