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4 smokin' hot startups: The next tech boom

4 smokin' hot startups: The next tech boom

Social networks are dead, and smart VC money is pouring into enterprise startups like Shoutlet, Asana, Narrative Science, and Delphix

The swell of early- and midstage venture capital continues to swamp the enterprise space. It's where the money is, with worldwide enterprise spending accelerating to pass $2.6 trillion in 2013, according to Gartner. The smartest VCs like Philly's First Round Capital (backers of Bazaarvoice, Gigya) are making enterprise-focused partner hires. They're competing for enterprise deals with everyone from Silicon Valley archangel Ron Conway to Microsoft; the latter teamed with seed fund TechStars to start the enterprise-focused Microsoft Accelerator.

Venture capital, like any asset class, tacks quickly to take advantage of prevailing winds. With Wall Street down on recent consumer Internet IPOs and enterprise M&A picking up, "the momentum/late-stage investors have moved from consumer to enterprise," writes Fred Wilson, whose Union Square Ventures is the smartest early-stage money on the East Coast. In 2012, VC consumer bets were off 42 percent as VCs watched enterprise get all the upstream loving -- from Cisco buying cloud-based Meraki Networks for $1.2 billion to enterprise scoring decent IPO floats like Demandware, Workday, and ExactTarget.

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No wonder enterprise angel-round valuations are rising to a median premoney valuation of $2.7 million, according to Halo Report. Venture investment in enterprise startups was the only area that didn't see a decline in the third quarter, according to Dow Jones VentureSource. Innovation shifts investment priorities. "IT will experience greater change in the next five years than there has been in the last 30 years," says Jim Kissane, partner at Stone Key Partners, a strategic financial adviser. And change means the sort of disruption that VCs love to fund.

The hottest enterprise startups not coincidentally mirror recent CIO spending increases in business intelligence, data visualization, collaboration, virtualization, and the move to the cloud and mobile. These new-breed enterprise firms tend to trickle their products into organizations via line-of-business managers rather than waiting for pilots. Here's a mix of under-the-radar and white-hot startups attracting smart money.

ShoutletSocial media management systems, or SMMSes, impose order on the social media chaos by adding governance, integration, workflow, and intelligence capabilities across the enterprise. Basically, they're a content management toolbox for social, handling the average brand's 178 social media accounts, according to Altimeter, and gleaning all manner of knowledge about itself.

Buddy Media sucks up a lot of oxygen in the end-to-end marketing enterprise space, with $90 million raised to date from top VCs. HubSpot is hot too, recently raising $35 million from gold-plated VC Sequoia. But because winning in the enterprise software game is about sales and marketing teams who can crash through the gatekeepers, smart money likes Shoutlet, whose sales brains helped build email service giant ExactTarget. New York City-based FTV Capital, a strong player in funding enterprise (its Utopia holding is a big data play), is behind Shoutlet, as is American Family Insurance (venture arms of insurance carriers are growing into an unexpected startup funder, with Liberty Mutual investing in Utopia).

Shoutlet aims at the midmarket rather than hunting elephants. "We're going after wide-open turf," says Eric Christopher, vice president of sales. In three years, Shoutlet has grown to 100 employees and 500 direct customers, doubling revenue every year. Shoutlet gets around $20,000 a year for cloud-based, consumer-oriented UI and services like Social Switchboard, which marketers use to trigger-schedule tweets, emails, and status updates for release once the company or product reaches a certain number of likes on Facebook or retweets on Twitter.

AsanaProject-management meteor Asana has collected about as much buzz as funding in its single year of life. Few startups demonstrate consumer Web DNA bleeding into the enterprise like Asana, led by Facebook co-founder Dustin Moskovitz and Justin Rosenstein who were cooking it up while working for Zuck. The money behind Asana, nearly $40 million of it, is beyond smart. It's Mensa money: Conway, Thiel, Andreessen, Horowitz, Kapor, Parker.

Aiming to own the group collaboration space, Asana calls itself a "collaborative information manager" that cuts down on all the work about work. Users ranging from small informal groups to hundreds working across departments inside Fortune 1000 companies use Asana to sync on projects, initiatives, and campaigns. Perhaps what the ill-fated Google Wave aspired to be, Asana's dashboard is a single space where team members deposit, organize, track, and communicate what they're working on.

