2016 june disruption in enterprise software final
- 1. www.intelcapital.com Intel Confidential Investing in global innovation June, 2016 Disruption in Enterprise Software Vibhor Rastogi, Director, Intel Capital Vibhor.rastogi@intel.com
- 2. 2 www.intelcapital.com Intel Confidential Agenda • Overview of Intel Capital • Venture Capital/M&A/IPO trends in Enterprise Software • Key disruptions in Enterprise Software • SaaS/Cloud • Big data/Cognitive applications/Real-time workloads • Open Source
- 3. 3 www.intelcapital.com Intel Confidential Market Leader 3 * Number Includes New and Follow-on Deals Investment data as of March 31, 2016
- 4. 4 www.intelcapital.com Intel Confidential A Proven Track Record of Engagement • Investments ranging from $250,000 to $250 million+ • Any stage of funding • Lead or supporting investor • Agile decision-making • Unparalleled network of Global 2000 companies • Resources beyond capital • Active board participation • New and follow-on rounds 4Investing $300 - $500 million per year in innovative companies
- 5. 5 www.intelcapital.com Intel Confidential A Global Presence Like No Other • US $11.7 billion invested in 1,445 companies in 57 countries • Proven ability to connect startups to international technologists and partners Intel Capital Invested 5
- 6. 6 www.intelcapital.com Intel Confidential 6 *other marks and brands are the properties of their respective owners Data as of March 31, 2016 Solid History of Success 212 portfolio companies have gone public; 383 were acquired or participated in a merger
- 7. 7 www.intelcapital.com Intel Confidential Agenda • Overview of Intel Capital • Venture Capital/M&A/IPO trends in Enterprise Software • Key disruptions in Enterprise Software • SaaS/Cloud • Cognitive applications/Real-time workloads • Open Source
- 8. 8 www.intelcapital.com Intel Confidential Spend on Software growing 2x than Enterprise spend. Sub-sectors such as SaaS growing at 6x overall IT spend $300.00 $317.00 $335.00 $3,673.00 $3,737.00 $3,828.00 $0.00 $500.00 $1,000.00 $1,500.00 $2,000.00 $2,500.00 $3,000.00 $3,500.00 $4,000.00 $4,500.00 2013 2014 2015 Global spend on Enterprise Software ($B) vs. ICT spend ($B) Enterprise Software spend ($B) Total ICT spend ($B) Source: Gartner
- 9. 9 www.intelcapital.com Intel Confidential Software (with smart hardware) is eating every industry including those that are digital laggards – Agriculture, Healthcare and Transportation Healthcare: Basis smartwatch used to collect patient data for Parkinsons patients and analyzed in the Cloud Agriculture: Precision Hawk drone being used for mapping of agriculture fields Transportation: Peloton fleet management software helps reduce fuel consumption Source: MGI
- 10. 10 www.intelcapital.com Intel Confidential VC investment in Software has grown in the last 5 years due to better liquidity (IPO and M&A) environment 2009 2012 2014 2015 $17.70 $26.70 $49.30 $59.06 $3.19 $8.28 $20.21 $23.62 Software investment by VCs Total VC investment ($B) Software investment ($B) Source: NVCA
- 11. 11 www.intelcapital.com Intel Confidential Next-generation software companies trading at significantly higher multiples of revenue than legacy software companies $- $50,000 $100,000 $150,000 $200,000 $250,000 $300,000 $350,000 $400,000 $450,000 $500,000 1992 1994 1996 1998 2000 2002 2004 2006 2008 2010 2012 2014 Market cap ($B) Microsoft Oracle SAP Vmware Workday Salesforce Source: CapitalIQ
- 12. 12 www.intelcapital.com Intel Confidential M&A market for high-growth software companies is stronger than ever May’16 -Textura acquired for $552M Apr’16 - Opower acquired for $683M June’16 - Symantec acquires Blue coat for $4.9B June’16 – Salesforce acquires Demandware for $2.9B June’16 Microsoft acquires Linkedin for $26B Acquirer Targets Source: CapitalIQ
- 13. 13 www.intelcapital.com Intel Confidential Software companies with strong cash flow also good targets for PE Jan’15 - Informatica taken private by Premira for €4.7B Dec’14 – TIBCO taken private by Vista Equity Partners for $4.7B June’16 – Qlik taken private by Thoma Bravo for $3B Source: CapitalIQ
- 14. 14 www.intelcapital.com Intel Confidential The IPO market slowed down in 2015 due to underperformance of companies that went public. Twilio’s strong after-market performance expected to benefit pre-IPO private companies Private Software Companies >$1B valuation
- 15. 15 www.intelcapital.com Intel Confidential Agenda • Overview of Intel Capital • Venture Capital/M&A/IPO trends in Enterprise Software • Key disruptions in Enterprise Software • SaaS/Cloud • Cognitive applications/Real-time workloads • Open Source
- 16. 16 www.intelcapital.com Intel Confidential SaaS market has grown 4x on-premise software and has created several multi-billion dollar market-cap venture backed companies Venture backed success stories $47B Market cap* $14B Market cap* $11B Market cap* Source: CapitalIQ, as of June 30 2016
- 17. 17 www.intelcapital.com Intel Confidential Public Cloud spend growing at 50% CAGR (2009- 2015) making it easier than ever for software companies to develop, test and deploy SaaS applications
