Enterprise software is a multi-billion-dollar industry and an investor’s dream. Most of the market share belongs to large, well-established vendor companies with a user base that numbers in the millions. Their clients represent long-term relationships measured over years and the accompanying promise of rich profits yielded from SaaS-based payment models.
Client companies have to invest heavily in rolling out their selected enterprise software. In between the capital costs of implementation and the expenses of staff training, businesses become accustomed to working with a particular system and tend to be longstanding clients. They don’t want to worry about data migration, infrastructure issues, or the confusion that comes with educating employees about using a new application. They’re often willing to pay premium prices for the convenience and predictability of a software solution that works for them.
It’s a perfect set of circumstances for established businesses boasting a star-studded Fortune 500 client list but leaves little room for up-and-coming companies with little more than a promising product and some sweat equity. So, when an organization comes along that offers a new way of doing business, investors stand to make big returns on a small start-up. Fortunately, the move towards cloud-based technology is opening up new frontiers and this is creating opportunities for the little guys eager to make a big impression.
Here are three start-ups that are challenging the status quo and offer strong potential returns on investment:
Acting as a repository for much of their important information, databases fulfill an important function for businesses and represent a $63 billion industry. While older software giants like Oracle currently enjoy the biggest piece of the marketing pie, there are other companies out there who are not satisfied with politely waiting in a line for their own small slice. Meet MongoDB.
Founded in 2007, this company has set out to change the way databases are devised. For decades, traditional relational databases have been following the same row-and-column design. Based on forty-year-old technology, the format is rigid and not ideally suited to today’s social media post-type presentation of data. MongoDB has created a new kind of database built on a document architecture. It’s a trend that’s starting to catch on.
According to company CEO Dev Ittycheria, 98 percent of all workloads still operate on legacy relational databases and points to the potential for future growth. Their current stats support Ittycheria’s statements, showing the company’s fourth quarter 2019 earnings at 71 percent growth; a net expansion rate of 120 percent; and customer growth at 130 percent. In addition, this last quarter represents the sixteenth straight quarter of 120 percent plus of expansion amongst existing customers.
In 2008, Twilio was founded with a new API that allowed application developers to conveniently build secure communication options into their applications. Many ride-hailing services use this API to ensure that drivers and riders can communicate with each other while ensuring their mobile numbers remain anonymous. The company also offers an enterprise call center technology and actual-time mobile marketing application.
The company’s reported numbers show a strong upwards trend with revenue growth coming in at 77 percent and customer growth at 31 percent. More impressively, their net expansion rate is at 147 percent which is its highest growth rate in two years. In other words, not only are existing customers adopting more of Twilio’s products but they are doing so faster than ever.
This company has found its niche with their employer/customer verification technology that protects organizations against security breaches. As attacks against companies become more complex and more common, Okta offers a way for IT teams to protect against hacking attempts without having to develop an in-house application to do so. Their flagship product, Okta Identity Cloud, integrates with over 6,000 of the most popular enterprise software applications. This offers the flexibility to connect offices, employees and other assets scattered around the globe via different devices without compromising security.
Like MongoDB and Twillio, Okta’s numbers offer a strong potential for future growth, including 50 percent revenue growth; 120 percent next expansion growth; and 40 percent customer growth.