12 VCs share their thoughts on enterprise startup trends and opportunities

Compared to other tech firms, enterprise companies have held up well during the pandemic.

If anything, the problems enterprises were facing prior to the economic downturn have become even more pronounced; if you were thinking about moving to the cloud or just dabbling in it, you’re probably accelerating that motion. If you were trying to move off of legacy systems, that has become even more imperative. And if you were attempting to modernize processes and workflows, whether engineer- and developer-related, or across other parts of the organization, chances are good that you are giving that a much closer look.

We won’t be locked down forever and employees will eventually return to offices, but it’s likely that many companies will take the lessons they learned during this era and put them to work inside their organizations. Startups are uniquely positioned to help companies solve these new modern kinds of problems, much more so than a legacy vendor (which could be itself trying to update its approach).

Venture capitalists certainly understand all of these dynamics and are always dutifully searching for startups that could help companies shift to a digital future more quickly.

We spoke to 12 of them to take their pulse and learn more about the trends that are exciting them, what they look for in an investment opportunity and which parts of the enterprise are ripe for startups to impact:

  • Max Gazor, CRV
  • Navin Chaddha, Mayfield
  • Matt Murphy, Menlo Venture Capital
  • Soma Somasagar, Madrona Ventures
  • Jon Lehr, Work-Bench
  • Steve Herrod, General Catalyst
  • Jai Das, Sapphire Ventures
  • Max Gazor,  CRV
  • Ed Sim, Boldstart Ventures
  • Martin Cassado, Andreessen Horowitz
  • Vassant Natarajan, Accel
  • Dharmesh Thakker, Battery Ventures

Max Gazor, CRV

What trends are you most excited about in the enterprise from an investing perspective?

It’s abundantly clear that cloud software markets are bigger than most people anticipated. We continue to invest heavily there as we have been doing for the last decade.

Specifically, the most exciting trend right now in enterprise is low-code software development. I’m on the board of Airtable, where I led the Series A and co-led the Series B investments, so I see first hand how this will play out. We are heading toward a future where hundreds of millions of people will be empowered to compose software that fits their own needs. Imagine the productivity and transformation that will unlock in the world! It may be one of the largest market opportunities we have seen since cloud computing.

What are you looking for in your next enterprise investment?

It’s important to see a great product, and when not available, a team that has a history of building great products. Over the last decade, through CRV companies such as Zendesk, Airtable and Postman we have seen a transition to product-led distribution strategies where there is huge user love that drives adoption and capital efficient growth. For software startups to compete in a world where the incumbents are more powerful than ever, it is more important than ever to have this.

What parts of enterprise do you think are most in need of new technologies?

Even despite the rapid growth and developments in cloud computing, I believe there is so much more room for innovation here. It’s remarkable that most of the enterprise software dollars spent are still supporting legacy infrastructure that’s not in the cloud. The massive transformation to the cloud over the next decade will create the need for new technologies and categories that will be tremendous investment opportunities. We’re seeing a lot of opportunity within data infrastructure, cloud networking, process automation and other traditional legacy categories that are undergoing transitions to the cloud.

Navin Chaddha, Mayfield

What trends are you most excited about in the enterprise from an investing perspective?

Future of remote work

As the world moves to a distributed workforce, a remote-first ecosystem will spur innovation in many areas including collaboration, communication, marketing, sales, customer support and knowledge sharing. This will build on the forces shaping the future of work that was already in place prior to the pandemic. Some of those include: the rise of gig workers, the potential for AI to increase productivity by automating tasks, the dramatic increase in a decentralized workforce that are often deskless and mobile, and the desire for workers to derive meaning beyond income from their services.

Human-centered AI

AI should enhance humans, rather than replace them. Some examples include using AI in recruiting to eliminate bias in hiring; using AI for repetitive tasks in customer support so that humans can handle escalated cases for greater satisfaction; and using AI in hospitals to pattern match in radiation diagnostics, so humans can come in for the final analysis.

