Jeff Bussgang reported from the annual VC Conference, “The enterprise software business model is dead… VC appetite for standard enterprise software appears to be dwindling to nothing.” And Jeff Nolan simply replies, “agreed.”
But even though enterprise software is dead, it’s not really going to die. Despite indications otherwise, VC’s will continue to fund enterprise software companies for three reasons:
1. While the overall model and outlook admittedly looks grim, there are still a few remaining pockets where innovative start-ups will fill in gaps with new technologies facilitating localized change.
2. Fledgling enterprise software companies will dress up and adopt buzz-word monikers like Software-as-a-Service and open source. Then it’s sexy, and more likely fundable.
3. VCs, especially those on the East Coast, are used to funding enterprise software companies. It’s really tough to change, as old habits die hard.