1Mby1M Virtual Accelerator Investor Forum: With Brian Jacobs of Emergence Capital (Part 3)

Brian Jacobs: As far as the future of the cloud is concerned, I think we continue to see more and more innovation. I believe innovation begets more innovation. Once you see how the cloud changes your business, you start to see new opportunities that maybe weren’t so visible initially.

I think that this idea around industry cloud, which is a vertical software company that is enabling competitors to aggregate data and share data without compromising their trade secrets, is an exciting opportunity. It’s a mix of vertical software with Big Data with the idea that by sharing data in the cloud, you can do some things that companies with an on-premise solution just can’t do. That’s one of our key investment themes.

Another one is mobile business applications. We think that the mobile phone is now effectively a supercomputer in your pocket. There’s no reason why every worker in your company can’t be connected and using the information from the company and also contributing information into the knowledge of the company. We think that there is a lot of innovation in the mobile space but more companies are being funded in the consumer realm than in the business realm. We know from experience that there’s a major opportunity for businesses to take advantage of these technologies as well.

Sramana Mitra: All of September, we had events around the launch of the e-commerce book that I just published. E-commerce is very hot right now. So is cloud. In both of those cases, I think there’s one question that is coming up. When an industry gets to this mature stage, we see a lot of small businesses. This is something that is not going to be venture scale, but you can build a $5 million cloud business. We are seeing it all over the place.

Some of it is slower growth. Indian SME market and even enterprise market is a very slow technology adopter market. However, there are lots of cloud companies that are now catering to the needs of these Indian SMEs, and there are lots of them. For these companies to become venture scale and be growing at a venture pace is something that is not clear quite yet.

This is true for a lot of the international market. If you look at the Latin American situation, it’s very similar. India, in fact, is more mature. China is more mature, but there are lots of less mature markets like Latin America and Indonesia. There are lots of cloud business opportunities all over the place. Whether they’re venture scale or not is a question that has to be evaluated.

The other trend that we are seeing is some of those companies that have been built somewhere else, including Europe, are moving to Silicon Valley or US and taking a global spin on whatever they have built. They have built good technology. They have built good customer bases. To go global and become full-fledged larger software companies, they are moving to the US. Is this something you’re seeing in your practice?

Brian Jacobs: Absolutely. We believe that it’s possible now to grow a business from anywhere in the world to become a global leader. The US is well ahead of these other markets in adopting the cloud. What we’ve seen is the companies that emerge as the US leader are then in very high demand in international markets. Because the cloud levels the playing field and in most cases, these cloud applications can be accessed from anywhere on the planet, companies naturally gravitate towards the market leader.

If hundreds of thousands of businesses in the US have embraced a particular solution, most international businesspeople realize that’s probably the best solution. In some cases, markets will be fragmented depending on the country. For instance, financial applications don’t translate as well across borders as some of these other solutions even though the financial standards are emerging to the point where that’s going to become a single global market at some point.

In general, we tell our companies, “Win the US market. Put all of your energy into winning the US market. The rest of the world will come knocking at your door.” Entrepreneurs from other regions have absolutely come knocking at our door.

We’ve worked with them, in some cases, to transplant the company into Silicon Valley and in other cases, maintain their engineering in their local environment, which often have fantastic domain experience and a much better cost structure but build their sales and marketing in Silicon Valley where we have the talent that is experienced with hyper growth and with capturing the US market. That’s absolutely a trend that we see and one that we’re trying to encourage as well.

This segment is part 3 in the series : 1Mby1M Virtual Accelerator Investor Forum: With Brian Jacobs of Emergence Capital
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