If I had a nickel…
By Ron Weissman
If I had a nickel for every enterprise technology company pitch I have heard as an investor that focused on big finance, big tech, big telecom or big pharma, I wouldn’t be writing this blog–I’d have retired long ago. Perhaps it is because startup teams are often spun out of established companies and when they leave, they take their old market habits with them.

While they might kick the tires to satisfy their curiosity, Cisco, JP Morgan and GSK cannot actually deploy every new product they test. It is true, of course, that tech wizard CIOs, finance hot shots and pharma scientists live at the bleeding edge and are fearless in their trial of new technology. These are the guys who buy every new router and every shiny data analytic tool from every new vendor. But as we learned long ago from Geoff Moore, the bleeding edge is neither a large market nor one that leads to broader adoption. There are a hundred people in America who will buy one of anything. That a product works at MIT or Goldman Sachs doesn’t prove anything and can even be a kiss of death rather than an endorsement when viewed from Main Street rather than Wall St. And mainstream telecom, pharma and tech are very crowded markets with established players having dominant market share.

As an investor, I look, increasingly, for companies serving markets that are not already saturated with vendors. Firms in these underserved markets are usually willing to partner with bright innovators developing unique, market-specific solutions, even in today’s economy. Startups can achieve very significant liftoff by focusing where their competitors do not. Retail Solutions is one such company, having acquired an enviable customer base across the top global CPG companies like Kraft, Unilever and Walgreens for their inventory optimization solutions; or Transera, focusing its call center virtualization solutions on top direct marketing firms, or Cataphora, offering investigative risk analytics for top petrochemical, legal, and energy firms; or Plex, selling mid-tier ERP to leaders in automotive and food and beverage supply chains.

While the “same old” markets offer the virtues of familiarity, underserved markets, like Oil and Gas, Commercial Real Estate, CPG, Energy, Food and Beverage, and Retail offer different advantages:

  • They are generally underserved, at least as compared to financial services, pharma and big tech
  • Market participants are willing to work with younger companies as they develop vertical market solutions
  • These markets are generally not where your technology competitors are and enable you to establish a market-leading beachhead, an initial market from which you can advance to near neighbor markets

In the thousands of pitches I have heard, I am often more inclined to support companies who have designed a tight solution around a well defined and “different” market from the get-go. These contrast sharply with companies, even those with strong technology, who, when asked, “Who is your market?” answer: “Probably the usual, financial services and telecom.”

Takeaways

  • Gain a foothold in markets where your technology competitors are not present
  • Work closely with leading companies in these markets. You will be surprised at how willing they are.
  • Be a market anthropologist: Learn how decision makers work, get rewarded and promoted, what language they use, and what keeps them up at night.
  • Clear away your mental cobwebs—with concrete criteria, perform a best-fit market assessment to see where, beyond finance and pharma, your products can win big.