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Enterprise Businesses: Venture Capitalists Focus on Enterprise Software in 2013
Businesses focused exclusively on consumers are losing favor with investors. 2013 is shaping up to be a year where businesses focused on enterprise software will do well. Peter Cohan of Young Entrepreneur reports that consumer businesses like Facebook, Groupon, and Zygna were all well below their IPO first-day prices by 11 percent, 81 percent, and 75 percent, respectively.
The top seven venture-funded enterprise software startups are shown in the chart below. The total venture capital injected into these businesses in 2012 exceeded $600 million. Data for the chart was supplied by the National Venture Capital Association and compiled by Marcus Wohlsen at Wired magazine. The NVCA found that in 2012 venture capital investments across all sectors declined by 10 percent. The year saw investments of over $26.5 billion in 3698 deals. That’s the first time in three years that there was a decline in spending. Industries like clean technology and life sciences saw the biggest declines, while software deals actually saw good gains.
| Box, Inc. | $125,000,200 |
| Drilling Info | $116,832,000 |
| GitHub | $99,500,000 |
| Internet Pipeline | $71,435,100 |
| Qualtrics Labs | $70,000,000 |
| Cloudera | $64,677,100 |
| Palantir Technologies | $56,120,000 |
Mark Heesen, president of NVCA, said that “We continue to see the impact of public policy on venture capital investment levels in very specific ways. Life sciences investment was suppressed for much of the year, particularly with first-time fundings, due in part to the impact of the regulatory and reimbursement environments, while clean tech investors began moving towards more capital efficient deals less dependent on government support. Simultaneously, investment in information technology flowed, as far fewer obstacles impeded success in those sectors.”
In 2013, to take advantage of the current investment climate, enterprise-focused software businesses like SugarCRM and Alfresco are eyeing potential IPO’s.
As an example of what VC’s are thinking, Promod Haque, venture capitalist at Norwest Venture Partner, said that in 2013 that they are excited about opportunities in health care IT, enterprise software, data networking, and ‘the infrastructure in general.’ The NVCA survey found that 61 percent of VS’s expect increased investments into business IT and a 57 percent increase to health-care IT. On the other hand, NVCA also expects a drops of 61 percent drop in clean technology and 53 percent in medical device investments.
