Top SaaS investors have been saying for nearly a year that the next billion-dollar market opportunities are rooted in mobile enterprise apps – software for people who don’t sit behind a desk but do keep a smartphone in their pocket.
Last month, we talked about the trend with Kevin Spain of Emergence Capital. More recently, we caught up with Byron Deeter of Bessemer Venture Partners, who says Bessemer, which has already made 10 related bets, is similarly making a giant push into more mobile enterprise apps businesses. More from our chat, lightly edited, here:
TC: How long have you been focusing on mobile enterprise apps?
BD: We probably began focusing on this 18 months ago, with investments that range from pure plays like [the conference calling software company] Speakeasy to vertical applications – meaning they have mobile-heavy use cases or vertical use cases — like [the construction management software company] Procore; ServiceTitan [it makes management software for home services businesses like plumbing]; and ClearCare [which makes software for home care agencies].
TC: Something like 80 percent of the 3 billion people in the world who work do not sit behind a desk. Given the opportunities, how do you decide which industries to go after first?
BD: We look at industries and market size and sectors. We look at the state of existing technologies. And we try to have hypotheses around which verticals should fall first and where the biggest opportunities should lie. But we’re also very opportunistic in terms of meeting with great entrepreneurs and trying to find out where traction is happening because often it happens in areas you wouldn’t expect. For example, construction wasn’t an area we were looking at as an early adopter segment. Now that we work with Procore, it seems obvious in hindsight. But it isn’t something you would have seen outside in. It took industry insiders and proactive outreach to understand the power of the trend.
TC: Which is suddenly huge. There seem to be a lot of mobile companies now tackling the construction market.
BD: There can be multiple winners in these markets; they’re surprisingly big. Take ClearCare in the health care space. Healthcare alone is massive and it’s just sourcing a small part of it. The company is [focused on] home care workers for a specific type of segment. But there are probably dozens of other opportunities to do mobile-centric things in healthcare, within the hospital setting, within the home setting . . . we think it will be many years in the making, and that these are very early days.
TC: What industry do you think is ripe for mobile disruption next?
We already have a string of verticals. We’ve done a little bit in automotive, we’ve done some in pharma. We’ve been looking at adjacent products. You can literally take the U.S. gross domestic product and slice it by segments, then think about mobility.
With a lot of these, we’re looking for the vertical entry point but hoping for the horizontal use case, where you start somewhere, then move over.
TC: Can you give us an example of what you mean?
BD: DoubleDutch is one; it’s a mobile event management application that originally focused on tech conferences, but [has expanded its reach to the] American Cowbell Association and trucker conferences and things. It applies across any business where you have trade shows and where you get dealers and distributors together, but we found them through a vertical thesis.
One of the big questions is always market size and where can this go and can it truly play in a horizontal market, and I’ll admit that often we don’t know the answer when we make the investment. We look for great teams and big ideas, but one of the trade-offs in these vertical bets is that you may reach market size limits much faster than you normally would.
TC: How does mobile enterprise adoption differ from what we’ve seen on the consumer side?
BD: Much smaller numbers but much deeper usage and higher monetization. User numbers in consumer markets are staggering and you’re not going to see that with enterprise apps yet. But their ability to make money is an order of magnitude more. People will pay $30 and sometimes $100 a user per month for a compelling app, versus $3 to download a [consumer] app. There are very few enterprise-class mobile-first or mobile-only apps to reach scale, so we’re figuring this out together but we think it will be every bit as exciting as we’ve seen on the cloud and SaaS side.
TC: Are you seeing resistance to the apps in a way that you don’t with consumer apps?
BD: The [user interfaces] have to be different. A business user won’t listen to a tutorial or go to a training session on how to use a product like they use to. An enterprise mobile user now, if they can’t figure out your product within the first 30 seconds, they’re gone. And that’s the design challenge for these enterprise companies. They’re very different from SAPs and Oracles and PeopleSofts of years ago, where companies would force their teams to adopt their technology and go through weeklong training sessions to understand it. We’re at the complete opposite end of the spectrum now.
TC: Given what you’ve seen so far, do founders who’ve built SaaS products previously have an advantage over newly minted entrepreneurs or vice versa?
BD: We’re seeing a variety of entrepreneurs attack the space. The new, college graduate is often still going more toward consumer because it’s a market they understand and it’s more interesting to many people. What we’ve seen in the enterprise space historically is people who’ve been forced to use a crappy software product and felt the pain firsthand in an organization — they’re often the best founders. They know the problem intimately and know how to solve it.
TC: Five years from now, how much of Bessemer’s resources will be tied up in enterprise mobile companies?
BD: Mobile enterprise is a huge focus for us going forward because of the growth of the market. We think a huge portion of the enterprise software landscape will look at tablets and phones as their primary interface. So cloud companies that aren’t mobile oriented are subject to disruption and a lot of net new use cases that just weren’t possible before we reached today’s mobile ubiquity will be unveiled. We think we’ll see tens of billions of dollars in market cap created by companies that you really couldn’t have thought of until mobile platforms reached this level of maturity.