By Mike Brown Jr., contributor
FORTUNE -- Enormous changes are afoot in the C-suite at companies at every level of scale and growth. We built Bowery Capital on the thesis that roughly $357 billion would change hands over the next ten years through the swapping out of old technology for new. This perspective comes from years of seeing Internet natives becoming IT decision-makers, a concept on the rise, but this is something we are just at the beginning of.
Greylock's David Sze recently talked about finding companies to invest in companies that access the "140 billion of IT spend up for grabs" and we not only agree, but see the number as far higher. More specifically in pulling spend shift data every quarter (see below), we think we are only in the 1st or 2nd inning of this shift.
In my view, the absence of a few key discussions is further proof that we're in the very early stages:
Risk & Safety versus Growth & Leverage
Many CMOs, CTOs, and CIO in medium to large companies still think in terms of risk and safety rather than growth and leverage. They all are thinking about "enterprise 2.0," but we have just not seen a radical shift in thinking towards growth. Concepts like bring your own device (BYOD), cloud, etc. are going to take a long time to truly impact the medium to large company so long as people continue to think from a place of fear, not opportunity.
Okay, maybe this one is talked about a lot. But I focus on the hosting abstraction over the software paradigm (client-server) because I think it actually is more important. While this concept is not novel to any venture capitalist, we're only seeing surface level adoption across the mass of medium to large companies. Many of these companies are just starting to understand the scale, cost, and power efficiencies of cloud computing. Just think about the length of time it took to move from standalone applications to client-server applications.
Consumer Battle Testing
For the first time in history we actually have consumers battle-testing software that can then be sold into medium to large companies -- think Dropbox, Skype, etc. These companies now have the ability to answer the age old question of, "how do I know your product can scale to my organization?" While there are competitive dynamics at play beyond this concept (i.e., time will tell whether Dropbox can build a major enterprise product) we believe the next 10 years will see winners that provide best-of-breed tools to both consumers and businesses.
Horizontal versus Vertical
The old guard grew up in the world of horizontal software solutions. Oracle (ORCL) and SAP (SAP) are the greatest examples of this and I would even argue that Workday (WDAY) is as well. These organizations have malleable products and solutionss that can win in any category or business type. Very few organizations have really gone vertical however, with solutions that truly dominate and out-compete these players in a specific category. A few examples of companies who've grasped this concept are CareCloud for health practices, Fleetmatics (FLTX) for fleet tracking, and Veeva Systems (VEEV) for global life sciences). Industries such as health, manufacturing, retail, media and education all are up for grabs and, in the future, there will be billion dollar specialists in every category.
Look At Revenue + Customer Numbers
Anchoring the $357 billion of spend shifts, are enterprise 2.0 companies really capturing a ton of the market from a revenue standpoint? Sure Buddy Media and ExactTarget sold for a lot, and WorkDay and Palo Alto Networks (PANW) have gone public. But if you look at these and other 2.0 companies' revenue and customer numbers, they have a long way to go relative to their 1.0 predecessors. In our view there has only been about $38 billion that has changed hands to date out of old and into the $357 billion of new. We're optimistic with the initial swapping cycle and excited the market is still in its early days.
Mike Brown Jr. (@MikeBrownJr) is a general partner with New York-based venture capital firm Bowery Capital, and previously co-founded AOL Ventures.
The Bloomberg terminal has more going for it than just incumbency, but there still is room for financial startups to innovate.
By Matt Turck
FORTUNE -- In the eye of some entrepreneurs and venture capitalists, the Bloomberg terminal is a bit of an anomaly, perhaps even an anachronism. In the era of free information on the Internet and open source Big Data tools, here's a business that charges its users to MOREMar 20, 2014 12:52 PM ET
When analyzing data, be careful not to confuse correlation for causation.
By Tomasz Tunguz
FORTUNE -- Naming your startup can be one of the hardest things to do when starting a company. Each founder must agree. The domain must be available to buy. Lastly, and perhaps most importantly, investors need to like it because the first letter of startup's name has meaningful impact on how easily the company will be able MOREFeb 7, 2014 5:04 PM ET
Charlie O'Donnell has raised his first fund focused on New York City startups. It was anything but easy.
By Charlie O'Donnell
FORTUNE -- There are three ways to raise a first-time seed fund when you've never even been a VC firm partner before. You can:
1. Have millions of dollars.
2. Work for a company that has millions of dollars and wants to be cool, innovate, etc.
3. Go running (or in my case, biking) MORE
If the federal government won't protect us from the monopolies, then the states must.
By Albert Wenger
FORTUNE -- We live in the Chelsea part of Manhattan, which in turn is part of New York City, one of the iconic cities of the U.S. and arguably the world. We have exactly one broadband provider available at our address. There is zero competition. Never mind an oligopoly or a duopoly. Broadband for MOREJan 17, 2014 1:57 PM ET
Last year's banner year for tech IPOs has a lot to live up to.
By Jeff Richards
FORTUNE -- The year 2013 was a banner year for venture-backed technology IPOs. According to the National Venture Capital Association, 82 VC-backed companies raised $11.25 billion in IPOs in 2013, the most VC-backed IPOs since 2007. Public market investors showed strong interest in many of these offerings at IPO as well as afterward MOREJan 7, 2014 6:00 AM ET
The Blackstone Group's Byron Wien thinks oil and corn prices will rise this year, and is bullish on the long-term stock market.
By Byron Wien
FORTUNE -- In January 1986, Morgan Stanley investment strategist Byron Wien published a list of 10 "surprises" for the upcoming year. He is now vice chairman of The Blackstone Group's (BX) advisory practice, but is still making predictions.
For Wien,"surprises" are events that the average investor would only MOREJan 6, 2014 2:14 PM ET
The lack of female tech founders is about a lot more than knowing how to hack.
By Poornima Vijayashanker
FORTUNE -- Moore's law, which is really a conjecture, states that the number of transistors on an integrated circuit doubles every two years. It is safe to presume that this doubling effect also doubles processor speeds, because having more transistors on a chip means faster processors.
However, you cannot just cram MOREJan 3, 2014 9:20 AM ET
It's time for VCs and angels to set aside their differences, in part because they are largely cosmetic.
By Kittu Kolluri
FORTUNE -- No topic fuels more discussion and debate within the early-stage investment community than the dynamics between VC and angel investors. Are they natural enemies or complementary players in an increasingly diverse funding ecosystem? Or both?
AngelList's introduction of syndicates has added several new twists to this debate—the notion of MOREDec 4, 2013 3:06 PM ET
Companies must pay close attention to the company they keep.
By Venky Ganesan
FORTUNE -- One of my favorite episodes of Freakonomics Radio concerns a diner at the Manhattan branch of high-end, organic restaurant chain, Le Pain Quotidien, who finds a deceased field mouse in her salad. As often happens on Freakonomics, this revolting tale begets an interesting discussion of economics: From the function of 'anchoring' in influencing pricing behavior to the challenge MOREDec 4, 2013 1:54 PM ET
|5 people you might not tip (but should)|
|General Mills reverses course on right to sue after backlash|
|Pope Francis challenges the free market - The Buzz|
|Stocks: It's report card time on Wall Street|
|Americans have fallen in love with real estate once again|