2004 new era of optimism in software heidi roizen, managing director mobius venture capital...
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2004New Era of Optimism in Software
Heidi Roizen, Managing Director Mobius Venture Capital [email protected]
Ann Winblad, Partner Hummer Winblad Venture Partners
Hummer Winblad Venture Partners
• First Fund Exclusively for Software Investing– Founded September 1989
• $1B Under Management– 9 investment professionals– Fund V: $425M (raised 2001)
• All Stages, focus on early stage including seed– Usually Part of First Round of Venture Funding– Usually Lead or Co-Lead
• 90+ Investments to Date: 16 IPOs, 29 Acquisitions
Mobius Venture Capital
• Founded in 1996 in conjunction with Softbank • $2B Under Management
– 13 investment professionals: 5 managing directors– Fund VI: $1.25B (raised 2000)
• All Stages, focus on early stage including seed– Usually Part of First Round of Venture Funding– Usually Lead or Co-Lead
• 100+ Investments to Date
Entrepreneurs, then VCs
Software Big Leader in Early Stage
• Software is the Big Leader in Early Stage – 27% of Early Stage Financings (Q1-Q3) 2003– 22% of Early Stage Dollars (Q1-Q3) 2003
• Capital Efficient Profile Matches Era– Early Stage Software Average (2002) Round is $4.0M– Average of other sectors is $6.2M Round
• Software Still the Largest Investment Area– 20% of Overall Investment Dollars (Q1-Q3), all stages
• But 28% Decline from 2002
Drivers for Software Innovation and Investment Opportunity
• Outsourcing– Leveraging high caliber 24X7 resources
• Specifically India
• Open Source– Driving innovation for early stage developers– Competitive ‘turmoil’ among the larger players
• Moore’s Law and Metcalf’s Law– Broadband reaches critical mass deployment– Storage costs dramatically lower, affordable in personal devices
• On demand solutions– New platforms, new pricing
• M&A at the top reopening market segments– Documentum, Rational, JD Edwards….
Fast Pace of Technical Innovation Creates New Leaders and New Laggards
Consumer:Customer Demands Driving Innovation
• Digital Lifestyle demands:– Communication and collaboration
• Interactivity across devices
– Immediacy– Omnipresence
• Always on, anywhere
– Customizable• My content, my creativity
– Fair prices
Broadband, Coupled with Cheap Storage Driving Digital Lifestyle
Enterprise:Customer Demands Driving Innovation• Real Time Connected Enterprise
– Communication and collaboration• Interactivity and security across enterprise and industry
partners– Shift of business value to communications platform– Immediacy
• Real time business performance management– Confidence, Security, Privacy
• Sarbanes Oxley effect, GLB, HIPPA– Open architecture– Solutions and pricing
• Undeniable short term ROI • Software as a service/utility
Internet Era Creates New IT Infrastructure
End to end integration of transactions Existing applications and data leveraged Applications acting as processes Workload optimized to any server Massive amounts of information: stored and ‘flowing’
New Set of Software Challenges: Expanding the Software Stack
2004: Start of Era of Optimism
• Most CIOs are budgeting for new projects – Cost Reduction and Integration (2001-2003) – Integration and New Project Expansion (2004 - )
• Will lead new phase of venture capital investing
• Demand improving:– Enterprise– Consumer– Small and medium business
• Early Stage Venture Capital at stable bottom– Best time to start a company– Best time to invest, especially at seed– Best time to be an optimist
Fewer Investors, Better Companies?
• Corporate/Strategic investors have abandoned the sector– $211M in 2003 versus $6B in 2000
• Individual investors have abandoned the sector– $84M in 2003 versus $2.4B in 2000
• VCs syndicating most deals– Multiple VCs in most rounds
Recent Hummer Winblad Investments Focused on Enterprise Infrastructure
• Security, Reliability– Voltage– Cenzic
• Data and Disaster Recovery– Abhai
• Management – Scalent – Jareva (early); (acquired by Veritas)
• Application Integration– Knowmadic
• Provisioning and Identity Management– Bridgestream
Recent Mobius Venture Capital Investments
• Planitax: enterprise tax software• MessageCast: Broadcast IM management• CastBridge: user-driven data sharing• Auctiondrop: “you drop it off, we sell it on eBay”• Perpetual Entertainment: MMOG• Reactrix: visual display meets motion sensor
Closing Advice
• The opportunity window is open now in software• Make lots of friends with engineers• Meet customers early
– Customers know what they want and are smart technologists
• Focus, Focus, Focus– Otherwise tough to be “Best” at anything
• The intellectual capital in your company and coaching your company is more important than money– Most companies die of self inflicted wounds
