ZapThink Startup Insights: Few Opportunities for Startups in Cloud Infrastructure

ZapThink Startup Insights
Week of June 15, 2010

Funding Insights
Interview: Elon Bloms – LaunchCapital
For this issue, ZapThink spoke with Elon Bloms, Managing Director of LaunchCapital LLC, a market-agnostic, early stage seed investment firm. The company doesn’t specifically focus on IT, but they do look at around 100 deals a year in the IT space. Their portfolio investments are very early stage — many don’t yet even have a single customer.

What’s Hot
Education and Training
Elon sees that training, learning, and education tools and businesses are very hot. There is still significant need for increasingly more skilled education and training, and Elon sees huge corporate overhead in doing training. As technologies, systems, and processes get more complex, the training space will see increase growth, especially on the IT side. He sees a mix of online and offline (in person) training as key.

Sales and Marketing Support
From an applications perspective, Elon sees a ton of opportunity for solutions in the sales and marketing arena, especially plugins that fit around the Salesforce.com and similar ecosystems. Opportunities include lead generation, geolocation, and similar gap-fillers.

Facilitating Research & Development
An interesting niche where IT can have a huge impact is on solutions that can help facilitate R&D in a wide range of industries. For example, SocialSci is a great example of a company focusing on leveraging social networks and the Internet for market and research studies. There’s lots of opportunities here, especially in the medical, energy, and IT fields.

What’s Not
Cloud Infrastructure
For Launch Capital, the term Cloud is too vague. They are finding it tough for very early, seed stage companies to participate in Cloud infrastructure opportunities and even less room for development software.

Enterprise Social Networking
Elon claims that while social networking has garnered huge success and adoption in the consumer and individual market, it is a much more difficult value proposition for enterprises. While there are many well-developed enterprise-focused social networking startups and companies, he feel it has an uncertain future and unclear value proposition.

Advice for Enterprise IT Startups
Incremental Adoption is the way to go
Elon provides advice for both customers and CIOs who adopt IT startup technologies as well as startups providing them. For the former group, Elon advises that we’ve moved away from a time of huge ground-breaking innovation to a time of incremental innovation. This shapes decisions on where to spend money and focus future IT effort. For startups, he encourages companies to focus on co-development of products with the customer. This will help mimize risk, maximize value, and optimize the entry into the greater market. Rather than try to hammer a sale, startups should look for a partner.