Enterprise tech thru Arali Lens - Aug 22
Cloud acceleration, B2B Marketplace nuances, and other things B2Btech
Amidst all the cloud bursts that have hit Bangalore in the last few days, it is probably appropriate to start this monthly edition with the story of cloud running amok.
Cloud on cloud9, despite the larger market conditions
This month marks a change of guard in the cloud world, Salesforce surpassing SAP as the largest cloud enterprise platform. While this was expected in some ways, given Salesforce’s long and astounding growth ( 73 straight quarters of rising revenues), what was surprising was the astounding growth rates of the large corporations (and often mistakenly called legacy giants), now outpacing themselves as cloud-first companies. Another jaw-dropping statistic is the growth rate of cloud leaders and SaaS companies—an average of 53% when they hit $1B ARR. The key is to build sales momentum and in all probability, a multi-product portfolio as you scale.
However, the path to getting to those exalted ARRs and growth rates is never easy. It is certainly a long road, with the median exit in SaaS taking at least 10 years. Continuous nose-to-the-ground execution, timely product extensions, going upmarket, doubling down on sales, and building the culture are the often talked about areas. However, one aspect that is not given more importance is knowing when to pivot in the early days. I have seen multiple startups trudge along with not-so-great product-market fit; and the absence of hard decisions upfront means that they don’t scale significantly, often resulting in founder fatigue and sub-optimal outcomes.
One crucial evaluation criterion for us while looking at founders at the seed stage is to figure if they can put their ego aside and call the bluff / make hard-nosed decisions.
We have dropped quite a few deals because we couldn’t build conviction on this aspect of the team’s ability.
Indian B2B marketplaces and their uniqueness
Meanwhile, B2B marketplaces are getting their place in the sun. Businesses have realised that they can be a mainstream sales channel. Another key indicator that this is going mainstream is the announcement from Shopify that they have now integrated B2B functionality. Not surprisingly, a B2B marketplace funding napkin has also made its appearance. While it has some interesting perspectives on the path to scaling, it needs to be customised for markets like India. A research project, anyone?
Fundamentally though, there are some nuances of this market that need factoring in.
Quite a few B2B marketplaces are springing up in industries that are fairly laggard adopters of technology and have highly fragmented & unorganised market structures. Therein lies the opportunity, you would think…
However, in most of these marketplaces, especially those targeting the SME/mid-market, the take-rates and the customer AOVs tend to be on the lower side, putting significant pressure on growing GMV. The most important factor though is that the competitor for a B2B marketplace is an unorganized player with a far lower cost structure and an immensely valueable asset-customer trust. Overcoming both these constraints and building a cash-positive marketplace is a tough ask, especially since evidence shows multiple instances of marketplaces struggling to keep margins under control with scale.
The key, therefore, is to assess whether the buyer in the marketplace is really keen on digital adoption to solve problems of pricing opacity or product discovery and willing to pay a small premium for that, if necessary. Else, the B2B marketplace runs the risk of being yet another vendor. Double digit take-rates would be nice, too!
Robotics coming of age?
2021 was great for robotics, with VC investments peaking at $17.1B. While most of the funding has been focussed on autonomous robots and supply chain applications, investments in industry specific applications have been picking up.
In the consumer robotics space, Amazon announced the acquisition of ‘Roomba’ maker iRobot for $1.6B. The play might be as much about data as it is about building a presence in consumer robotics. A sneak peak into Amazon’s robotic ecosystem shows how increased focus from large enterprises can give a big fillip to the ecosystem.
Is there an Amazon equivalent doing the same in manufacturing robotics?
Noteworthy B2B action in August
B2B SaaS company WebEngage raised funds in a Series B round. The growth of the marketing automation platform over the years demonstrates the potential of Indian SaaS on the world stage.
Perhaps, the most prominent fundraise this month was that of CleverTap. This customer engagement & retention platform is among the fastest growing SaaS startups, once again reinstating our belief in homegrown SaaS companies catering to a global audience.
SaaS-enabled sales-talent marketplace Squadstack also raised funds in a Series B round. The company aims to disrupt the gigantic telesales industry in India which has not seen adequate innovation so far.
B2B SaaS startup Phyllo also bagged funding in a Series A round. Phyllo is offering APIs for companies building tools for the creator economy.
Further, RevSure.AI raised seed funding. RevSure is building a sales pipeline readiness solution for B2B SaaS companies at a time when B2B firms struggle with driving predictable revenue growth.
Arali Perspectives
When it comes to fundraising, compliance and due diligence cannot be an afterthought. Read our take on due diligence for founders.
From Arali’s Portfolio
First for the big announcement! Arali participated in the pre-Series A round of Prolance. Team Prolance is all set to transform the Interior Design industry, and we are glad to be supporting them in their journey! Here’s a quick compilation of why we think this is very interesting opportunity.
Unbox Robotics was recognised in the 2022 Gartner Hype Cycle™ for Mobile Robots and Drones 2022 as well as Supply Chain Execution Technologies 2022. Unbox’s “UnboxSort” the first-of-its-kind vertical robotics sortation solution was unveiled at India Warehousing Show in New Delhi, enabling eCommerce retailers to scale up logistics seamlessly.
Cynlr in partnership with Ace Micromatic Group, showcased its machine tending solution at Automation Expo Mumbai from 16-19th August.
WIZBULK formally launched its services, signalling a big step in the tech-enablement of a hitherto tech-laggard segment of shipping and logistics. The scope of transforming this large segment and the initial feedback are very encouraging. Furthermore, the company inaugurated a Tech and R&D Centre in Chennai for logistics tech.
Signing off, folks!
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