More and more successful companies are taking a holistic approach to serve specific market niches or verticals. Instead of offering a broad-based horizontal solution that may service a larger market, but require more customization and will likely involve competition from larger players, these companies are finding success 'below the radar' by staying focused on a narrower segment.
These companies are also moving beyond simply selling software….. they are inclined towards integrated solutions that they can sell to a segment. For example, this may involve software and outsourced call centers, a specialization in apps on the mobile phone plus a website, all working in concert to help solve a problem in the insurance industry, automotive industry, healthcare vertical, and so on. By offering a highly specific solution to the vertical, these companies can scale faster, require less capital, have shorter sales cycles, and also dramatically reduce implementation times.
A second interesting trend is the blending of the consumer and enterprise spaces. Some of the most exciting young companies are the ones that ultimately make money from enterprises but also have a very strong consumer value proposition. For instance, LinkedIn (a Bain Capital Ventures portfolio company) whose service facilitates business networking, while simultaneously providing an invaluable service to enterprises that are trying to find and attract talent. I believe that we will see more and more companies that take advantage of the consumer trends of social networking, mobile, location apps, and ultimately use them to sell a business oriented solution.
These trends have lured many to don the entrepreneur role, and the advice to these entrepreneurs comes not only from my observations as a venture capitalist but also from my eight years at Trilogy Software, a successful venture backed company in Texas. First, it is important for one to be a domain expert – make sure you know more about the ecosystem that you are playing in than anyone else. Once, you are aware of the system, invest in building a strong culture early on – people should want to work hard and be at the office all weekend for reasons other than monetary benefits. Many companies don’t have this foundation and, as a result, when the startup hits a rough patch (which inevitably all startups do), it becomes tough to retain talent.
Second, while building the team hire ‘generalist athletes’ early on and functional experts later. In the early days of a startup, a business goes through much iteration. You don’t know exactly what skill sets you will need and therefore a startup is much better off hiring people who can wear lots of hats and get things done. When one scales and the business becomes more focused, one will be in a better position to identify and hire specific functional experts. Third, set stretch goals. This was a technique we used often at Trilogy. It’s amazing how a startup can get bogged down in conventional thinking and incremental changes. The best startups have ridiculous goals, many of which are never achieved, but the process of setting and trying to achieve crazy goals can unlock out-of-the-box ideas and drive quantum leaps in performance.