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Information Technology
The information technology sector experienced a remarkably compressed boom and bust cycle in the late 1990s. Spurred by excitement over the emergence of the internet and its related technologies ("irrational exuberance", anyone?), companies' revenues and valuations went through the roof. And just as surely as the foliage goes "golden" in California every summer, those valuations came crashing back down to earth.
While the current climate in information technology isn't nearly as volatile, it's still marked by a number of trends that small and midsize companies must factor into their go-to-market activities:
- Consolidation: In the last 36 months, Veritas, Macromedia, Retek, PeopleSoft, GEAC, and Siebel have been acquired. When names like this get swallowed by larger suitors, it makes headlines, but in fact it's the multitude of smaller acquisitions that illustrate the magnitude of this trend. What it means for the survivors is that they face stiff competition from far larger and well funded competitors. On the other hand, after years of botched implementations of large enterprise packages, there is no shortage of user companies who hold a strong preference for doing business with smaller, more nimble - and less arrogant - vendors.
- The coming of age of Software-as-a-Service: The SaaS model has finally come of age as a legitimate way for enterprises with concerns about flexibility and cost to acquire core business functionality. While salesforce.com is often held up as the poster child of the movement, there are numerous other successful ASPs who, despite their lower profiles, are making a large impact in areas such as ERP, supply chain management, product lifecycle management and other areas previously the exclusive domain of client-server software packages.
- The emergence of the open-source model: Open-source once seemed to many observers to be an oddity: a bunch of dispersed, diverse, unpaid developers coming together to jointly develop software that would meet their individual needs. Could such ventures ("anti-ventures", really) conceivably pose a threat to the coordinated, for-profit efforts of overwhelmingly successful and dominant commercial entities? They sure could. And their clout in the enterprise software space is growing.
- "Google-ization": Google's success in creating an advertising-driven revenue stream has prompted vendors of other types of software to investigate the notion of making money on advertising to captive eyeballs. In turn, they offer their products for free - or at least heavily subsidized by their advertising revenue.
These trends - alone and in concert with one another - create an operating environment for IT and software companies that differs radically from the milieu to which most of them have become accustomed. The questions abound: Is small beautiful? Or just small? Is the value of your company locked up in its functionality, technology, or installed-base? Is consolidation coming to your sector soon? And does that herald a profitable exit, or is that sound you hear the bell tolling for thee? The Launch Factory helps its clients to chart a course through this potentially perilous, potentially profitable landscape by offering insight and acumen borne of decades of experience. Click here to contact us.
Medical Devices and Lifesciences
The nature of the medical devices and lifesciences sector represents an interesting and unique challenge for start-ups:
- High start-up R&D costs: Unlike start-ups in other technology areas, companies in the medical devices and lifesciences sector often incur extremely high start-up research and development costs, including testing and regulatory expenses. The implication of this is that start-ups in this sector have radically different cash flow curves than in other industries, and as such require a very specialized type of investor who can subsume such risk.
- Need to explain sometimes complex science to lay-people: All technology start-ups suffer, to varying extents, from the requirement of having to enlighten non-technologists about their product offerings. This challenge is magnified in the lifesciences and medical devices sector as the minutiae and complexity of the science underlying a given product offering can simultaneously be quite daunting and the source of competitive differentiation.
- Product liability issues: The very nature of lifesciences means that human lives are somehow being touched by the product in question. This has profound implications for how such products are developed and tested, and for ancillary issues such as liability insurance coverage.
The Launch Factory works with early-stage medical device and lifesciences companies to surmount their distinctive and intrinsic challenges. We have worked with numerous companies in crafting compelling value propositions and positioning them for success with end-user and financial audiences. Click here to contact us.
Green Technology
North America's energy sector is experiencing unprecedented change as our burgeoning demand for energy strains production, transmission and distribution infrastructure to the limits.
This unprecedented demand is creating dramatic price volatility across electricity and natural gas markets and bringing to the forefront into question grid stability along with its impact on security.
On the supply side, large fixed assets (including generating plants) are aging and will require billions of dollars in investment to refurbish/ replace, capital that is increasingly hard to attract. The timelines for such construction is five to 10 years and cannot address the supply and demand issues which are now becoming critical. While gas-fired plants represent a shorter time-to-market, they are fuelling the crisis by increasing the economic links between natural gas, a non-renewable and declining energy reserve, and electricity prices.
On the demand side, utilities are faced with capacity issues arising from myriad sources including increased penetration of residential air conditioning, congestion in transmission systems, and the explosion of consumer electronic devices.
The establishment of competitive energy markets in natural gas and electricity is a continuing trend and a clear policy to attract new sources of capital, encourage innovation and deploy new technologies. Hourly markets in electricity are a mechanism to shift consumer behavior and encourage off-peak consumption.
Some of the technologies in electricity, natural gas, and water conservation that represent the future of the energy sector include (broadly):
- Distributed generation: including micro-generation, CHP, storage technology, renewable energy (solar, wind, alternatives including TDF biomass, and gasification)
- Smart metering: devices data telecommunications, and data management solutions
- Demand response: real-time command/ control, energy intelligence (predictive forecasting, analytics, decision support, load control devices, wireless/ smart controls)
- Energy efficiency: heat recovery, water purification and recycling, high efficiency appliances, advanced lighting control (dimming technologies, daylight harvesting, task tuning, fixture indexing etc.
The energy sector is an industry with multiple stakeholders -- regulated and competitive entities intertwined and interdependent. The Launch Factory, with its deep understanding of the sector, helps its clients to sucessfully navigate this complex market landscape and develop the strategies and tactics to successfully deliver their offerings to the energy marketplace.
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