I have written often about how the next wave of developer-focused software companies will fuel a $ 1 trillion enterprise software market, driven by trends such as free open source platforms and software. flexible API building blocks. The market fundamentals that underpin this trillion dollar software industry are clear: as every business transforms into a software business – a transformation that has only been accelerated by the pandemic – developers are on the line. orders. They want to choose their own tools, technologies and platforms, not the products their employers impose on them. So, enterprise software vendors who understand and meet the needs of developers are expected to generate hundreds of millions of dollars in revenue in the years to come.
But what sets this next wave of billion-dollar enterprise software apart from previous waves of SaaS and public cloud software is that the next billion-dollar companies could be born anywhere. which country. Most of today’s major software companies are headquartered in the United States, but over the next few years we will see several multi-billion dollar business leaders emerge in Europe, Asia, Israel and the United States. Latin America. Indeed, the very nature of developer-centric software (global, distributed, bottom-up, collaborative) provides fertile ground for developer-centric entrepreneurs to build their businesses anywhere. Developers don’t care if great open source code or APIs debuted in Boston, Bangalore, or Buenos Aires, they just want to use the best platforms available. And they’re used to collaborating with developers around the world, sharing ideas on forums, writing code for global open source projects, and reading articles written by their peers working on similar projects.
Already, we are seeing developer-focused software companies springing up around the world that have reached or are on the verge of reaching multi-billion dollar valuations. For example, JFrog, an Israel-born software company that went public in September 2020 is now worth more than $ 4 billion. Factor, an American / Bangalore company building a collaborative platform for API development announced a $ 150 million Series C round at a valuation of $ 2 billion amid the pandemic and Browser stack, an Indian cloud-based web and mobile testing platform made a fundraising round of $ 200 million for a valuation of $ 4 billion in June of this year.
A wide range of early stage developer-led software companies born outside the United States that are also on their way to becoming billion dollar companies include Flux, an Amsterdam-based leader in API-based instant messaging and activity feed solutions; Rasa, developers of open source conversational AI tools based in Berlin; Evervault, a Dublin-based provider of encryption tools for developers; Nozomi Networks, a leader in IoT security founded in Switzerland; Supabase, an open source database company based in Singapore; and Jina, a Berlin-based open source AI company with development teams in China. All of these companies have developers who use their products around the world and sell to companies around the world.
Venture capitalists have traditionally focused on funding US-based enterprise software companies, but now that the focus has shifted to developer-focused software, the opportunities are everywhere. Investment trends show a shift towards global investment in enterprise software companies. Analyzing data from Pitchbook showing the total venture capital dollars invested in enterprise software companies around the world between 2017 and 2021 (with numbers projected through the end of the year), we found that investors are increasingly supporting companies outside of the United States, albeit intermittently. keep pace with change. In 2017, the United States captured 69% of total venture capital dollars invested in enterprise software companies, falling to 49% in 2018 when transactions in China and Singapore increased, then climbing back to 61 % by 2020. For 2021, the United States is expected to account for 59% of total venture capital investment in businesses. Over the past five years, the companies that have continued to earn investment dollars have been Germany, the UK, and Spain, while Israel, France, and Brazil have remained largely stable.
If the pandemic has proven anything, it’s that countries around the world are deeply connected, but software developers have known this for years. Whether a developer lives in Bangalore or Budapest, they want the best tools for the job, no matter where they were created. And they collaborate with each other through forums, Github, shared projects and open source communities. Enterprise software companies that create tools and platforms for the global developer community, and truly understand the needs and mindset of this diverse group, are well positioned to become brands of a billion dollars, no matter where they start.
My company, GGV Capital, is an investor in Nozomi Networks, Stream and Jina, all mentioned in this article.