Startup markets tend to ebb and flow. Here are five trends to watch from enterprise startups this year.
Despite conservative leanings when it comes to selecting new vendors, the enterprise is under pressure to innovate. Everyday, new startups come into being — startups that could help a corporation leapfrog one of its competitors.
Going for what is "safe" is no longer an acceptable excuse to forgo a potential upper hand in business. However, this means taking a risk, which isn't the easiest thing to do when a company's reputation, not to mention money, is at stake.
So, how do you hedge your bets? While there is no surefire way to mitigate some of the assumed risk involved with employing a young technology vendor, you can watch the landscape in hopes of making better choices for your company.
Here are five trends you should watch in enterprise startups.
Joe Horowitz and his team at Icon Ventures initially made investments in security companies in 2006 and 2008, funding companies such as FireEye and Palo Alto Networks. At the time, the poor performance of incumbents led them to believe the market was ripe for disruption. While the market was exciting then, Horowitz been surprised by how it is taking off now.
"Security continues to be a very interesting category for investment," he said. "The bad guys are getting more sophisticated and now it's not just hackers in basements in Eastern Europe, but it's sovereign nations waging war against other nations from a cyber security perspective."
However, it's not just that threats have become more complicated. The rise of mobile in the workplace and the Internet of Things have created a host of new opportunities for cyber criminals.
"The proliferation of connected devices creates a huge security risk — everything can be, and likely will be, hacked," said Arun Mathew, a principal at Accel Partners. "I expect to see more and more technology that helps protect the enterprise (or the consumer) in the face of growing mobile, desktop, data center and firewall threats."
While we saw quite a few unique security startups launch in 2014, Mathew said that the challenges posed by these new threats will prompt a new crop of startups to build preventative tools and technologies during the next decade.
Big data has been around for quite some time, but it's safe to say that big data began to truly hit its stride in the last couple years. Building on that traction, it's set to explode in the next year or so.
Part of the initial problem with big data was finding a use case. As big data continues to evolve, though, Horowitz said that it is expanding in new ways and filling the need for specific industries.
"The evolution of big data is such that it's of interest, not as a horizontal platform today, as much as vertical applications," Horowitz said. "Big data for marketers, big data for life sciences."
Another key piece of the big data equation is data inputs. The sheer volume of computing devices and IoT sensors are producing heaps of data, and Mathew said that is where the opportunity is.
"The result is an explosion of data about consumer behaviors and technology applicability throughout the daily lives of millions of consumers," Mathew said. "I expect to see the rise of new technologies that can sift through and process this data, and provide actionable recommendations and analysis for consumers and enterprises alike."
As a concept, artificial intelligence has existed for a long time, but it hasn't been put clearly into practice until recently. Major tech companies like Google and Facebook made strategic investments in AI and deep learning to push the market forward in the past year.
For a long time, AI existed only in the deep recesses of university science departments and government research facilities. Now, some of that same technology is becoming available to consumers and the enterprise.
Eric Chin, a partner at Crosslink Capital, believes that software algorithms for AI technologies such as deep learning and self learning will be deployed more readily in both consumer and enterprise applications in the coming year.
"This tipping point started and in 2014 and is happening now," Chin said. "Hence, startups, tech companies, and enterprises for the first time have access to this resource to create innovative and breakthrough software apps and programs at unparalleled velocity."
According to Chin, data is the reason we are seeing AI move to center stage. Data storage costs less and is declining in price every month, and there are plenty of new database technologies and ways to store the data. Additionally, we have open source runtime environments for real time computing and other unique tools.
The rise of mobility in the workforce is a big deal, and is something that will provide new opportunities for enterprise startups.
There is the opportunity for new mobile apps. But, there is also a need for new startups to deal with the changes to IT infrastructure and security that come along with it, Horowitz said. Also, new enterprise message options and company tools will also be needed along with mobile device management solutions (MDM).
"It's everything from how can business be done better, to how do you allow people to have their choice of mobile devices and have it work compatibly with the enterprise from a security point of view, and from the point of view of that ubiquity of enterprise applications that allow the workforce to be more effective," Horowitz said.
Changes to the way we approach finances has been as slow moving as the financial institutions themselves. However, the pace has quickened and, according to Mathew, it started with a new audience focus.
"For the first time, enterprises are catering to a younger demographic," Mathew said. "These millennials present very different purchase behaviors. More often than not, startups provide new and attractive solutions that provide more intuitive and engaging UI/UX."
While it's obvious that this will make the products look better and perform well, it will force enterprise financial companies to engage the consumer world and vice versa.
The consumer products will need the same security and reliable infrastructure as the enterprise products, but they will require those will experience working with enterprise applications.
"The outcome will be consumer or enterprise products that better enable an emerging class of consumers to track and improve their financial investments without having to talk to a specialist on the phone," Mathew said. "These are very different interests and habits than older users — new innovation will democratize these technologies and use cases."
What do you think?
We want to know. What startup trends do you think we should expect in 2015?