Sounds easy, right? Not so fast. Start-ups with a good go-to-market strategy still need to find their market. To be successful in cloud computing, especially to gain first-mover advantage, small companies need to prove they have broad market applicability -- and specifically -- customers who are willing to pay. Proof will be found not in the small-to-medium business market; it has to be gained in the enterprise market. If start-ups can't scale up with the capabilities, reliability and redundancy a large enterprise requires then they're just playing on a cost basis rather than bringing about business transformation. And if they can't find a high-margin sales model, they run the risk of losing to more capital-rich competitors. The real challenge for start-ups is that they must find a way to prove their case before burning up their cash.
Technology will continue to trend in favor of entrepreneurs interested in pursuing these opportunities. Bandwidth is becoming less expensive and networking infrastructure is increasingly efficient, making it much more realistic for enterprises to outsource infrastructure or processing without as much latency. And that will only improve over time.
Big companies -- even market leaders -- take a long time to turn the boat; they always have and they always will. Visionary entrepreneurs who understand the complex computing requirements of the enterprise are in a unique position to sail out ahead of the behemoths. First movers are going to be able to grow their businesses more rapidly, gaining more sustainable, higher valuations that will open up opportunities down the road for acquisitions or public offerings.
What sounds like pie-in-the-sky today just may be the cloud computing leader of tomorrow.
Elefant is a founding partner of Opus Capital focusing primarily on Internet and software investments. Previously, he was a senior associate at Lightspeed Venture Partners and Battery Ventures, and director of international sales and marketing at Radius.