Rise of the Underdogs
With improved products, global expansion, enterprise startups poised to become attractive again
On January 8, Avlesh Singh, chief executive of WebEngage, kicked up a tweetstorm announcing the launch of his company’s latest product while also pouring out his angst on the spotlight hogged by consumer internet companies. A couple of tweets caught everyone’s attention.
“These folks didn’t know that WebEngage is on road to clock $10 million in annualized revenue by end of 2016,” wrote Singh, whose new marketing automation tool will shortly be rolled out to more than 1,000 customers across 50 countries. “It was hard, but I am glad we didn’t lose focus. Uninformed folks mistook the lack of hype as ‘lack of ambition’ in us.”
What WebEngage did to get here, several other enterprise software firms, too, have been doing in the past couple of years. They put their heads down and focused on improving their technology, strategy and global reach, not entirely oblivious to the hoopla around ecommerce, transport, delivery and food-tech startups. This is the kind of stuff investors are forcing ecommerce firms to focus on now—with defined paths to profitability— and there might be plenty lessons on offer for India’s startup superstars.
Enterprise startups are emerging from hibernation to show off revenues and, in some cases, profits even, in a space that’s bogged by highentry barriers and long sales cycles. Be it enterprise security firm Druva, human resource analytics firm Edge Networks, ad-tech company Adadyn or financial services firm Eko, all are poised for a steep-growth trajectory in the next two years.
“It’s like what happened in 2011-12,” said Druva CEO Jaspreet Singh. “In 2011, people put a ton of money in consumer. In 2012, Facebook was going to go public and there was doubt about Facebook’s model and suddenly we started hearing, enterprise is again sexy. This is that all over again.”
An IPO for Druva in the next two years is very possible, Singh said, adding that 2016 will be all about execution for companies like his. “Enterprise companies in my mind would have grown fairly well last year. It was just that everybody had their heads down,” he said, recalling surreal times when consumer internet firms making a fraction of Druva’s revenue were valued at the same level.
This represents a sectoral shift for investors from metro-based consumer businesses to enterprise technology and customers in smaller towns and cities, according to Sharad Sharma, cofounder of software product thinktank iSpirt. “There is enough evidence to show that this is happening,” he said. “As a result, going forward, people in this sector (too) will become fashionable,” he said.
Sure, not all enterprise software product companies are on the cusp of growth. That’s an expectation being laid on companies that have been around at least four years and built an international presence and a pool of paying customers. These are the ones most likely to break through in 2016, said Mohan Kumar, executive director at Norwest Venture Partners India.
It helps that a majority of enterprise software today do not have to be installed on a user’s computer and can be accessed over the internet. Customers pay as they would for a service subscription.
Edge Networks, a six-year-old HR analytics firm that caters to technology services giants such as Wipro and HCL Technologies, has thus been able to score over larger firms with its so-called software-asa-service, or SaaS, products. Last year alone, it matched 15 million jobseekers with more than 4.8 million job profiles.
“We did not come out to talk about our work because ours was ameatand-potatoes business model,” said CEO Arjun Pratap. “Now, with our deep-learning algorithm, we can do things that IBM’s Watson (advanced cognitive software) can, specific to the hiring space.”
Paras Chopra, CEO of customer engagement suite Wingify, recently launched PushCrew, a software product that pushes browser notifications. Ratan Tata-backed Infinite Analytics integrated its product recommendation engine into Microsoft’s software to allow retailers to target the right customers.
Not just online, several chunks of the offline world, too, are being made more efficient through software. A few months ago, Delhi-based Applicate launched a mobile application called Trade Gini, which has linked and created distribution channels for more than 4,500 offline retailers with 130 online sellers. As these enterprise software product firms gather momentum, the ecosystem is coming together to lift them to a higher growth phase.
In a first, researchers at Stanford and Duke used their university grants to fund a three-day workshop this month to help enterprise software makers learn how to achieve category leadership. At the Infosys campus in Mysuru, 200 entrepreneurs were prescribed five mantras to live by to graduate from a startup mindset to that of a ‘category leader’. They were told to be willing to take on incumbents and make chess-moves that can deliver huge impact.
Even so, challenges remain. Kumar of Norwest Venture, which has invested in several enterprise software firms in India, says the Holy Grail for these companies is the US market. Also, building a horizontal SaaSbased product—one that can fit into any industry—is still a very hard problem, said Alok Goel, MD of SAIF Partners India “Not many (enterprise software startups) are showing scale. And out of 10, only one makes it big in the United States at any given point in time,” Kumar said. “This is not going to be a breakthrough year for them, but having said that, a lot of them will reach maturity.”
That’s the kind of sentiment enterprise product startups are seeking to challenge, one step at a time. “You have to be patient with the market and do your work,” Druva’s Singh said, “and then they’ll reward you.”