- 18. 18 www.intelcapital.com Intel Confidential Improvement in ROI is a significant driver for SaaS spend
- 19. 19 www.intelcapital.com Intel Confidential SaaS companies need significant capital prior to a liquidity event • SaaS is a capital intensive business Model • Median amount raised by SaaS companies >$50M
- 20. 20 www.intelcapital.com Intel Confidential What are next-gen SaaS companies focused on? • Applications powered by Machine learning, e.g, Next-gen B2B sales and digital marketing powered by machine learning and predictive analytics • Video powered B2B collaboration, e.g., employee recruiting, customer service • Analytics embedded in the SaaS applications vs. a separate enterprise data warehouse • Beautiful user interface and consumer marketing DNA • Mobile first strategy • Social collaboration built into the product • Expertise in Vertical markets – e.g Healthcare, Commerce, Transportation
- 21. 21 www.intelcapital.com Intel Confidential Agenda • Overview of Intel Capital • Venture Capital/M&A/IPO trends in Enterprise Software • Key disruptions in Enterprise Software • SaaS/Cloud • Cognitive/AI applications/Real-time workloads • Open Source
- 22. 22 www.intelcapital.com Intel Confidential Lower compute and storage costs accelerating adoption of Big data by Enterprises 22
- 23. 23 www.intelcapital.com Intel Confidential Big data problems are a top priority in IT spending 23
- 24. 24 www.intelcapital.com Intel Confidential 45ZB of data expected to be created by 2020 which coupled with cheap compute creates rich datasets for Cognitive computing/AI 24
- 25. 25 www.intelcapital.com Intel Confidential Cognitive Computing/AI is a nascent market segment today but expected to grow quickly
- 26. 26 www.intelcapital.com Intel Confidential Cognitive computing/AI is disrupting every major industry • Fintech - Automated lending decisions, wealth- management • Retail – Personal Concierge • Media - Programmatic buying • Education – Personalized curriculum • Transportation – Autonomous fleets • Agriculture – Autonomous vehicles for precision agriculture • Manufacturing – Industrial robotics • Healthcare – Automated claims processing. Clinical decisions (couple years away) • Horizontal use cases • Personal assistant • Sales and Marketing • Help desk • Recruiting
- 27. 27 www.intelcapital.com Intel Confidential “Flood” of machine (45% of data created by 2020) and social data, falling cost of memory creates the need and opportunity to run analytics in real-time vs. traditional store and process Security Event Processing Risk & Fraud Alerting Quality of Service Management Consumer Analytics DataCenter Management
- 28. 28 www.intelcapital.com Intel Confidential Next-gen web/mobile applications leveraging data stored in Big data repositories Personalized Gaming/Adtech Recommendation Engines User and Behavior analytics
- 29. 29 www.intelcapital.com Intel Confidential Agenda • Overview of Intel Capital • Venture Capital/M&A/IPO trends in Enterprise Software • Key disruptions in Enterprise Software • SaaS/Cloud • Cognitive applications/Real-time workloads • Open Source
- 30. 30 www.intelcapital.com Intel Confidential Open source disruption • Linux disrupted the $150B data center market • Android disrupted the $1.5T mobile market • Hadoop and Spark disrupting the $100B analytics market • Which other markets can open source disrupt? • Autonomous cars? • Enterprise IoT? • Machine learning? • Vertical SaaS? 30
- 31. 31 www.intelcapital.com Intel Confidential Linux and Android grew significantly faster than their commercial alternatives to dominate the data center and mobile markets $- $200.00 $400.00 $600.00 $800.00 $1,000.00 $1,200.00 $1,400.00 $1,600.00 $1,800.00 $2,000.00 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 RedHat revenues
- 32. 32 www.intelcapital.com Intel Confidential Open source has gone mainstream. Every commercial and governmental organization worldwide uses open source. Most technology companies are significant contributors Web 2.0 Government Enterprise High-Tech
- 33. 33 www.intelcapital.com Intel Confidential Open Source Business models for startups to consider Support • Give software away for free • Charge for support • Examples 33 Open Core • Core functionality is free • Premium features are paid • Examples Leverage Open Source • Commercial product built on open source • Examples
- 34. 34 www.intelcapital.com Intel Confidential Key takeaways • VC interest in Enterprise Software continues to accelerate • Ample liquidity/exit options available to high-growth software companies with the right unit economics via M&A, IPO and PE markets • The virtuous cycle of Cloud, Open Source software, Big data and Cognitive computing will create the next trillion dollar of market cap in Enterprise Software
Editor's Notes
- #15: Adaptive Insights, Apttus, Avalara, Cloudera, DocuSign, FinancialForce, Hootsuite, InsideSales, Medallia, MuleSoft, Nintex, Okta, ServiceMax, Slack, Spredfast, Sprinklr, Tanium, Telogis, and Zuora. http://graphics.wsj.com/billion-dollar-club/