Fred Wilson Calls Out Enterprise Tech Incumbents, Sees Room for NY Startups
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could be applied elsewhere. “If every person who bought stock in an IPO had to take a test to prove they’ve read the prospectus, we’d be in a better place,” he said.
Of course, everyone wanted to hear more about the kinds of companies that draw Wilson’s attention. “One of the great things about the venture capital business is every day, without fail, I see an incredibly good idea,” he said.
Union Square Ventures, he said, looks for companies that could be worth hundreds of millions if not billions of dollars. “In return for going after those kinds of opportunities, we’re willing to take on a lot of risk,” he said. About one-third of the ideas Union Square Ventures backs fail completely, one-third are successful to some degree, either through a sale or becoming profitable, and one-third achieve the high worth Wilson hopes for.
Entrepreneurs developing enterprise software will have to work hard to impress him. He spoke about the prevalence of “ankle-biters” who often undercut innovators that establish new markets. Furthermore, other software developers might create open-source versions of the technology to distribute for free. “That’s been going on in the software business for over a decade,” he said. “It is a reality for everybody that there is very little value in software, per se, because it’s commoditized.”
Wilson said what gets his attention are network effects when there is something other than the software that the enterprise is buying. The network effect means each new user of a system increases the value of the overall system. “The more customers you get using your software, the more these network effects grow,” he said, making it difficult for the “ankle-biters” to compete with companies that already have the major players in the market.
Though New York has a vibrant community of enterprise-focused technology companies that serve the financial industry, Wilson also sees potential for more startups to emerge here pursuing horizontal markets, much like Oracle, SAP, and Salesforce.com.
“Silicon Valley has been the place where many of those companies have been built,” he said. “We have to have some of those successes in New York so people can say they can build one of those companies too.”