Ed Sim’s BeyondVC blog has two recent posts on it that I really like.
In the first post he says something I’ve been saying for years – that venture backed companies are bought, not sold. I completely agree Ed. The only thing I would object to is the comment that every company that Ed invests in must have IPO potential. I don’t think that is necessary or even desirable in many cases. As long as the company can build a meaningful business with good margins and cash flow, I think it will get bought by someone eventually and the IPO exit doesn’t have to be there.
The second post is about the changing face of the software business. This is a longer discourse about the commodization of hardware and the resulting effiency with which software companies can quickly develop solutions and go to market. He postulates, and I agree, that these changes make software an even more compelling opportunity for venture investment than it has been in the past.
Ed also asserts that classic enterprise software is becoming less attractive as new ASP and appliance models are developing. My gut tells me that there is a lot of truth to this as well. I am not sure it will play out exactly as Ed outlines, but I believe he is directionally correct.