Hacker-proof security and privacy in the age of surveillance

We live in the age of hackers and other bad actors. Enterprises need to build security policies and solutions that respond to breaches but are also effective in preventing them. At the same time, as we go into a future where users grant permission for tracking their health data, enterprises have to do so while complying with privacy regulations such as HIPAA, GDPR and CCPA. Some examples include cybersecurity posture transformation, continuous application monitoring, data privacy compliance, secure access to secrets such as API keys, passwords or certificates, and encryption platforms for distributed file sharing that eliminate the need for passwords and public keys.

Systems of engagement and intelligence apps

The world of SaaS business applications has moved from systems of record to systems of engagement and intelligence. We believe that modern platforms aimed at major lines of business such as the remote salesperson, the remote marketeer, the remote recruiter, the remote alliance manager, the remote customer support representative and so on that combine delightful interfaces with deep domain knowledge will thrive.

Developer and DevOps-centric platforms and communities

Engineers, designers and product managers today are using an ever-increasing array of tools to try to do their jobs — tracking issues, writing code reviews, iterating on designs — and less time actually getting their jobs done building software. At the same time, technology executives want more granular visibility into the software delivery lifecycle. There is a huge opportunity for startups to create “force multiplier” tooling for product development personnel by automating repetitive workflows, stitching together disparate tooling and facilitating team collaboration, while providing actionable insights and analytics for managers and executives.

Additionally, in the wake of COVID-19, enterprises have accelerated their digital transformation plans and journey to the cloud. CIOs and other key IT stakeholders are looking at Day 2 operations — what it takes to keep modernized apps and infrastructure up and running — and cost reduction, downtime management and security are paramount considerations. There are significant opportunities for startups in areas such as incident response and troubleshooting, infrastructure compliance and auditing, and cloud/API-based monitoring and security.

Rise of the edge

As 50 billion IoT devices get installed and edge use cases such as autonomous cars and edge data centers go mainstream, microbranches with people working from home offices, software that delivers the power of the cloud at the edge with real-time, low-latency access will need to be created. A new class of companies will enable enterprises and service providers to bring a consistent cloud environment to wherever they are distributing their applications, be it on-premises, one or more public clouds or a diverse set of edge sites and locations.

Robotics, drones, AR/VR

The rise of robotic process automation in industrial warehouses and logistics will address supply chain failures. In hospitals, robots are taking the pulse of patients and assisting in operating rooms. Drones are providing security patrols and being tested for delivery of goods. AR and VR applications are allowing for touchless experiences. Other technologies such as quantum computing, thermal cooling and blockchain also have potential.

What are you looking for in your next enterprise investment?

As a people-first investor, I am always looking for a founding team with a mission-driven culture, a must-have value proposition and a growth mindset, which is especially important during this climate.

What parts of enterprise do you think are most in need of new technologies?

I believe that the whole stack is ripe for innovation from infrastructure being offered as a service, to middleware platforms, all the way to the application layer becoming systems of engagement and intelligence.

Matt Murphy, Menlo Venture Capital

What trends are you most excited about in the enterprise from an investing perspective?

Most excited about automation of many workflows and processes enabled by ML/AI Z — both process automation (not RPA, but AI used to make a process smarter, faster, better, e.g., Gong) and actual robots (which replace functions humans generally do not want to perform, e.g., 6 River Systems).

What are you looking for in your next enterprise investment?

I remain committed to broken, antiquated, even analog workflows (e.g., Docusign, Benchling) that need to be digitized and replaced by a purpose-built end-to-end app that covers the entire workflow and then makes the process smarter. Step one is to digitize, step two is to add intelligence, insights and smart actions that enable people to do their jobs better or for the workflow to occur autonomously. e.g., Harness automatically deploying software, testing and rolling back if necessary. There are many of these processes that are under tremendous stress in a remote work environment, so the opportunity is bigger than ever.

What parts of enterprise do you think are most in need of new technologies?

