Funding Strategy for Enterprise Software Startups
Enterprise software requires a much different startup/funding strategy then the consumer web startups due to the higher startup costs (Oracle licenses!).
How should a startup in this space approach raising capital?
Are there angels/VC's that are more active in investing in enterprise?
Is there an aversion to enterprise in general?
Should one go straight for VC or seek Angel seed money?
How should a startup in this space approach raising capital?
Are there angels/VC's that are more active in investing in enterprise?
Is there an aversion to enterprise in general?
Should one go straight for VC or seek Angel seed money?
We actually don’t believe the funding strategy is that different for enterprise software startups as opposed to consumer web startups. Costs are slightly higher but the same kind of capital efficiency exists. Costs on the development side have been driven down because of open source. Similarly, costs on the operational side have been driven down because of Amazon, Rackspace and others while distribution models have been much more focused around low cost web channels.
As a result we have been extremely active in the space investing in both enterprise applications and infrastructure through companies such as SocialCast, Assistly, Loopfuse, Syncplicity, Loggly, Urban Airship, PuppetLabs, Scio, and others. We think there is a huge opportunity in enterprise as the next generation data center and resulting applications evolve. There are also others who are active in the space such as Radar Partners, Maples, etc.
I would agree that there is generally an aversion to enterprise software investing among seed stage angels and VCs who tend to lean much more heavily on the consumer side. The key is finding the right investor who is not afraid to dig in and understand the space.
In terms of whether to seek angel or early stage VC money, I would suggest staying lean initially and determining the right product fit before scaling and raising significantly more capital. It keeps your options open and allows you to get a better valuation once you understand the opportunity for the business better. I would therefore suggest a seed stage type investor to start with.
As a result we have been extremely active in the space investing in both enterprise applications and infrastructure through companies such as SocialCast, Assistly, Loopfuse, Syncplicity, Loggly, Urban Airship, PuppetLabs, Scio, and others. We think there is a huge opportunity in enterprise as the next generation data center and resulting applications evolve. There are also others who are active in the space such as Radar Partners, Maples, etc.
I would agree that there is generally an aversion to enterprise software investing among seed stage angels and VCs who tend to lean much more heavily on the consumer side. The key is finding the right investor who is not afraid to dig in and understand the space.
In terms of whether to seek angel or early stage VC money, I would suggest staying lean initially and determining the right product fit before scaling and raising significantly more capital. It keeps your options open and allows you to get a better valuation once you understand the opportunity for the business better. I would therefore suggest a seed stage type investor to start with.
