Bill Stensrud of Enterprise Partners was in to give a talk yesterday on commercialization of early-stage research. Without diving into everything that he had to say in a provocative discussion, one idea he threw out was that the venture business is on the cusp of a major consumer-centric shift.
His argument: Corporate IT spending cannot continue to grow at historical rates without growing into the entire economy. At the same time, corporates are slowing because they have massive installed bases of technology; new technology is as much an irritation as a boon given that it has to fit in with what they already have.
The solution? Consumers. In what other IT market are you going to find so many buyers with no legacy database, CRM, SCM, CMS, firewall, intrusion technologies, etc. etc.? While it turns pricing models upside-down and is scary as heck to venture investors weaned on investing in companies selling to companies, the consumer market is the undiscovered market for IT venture investing.
Or is it? Even Bill seemed unsure about the idea, and he was really putting out the consumer market as a thought experiment. There are, after all, oodles of good reasons to be skittish about venture firms putting significant slugs of capital into such companies, including that most venture investors have learned from hard experience that they can’t generalize from their own wants and needs.
But then again, there is that idea of no real installed base of apps …. and some smart people at Maveron just raised a $200-million fund on the idea of creating consumer-centric companies. So just what is it that makes creating such firms different from dealing in lab rats and other such IP-centric startups? Well:
Richard Tait, the grand poo-bah ( his title) of another investment, Seattle-based Cranium, said Maveron’s knowledge base, especially on consumer issues, is particularly helpful.
“A consumer brand like Cranium is a passion brand, and very few investment firms are sensitive, supportive and equipped to fuel brands toward that mission,” he said.