Niche Segments Emerge Fertile Grounds for Entrepreneurs

Date:   Tuesday , December 01, 2009

Although this recession is impacting all facets of economy, some segments of the industry are riding the tailwinds of industries that must consider new innovation in order to survive over the long-term. One such example is Education. The soaring costs of higher education provide fertile grounds for entrepreneurs who can offer new educational tools to a value-conscious consumer. The same is true for technologies that lower the costs of healthcare and financial services industries, both of which are in a great deal of pain.

In the mobile world, there is a tendency to steer clear of companies that sell directly to carriers, which have very long sales cycles, and are generally capital intensive as well. New areas of innovation within the SaaS delivery model are also being explored and startups are taking advantage of emerging cloud computing and virtualization technologies that dramatically lower the costs of deploying and maintaining applications. The budding entrepreneurs seem to have retrained their focus from core, IP-centric technologies (like hardware and infrastructure) to applied technologies and information services.

The level of innovation in the New York metro geography is on an all-time-high and this region will continue to grow as a hub of applied technology entrepreneurship over the years to come. Silicon Valley will always continue to be the major region for core technology innovation but as technology commoditizes, the geography where engineers are based becomes less important. Many of the investments are back, focused on B2B business models with short sales cycles. A few marquis customers and strategic partners will play a key role in fueling the initial growth. These types of investments are more likely to weather an economic downturn and also provide great upside once the economy rebounds.

Though it seems that due to the sudden onset of downturn, many companies are being forced to slash marketing budgets, it is only a half-truth. The people in charge of the marketing spend are actually increasing investments in areas that generate solid ROI and lower the customer acquisition costs. Hence, a great deal of entrepreneurial activity within the media and advertising and marketing services industry has up-sided, to meet the demand of the marketing agents of different companies. A company can have a great technology and address a fabulous market, but if the company does not match the right sales strategy to its product and communicate its value proposition effectively, it will be difficult to scale especially in the current economic climate. It is important to understand a customer’s pain point and how you can apply your product or service to deliver significant ROI. The same is true when you pitch to investors.

Entrepreneurs must not lose their focus on capital efficiency. Raising external capital now takes much longer than it did a few years ago; so preserving cash for a rainy day will place you in a better position once the economy rebounds. It may take many more calls and meetings to close the sale, but finally the companies will be rewarded for the persistence as competitors fade away and the exit window reopens. The breadth and depth of the talent pool at any company’s disposal is unprecedented. Many of the venture industry’s greatest investments occurred in pre-recession times and entrepreneurs will play a major role in putting our economy back on the track.

The author is Vice President, Greenhill SAVP