If your company is getting ready to go public, beware: VCs don’t want your varsity-level software offerings. Instead, they want quirky consumer services and quirky enterprise services.
Most investor focus is still on the few key players, like Uber, Netflix, and Airbnb. But as the rest of the Internet monetizes and moves onto the next-gen “cloud” platform, there’s also VC targets like Zynga and Pinterest. Mark Zuckerberg is having a hard time raising money for his next billion-dollar startup. However, enterprise software’s status as the top emerging segment of the market is already starting to dwindle, so people like Yammer founder David Sacks and Graphiq founder Kevin Healy are trying new things.
But software is leading the way, and as the world goes to the cloud, you want the most useful applications out there. I’ve also got seen a lot of promising startups go under, like Slack and Disqus, and soon only the big dogs with deep VCs are likely to survive.
But here’s the problem for moonshot enterprise startups seeking Series A funding. If they’re trying to tackle big problems like energy efficiency, healthcare, or new industrials, it will require building large team with significant experience that can consistently deliver on their vision. For a company like Kik, it’s growth-centric social messaging platform. For P2P lending platform Prosper, it’s actually lending out your own money and potentially risking your entire retirement for a friend who just signed up.
Then there’s going to be an investor energy hard to tap. Fundraising is hard regardless, but it’s particularly brutal when your hot new software is only as good as the database sitting atop it.
If you’re trying to launch a thriving, seemingly mission-critical product, it’s almost impossible for your VCs to pony up large seed rounds or unicorn funding. They’ll prefer to stick with well-financed successes like Airbnb, Shopify, Kik, Dropbox, Riot Games, or AirBNB. They want a bit of the “tide-passing-through” story, and with so many competitors in the space, they’ll rather you make your own differentiation and show far more momentum than the competition.
Successful businesses of the future will have to prove they can carve out a unique niche and pursue a big long-term vision as the world goes to the cloud. That’s going to be exactly the opposite of what the VC’s are used to getting paid for today.
Stay tuned as we explore these issues in more depth, as well as profiles of another bunch of young companies who are at the leading edge of many of them, including accelerators Geeks on a Plane and Thinkful. You can listen in as I talk about the difficult situation facing Thiel-backed Chan Zuckerberg Initiative, and direct you to learn more about how folks like Mark Zuckerberg, Zuck Visionaries, Andreessen Horowitz, Crosslink Capital, Leedrick Yang, Lily Liu, BBG Ventures, Adeo Ressi, Azuqua Labs, Whitepages, and Wasabi can capitalize on the opportunity. And I promise that my goal isn’t to reveal confidential company information here or hide startup startups from you.