“National Shift in 2012 Signals Opportunity Ahead for Indiana Tech”
This opinion piece by Mike Langellier ran in the January 19, 2013 issue of Indiana Business Journal.
A major shift happened in 2012 that presents opportunity for us here in Indiana. We need to boldly, purposefully seize that opportunity.
For the past several years, the national media and venture capital investment community have had a myopic focus on consumer web & social web companies like Facebook, Zynga, Groupon, and many others. In Q1-Q3 of 2012, venture capital firms invested significantly more money in Software than any other Industry, followed by Biotech and then Industrial/Energy (all of which have a core tech component), and per Fred Wilson, a preeminent investor, “a large pool of [that] money…was "all in" on consumer web/social web in the 2009-2011 time frame.” As a result, those companies got funded, and they were hyped by the press, but these mass user adoption and advertising driven companies are not the kinds of companies that we grow in Indiana in large quantities.
But in 2012, things started to change. Facebook, Zynga, and Groupon IPO’d and quickly plummeted in value as they were subjected to the open market and were forced to demonstrate strong, sustainable revenue potential. The media in turn began aiming a more critical eye toward these businesses and business models.
Additionally, Napster president and Facebook’s first president, Sean Parker’s, social web video-chat company Airtime evaporated along with $33 million in funding. Color, a photo-sharing mobile application raised $41 million, but didn’t make it through the year. And social-discovery apps like Highlight sought to change the way we meet and interact with strangers, but mostly succeeded in creeping people out.
As a result of investors and consumers recognizing the challenges of these products and business models, focus and preference has shifted to enterprise and business software platforms, which offer recurring, dependable, subscription-based revenue. This signals great opportunity for Indiana’s technology sector because enterprise and business software platforms are a Hoosier strength and specialty – especially in the rapidly growing marketing technology and health information technology microsectors. Companies like ExactTarget (and iGoDigital), Interactive Intelligence, Aprimo, Compendium, SmarterRemarketer, Delivra, RightOn Interactive, AddressTwo, ChaCha (and Social Reactor), CIK Enterprises, Marketpath, and Tinderbox are just a few of nearly 100 Indiana software businesses that are now more appealing than ever to venture capitalists.
That said, we would be foolish to dismiss consumer web/social web as passing fads to ignore. These powerful influencers significantly changed communications paradigms, marketing strategies, and buying behaviors. They created substantial wealth, knowledge, and job opportunities as well as enormous networks that digitally, globally interconnect us in real-time. Unfortunately, because we were not well positioned on the front end of that innovation curve, we did not share significantly in that wealth, knowledge, and job creation.
However, the next wave is here, where enterprise and business platforms leverage these networks to generate tangible value and revenue, and we are much better suited to ride that wave. As we enter into new year business planning, new administration, new legislature, etc., let us be strategic, decisive, and bold in our long-term initiatives that create competitive advantages, regional notoriety, additional investment, exceptionally skilled workforce, and additional software startup activity.
In the past decade only five other metro areas produced more Inc 500 high-growth companies per capita than Indy. Let’s evangelize and build upon that.
Indiana has some of the country’s finest universities, and they rank second in attracting out of state students, but then 80% leave after school. Let’s connect those students with Indy and area businesses while they are here.
Tech companies are naturally high-growth and offer higher wages, let’s invest heavily in them.
Indiana is blessed with fiscal strength at a time when others are weak. Let’s double down on innovations that will secure a dominant future.
Indy is an increasingly great place to start a business, start a career, and start a family; virtues lacking in other coast cities. Let’s boldly evangelize that to others who have moved or are living elsewhere.