Venture capitalists to tech startups: Embrace the downturn

Still only 22% of spend is in the cloud,’ said Alex Kayyal, senior vice president and managing partner at Salesforce Ventures (Photo: Reuters)
Still only 22% of spend is in the cloud,’ said Alex Kayyal, senior vice president and managing partner at Salesforce Ventures (Photo: Reuters)

Summary

‘Obviously, we’re in an uncertain economy, but we see the innovation’

Enterprise tech startups are continuing to innovate amid tighter economic conditions, fueled by demand from companies who fear underinvestment in tech could lose them market share, venture partners said.

“Markets are won or lost based upon what you do in a downturn," said Shane Wall, venture partner and president of the CXO Network at Fusion Fund, speaking at The Wall Street Journal’s CIO Network held virtually Tuesday. Tech chiefs now have a critical role to play in ensuring their businesses continue prioritizing technology or risk falling behind in the market.

One area where it is especially vital to continue spending is in cloud investments, Mr. Wall said, adding that we are only at the beginning of the cloud era.

“Still only 22% of spend is in the cloud," said Alex Kayyal, senior vice president and managing partner at Salesforce Ventures, also at WSJ’s CIO Network. “So to me, what that screams is, there’s still such a massive opportunity."

Cybersecurity and automation are two additional areas where companies are actively investing now, Mr. Kayyal said.

As CIOs and companies continue putting dollars into those areas, enterprise technology startups are leaning in to meet that demand, the venture partners said.

If anything, the tighter economic conditions are making entrepreneurs even hungrier, Mr. Kayyal said. They see the pain companies are in and want to solve the problem, he added.

“Obviously, we’re in an uncertain economy, but we see the innovation," Mr. Kayyal said.

One example of that is Boston-based Snyk Ltd., which raised money from Salesforce Ventures and others last year at an $8.6 billion valuation. The company aims to bring the security mind-set to the developer stage, so code is written from the outset with cybersecurity in mind, Mr. Kayyal said.

“I do think over the next year we’ll see the economy soften. We’re gonna see pullback, and we’re gonna see winners and losers in that pullback," said Mr. Wall. At the same time, he said, “The growth opportunities remain huge."

 

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