I’m always surprised at how many industry and general workflows are not digitized or are still dominated by general tools Word/Excel/email. [Companies like] Carta and Cap Tables used to all be in spreadsheets. That gave their customers the opportunity to become a system of record and develop an entire suite of applications.

Soma Somasagar, Madrona Ventures

What trends are you most excited about in the enterprise from an investing perspective?

Future of work

Imagine a flipped workplace model where more people by default are working from wherever they are and come together for certain key interactions or events. Communication tools, collaboration tools, learning tools and other kinds of productivity tools will need to continue to be reimagined.

Automation

There will be acceleration for automation of back office processes as well as for processes and workflows related to customer engagement and support. Automation capabilities for vertical and domain specific processes will be in high demand.

Intelligent applications

Building the next generation of SaaS applications that focus on taking advantage of data with sophisticated ML and AI models to build a continuous learning system.

Low-code/no-code development tools

The move to enable a much broader number of people who don’t have sophisticated programming skills to be able to easily and seamlessly build applications is only going to gain more momentum.

What are you looking for in your next enterprise investment?

A great founding team, solving a problem that is a “must-have” solution versus a “nice to have solution,” a customer-focused approach and a potentially large opportunity.

What parts of enterprise do you think are most in need of new technologies?

The glass half-full and half-empty view are similar. Every part of the enterprise needs new technologies. Customer engagement, retention and satisfaction to infrastructure that scales automatically and efficiently to automating the back office. The current situation has shown that every part of the enterprise needs new technologies to not just survive, but thrive.

Jon Lehr, Work-Bench

What trends are you most excited about in the enterprise from an investing perspective?

COVID-19 has put an emphasis on operational efficiency and there are still a lot of areas in the enterprise that are bogged down by manual and resource intensive processes. This includes everything from data engineering and DevOps to security operations, vendor risk management and HR processes. Automation and machine intelligence will play a big part here.

What are you looking for in your next enterprise investment?

There are still a lot of unknowns in the enterprise, such as when folks will get back to the office and how the office environment will pan out. What is clear is that remote work is here to stay in some shape or form. We’re keen to find investment opportunities that aim to bring operational efficiency and productivity to this new working environment. This can include technologies that enable specific roles, such as developers or data scientists, to better collaborate or communicate and be more productive when they can’t go tap their colleague on their shoulder with a question.

What parts of enterprise do you think are most in need of new technologies?

Enterprises need the most improvement in back office paper-based processes, DevOps and incident response, as well as security engineering to embed security into the software development lifecycle, so that bugs and vulnerabilities can be caught earlier in the process and safeguards can be applied throughout.

Steve Herrod, General Catalyst

What trends are you most excited about in the enterprise from an investing perspective?

It’s never been more clear that the way knowledge workers do their jobs has changed dramatically, and it seems highly likely that we’ll never fully go back to the way things were. The implications of this “future of work” are profound from the importance of pervasive video to new, more collaborative applications to the challenge of properly securing the remote worker and their data. This trend started before the current crises and will be one that spawns a substantial number of important new companies.

What are you looking for in your next enterprise investment?

I focus on early-stage (Series A and B) companies, and these require thoughtful founders who have a strong opinion on what the future enterprise will look like. I’m particularly looking for ambitious, highly technical teams with products that sell themselves “bottoms up.” The traditional in-person direct sales model will be challenged in our new world and so this ability to attract users through product accessibility and excellence is critical to me.

What parts of enterprise do you think are most in need of new technologies?

I continue to be bullish on numerous areas. Cybersecurity continues to need new solutions, especially with extreme levels of working from home uncovering huge pain areas around VPNs, data leakage, access control and new types of threats. Many companies need to accelerate their own internal and branch office networking setups to deal with new loads and traffic patterns.

Application creation and deployment needs to be more nimble than ever, and the DevOps movement still has a long way to go. And any enterprise process that is not yet fully digitalized and automated will always be in strong need of technology to do so.

Jai Das, Sapphire Ventures

What trends are you most excited about in the enterprise from an investing perspective?

