The hottest startups are targeting the enterprise

More than 70 per cent of venture exits in the last two years valued at over $US500 million have been in the enterprise sector

While some of the most successful consumer Internet companies are capturing the headlines today, more than 70 per cent of venture exits in the last two years valued at over $500 million have been in the enterprise sector.

These exits have also outperformed their consumer brethren post-IPO. Of the top 10 largest IPOs in the last two years, all the enterprise companies in that bracket are trading above their offering prices; only one of the consumer companies (LinkedIn) is doing so. The average growth company in the enterprise sector is healthier than it was several years ago, driven by capital efficiency in R&D and sales, and more profitability at scale.

[ REVIEW: How recent dot-com IPOs have fared 

IN PICTURES: From Facebook to 'Star Wars': Techies ring the Nasdaq opening bell ]

Why the wealth of activity in enterprise sectors? The answer lies in two exponential changes these companies are taking advantage of: the massive expansion of computing power and the growth of big data. These are not new trends, but we are on the steep part of both curves and it is making the cycle of innovation/obsolescence shorter than it has ever been before. This is creating great opportunities (at Menlo Ventures, for example, half of our investments are in enterprise technologies), but also big challenges.

Computing power and the cloud

The first major challenge results from Moore's Law, which states that processing power doubles every two years. We're climbing an incredible ramp in computing power that has changed the game for young enterprise technology companies.

In the past, developing a new network switch or storage subsystem required a company to develop its own chips to push performance higher, at enormous financial cost and technical risk. Today, commodity components have so much power, the trick is not faster processing, but higher efficiency and utilization. This means that value creation is occurring in software, not hardware, even if the product that is shipped is a physical device.

In fact, no one really cares much what the underlying physical infrastructure is -- put it in the cloud! -- as long is it works. Cloud computing is a platform shift as important as the move to three-tier Web architecture and to the client-server model. Interesting new companies are now virtualizing the network (Pluribus) and storage layers (Coraid, Tintri) of the data center just like VMware did with computing. With so much raw resource available "on tap," we will surely see more disruptive software companies replacing an older generation of applications.

Companies like Salesforce, Workday, Jive, Dropbox and Carbonite are just the beginning. Security, as one example, is a sector that is still immature in the cloud and one in which we expect to see many exciting startups in the next few years.

Big data

The growth in data is the other phenomenal, exponential wave we are riding. Five exabytes of data are now created every 10 minutes, compared to every two days just two years ago, Google's Eric Schmidt was quoted as saying in 2010. Five exabytes is 5 billion gigabytes, an amount equal to the data crated from the beginning of human evolution until 2003.

Technologies like Hadoop, developed and made available as open source from Yahoo, Google, Facebook and Amazon, are becoming a new layer of commercial infrastructure to cheaply and efficiently store, search, and analyze information in volumes and at speeds never before imagined.

We will see many new investment opportunities in vertical analytic applications. For example, Menlo Ventures portfolio companies like Comprehend Systems, DataXu, eXelate and ParAccel are using "big data" for applications in clinical trials, online advertising and financial analysis and seeing huge demand for the new capabilities they offer.

I cannot remember another time in 16 years in venture capital when there were so many disruptive technologies coming to maturity at the same time. Certainly, these profound shifts in computing technologies do not happen often, but it does seem like they are occurring on a more rapid cycle.

If this is true, then there will continue to be an abundance of opportunity for emerging growth companies. But it also means they'll need to develop difficult, defensible technology very efficiently, and grow to scale and profitability more rapidly than ever before.

Read more about data center in Network World's Data Center section.

Join the PC World newsletter!

Error: Please check your email address.

Tags business issuesapplicationsLinkedIndata miningsoftwarebig datahpcinvestmentsFacebookcorporate issuestech startupssupercomputing

Our Back to Business guide highlights the best products for you to boost your productivity at home, on the road, at the office, or in the classroom.

Keep up with the latest tech news, reviews and previews by subscribing to the Good Gear Guide newsletter.
Show Comments

Essentials

Lexar® JumpDrive® S57 USB 3.0 flash drive

Learn more >

Microsoft L5V-00027 Sculpt Ergonomic Keyboard Desktop

Learn more >

Mobile

Lexar® JumpDrive® S45 USB 3.0 flash drive 

Learn more >

Exec

Lexar® Professional 1800x microSDHC™/microSDXC™ UHS-II cards 

Learn more >

Lexar® JumpDrive® C20c USB Type-C flash drive 

Learn more >

HD Pan/Tilt Wi-Fi Camera with Night Vision NC450

Learn more >

Audio-Technica ATH-ANC70 Noise Cancelling Headphones

Learn more >

Budget

Back To Business Guide

Click for more ›

Most Popular Reviews

Latest News Articles

Resources

PCW Evaluation Team

Azadeh Williams

HP OfficeJet Pro 8730

A smarter way to print for busy small business owners, combining speedy printing with scanning and copying, making it easier to produce high quality documents and images at a touch of a button.

Andrew Grant

HP OfficeJet Pro 8730

I've had a multifunction printer in the office going on 10 years now. It was a neat bit of kit back in the day -- print, copy, scan, fax -- when printing over WiFi felt a bit like magic. It’s seen better days though and an upgrade’s well overdue. This HP OfficeJet Pro 8730 looks like it ticks all the same boxes: print, copy, scan, and fax. (Really? Does anyone fax anything any more? I guess it's good to know the facility’s there, just in case.) Printing over WiFi is more-or- less standard these days.

Ed Dawson

HP OfficeJet Pro 8730

As a freelance writer who is always on the go, I like my technology to be both efficient and effective so I can do my job well. The HP OfficeJet Pro 8730 Inkjet Printer ticks all the boxes in terms of form factor, performance and user interface.

Michael Hargreaves

Windows 10 for Business / Dell XPS 13

I’d happily recommend this touchscreen laptop and Windows 10 as a great way to get serious work done at a desk or on the road.

Aysha Strobbe

Windows 10 / HP Spectre x360

Ultimately, I think the Windows 10 environment is excellent for me as it caters for so many different uses. The inclusion of the Xbox app is also great for when you need some downtime too!

Mark Escubio

Windows 10 / Lenovo Yoga 910

For me, the Xbox Play Anywhere is a great new feature as it allows you to play your current Xbox games with higher resolutions and better graphics without forking out extra cash for another copy. Although available titles are still scarce, but I’m sure it will grow in time.

Featured Content

Latest Jobs

Don’t have an account? Sign up here

Don't have an account? Sign up now

Forgot password?