Why does most enterprise technology feel like it is a decade behind consumer technology? For the same reason our health care system is broken. The “user” isn’t the same person as the “buyer”. In enterprise software the user is generally a non-IT person but the buyer is usually, at least in part, the IT department.* (In healthcare the “user” is the patient and the “buyer” is the doctor or insurance company).
SAP bought SuccessFactors today, in a big win for “cloud” based enterprise software. The cloud might sound like a buzzword but is in fact a vastly superior architecture, not because it makes installation and updates easier (although that’s good too), but because it starts to remove IT from the purchasing process, meaning the user and the buyer are, increasingly, the same person.
* A corollary to this is that IT-related enterprise software, i.e. infrastructure, is generally pretty good.
It was reported today that Dropbox will generate $100M in revenue this year. Whether or not those reports are right, it is certainly a great product, beloved by its customers and will almost certainly be wildly successful. I knew the founder, Drew Houston, back before he started Dropbox. He was an MIT CS guy, hanging around Boston in 2005 when I was working on SiteAdvisor and spending most of my time trying to recruit great devs. He was introduced to me by my investor and friend Hemant Taneja, another MIT CS guy, as a super smart kid I should recruit. I tried to recruit him but lost him to another company called Bit9.
(Funny side story about Bit9: After we sold SiteAdvisor to McAfee in 2006, I encountered Bit9 again when I was visiting SF and crashed a party hosted by one of their investors. This investor was a lifetime middle manager from Symantec who had never started a company and was now a partner at a big VC firm. He spent 30 minutes giving a speech about how the Internet was dead and people investing in it were stupid and his firm was focused on Cleantech instead, and then started talking about how rich he was and how many wineries he owned (yes, seriously). He barely mentioned the poor startup that sponsored the event. It was totally embarassing and represented everything wrong with the old, dead VC world. When I was introduced to this jackass VC after his speech as someone who had just sold his company to McAfee, he said to me “Bit9 is going to eat McAfee’s lunch.” Trying to neg a startup guy by saying a startup is going to beat an incumbent just shows how incredibly clueless and middle-managery this guy was.).
Anyways, the next time I met Drew was after I left McAfee and rented a small temporary office space in the garmet district in NYC. We were on the 19th floor of this awful shared place called E-merge (this was before the resurgence of incubators) in a tiny room infested with fruit flies. I was sitting there with my pals from SiteAdvisor Matt Gattis and Tom Pinckney coding some random machine learning ideas which eventually led to the seeds of Hunch. Drew came by to get advice on his new startup and we met for an hour or two. We chatted about strategy, recruiting, fundraising etc – the usual early stage conversations. He then moved off the California – I think to do Y Combinator. Next time I heard from him he had just closed a round of financing from Sequoia. I was never offered to invest in the company but probably I could have if I asked Drew since he had come to me for advice. Sometimes when people come to you for advice like that they are really hoping you will ask to invest and I didn’t. I’d have to say in all honesty if I were offered I probably would have passed. 2005-6 saw about 100 consumer backup/storage/file sharing companies raise funding. I remember after Drew left my office I looked at some article on RWW or Mashable or someplace that listed page after page of consumer backup/storage/file sharing companies. It just seemed like an insane idea to start another one and it seemed like Drew’s only thesis was that his product would work better.
Well, it turned out storage is a hard problem and having an MIT storage guy who builds a great product actually matters. I don’t know how under any investment philosophy that emphasized theses, areas of investment, roadmaps, etc you could have decided to invest in B2C file sharing company #120 in 2007. Obviously Sequioa knew better than me and invested. I think the only way they could have made that decision was by ignoring the space, competitors, etc. and simply investing in a super talented person/team. Dropbox is one reason I now have a strict rule to only invest in teams. There are other examples of companies I missed and other examples of the converse – companies where I invested in mediocre people chasing a great idea and the company failed – but Dropbox is emblematic to me as to why you should always invest in people over ideas.