ZapThink Startup Insights: Take a Page from the Energy Utility Industry

ZapThink Startup Insights
Week of June 8, 2010

Funding Insights
Interview: Adam Berrey – General Catalyst and the Startup Blender Blog
For this issue, ZapThink spoke with Adam Berrey, entrepeneur-in-residence at General Catalyst Partners, a venture capital and private equity firm with $1.4B under management, and also writes the Startup Blender Blog on topics of interest to IT startups. Adam ha been involved in startups for past 15 years, was part of the Allaire founding team and then global marketing @ Macromedia (now Adobe), followed by a stint at BrightCove.

What’s Hot
Data and Analytics in the Cloud
According to Adam, obviously cloud computing and SaaS are hot areas of investment for VCs, but what interests him most is data and analytics applications in the coud, especially for very large databases and complex analytics. In many ways he sees this as what the Cloud is best suited for — where you can put large amount of info in the cloud and leverage computing power for great efficiency. The Cloud offers different approaches to data analysis with faster, lower cost, point-solutions that can provide significant disruption. Cloud storage and backup is hot as well as queries and caching on large data sets. He also sees a private-cloud angle to the Cloud-based analytics story, although public clouds will gather most of the VC and customer buying attention.

IT Energy Management
Adam focuses much of his time on Clean Energy technology, so it’s no surprise that he sees IT Energy Management as a hot area for investment, especially around data centers and PCs. Data centers are still huge power, cooling, and space hogs. There is a lot of room for improvement that will impact companies’ bottom lines in a significant way.

Compliance
Compliance in an age of increased corporate scrutiny is becoming an increasing necessity for corporate IT organizations, according to Adam. General Catalyst has shown interest in robust compliance and governance solutions with an investment in Black Duck Software, a company that helps manage enterprises’ open source utilization and IT liability.

What’s Not
HTML5 – it’s a technology trend, not a business opportunity
According to Adam, he sees the movement to HTML 5 as an inevitable turn for the industry, but he doesn’t see that many opportunities for new startups. While there might be point solutions for developer tools and widgets, the HTML 5 space is bound to be mostly taken advantage of by the large incumbent software providers. Just like the RIA market consolidated around incumbents, he too sees HTML 5 as a technology that favors incumbents.

Business Intelligence Enterprise Software
Adam says that the opportunity for startups to provide solutions in the business intelligence space, especially non-cloud solutions, has largely come and gone. Most enterprises have already settled on their BI solutions of choice.

Advice for Enterprise IT Startups
Take a Page from the Energy Utility Industry
Enterprises looking to adopt IT startup capablities should take a page from the utility industry and its approach to the Smart Grid. Adam sees two things that the Energy industry is doing well as they are looking to Smart grid: 1) They have set up test labs to try out new technology in a low risk way. Almost every major utility has a lab with staff technologists to do evaluations of new technologies. This reduces the risk for the enterprises as well as the sales cycle for IT startups. The goal of these labs is to get the latest technology and put it through its paces. 2) Actual, paid pilots. A lot of enterprises expect companies to give them product for free, but this makes the economics for a startup very difficult. Instead, Energy companies have made it part of their business plans to fund pilots for IT startup companies that have made it past their lab evaluations. This way they get the benefit of new technology fast without jeopardizing the future of the companies they are using.