Asana is a task list manager and communication hub that exists in the space between email and IM. Users post comments around an easily found nugget of work rather than deep inside myriad reply-all emails. It organizes and prioritizes tasks, milestones, and task owners. Given its strong communication reach and its independent, secure workspaces, Asana also aims to extend into CRM and vendor-client collaboration.

The laudable big idea here is to help teams avoid the La Brea tar pit that is email. Trello also has good momentum in the collaboration space (ditto Pivotal Tracker). Trello rates because it's a little more graphically appealing than Asana, with more obvious UI metaphors -- for now.

Narrative ScienceThe explosion of cloud-based data demands new tools to interpret and present all that data. Some of the hottest big data startups help manage massive data sets: Cloudera, pioneer of the ubiquitous open source framework Apache Hadoop (backed by top-shelf enterprise VCs Accel and Greylock), and Qumulo, suddenly a big data player with its $25 million Series A that included resurgent Seattle-based Madrona Ventures (early Amazon money).

Neither Cloudera nor Qumulo focus on the next step, the interpretation and presentation layer for data, whether big or little. That's where you'll find Narrative Science, analyzing and organizing the rush of data coming from performance dashboards; sensors on turbines, hospital beds, or pills inside your body; and nontraditional sources like the proliferating "graphs" of social, interest, intent, and mobile. "The problem of big data is no longer the data," says Narrative CTO Kris Hammond. "It's the communication layer (between data and human)."

Narrative's Quill writing engine, an artificial-intelligence platform powered by Backbone JavaScript library, grew out of a 2009 cross-discipline project between Northwestern's schools of engineering and journalism. Quill's magic is combing and collecting massive stores of data for its self-teaching algorithms to interpret, then overlay with context, and finally, fit into templates structured to conform to various reports.

Applications include everything from sifting management reports or market analysis out of spreadsheets to reporting on Little League baseball games. Immediately, profit-pressed media companies like Forbes understood the value. Now, SMBs use Narrative to produce internal reports. Ancestry.com uses Narrative for its users to turn reams of unwieldy genealogical records into family stories. Stuart Frankel, former head of DoubleClick's Performics subsidiary, was so impressed that he became CEO of the company. Narrative investors include Battery Ventures (Exact Target, Angie's List), Ron Conway, and former DoubleClick powerhouses David Rosenblatt and Chris Saridakis.

DelphixOnly big companies with big budgets can afford multiple environments for any old production database they need to work with, right? Not now that Delphix is around. Aware that lots of businesses would like to create lots of environments -- for development, for testing, for QA, for risk management, application re-architecture -- Delphix founder Jedidiah Yueh came up with a ridiculously simple solution.

Delphix virtualizes the data files and blocks comprising a database by creating a "single data authority" that drops into any environment -- private cloud, public cloud, standard servers -- and hits the Record button. Need a new copy of that database? Click over to Delphix; it has the latest copy of your database because the company is constantly TiVoing it.

Give Delphix this time-machine capability over your data and Yueh says he'll give you a ridiculously long cascade of redundant copies of a database for, oh, a lot less than you're paying now. Delphix provisions a 10TB database that typically takes six months and a million dollars' worth of hardware in three clicks, 10 seconds, shrunk down to 1TB. Think about it: three clicks.

True metrics like that executed by a team like Delphix's tend to attract A-list investors. In this case, Greylock and Lightspeed got in on the first round in 2008. Delphix's $25 million Series C funding round in June was standing room-only, adding Battery Ventures (Splunk). The A-list investors are excited about a Delphix team that's been around the block, developing Oracle RAC and EMC Avamar (pioneer of data deduplication).

The strong Series C was driven by Delphix's traction in the marketplace. Delphix says it has more than 50 clients -- 30 Fortune 1000 companies; three of the top-10 U.S. banks -- paying average tickets of $100,000 per year since launching in the fall of 2010. Nothing says traction like big customers paying big recurring tickets.

This article, "4 smokin' hot startups: The next tech boom," was originally published at InfoWorld.com. Follow the latest developments in business technology news and get a digest of the key stories each day in the InfoWorld Daily newsletter. For the latest business technology news, follow InfoWorld on Twitter.

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