I had a meeting this morning with the wonderful folks at Square 1 Bank. We’re truly fortunate to have a group like this right in our backyard, but that’s another topic entirely. On the drive home, I had a number of thoughts that were a direct result of the conversation with Peter and Adam (thanks guys!!).
So as every start-up guy knows, there are three markets for software: Consumer, SMB and Enterprise. The consumer market is pretty obvious and clearly defined. Enterprise is too. It has always seemed to me that the SMB market is most clearly defined as everything in between i.e. neither consumer nor enterprise.
Each market has its pros and cons. Inevitably as we’re building our company and pitching potential investors, we are frequently asked if we’ll be chasing the enterprise software market. So far, I’ve said no. But I think my reasons for saying no have more to do with the negative implications of the definition of “enterprise” more than the target audience and type of application.
Here are some of the things I associate with the concept of “enterprise software”:
- Large companies
- Server-based or SaaS solutions
- Extensive customization
- Big scale software that handles lots and lots of data
And more negatively:
- Huge company with a large and defensive IT department
- Long sales cycle that requires an active salesforce
- Huge prior investment in entrenched players (Oracle, SAP etc)
What occurred to me today is that many small companies now deal with huge volumes of information and data.
Well Duh!!
But bear with me… Think of this volume of data in terms of the concept of enterprise software. The volume of data that a small company deals with today is broadly comparable with the volume of data that an “enterprise” was dealing with ten years ago.
In other words, Data Superabundance has spawned the Miniprise.
A Miniprise is a non-enterprise company that has enterprise-like needs.
This collection of small companies typically has little investment in any of the entrenched players. Their IT departments are usually running a patchwork of odds and ends that were built on the fly – these systems get things done but there is plenty of room for improvement. What’s more, small company IT departments are far more open to new solutions than a traditional enterprise IT department. Last but not least, these are agile businesses that make decisions quickly, so the sales cycle ought to be shorter.
Of course, software for the Miniprise won’t command the same kind of price as traditional enterprise software. But thanks to SaaS, enterprise software doesn’t usually command that kind of price these days either.
Providing tools with some enterprise-like traits to non-enterprise (or mini-enterprise) customers is a big opportunity. And that’s the market I’m calling the Miniprise.
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