Consumer and Enterprise

The Most Interesting Companies in the World are Both

Welcome to issue #2 of next big thing.

The technology world used to clearly segment businesses by consumer or enterprise.

But those lines have been blurring for quite some time.

And the most interesting companies in the world fit neither bucket. They are both consumer and enterprise technology businesses.


Consumer vs. Enterprise

Go to the website of most technology-focused venture capital firms, and you'll find the portfolio segmented between consumer and enterprise companies. Most of us have grown up in the industry with the distinction between consumer and enterprise seared into our minds. I've probably been asked this question hundreds, if not thousands, of times:

What do you focus on? Consumer or Enterprise?

Venture partnerships often get split between consumer and enterprise, with each "group" of sector-focused partners doing their own pipeline meetings and sometimes even making decisions independently of the other group.

When I started in venture capital in 2010, there was general consensus that the biggest companies were consumer companies, and that enterprise investing offered lower risk but also lower reward. I remember one of the partners I worked with saying to me:

In enterprise, if you're lucky you can invest in a company that exits for $5-10B. But the upside is capped. In consumer, you can invest in companies that become worth over $100B, but the risk of a 0 is also higher.

That narrative has adjusted in the past decade, as several enterprise companies have grown massively in scale. Salesforce*, for instance, is worth over $150B today, up from under $10B at the start of 2010. Enterprise investing has become more and more attractive, as the exits have become larger, and as more companies across more industries adopt technology.

But the fundamental nature of what defines a consumer or enterprise technology company has also changed in the past decade.

The Consumerization of the Enterprise and The Enterprization of the Consumer

In #1, I discussed the evolution of doing work, and how products today like Notion and Roam are ushering in a new paradigm detached from the traditional Microsoft* and Google* productivity suites.

Microsoft has been thinking about this trend for a long time. In its 2012 shareholder letter, former CEO Steve Ballmer wrote:

Fantastic devices and services for end users will drive our enterprise businesses forward given the increasing influence employees have in the technology they use at work — a trend commonly referred to as the Consumerization of IT.

Ballmer and Microsoft were right. The bar for the user experience in software was raised by consumer technology companies like Google and Facebook*, and employees expected their software at work to match that bar. There were further tides sweeping software at the time and making it more consumerized.

Ben Thompson wrote a great piece in 2016 where he pointed out three distinct definitions of "the consumerization of the enterprise":

  1. Products already used by enterprises that have evolved to be more user-friendly, so that employees enjoy using them (what Ballmer was referring to and what Microsoft has executed on).

  2. Consumer applications that are ported to the enterprise and made "enterprise-ready." Google did this with Google Apps such as Gmail and Calendar, which they launched for companies to use with their own domains.

  3. Self-serve enterprise software, such as the products by Atlassian. This is neither a traditional enterprise product with a consumer-like interface, nor a consumer product ported to the enterprise. Instead, it's a new business model for selling software - in Atlassian’s case, products like JIRA - "bottoms-up" to employees, teams, and companies.

These trends, particularly the final one, have changed what it means to be an enterprise technology company in the past decade.

We've also seen "the enterprization of the consumer." I'll discuss this trend further next week, but there's an increasing set of products that focus on acquiring consumers, and helping them in turn become entrepreneurs. My friend Li Jin was the first person I know to publicly discuss this term last year in a Twitter thread:

The lines between consumer and enterprise have blurred even further as some of the most prominent technology companies in the world have grown and launched new businesses.

Amazon*, the largest e-commerce (consumer!) company in the world, offers Amazon Web Services, the largest cloud services (enterprise!) business in the world.

NVIDIA, the largest personal computer graphics (consumer!) company in the world, offers graphics processing units (GPUs) for artificial intelligence applications (enterprise!), and has seen its market cap grow 20X in the past decade since this dual focus.

These companies, as well as many more, cannot and should not be bucketed into consumer or enterprise.

Consumer and Enterprise

Amazon and NVIDIA are two examples of companies that began consumer-focused, but have launched enterprise-focused technology businesses along the way. There are several more.

