What do cloud start-ups need to do in order to attract the right kind of investment?

With the adoption of cloud computing in Europe at an all-time high, here's what cloud SMEs need to do in order to attract the right kind of investment. Salesforce Ventures' Alex Kayyal writes.

There has never been a better time to start a cloud company in Europe, says Alex Kayyal, EMEA Head at Salesforce Ventures.

He says that cloud computing has changed the way existing organisations operate, and created an environment that will allow the next generation of businesses to flourish. ‘From data backup and remote working through to information sharing and storage, cloud technology has been a game-changer. And it’s continuing to evolve at an incredible rate,’ he says.

Europe growth is highest; cloud-related enterprise spending is projected to almost double in the next few years, from $83 billion in 2016 to $162 billion in 2020.

In a competitive and crowded market many start-ups are trying to make themselves heard , so what can they do to get the support they need to grow and stand out?

The clout of the cloud

He says one of the main benefits of cloud computing is that it drastically cuts down the initial infrastructure costs needed to start a company today, as compared to 10 or 20 years ago.

‘There was once a time when you’d need to raise $10 million just to get an email server up and running. But cloud computing’s flexible infrastructure has dramatically reduced the upfront investment required, making it much easier to get started,’ he says.

Another benefit is the added security is smaller firms can now use backup facilities, fire-walling and encryption, so they can focus their efforts on generating revenue and growth.  

Keeping data as secure as possible from hackers is vital for businesses
Keeping data as secure as possible from hackers is vital for businesses

Of course, scalability is a must for any fast-growing business too, and the subscription model of cloud-based solutions helps make scalability less of an issue from a technological perspective.Kayyal says that with cloud solutions, a startup can easily add on ‘storage, more computing power or other resources, making scaling up (or down) much simpler, cost-effective and agile.’

He concludes, ‘Importantly, cloud businesses are more likely to have recurring revenue models with high levels of predictability and a growth engine that can more easily be tuned.’

But what about funding that growth?

A capital idea

Its clear that securing capital is paramount for start-ups that are looking for fast growth. However, relying on investors for support isn’t just about getting the financial backing as capital alone is becoming more of a commodity.Kayyal says the guidance, advice, mentorship and access that institutional Venture Capitals (VCs) bring is equally valuable. He adds, ‘Attracting the right investor impacts long-term business decisions, and founders need to have a close lens on who they bring on board, which means understanding the potential investor’s own strategy and how they can add value.’

Kayyal says Salesforce Ventures is focused on investing alongside traditional VCs and adding value to companies through access to its own cloud ecosystem. ‘In addition, we seek to lend our credibility and know-how to the companies we work with based on our own experience.’

‘Entrepreneurs should really dig in to find out where VCs can add value, as it can have a material impact on a company’s trajectory.’

However, Kayal warns against rushing into working with VCs as the approach may not be for every company. 

‘Founders need to weigh the pros and cons of raising funds and consider all implications in both the short and long term.

Typically, the biggest trade-off is about speed to market; by working alone you can build a great route to market and keep 100 per cent of the business, but ultimately it takes longer to grow,’ he explains. ‘VC funding is an effective accelerant that enables you to capture market share faster.’

New ideas, new heights

It seems there’s always another exciting business idea around the corner, with entrepreneurs finding new ways to solve problems, both old and new. Currently, Salesforce Ventures work with a range of cloud computing companies such as Privitar, who is building a disruptive data privacy platform; identity verifier Onfido, cloud contact centre NewVoiceMedia and location software firm Carto.

Kayyal says with Europe seeing a huge boom in this area, ‘it’s crucial for start-ups to leverage that momentum and take advantage of the opportunity’.

‘The unique combination of access to capital, disruptive ideas, great talent and customers looking for cloud-based solutions makes this an exciting time for any cloud entrepreneur.’

Praseeda Nair

Praseeda Nair

Praseeda was Editor for GrowthBusiness.co.uk from 2016 to 2018.

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