The Intelligent Enterprise: Investing In The Next Wave Of B2B Tech
By Esteban Reyes, Founding Partner at Las Olas VC (a.k.a. LOVC)
We’ve spent the last 6 months researching early-stage, investment opportunities in B2B technology. This work has become foundational to our investment thesis at Las Olas VC (LOVC), which so far is yielding promising results. We’re sharing our findings in this blog post series, which hopefully is helpful to other founders and investors exploring similar opportunities.
In short, our thesis formulates that the intersection of several economic, technological, and behavioural trends create an unprecedented opportunity for early-stage investing in B2B, vertically-focused and knowledge worker automation startups.
- In this first post series I will dive into our investment thesis and explain some of the macro and micro trends that (in our view) drive the opportunity, and why now is the time to pursue it.
- In the upcoming post series I’ll explain some of the specific investment opportunities across a number of industries, conclusions and key insights, and will present examples of actual startups we’re excited about that fit our thesis.
- In the last post series I’ll share the point-of-view of other investors and founders whom we asked for feedback, as well as summarize all sources including any invalidating data we found through our research process (e.g. antithesis).
Please reach out to me directly with any feedback, comments, or ideas to er@lasolasvc.com
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Thesis: The Intelligent Enterprise
Numerous multi-billion and multi-trillion dollar tech-starved industries are being pressured to modernize, representing 80% of the world’s workforce. Flat to declining multifactor productivity trends and increases in enterprise IT spend suggest massive inefficiencies that remain unresolved. Enterprises deeply understand the challenges and opportunities within their industries, and despite having available budget, they still lack the ability to modernize.
Examples of some industries and market size:
- Logistics & Transportation ($1.4 trillion)
- Manufacturing ($6.2 trillion)
- Professional Services ($2 trillion)
- Insurance ($4.7 trillion)
Similarly, consumer expectations have shifted to everything digital, anywhere, anytime. Teams need better ways to do their work and keep the pace to meet objectives. The only answers for step function change in productivity are better tools and automation.
Examples of enterprise teams requiring better tools and digital infrastructure:
- Product development & engineering
- Core operations
- Security and compliance
All of this represents a unique investment opportunity enabled by three technology trends:
- Cloud computing adoption has become a strategic imperative for enterprises. An IDG study conducted in 2018 found that 95% of all organizations will be relying on SaaS for application delivery in 18 months, with IaaS increasing to 83% and PaaS, 73%.
- Machine learning (ML) is maturing in performance and ease of deployment. While general application of ML is still at its infancy, there are now multiple use cases in which ML can dramatically surpass human cognition.
- Continuous improvements in internet infrastructure coupled with distributed compute power are eliminating system and network constraints.
In the last decade, 44 enterprise software companies (excluding Amazon and Microsoft) captured over $700Bn of enterprise value with the shift from on-premise software to software-as-a-service (SaaS). Much of the value has come from digitizing functional workflows and converting static, siloed systems into real-time, globally accessible cloud applications. This laid the foundation for building industry specific and team-centric software and automation.
Traditionally, this has been seen as a classic “disruption” opportunity for Silicon Valley, and indeed it is. However, entrepreneurship has become a global phenomenon, and more companies are being started than ever before. There’s proof that $Bn companies can be built outside of traditional tech hubs, especially in enterprise software. Unlike in the early days of venture capital, founding teams that execute well can get funding regardless of their location or background. VC activity is at record levels, yet despite a growing number of micro VC funds, active, B2B-focused seed investors are scarce.
The intersection of these forces creates an unprecedented opportunity for early-stage investing in B2B, vertically-focused and knowledge worker automation startups. The remainder of this blog post series identifies specific investment opportunities, and makes a case for why now is a unique time for a B2B, thesis-focused, early-stage, lead-investor VC firm.