Dropbox*, for instance, began life as a consumer technology company, enabling anyone to start using Dropbox for storing and sharing their files on the internet, instead of using a USB drive. But its product and go-to-market have evolved since to serve businesses.

More recently, companies like Slack and Zoom* have begun with enterprise-focused products, but these products have been adapted by consumers for their uses, and have even experienced consumer-like viral adoption.

And the blurring of the lines between consumer and enterprise extends beyond software companies in the "technology" vertical, into industries such as financial services, healthcare, and education.

Consider PayPal, for example, which began as a merger between consumer-focused online banking and money transfer businesses. Today, PayPal operates consumer-focused money transfer app Venmo, as well as business payment processing service Braintree.

In healthcare, One Medical serves both consumer members as well as enterprises that sign up and pay for the service for their employees. In education, Lambda School helps consumers learns to code, and works closely with enterprises to source both educators and job placements for their students.

The Most Interesting Companies in the World

Some of the fastest growing public and private companies in the world are both consumer and enterprise technology companies.

And they are also proving to be some of the most resilient companies during the current economic crisis.

Shopify* is a technology platform company enabling businesses to set up and run their online stores. The company's market cap has increased by almost 2X in 2020, with the stock reaching an all-time high on May 12, 2020. And a couple weeks before this all-time high, it announced a new product, Shop, enabling consumers to browse products from Shopify merchants. Shopify is now, more than ever, both a consumer and enterprise company.

Notion, a company building an all-in-one workspace product, and Figma, a collaborative interface design software company, have each raised funding rounds at $2B valuations, significant step-ups from their last valuations, in the past few months. Airtable, another collaborative software company that combines tables and databases, is rumored to be raising a round at an even higher valuation. Canva*, a collaborative graphic design software company, was valued at $3.2B in a funding round last year.

Anyone can sign up for these products and use them for themselves, as consumers, and/or with their friends, and/or with their companies. All four companies are both consumer and enterprise. Just check out this tweet and its responses about Figma!

My friend Brianne Kimmel even built a digital world on Figma, and she had this to say about the designer, Fiona Carty, who she hired to do it:

I was blown away by her ability to build authentic communities through technology that's traditionally used for work: Figma, Notion, and Airtable.

And then of course, there's Zoom, the poster child for pandemic resilience, and for evolving into both a consumer and enterprise company.

Stay Tuned for More...

So how do you build one of these companies that are both consumer and enterprise? Are there certain defining characteristics? It seems like a number of the more recent companies like this have been enterprise-first, then consumer, whereas historically a number of them have been consumer-first, then enterprise? Or can companies focus on both, from a product and go-to-market perspective, at the same time? And what about building vs. acquiring vs. partnering to become both consumer and enterprise?

Superhuman has built a fast-growing email app that incorporates game design to help individuals and their teams be more productive. Roblox, which was valued at $4B in a financing round in February, is a game that enables creators within it to build businesses from their creations. Are consumer and enterprise increasingly two sides of the same coin?

How many more companies could we fit into the middle of the Venn diagram that I haven't yet mentioned in this post? Tesla*, Intuit, Instacart, Carta, Coinbase, Color Genomics*, Doctor on Demand*, Frame.io*, Kapwing*, Tandem*... who else?

The best two venture capital firms in the world, Benchmark and Sequoia, do not have separate consumer and enterprise groups; just one early-stage focused investing team at each firm. Should more firms follow this model, to have learnings from all perspectives as they evaluate companies that fit neither bucket?

Instead of calling these companies “consumer and enterprise” should we come up with a new phrase? Does an existing term like B2B2C define a lot of these companies?

I could go on and on, but I'll save more commentary for another day.

I hope I've convinced you, because the examples are everywhere you look.

The next big thing is both a consumer and enterprise technology company.


I started next big thing to share unfiltered thoughts. I’d love your feedback, questions, and comments!

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*denotes a company I'm affiliated with as an investor - see my substack about page.