Sabrix: Marrying Domain Expertise with Algorithms
With a rare mix of in-depth understanding of the global sales, use and value-added Tax laws, and a well-crafted pseudo-coding language to translate from an English-like language into algorithms that can calculate and manage taxes, as well as adjust and update regulatory changes, Sabrix is a diamond-in-the-rough amidst the troubled waters of enterprise software.
I sought permission from the CEO Steve Adams to write this article, since Steve has shared a lot of information with me in the context of doing some work together. The reason I wanted to write about it is that I believe in the translation of domain expertise (you could call it content) into software solutions to deliver useful business process efficiencies is a very interesting area.
Sabrix has raised $29 Million in 3 rounds, achieved 100% growth last year, and counts amongst its customers the visionaries of the Tax discipline like IBM, GE and many others of the Fortune 50, along with progressive companies like Chick-Fil-A, a seemingly unlikely early adopter. That said, for all enterprise software companies today, the drag is that ~75% of the IT budget is allocated for maintenance, leaving a small portion for acquisition of new technologies. Even in that priority list of new technologies to acquire, IT organizations are more focused on Security, Mobile, and Storage strategies, leaving little room for a company like Sabrix.
While a huge number of companies all over the world need to manage their taxes, rendering a rather large Total Available Market (TAM), the issues around budget priorities slash the Serviceable Available Market (SAM) and the top-line growth trajectory to be significantly more limited. There are ways to get out of this bind, by expanding the target segments to address smaller companies, which means delivery vehicles and business models also need to be customized to the needs of those segments. Hence, Software-as-a-Service (SaaS) kicks in as a potential, although so far Sabrix’s business has been entirely Licensed software. Partnerships with companies such as Intuit would make a lot of sense to bring such an offering to the market.
In enterprise software, most of the remaining smaller ISVs are nothing but a feature of a larger ERP like Oracle or SAP. Sabrix, however, having developed such strong core-competency in a domain that does not necessarily lend itself to easy emulation, is an exception.
The trend question that this example poses for other enterprise software entrepreneurs: Are there other such deep domain knowledge based opportunities which may allow you to carve a niche for yourself, and have a sufficient TAM to be interesting to investors?
And for VCs, this is a shift away from deep, defensible technology based investments to something that is perhaps not the most challenging technical problem to address. Domain expertise, however, is extremely defensible, especially when married with technology.
