Cloud Computing Law #4 - Bessemer Venture Partners

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BESSEMER CLOUD COMPUTING LAW #4: Forget everything you learned about software channels. The internet is your new channel and Technology Enabled Service providers are among the few partners that actually care if you succeed.

Unfortunately many software executives have spent years building deep relationships with executives at the major software and integration companies like IBM, Oracle, HP, and Accenture…only to find they aren’t much help to Cloud businesses. Cloud products, by their nature (and luckily for customers!), do not pull through sizeable amounts of professional services, hardware, or infrastructure software, so none of these traditional vendors will really help in selling your product. Channel relationships are very hard for any small company to establish even when interests are directly aligned, but it is practically impossible given Cloud’s restricted value proposition to the SI and ISV community. Therefore, it is still the case that most Cloud businesses have to be comfortable with the fact that they will live or die by their ability to sell directly.

However, there is good news to more than offset this loss of traditional channels. The internet is the new channel. The biggest sales gift of the internet is direct access to your customers. Laws 5 & 6 highlight related elements of this new paradigm, but you now have the ability to reach these customers directly. It is now possible to reach customers in a 1:1 fashion as never before, with freemium models, limited trials, access-based pricing, and very low friction processes overall, giving the nimble startup a sizeable advantage over many of the traditional incumbents.

For businesses that are successful selling directly and believe they can still achieve some leverage through more traditional channels, we have seen some encouraging signs within business services channels, i.e., partners that provide technology enabled or managed services to the same customer segment and can enrich their offering by adding a Cloud application. These business services channel partners range from marketing agencies to payroll providers (such as ADP) to accounting firms and have started to understand the power of Cloud when many of the ISVs and SIs do not. We have also seen the emergence of a new generation of smaller, more nimble and Cloud-savvy SI firms (like Appirio) that have started to extend their set of partnerships to late stage private companies.

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We believe Cloud Computing is the most important trend in the software industry of the decade. We have been fortunate to work with many of the early pioneers in this high growth market segment, and continue to invest actively to grow our current portfolio.

Adam Fisher joined Bessemer in 2007 as a Partner. Based in the Larchmont office, he focuses on the firm’s Israel-related investments in both the U.S. and Israel. Adam is Bessemer’s first partner to be dedicated to Israel, where the firm has made a number of investments, including ART (acquired by Scansoft, now Nuance

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Byron Deeter is a Partner in BVP's Menlo Park office after having previously been a successful entrepreneur, investor, and consultant. At Bessemer, he focuses on investments in the software, Software as a Service (SaaS) , Internet, and gaming sectors. Most recently, Byron was an executive at IBM, as a result of

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David Cowan joined Bessemer in 1992. Of his 45 early-stage investments, 18 were acquired and 19 went public.

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Jeremy is a Partner with Bessemer Venture Partners. He focuses primarily on software and services investments. Prior to joining BVP in 2001, Jeremy was Vice President of Operations at Dash, an Internet software publisher. Jeremy joined Dash from AEA Investors, a private equity firm with an expertise in leveraged an

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Philippe Botteri is a Senior Associate in BVP’s Menlo Park office. Working primarily with Byron Deeter, he focuses on the enterprise software and internet sectors. Most recently, Philippe was a senior engagement manager at McKinsey & Co.’s high-tech practice in Silicon Valley, where he focused in the software,

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