The good news for entrepreneurs working on startups in leading edge IT areas such as cloud computing, virtualization, big data, and mobile, say three venture capital partners, is that despite the general retreat of capital in the last two years, money is available for startups in exciting new areas.
“I would rate startups in the cloud as close to an 8 or 9,” Charles Beeler, partner at El Dorado Ventures told SiliconAngle Founder John Furrier in a panel interview webcast over SiliconAngle.tv recently. The full transcription is available on Wikibon.org.
“All these areas and really novel technologies are presenting huge opportunities for new businesses,” agrees Pete Sonsini, partner at New Enterprise Associates (NEA). “Even in traditional areas like storage – which is, you know, storage, it's boring old storage – is seeing crazy things happen, and there's a lot of innovation to be had as it relates to cloud.”
On the user end, the combination of cloud and mobile computing is going to enable exciting new applications, says Ping Li, partner at Accel Partners. “I do think your imagination can run wild. If you can process all the data in the cloud through a Hadoop cluster, and you can build a really neat user interface through the iPhone, imagine some of the applications that are possible that just don't exist today.”
The funding market has tightened up, they admit, but the level of opportunity means that the healthy venture capital companies “have to look past that and look at the opportunities for the businesses,” Mr. Beeler says. “Fortunately you have three groups here who have capital to put to work so we can actually fund these things.”
What VCs Want
So the VCs are looking for entrepreneurs with creative ideas. But beyond that, the panel agrees, they are looking for the same kinds of things they have always wanted.
“For me it still comes down to the team,” says Mr. Beeler. “I don't care where they went to school, I care what they know about the market they are going after. What have they done before that shows they understand the market they're going after? I'm hoping that the entrepreneurs we back know a lot more about the market they are in than I could. At the stage where we invest it really is all about the team because good teams have good ideas, and they know how to pursue them.”
Mr. Sonsini says four areas – people, markets, business traction, and technology – define a strong startup prospect for him. “Does the entrepreneur really have that privileged insight and opportunity? Do they know this market and this opportunity and how to exploit it better than everybody else? At the end of the day that is probably the most important thing.”
In a new market such as cloud computing, Mr. Li says, the first wave of ventures are usually focused on providing new features for existing platforms. The second wave will be much more creative new platforms and services built on the unique strengths of the new technology. “Sometimes trying to parse out which is which is not an easy task.” But it is that second group of ideas that do not fit into existing classifications that offer the most exciting potential. Those that succeed can become the real winners, and that is what the VCs are really seeking.
Action Item: In the past a single major technology such as personal computing has driven market growth. Today's leading edge is more complicated, and the most exciting opportunities for entrepreneurs today are found at the conjunctions among the new technologies of the cloud, big data and advanced analytics, virtualization, and mobile computing. For those who can harness these technologies to provide valuable services for business or consumers can grab the attention of the VC firms and win the backing for the next big success.