Historically, we saw venture investing trending toward technology opportunities catering to either large enterprises or consumers. Many VC’s avoided investing in technology companies focused on small and medium-sized businesses (SMB). The conventional wisdom was that this sector suffered from three hurdles, which made it very difficult to build long-lasting and profitable businesses:
- Customer acquisition and retention costs are low compared to lifetime value.
- Sales and marketing costs are high
- Price points are low
- Churn is high
- Service requirements are high compared to lifetime value.
- Consumer technologies can be scaled more virally compared to business technologies.
Approaches to building companies catering to SMB’s have changed, and these hurdles no longer apply. Therefore, it is an ideal time to invest in technologies that serve this market because of the following developments:
- Targeting and reaching new prospects and clients has become much easier given the emergence of data, search targeting capabilities and social platforms.
- Servicing customers is more economical given improvements in communications. These include ubiquitous chat technologies, self-serve technologies, and multimedia (e.g. video, collaborative tools, etc.).
- The emergence of cloud makes maintenance much cheaper and easier.
- Customer acquisition tactics have moved from “push” to “pull.” End users are now driving the adoption of new technologies within corporations, and companies like Box and Salesforce.com are perfect examples of this. These companies, as well as many other successful companies we’re seeing, are built on the power of consumer pull and the “consumerization of software distribution.”
The combination of these trends and the company’s impressive track record led to our investment today in Adaptive Planning, the leader in cloud-based corporate performance management (CPM). The partnership came about when former NVP EIR John Herr (Adaptive Planning CEO) approached us to invest. Though our existing relationship opened the door, what sealed the deal is the success that Adaptive Planning is experiencing.
The company has more customers (over 1,200) and more partners (over 200) than all the other cloud CPM providers combined, and it is the #1-rated brand in midmarket CPM according to Merrill Research. Adaptive Planning also ranks #1 in customer satisfaction among leading CPM vendors, according to Gartner and BPM surveys.
Moreover, Adaptive Planning’s target market is large and hungry for a technology offering that can provide a complete and simplified solution in contrast to the existing enterprise software options currently available. The team has developed a robust product that has been well accepted in the marketplace—and today’s investment will help Adaptive Planning expand and grow its sales team to accommodate the demand for its solutions.
I worked closely with CEO John Herr for many years at eBay and I’m excited to partner with him again to help cultivate the company’s leadership position in this attractive and rapidly growing market.