Trends for investment - Rob Chandra
Date: Thursday , May 07, 2009
We are enthusiastic about the shift in enterprise computing architecture that is well underway. Enterprises are shifting from owning the technology to renting it. Companies in the past might have owned their infrastructure but in the future will simply rent the compute cycles by plugging into a cloud. Our portfolio company Parallels helps enable this could computing architecture. In a similar way, enterprises are shifting from buying licensed software to renting software on a recurring monthly license manner. The industry refers to this trend as Software as a Service and we believe we have among the largest SaaS portfolio’s in the venture industry.
Entrepreneurs and consumers continue to find new and better ways of using the constantly connected world of the internet to all their devices. Social networking companies like our portfolio company Linked In are allowing people to connect and trade information for professional benfits. However, with all this internet connectedness comes a loss of privacy and perhaps the challenges of having your identity compromised. So, new companies like LifeLock are emerging to prevent identity theft. We expect that in the years ahead more and more applications will be developed that take advantage of the constantly connected consumer.
The wireless community continues to deliver better and better consumer experiences with higher bandwidth, more applications, and better handheld devices. We are rather enthusiastic about the amount of innovation going on in the wireless world.
Silicon valley is tranforming to become the Green Valley. What’s interesting for us is that several of the clean technology markets are larger in size than the IT industry. The disruption in the clean tech world represents a once in a lifetime opportunity to change the world and also realize your professional aspirations. While many companies in this sector are too capital intensive to be commercial successes, we are enthusiastic about solar companies like Miasole and LED companies like Exclara.
Within our life sciences practice, we believe that the Obama’s adminstration support for stem cell research will allow for some interesting new life sciences platform companies. While the FDA approval process remains a key obstacle for any life sciences start-up, we believe that one area in which the U.S. and Silicon Valley will retain its competitive advantage is in drug discovery. The health care industry remains a mess. Just ask anybody who recently experienced it as a patient.
Entrepreneurship is no longer just about companies based in Silicon Valley. Indeed, some very interesting companies are now in emerging markets. We were the first top tier U.S. fund to set up offices in India. We remain very active investors in companies catering to the unique needs of middle class Indians. One example is that India remains acutely short of power. So, our company Orient Green Power Limited has now become India’s largest independent producer of clean energy.
Finally, several large sectors of the U.S. economy are about to be re-regulated: health care and financial services. We expect the new regulations in both sectors will create opportunities for new entreprenurial companies.
New areas of opportunity for innovation
We continue to see several interesting areas for innovation that, in fact, require Silicon Valley’s unique talent for solving big and tough problems. As one example, we have been looking for an entreprneurial team to help solve the problem of distributed energy storage. When a windmill or solar firm produces energy, how do you store it locally at low cost? There are many other such problems for entrepreneurs to solve. We hope to find and back such entrepreneurs.
Advice to entrepreneurs
First, your company must solve an important problem. There are lots of things that companies do which remind me more of muscle builders and not painkillers. People won’t always go to the gym to build muscles, but they will turn their house upside down looking for an aspirin when they have a headache. So, the more your product is like an aspirin, the more likely it will succeed. Second, the entrepreneurial process takes time. When my portfolio company IPC went public during 2008, we had been involved with them for 8 years. Good wine takes time to age. So, be prepared emotionally and financially to invest the time and effort over time to build success. Third and final advice is that there is an element of luck in all successful ventures. If you do happen to get lucky, don’t let it go to your head.
Rob Chandra is Partner, Bessemer Venture Partners.