Archive for February, 2011
For years, VCs have had the refrain of how hard it is to sell to the huge but massively fragmented SMB market. Invoking the curse of the SMB market was a great way to winnow out our email boxes and/or avoid a followup meeting.
Today, though, SMB-facing businesses seem all the rage. Why the turnabout?
It’s simple — the migration onto the Web has flipped small and medium sized businesses from the hardest to reach to the easiest to reach businesses. Today, nearly all SMBs are online — using the Web both for their own business and to find goods and services. As a result, where larger enterprises still require direct sales, SMBs often can be brought into the sales funnel using very highly leveraged online marketing campaigns, whether it be SEM/SEO, email marketing, or social media. Large and very profitable software-as-a-service businesses can be built targetting SMBs without ever raising the type of capital necessary for businesses that depend on a direct salesforce.
At Polaris, we’ve had the chance to see this across a number of our software companies, most notably LogMeIn, which went from tiny startup to billion dollar public company in just 5 years and less than $20 million in capital. With our partner Dave Barrett, who worked closely LogMeIn and its marketing guru Sean Ellis, leading the charge, we’ve since backed a range of companies focused on bringing cost- and -management-effective solutions to SMBs, including the likes of Egnyte (file management), KISSMetrics (analytics), Recurly (subscription management) and a couple other not yet public projects.
OK, so maybe it’s not exactly “sexy,” but it sure is a great way to build highly profitable businesses…
There is alot of hype swirling around these days about the big platform shifts: social, local, mobile, cloud, it’s all transforming the web as we know it, we hear just about every day now.
I buy into alot of the hype. Each of these is a bid deal in its own right, and the four together feel more like a tsunami than a wave.
But one trend that I don’t hear nearly as much about is at least as important as those four: the rise of data as the killer differentiator for Internet businesses. Sure, social/viral customer aggregation is changing the rules, and yes every web business needs a mobile strategy, and of course everything is moving to the cloud. But, if you ask me, the line between the winners and also rans of this generation’s startups is going to be drawn according to who really and truly understands data, and uses it to their own and their customers’ advantage, versus those who only give data lip service in fundraising pitches.
Most entrepreneurs we meet with these days are at least smart enough to pay homage to data being a key longterm asset. But I am not convinced many of them really are capable of executing on this. I’ve been fortunate to have a front row seat from which to appreciate both the challenge and power of leveraging data. For three of my current portfolio companies, data is the single most important strategic asset contributing to their success. And in each instance, major investments in infrastructure from the outset, a near maniacal passion for analyzing data, and some pretty crazy math chops, are key aspects of the companies’ culture and strategy.
While you should certainly include that data slide in your fundraising pitch, first ask yourself whether you’ve really made it a priority>
Social Networks are all about our friends — we “friend” people on Facebook for a reason, right? Well, of course. Our social graph is just a fancy term for our network of friends.
But as the space emerges, the social web is more and more going to be about people we don’t know yet. Talking to startups doing interesting things in the space, we are hearing more and more about leveraging the social web to help you make connections with strangers you have a reason to know. Your mobile device tells you about people in your close proximity; or you get to connect with people you don’t'know but have similar interests to; or you find a service provider who has been endorsed by someone you know; or you identify a friend of a friend who works at that company you are dying to go work for.
The fun of the social web will continue to be around your friends, but the value is going to be more about finding strangers.
