ZapThink Startup Insights: Simeon Simeonov, FastIgnite

ZapThink Startup Insights
Week of April 26, 2010

Funding Insights
Interview: Simeon Simeonov – FastIgnite

This week, ZapThink spoke with Simeon Simeonov, Entrepreneur / Investor / Advisor, head of FastIgnite, and formerly Technology Partner at Polaris Venture Partners.

What’s Hot
While Simeon didn’t quite see the enterprise / B2B marketplace as we did, he did acknoweldge certain markets ripe for startup activity and investment:

Cloud Storage / Backup
Simeon tells us that the cloud storage and backup market is getting more attention. As people move more of their critical applications and data to the cloud, so too will need to secure and backup that information. Startup activity here, especially with SaaS and transactional business models are garnering much attention. He cites Backupify, a company mostly focused on B2C cloud apps now extending to B2B applications.

Horizontal-cum-Vertical Market Segments
Simeon cites the digital media & advertising, online marketing, and e-commerce industries as hot markets. While these are not necessarily vertical markets per se, they do represent great target opportunities for startups since they have not shown any slowing in growth over the past few years.

Hard Business Intelligence & Data problems
Solving hard, important problems never goes out of style, and with the pace of data growth and complexity increasing at remarkable rates, there is still need for savvy, high tech startups to solve intractable data analysis, integration, and intelligence capabilities. Simeon has seen a good pattern of companies that have taken hard technical problems and built custom hardware and/or software become large industry succeses.

Best of Breed trumps Large Suites
According to Simeon, the pendulum of computing has swung in favor of best-of-breed point solutions in high demand. Focused, niche applications especially in the cloud and SaaS space are getting better revenue growth and funding opportunities than large suite plays. The days of new large suite enterprise software vendor startups may be over.

What’s Not
Pendulum Swings Away from Enterprise Suites
As mentioned above, if you are a new startup with a plan to build an enterprise software suite for sale and install at the client site, forget it. Those days of opportunity and funding are past.

Cloud “Microbubbles”
Cloud is the big thing in the market and in the venture community. However, according to Simeon, there is simply too much of the “let’s just put on the Cloud what we do inside the firewall”. There is no compelling business reason (and therefore reason to fund companies) who are doing the same thing in a different way with the same end results. To be a success as a business, startups must rethink architecture, business model, and go-to-market.

Advice for Enterprise IT Startups
Migration from B2C apps into B2B
As we heard in our previous ZapThink Startup Insights newsletter, Simeon sees more SaaS / online software providers that sell in a B2C mode seeing more business customers. It’s easier to make the first few sales with consumers because of the sales cycle, but now enterprises are seeing the benefit of using consumer-orietned tools for their business operations. This may signal a huge transition in the way that IT is purchased and used in businesses – away from the IT department and towards the Line of Business (LOB).

Don’t make it better. Make it Different.
Simeon tells us that incrementalism doesn’t work. Unless the offering is extremely easy to sell and adopt, a solution that’s slightly better than one being used won’t sell. There’s not much enterprise purchasing going on right now, so things that are just a little better are just not selling in the enterprise. If you want to sell in the enterprise, be valuable and be different.

The Enterprise market may not be that attractive from an exit perspective
According to Simeon, there is a question about how big an enterprise software company can be built nowadays. There are not that many $500M enterprise software companies being built noawadays, and the consolidation in the IT market has littered the landscape with lots of niche players that are simply not worth as much as the investors would like them to be. This dampens interest in more investment.