Bet the Bank

With IT spending running as high as 25% of revenue, and a risk-taking culture, Wall Street firms are old favorites as customer prospects for venture capital backed startups.

It is tough to sell information technology products to Wall Street firms right now (if you can find any left). Balance sheets are shrinking, employee counts are shrinking, budgets are shrinking and risk taking has pretty much disappeared. However, smart vendors and smart buyers know that these times of retrenchment can be great times for the right kind of IT investment. In general that means something that pays for itself in a few months even in periods of severe contraction, something that is proven in the field, and provides new capabilities for when the economy starts to pick up, leaving competitors in the dust. This doesn't just go for Wall Street, but for many (or even any) large enterprises.

When thinking about new technology, large enterprises tend to think about whether the new technology has been field-proven to scale and perform, and trade that off against the risks of the new technology failing. Obviously a new, unproven technology will be more readily adopted if it doesn't cause too much harm if it fails a few times. If it is a "bet the bank" situation, then you can bet that only proven technology will be considered.




Here is a chart that illustrates the point, using Sigma Partners portfolio company examples, of course. EqualLogic (sold to Dell last year) provides very stable, low risk, more efficient disk storage systems. Initiate's software for bringing together data about customers from multiple systems is also very well proven, but is used in very high-profile applications (eg call centers) and if it fails then the call center operations may cease. As yet unproven software (at least in commercial applications) such as Acquia's editions of the open source Drupal system can be adopted for intranets and other low-risk areas of a corporation. No-one ever buys "bet the bank" technology which has not been field tested and proven to scale.

How does this compare to my life as a venture cyclist, and most people's buying habits? Answer: it's pretty similar. I am happy to buy a new, fangled "unproven" pair of biking gloves, but I would like my helmet to have a good pedigree!