DEMO: Are there any home runs left for enterprise startups?

During the expert panel assembled to discuss enterprise startups launching at the DEMO conference in Palm Desert (co-produced by VentureBeat), an audience member asked a provocative question: Are there any big, “home run” opportunities still remaining for startups selling to businesses, rather than consumers? Or is a ho-hum acquisition the best you can hope for?
Emergence Capital’s Gordon Ritter simply laughed and said, “Ouch,” when he heard the question, while MHS Capital’s Mark Sugarman responded, “I don’t think we’d be investing in the space if we didn’t think there were any home runs left.” (Side note: Sugarman is an investor in VentureBeat.)
John Taschek, vice president of strategy at Salesforce.com, focused his answer on enterprise software giant Oracle — not surprising, since Salesforce competes with Oracle in some areas. Plus Salesforce, particularly chief executive Marc Benioff, likes to take swings at bigger competitors. Taschek said Oracle only serves 20 percent of what an entire business needs, so there’s a lot of room for other products and companies.
“There’s so much innovation happening that they’re not going to be able to keep up,” Taschek said. At best, Oracle will try to keep pace through acquisitions, but he predicted it will fall behind.
NextLabs chief executive Keng Lim predicted there will be “a vacuum in the enterprise software space” in around five years, because there has been a lack of innovation for the last four years, and that pattern could continue for another four or five years. Presumably, that would create an opening for a company to do something big and disruptive.
So if all of these guys feel optimistic, where do they see the great opportunities? The common theme was a refrain that has become familiar at any enterprise software event: “The consumerization of IT,” where business products are reshaped to more closely resemble consumer services. One of the keys to this approach is thinking more about how to hook users and to spread your product virally throughout a company, rather than on how to close a big deal.
Several panelists pointed to Yammer as a success story. The Twitter-style business microblogging tool is now reaching 60,000 customers, it recently announced. Yammer offers both free and paid versions, and Ritter, whose firm invested in the startup, said chief executive David Sacks started by thinking about how to get the product into as many businesses as possible.
“And then he figured out, ‘How do I upsell and add value?’” Ritter said.
[image:flickr/kevinrushforth]
Companies: Emergence Capital, MHS Capital, NextLabs, Salesforce.com
People: Gordon Ritter, Keng Lim, Mark Sugarman