For those tech companies that kept up their growth momentum – like Yelp, Pandora and Facebook — times were effervescent in 2013. But keep in mind that the tech world can be relentlessly unpredictable, with success quickly plunging into disaster.
According to Craig Hanson, who is a VC at Next World Capital: “Lately, company CEOs have talked about when Wall Street may focus on profitability. They are worried that the high-growth, high-burn strategy could come to a sudden end.”
If this turns out to become a reality, it will certainly be a huge problem. Let’s face it, many of the new-fangled high fliers are hemorrhaging red ink.
“The talk in the boardroom is: Can we dial back growth and get to profitability if the market sentiment changes?” said Hanson. “Can we find safe ground?”
Such talk does go against the idea that the tech space is in the midst of a bubble. If anything, as seen with companies like Violin Memory (VMEM), the markets can be brutal when a company falls short of lofty expectations.
Now this does not mean that Craig is a bear. He thinks that IPOs will likely remain in the bull mode in 2014. But more importantly, he is keeping his eye on long-term trends. It’s really the most viable option for any VC that wants to snag breakout gains.
One of the categories he’s upbeat about is the cloud. “What are the next software categories to tip over to Saas?” he said. “I think we will see the cloud model take over more traditional on-premise segments and become multi-billion dollar plays. There are too many advantages to the cloud, such as faster time-to-value, lower upfront costs and dramatically better user experiences.”
So it should be no surprise that VCs like Craig are looking for the many categories where enterprises spend massive amounts of money on software. This is why Craig invested in Host Analytics, which leverages the cloud for budgeting and forecasting. It’s a market that is primarily owned by biggies like Oracle, IBM and SAP. But their solutions are mostly stuck in the dark ages.
Oh and yes, mobile will continue its winning ways as well. “In 2014, we will probably see customer usage tip over to the majority of consumption for transactions,” said Craig. “But this means that software vendors need to have seamless mobile capabilities.”
In other words – as is typical – tech will remain an exciting place going into the new year.
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