NICK DENTON: e-mail from the valley

NICK DENTON: e-mail from the valley - One of our investors has a portfolio company called GuruNet, an Israeli venture that has developed a cute downloadable gadget for finding related information on the web, using dictionaries and other reference sources.

by NICK DENTON, a founder of Europe's start-up community FirstTuesday, is CEO of Moreover.com (nick@moreover.com)
Last Updated: 31 Aug 2010

One of our investors has a portfolio company called GuruNet, an Israeli venture that has developed a cute downloadable gadget for finding related information on the web, using dictionaries and other reference sources. Walt Mossberg, the maker and breaker of consumer technology, praised it to the skies. GuruNet was poised for internet success.

Except the company formerly known as GuruNet has adopted a more corporate tone, and is now Atomica. Atomica's web site contains images of serious young executives researching important business decisions And that cool web gadget? It has morphed into knowledge retrieval and delivery solutions, which sounds so much more professional, and expensive.

In Silicon Valley, dot.coms are reinventing themselves as enterprise software companies. Their interest has turned from the users that they accumulated so greedily and the investors who until recently valued firms on the basis of those user numbers. Their attention is shifting to corporate customers, the mainstay of robust software companies such as Oracle and PeopleSoft.

The trend is universal. Xdrive, the free hard drive company, is now a provider of infrastructure software and services. Obongo, an online wallet company, is now a marketing tool for major banks. At our company Moreover, we claim always to have had an eye on the business market. But even I admit that we have altered our pitch: what was news search for a web user is a business intelligence solution for corporate customers.

Why the shift to enterprise sales? Because that is where the money is.

Online advertising revenues are stagnant, as the plight of the portals evidences. Investors are no longer funding ventures without a clear path to profitability. Business models based on subscriptions tend not to work because individual users are used to free services. Which leaves the Global 1000 companies - big spenders on IT and always Silicon Valley's most reliable friends.

It is as if the dot.com boom never happened. The tech industry is reverting to its traditional role, providing productivity-improving hardware and software to major corporations. The expectation is not for hypergrowth on the back of free services and instantaneous consumer adoption, but for a business built customer by customer.

Investors are banking not on a miraculous trade sale of a revenue-less venture with a cool product but on earnings, and then on reliable double-digit growth.

The reinvention of the dot.com has an amusing impact on the language of Silicon Valley. The word 'sales' is enjoying a revival. Before the Nasdaq downturn, sales betokened old ways of interacting with customers and absence of vision. Sales was guys in cheap suits who could not grow with the ambitions of the founders and VC backers. The preferred term for any dealmaker was business development - bizdev or BD.

Now, as far as I'm concerned, bizdev is a dirty word. BD stands for bad deals. Deals with portals such as Yahoo! or AOL in which a venture bankrupts itself in exchange for real estate of doubtful commercial value within channels such as Finance or Entertainment. Deals that were done just for the sake of doing deals, frenetic activity for its own sake or for some intangible PR benefit. Bizdev: I'd like to ban the word. Unlike a business development executive, a salesperson at least understands that he or she is expected to bring in revenue.

But this shift will not be as easy as changing vocabulary. There were too many internet companies to start with. And there are too many with the brilliant idea: what if we reconfigure ourselves as a provider of technology to other businesses? They then dress their consumer gizmos as enterprise-class solutions. I've been in many business discussions recently in which it has been clear that we are trying to sell technology to another venture while they are humouring us in order to pitch their technology to us.

I pity the cheque writers at Global 1000 companies. They must be besieged, fielding voicemails and e-mails from both established vendors and the internet startups for which corporate buyers are the last hope of profitability.

What's more, many of the startup salespeople aren't salespeople at all.

They are bizdev executives, usually just out of an MBA course, inexperienced in parting customers from their money, but with unwarranted confidence in their background and title.

And there's one more problem. Enterprise software is not the safe haven it once was. Half of all implementations fail, and major corporates are re-examining their bloated IT budgets. Already, firms such as Baan in Europe have imploded as sales momentum slows. For Atomica and other internet companies there may be no alternative to the enterprise market. But we may all be disappointed when we arrive.

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