I’m really excited about four major trends:

Technologies enabling remote collaboration like remote access, online whiteboarding, online events, online enterprise software selling, etc. We’ve been looking at these types of technologies for a while now. It’s not necessarily a result of COVID-19, but the current climate has certainly accelerated the need for these tools.

Cloud security. Most companies are going through a digital transformation right now. Along the way, they’re moving away from on-prem data centers to public clouds and are increasingly adopting SaaS applications. This creates new security challenges and risks for enterprises. Yet, there’s a huge shortage of security professions, which is only growing. The solution to this problem are security technologies that are easy for any engineer to understand and use.

Infrastructure that enables companies to sell goods and services online including everything from delivering products to residents to curbside pickup and restaurant take out. While this sort of technology is relevant right now, it’s also an area that will be increasingly important on the other side of this pandemic.

DevOps, or developer operations. Compared to the cost of engineering talent, the spend on developer tools is still small. The opportunity here isn’t only in the tools they use regularly like GitHub, but also in ops systems that developers spend time to maintain, but have nothing to do with the actual product they’re working on. There are lots of tools out there to help ensure developers aren’t spending time on repetitive workflows and instead let them focus on building business applications and features.

What are you looking for in your next enterprise investment?

Companies with teams that have navigated previous downturns or have previously turned around companies. These teams typically run their companies much more cash efficiently and also know how to keep their employees motivated and productive during these unusual times.

Companies that are focused on making their customers more efficient and enable them to increase topline, as well as conserve their spend.

Companies with inside-sales led business models that can target large enterprises and land large deals. These are the companies that will be successful when sales teams are unable to meet with customers face-to-face.

What parts of enterprise do you think are most in need of new technologies?

Most enterprises are using this time as an opportunity to look at every part of their business, digitize it and make it more efficient. The way enterprises are manufacturing, distributing and selling products, as well as how they’re providing customer support and managing employees are all being reevaluated. Artificial intelligence (AI), moving to public clouds and using more SaaS applications are going to be some of the first areas of focus for enterprises.

Ed Sim, Boldstart Ventures

What trends are you most excited about in the enterprise from an investing perspective?

We’ve been heavily focused on developer-first startups, anything helping developers be more productive from better tooling in their pipelines, security shifting left, abstracting infrastructure and teams working and coordinating better.

On the DevOps side, there is also this struggle inside of large organizations where developers want freedom to use and deploy whatever software they want and organizations want control and governance. Investing in helping enterprises manage this better is a huge focus area of ours as well. Finally, keeping the lights on 24/7 is super important so anything that helps enterprises build a more resilient infrastructure. Net net, our thesis has not changed and in fact is only accelerating with the pandemic as Fortune 500s accelerate their own digital transformations.

What are you looking for in your next enterprise investment?

The same thing we’ve always looked for: mission-driven technical founders on day one launching new enterprise companies born out of pain they’ve experienced. If anything, being heads down and in build mode for the next 12-18 months is not a bad place to be and hopefully these companies can build and iterate on product and emerge when we return to some semblance of normal.

One idea we’ve been super keen on for a while is the idea of GitOps or “git” for everything, version control and workflows for better collaboration. This includes traditional developer-led areas like Git for APIs (Optic) and IAC (Env0) but also expands to using a “version control” system for broader areas like data privacy (Cape Privacy), HR, finance and more. In a new normal when we have hybrid work environments, coordination and collaboration will become even more important.

What parts of enterprise do you think are most in need of new technologies?

Anything helping large enterprises become more digital from cloud enablement to developer productivity to automation and getting more value from their data.

Martin Cassado, Andreessen Horowitz

What trends are you most excited about in the enterprise from an investing perspective?

I’m very excited about tooling for operations as more and more companies shift from software companies to *aaS operations companies. I’m also very excited about the data infrastructure layer.

What are you looking for in your next enterprise investment?

I tend to like cash-efficient, horizontal companies that have strong bottoms-up interest.

What parts of enterprise do you think are most in need of new technologies?

Oh so many … user interaction modalities, automation frameworks for rote work, systems for distilling insight from data, etc.

