Word has it that these days, venture capital investors are only interested in putting money into software start-ups that deliver their applications on-demand. Licensed software is considered SO last century in VC circles.
But how do you make your on-demand venture a sure-fire prospect for VC dollars? Writing at SandHill.com last week, Deven Parekh and Peter Sobiloff of Insight Venture Partners have listed the "five imperatives" they look for to identify potential winners, and their advice is sound:
- Foster a 'Culture of Adoption'. Enterprise software vendors "have been able to get away with substandard offerings because customers feel locked in by their license and time investments," they write. "In the on-demand world, this can't happen ... Ease of adoption is critical to success."
- Focus on Satisfaction. Echoing the same sentiments as my posting yesterday, they write: "Continually satisfied customers are the basis for recurring revenue and future company performance."
- Leverage Guerilla Marketing. "Our portfolio companies have been successful by leveraging a variety of non-traditional marketing and sales vehicles which save both time and money: working through the channel, telesales, deploying online marketing, capitalizing on PR and world of mouth, and conducting sales meetings via WebEx. All of these methods achieve sales while holding down the cost of sales." In my experience too, this is typical of successful on-demand vendors.
- Utilize New Development Tactics. "Our portfolio companies are making aggressive use of open source technology and offshore development in order to improve the cost effectiveness of their development." As I mentioned earlier today, the use of open source platforms is a characteristic of successful on-demand vendors. Not all of them use offshore developers, but where it makes sense to do so, the cost benefits are unarguable.
- Develop a Flexible Architecture. "We are looking for companies with product architectures that are flexible and easy to convert to hosted solutions." This is a polite way of saying SoSaaS vendors need not apply.