I think that it is safe to say that when we think of venture companies and the money that they invest, we normally think about smaller startup technology companies as being on the receiving end. Without an influx of venture capital, a lot of these technology companies would never make it past their first year in business and actually produce a product.
The impression that we are getting now is that these companies are beginning to invest heavily into enterprise software companies. Enterprise software is purpose-designed computer software that is used to satisfy the needs of an organization rather than individual users. These organizations come in many varied forms from businesses, schools, interest-based user groups and clubs, retailers and even governments. Enterprise software is an integral part of a computer based Information System, which means that it also includes web site software production.
According to data received from CrunchBase, investments into these enterprise software startups have already exceeded the $5.4 billion mark. That figure represents just the first six months of this year. As a comparison, CrunchBase says that is about how much enterprise-facing companies raised for the entire year in 2013.
Possibly something that has made this possible is the growing number of services hosted through cloud services. These hosted services are beginning to crop up everywhere, in fact, services that were once the domain of a company’s IT department are now being hosted through a cloud service. This has the effect of reducing hardware and maintenance functions.
Cloudera is an enterprise software company that provides Apache Hadoop-based software and training to data-driven enterprises and it is also the company that received a major portion of this year’s funding, receiving $1.06 billion. Investing in companies such as Cloudera has led to a slowdown in commitments to new technology companies.
In talking about Cloudera, Joseph Ansanelli, a partner at Cloudera backer Greylock Partners, said “This is that next future data platform that in 30 years from now the vast majority that structured and semi-structured data would be stored in. Oracle? Their core database is basically under attack from Hadoop.”
New companies have found a way to take advantage of the formidable new infrastructure technologies and are using it to reshape the way that customer service and other business processes can be automated. This has led to established companies acquiring young cloud computing companies. It is a natural progression for a larger company to acquire a startup with good ideas and products and share its resources.
Ajay Agarwal of Bain Capital Ventures, said “One of the themes that we’ve invested heavily behind is this intersection between big data and traditional enterprise application software.” These comments were followed up by Bain’s newest partner, Enrique Salem who said “Historically some of these cycles have been a five-to-ten year change, but we are just at the beginning of this transformation. Historically, $120 billion was spent on hardware implemented inside data centers. Now consumers will start running and picking their own applications and that $120 billion spend that was inside the four walls of the data center? A majority of the spend will not be in the data center, but in companies that are delivering services.”
It does seem that as more companies turn to the cloud and reduce what actually happens in their own data centers, we can expect to see a much wider variety of changes than just how the company functions internally. We have now seen that venture capitalists are willing to fund enterprise software companies and not just go crazy over startup technology companies, what else can we expect to see as more functions become hosted services on the cloud?
Edited by
Alisen Downey