Enterprise VC Kevin Spain is excited when he looks at the today's tech landscape.
Spain has spent the last six years as a general partner for Emergence Capital Partners, which invests exclusively in enterprise startups, preferably at the seed stage.
With $575 million under management in three funds, it's not the biggest VC in the Valley. But it's had its share of stars, including Salesforce.com and SuccessFactors (which SAP bought for more than $3 billion last year).
We caught up with Spain to get his sense of where the enterprise tech was headed. He sees massive changes coming:
- A trend he calls the "mobile first platform" will transform the workplace. "A lot of legacy players — folks that build enterprise apps on prior platforms — will end up being disrupted by new players who are better equipped to take advantage of the new mobile platform. That could even happen to Salesforce and SuccessFactors that grew up in the web world."
- One example is his company Doximity which is like "LinkedIn for doctors." It's an iPhone/Android app that lets them chat about patients in a HIPAA-compliant way. Another (which is not one of his companies) is Gigwalk. It lets enterprises hire local labor for one-off projects like price checking the competitors. Microsoft used it to get people to take photos of restaurants to populate Bing.
- The trend of "technology-enabled managed services" is another biggie. This is SaaS software with a labor component. One example is SupportSpace, a virtual tech support squad for hire. Employees are all in the U.S. and work for home. For instance, Geek Squad uses SupportSpace, he says.
- VCs are tripping over themselves to find a fund enterprise startups. "There was a long period of time when we had much of this market to ourselves. Obviously competition is heated up."
- There are also signs of a tech bubble, mostly on valuations of later stage companies. "I feel like there's some bubbly activity in certain areas," he says. Valuations "have been skyrocketing" for growth-stage companies talking about an IPO within 12-24 months because valuations for public enterprise software-as-a-service (SaaS) companies "are really healthy right now. Whether those valuations are justified or not is a different story," he says. As for Series A companies where Spain mostly invests, valuations are rising there, too, but not as high, he says.
- He loves the SaaS model because software makers can predict their revenue. "Because they are recurring revenue, you spend $1 today to acquire a customer, you then have a stream of very profitable revenue that goes on for years. You can predict the future fairly well." That's not the same with the old licensing model, where "you start every quarter with zero in revenue. You have to sell more than you did last month in order to continue your growth."
- He's not hot on the open source model, even though Red Hat just hit a $1 billion in revenue. "Red Hat, one example does not a trend make. I think there are many more examples in favor of software going the way of the [SaaS] and recurring revenue than in the open source direction."
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