Enterprise startups: Is the fun about to end?
If you're a business technology buyer it has never been easier to buy from an enterprise startup due to cloud computing, integration ease and the appeal of being a big innovative customer of a smaller vendor.
But that music is going to stop at some point. The big question is whether you'll be ready. Consider the merger and acquisition and venture capital moving parts of late.
- Venture valuations have surged. So-called unicorns---startups valued at $1 billion or more---aren't so rare anymore.
- At the same time, the Silicon Valley Venture Capitalist Confidence Index, run by the University of San Francisco, dipped in the first quarter to 3.81 on a 5 point scale from 3.93 in the fourth quarter. The index is based on the growth venture environment for the next 6 to 18 months.
- Salesforce was rumored to be an acquisition target of Microsoft.
- In 24 hours last week, CA bought Rally Software for $480 million, Palo Alto Networks bought CirroSecure and Fortinet bought Meru Networks. For good measure, Avago Technologies said it would buy Broadcom. It's worth noting that both Rally and Meru were initial public offerings where shares stumbled once those companies had to report quarterly earnings.
Need more? Funding rounds for enterprise software are a dime a dozen. Not all of these companies are going to survive. Many have been built solely for a buyout offer. There are only so many buyers.
We're likely to see a few varieties of enterprise startups:
- Startups that get B and C rounds of funding, but then stall. These companies will either be bought, blow up or thrive and go public.
- Startups that go public, stall and then get bought.
- Startups that turn into the next Salesforce and Workday and can go it alone (maybe).
In either case, it's highly likely that your enterprise vendor you grew up with is going to be acquired.
Louis Columbus, a contributor to Forbes, recently rounded up the top 100 analytics startups. Finding the top analytics startups is a worthy endeavor. I couldn't get past the following question: Why are there more than 100 startups focused on analytics?!?
You could substitute the analytics category for enterprise mobility management and ask the same question. Simply put, there are too many alleged disruptors chasing one enterprise wallet. The cloud makes it easier to start an enterprise technology vendor. But the cloud also means that the barriers to entry are lower. Lock-in is challenging in the cloud. That reality is good for technology buyers, but does have the side effect of having to judge too many entrants to a market.
In other words, make sure you conduct your due diligence. The tech startup sledding could get tricky out there because it's a safe bet that the new breed enterprise vendor is going to be consolidated---willingly or otherwise.
ZDNet's Monday Morning Opener is our opening salvo for the week in tech. As a global site, this editorial publishes on Monday at 8am AEST in Sydney, Australia, which is 6pm Eastern Time on Sunday in the US. It is written by a member of ZDNet's global editorial board, which is comprised of our lead editors across Asia, Australia, Europe, and the US.
Previously on Monday Morning Opener:
- Lollipop brought the looks, now M needs to update Android's innards
- Can Windows 10 save the PC?
- Three big questions the new Microsoft needs to answer
- The mere idea of regaining privacy sends law enforcement into a tizzy
- Two types of fear, or how to win in the next stage of the cloud
- Apple Watch: When will it become a power tool for work?
- Can Samsung resharpen its edge against the competition?
- Microsoft and Apple are killing the password: Thumbs up to that
- Apple Watch: What does success look like?
- Wishlist for 2015: The solutions we need in business tech