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Top Five Things to Look For in the Next Disruptive Enterprise Technology

By February 3, 2015Article

Disruption is a word loaded with meaning: an interruption, break or severance. Put the word in the context of the technology industry, and it stands in nicely for the incredible impact a new approach can have on the status quo. I like to think of disruption as opening new possibility in the enterprise – making our lives easier, saving costs or driving innovation forward. 

Disruption has already come in many forms – the Internet, cloud and open source to name a few – technology advances that made it easier than ever for determined entrepreneurs to bring their company or product to life. As a result, the market has become saturated with companies claiming to disrupt with the latest and greatest mousetrap. 

As a venture capitalist, the real trick becomes separating the flavor-of-the-day pitch from actual potential for disruption. In today’s ultracompetitive startup landscape, a new idea simply isn’t enough. Entrepreneurs need to communicate a unique perspective and the ability to deliver value to the market in a way that no one has before. 

But that’s still a simplified view of disruption and certainly not all it requires to catch an investor’s eye. 

When I’m out to identify the next disruptive enterprise technology, I want to check off five boxes:

1.  Passionate people. Bet on those with passion, even if their success is yet to be proven. Entrepreneurs should be passionate about the industry they are working to disrupt, the problem they are trying to solve and about making the world a better place through their innovation. A disruptive technology is really only as good as the visionary behind it and the team in place to create and sell a product. 

2.  New approach. Does the technology look at existing problems with a unique lens? Does it question and challenge the status quo with a healthy skepticism? Does it have a realistic chance of not only changing the way people think but also being adopted by the market? Can the disruptive solution be consumed in a non-disruptive way?

3.  Promise of substantial value. Disruptive technologies don’t provide small incremental gains. The kind of major disruption VCs are on the lookout for should really deliver substantial jumps in value that are easily quantifiable and sustained over a period of time. This enables companies to charge a premium for that value, without products or services becoming commoditized in a short period of time. Sustainability of value is an important checkbox.

4.  Rapid rate of change. So many factors affect the rate of technology adoption, but truly disruptive technologies and approaches have the ability to transform the status quo seemingly overnight. It’s not only the change but the rapid timeframe of disruption that we expect from the game changers. And so from an investment perspective, it is not only the size of the return but also the rate of return that separates disruptive companies and technologies from the ho-hum.

5.  A primed audience. Disruptive technologies also must have broad applicability. They often open up new markets that were previously inaccessible by older technologies and reach existing and new audiences. Even the most disruptive companies will fall flat without an audience. While it may be an overused one, Apple is a good example of how important audience is to disruption. While often ahead of their time, the need and the (global) demand for Apple’s products have followed. 

Ticking the boxes 

I’ll use one of our investments, PernixData, an enterprise storage startup, as an example of my checkbox approach to identifying disruption. I am the founding investor in PernixData, and also advise the company and its executives as a board member. 

In previous roles at VMware and Oracle, the two founders, Satyam Vaghani and Poojan Kumar (both passionate and experienced technologists), witnessed firsthand the challenges that IT administrators faced. They set out to find a new way for them to efficiently scale storage performance using virtualization (a new approach). In 2012, the founders came to Lightspeed with a simple proposition: separate storage performance from capacity and buy performance through software (the promise of substantial value). 

When PernixData introduced this concept in 2012, the company took a leap from the status quo and was well received by enterprises hungry for change (rapid rate of change). Today, it’s considered one of the fastest-growing enterprise storage startups in Silicon Valley, with a growing customer base looking to maximize storage investments (primed audience) and improve performance in an entirely new way. 

As VCs, we hear a whole lot of pitches and a good deal of talk about disruption – I think it’s an overused word. But when the right boxes are checked and you invest in a real disruptor, it brings all the meaning back to the word. 

Bipul Sinha is a partner at Lightspeed Venture Partners, where he focuses primarily on software, mobile and Internet sectors with a particular interest in cloud services/infrastructure and social utilities/apps. Bipul’s current investments include PernixData, Nutanix, Bromium, and Peel. His past investments include Pulse (LinkedIn) and LiveProfile (RIM).





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