Vassant Natarajan, Accel

What trends are you most excited about in the enterprise from an investing perspective?

Ten years into this enterprise software bull market, the opportunities ahead are spread unevenly. We’ve long been investing in “future of work” companies (Atlassian, Dropbox, Slack, Ironclad, InVision, Miro and Freshworks) — collaborative software that modernized work for product, engineering or customer-facing teams. Add to them the many multipurpose products we admire from afar like Notion, Asana and Airtable, and just about every functional team has a shiny new collaborative cloud in place, deployed in only the past few years. It’s logical we see some slowing of startups in these horizontal workflow categories while customers digest all the great innovation of late.

What are you looking for in your next enterprise investment?

We’ve been excited by workflows that won’t fit neatly into off-the-shelf SaaS. Every organization has custom processes ripe for technology: employee onboarding, user management, billing, fraud, compliance — bespoke work that emerges as companies grow in their domain. Low-code/no-code apps and API integration platforms give teams a simple way to encode those processes digitally, filling gaps that SaaS struggles to reach. Companies like Process.ST, Webflow, Airkit, Bryter and Zapier are growing quickly here, and we’re bound to see more platforms that flex to these needs. Most software isn’t one-size-fits-all, after all.

What parts of enterprise do you think are most in need of new technologies?

We’re keen on privacy and data governance. The cloud data wave brought major change to the enterprise by eliminating infrastructure constraints. It combined operational scalability with diminishing marginal costs — every click, file, log or user event you collected had a cheap place in the cloud. Today’s data privacy movement is an important check and balance on infinite data collection.

It moves us from the question of “can we collect everything?” to “ought we to collect everything?” — and “what’s fair use?” These questions demand immediate attention now that GDPR and CCPA are in full effect. We’ve invested in a number of startups (Transcend, Privitar, TraceData) to help modern engineering and operations team adapt to a privacy-conscious world.

Dharmesh Thakker, Battery Ventures

What trends are you most excited about in the enterprise from an investing perspective?

At the macro level, the transition to cloud is going to accelerate. Enterprises are recognizing how difficult it is for them to manage remote infrastructure, run their own data centers and keep employees productive. While secondary and innovation projects are already being transitioned to the cloud inside organizations, many mission-critical apps are still running on-premise. If the plan was to transition those technologies the cloud in five or 10 years, that may accelerate to two to three years post-COVID.

As part of that larger trend, we’re also excited about the digitization and modernization of applications using new types of development tools. If you don’t have a digital footprint that allows you to engage with customers online — whether that’s in hospitality, with restaurants connecting to customers through food-delivery services, or retail companies that need to have a seamless e-commerce experience — you’re vulnerable. This is a massive trend that we’re excited about.

Finally, there’s security. This is going to be an ongoing need for improved security as more enterprise functions go digital. When companies are vulnerable on an economic level, they’re also vulnerable to hackers.

What are you looking for in your next enterprise investment?

The most important thing right now is remote-selling capabilities — the ability to sell a technology product or service without in-person interactions. Secondly, it is exposure to enterprise vs. SMB — the former being much more resilient. High-velocity, bottoms-up sales motions, where developers or departments inside organizations are buying products online, initially on their credit cards, are much more resilient.

To be clear, this was happening pre-COVID as well. What we’ve seen recently is that companies that have expensive, top-down sales motions are vulnerable. We prefer companies that are more bottoms-up, targeting enterprises and can transact remotely with customers. Customers need to be able to “try before they buy,” buying and testing out the product through the cloud. This will slowly become the norm in enterprise tech.

What parts of enterprise do you think are most in need of new technologies?

I think broadly speaking, ones that are not digitally ready. Any large enterprise that doesn’t have remote capabilities for its workforce is in need, for instance. Many parts of the enterprise are still running on on-premise software, particularly in areas like healthcare and those need to be upgraded. Throughout the economy, even Mom and Pop businesses like restaurants and brick-and-mortar stores must also start evolving so they have an omni-channel presence.