If you follow venture capital, you are probably aware that venture capitalists are hot and bothered about the enterprise right now. Some have been quietly investing in the enterprise for a while and others are jumping on the bandwagon.
One of the primary reasons for the new and renewed financing interest in enterprise among VCs is the fact that the vast majority of the largest tech exits in the last few years involved enterprise companies. While often less heralded than their consumer tech peers either because they eschew media attention or because only a small minority of folks get really excited about “enterprise cloud applications for human resources and finance” or “accelerating application performance for enterprises,” the reality is that when it comes to the largest exits in technology, most are enterprise focused.
That becomes abundantly clear when analyzing the 50 largest U.S. venture-backed tech exits in each of the past three years. While consumer-facing tech companies garnered 46% of the largest VC-backed tech exits in 2011, the number has steadily dropped with 2013 seeing less than 1 of 5 of the largest tech exits being consumer-facing.
Over the same period, large enterprise exits have taken off. Big data analytics firm Tableau Software for example, raised modest funding from New Enterprise Associates and went onto be the strongest Tech IPO offering in Q2’13 valued at nearly $2B on the day of its offering. Meanwhile, shares of network security company Fireeye doubled after its IPO. Enterprise-facing companies in the growing flash storage market have also seen a host of recent exit activity with several companies involved in flash storage all exiting in September including Violin Memory, Virident Systems and WhipTail Technologies.
The total exit valuation of the 50 largest venture-backed tech exits has also swung decidedly toward enterprise tech companies. In 2011, the consumer tech companies among the largest exits saw an aggregate exit valuation of $39.43B compared to $12.32B for enterprise tech. But within the 50 largest VC-backed tech exits in 2013 YTD, enterprise-facing companies have seen a total exit valuation of $19.5B, while exited consumer tech firms took just $3.69B. Note: Exit valuations from public offerings are taken as of the date of the IPO. 2012’s consumer pop is driven by Facebook.
Twitter’s much-hyped IPO later this year will be will be an interesting one to watch to see whether the offering will spur additional consumer tech IPO and M&A activity.