Emerging Trends Part II: Enterprise Software

As we move into the final quarter of 2020, our team at Conduit sat down to analyze key emerging sectors that we’ve been watching closely. Critically, each of the sectors has drawn enormous interest from a range of strategic angels, early-stage funds, and growth funds alike. In the second part of this four-part series, we’ll focus specifically on enterprise software.

Despite the pandemic-fueled economic downturn, software spending on cloud-based enterprise apps will increase by 6.8% this year, according to Gartner. On a macro scale, global enterprise application software spending is projected to reach $196B by Q4 of 2020.

The number of funds currently investing in the sector continues to rise, led by Y Combinator, Techstars, Accel, Battery Ventures, and Andreesen Horowitz, according to peak investment activity data from Forbes.

Collaboration software, an already extremely competitive sector pre-COVID, is now becoming even pricier for new and old investors alike. From a market opportunity perspective, analysts expect the space to continue attracting heightened investment interest in the coming years. Notably, deals are projected to increase from both a volume and valuation standpoint.

Investors have been referring to the past six months as a perfect storm, in which the pandemic has pushed tech companies everywhere to rapidly adopt collaboration software and tools. Critically, this sector was already quite competitive pre-COVID, especially around cloud-based workplace SaaS companies like Slack, Zoom, and the like. From a number of marquee deals in the space, one of the standout deals was Notion’s $50m round back in April.

Led by Index, this round brought Notion’s total valuation to $2 billion, up from $800 million at its previous valuation. The company’s all-in-one workspace offering competes with incumbent collaborative note-taking suites like Microsoft Office’s OneNote and Confluence. Similarly, Montreal-based Unito closed a $10.5 million Series A led by Bessemer towards the beginning of the pandemic. Unito collaborates among most of the major workplace productivity software suites’ APIs and automatically translates an action in one piece of software to the others.

Continuous delivery (CD) facilitates software development that can adapt quickly and meet increasing customer demand, while always ensuring a guarantee of satisfaction that enhances the value of the overall brand. Critically, the best-equipped enterprises on a macro scale are those that understand that the speed and quality of their software engineering output is integral to their bottom line. As a direct result, continuous delivery has quickly become a major category over the past handful of years in cloud-native technologies.

At the forefront of the CD field are CircleCI, a continuous integration and delivery platform for teams looking to shorten the distance between idea and delivery, CloudBees, which supports the entire application lifecycle from development to deployment, and Harness, which wants to help engineers push out reliable code faster. Notably, CircleCI raised $100 million in its Series E round back in April, led by IVP and Sapphire Ventures.

Improved data collection, monitoring, and analysis will continue to play integral roles in rapidly scaling enterprise SaaS companies around the globe. With increased monitoring assistance by machine learning and artificial intelligence capabilities, corporations will be able to quickly troubleshoot and respond to customer needs with lower downtime and tight feedback loops. As a result, companies across this field will continue to garner heightened investment interest.

Leading companies across the data monitoring spectrum include Humio, which provides observability capabilities, InfluxData, which offers a time-series data platform for monitoring, and Epsagon, a monitoring platform for serverless architectures.

Notably, InfluxData raised a marquee $60 million Series late last year led by Norwest Venture Partners and joined by Sorenson Capital and existing investors Sapphire Ventures, Battery Ventures, and Mayfield. In tandem, Humio raised a fresh $20 million earlier this year. Dell Technologies Capital led the financing, which included participation from existing backer Accel.

At Conduit, we connect the world’s best operator-investors and founders building the next generation of startups around the world.

As we scale our platform, understanding key market shifts across verticals will become increasingly vital. Our team will be digging deeper into emerging trends and first movers in the coming weeks, which you can find here.

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