Drones need software, too

Venture capitalists aren’t seers. But at Bessemer Venture Partners, we try to dive deep into a particular sector to find great investments. The thinking is that by thoroughly getting to know the pain points — and players — in a particular sector, we can identify trends and predict opportunities for investment. And, in turn, we will be better equipped to identify and support the next generation of transformative companies.

With that in mind, here are a few of our best guesses about industry-specific areas ripe for innovation — some of which are already starting to be explored, and some that are still untapped:

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Mobile-centric industry applications

Enterprise software historically catered only to people at their desks. But today’s mobile apps can make a field worker’s day far more productive, freeing up hours that would otherwise be spent physically filling out forms and pushing paperwork. By addressing industry-specific workflows, mobile solutions create better collaboration and communication. This seems obvious — until you come across an industry untouched by technology.

Commercial real estate was one such category. Brokers worked in the field, but returned to their desks to print tenant reports, enter deal updates, and share materials. Now, those common tasks are easily completed from the field using a mobile app from Hightower that enables landlords and brokers to quickly input and share transaction data.

Data entry challenges don’t just affect the real estate world, though. These sorts of slowdowns impact everything from hotels (housekeeping) to transportation (repair logs) to restaurants (food inspections) and local governments (work orders to fix potholes). And each of these industries is a prospective growth field.

Enterprise software for emerging hardware platforms

The emergence of a new hardware platform always prompts an era of profound opportunity for software makers building applications for it. Some of the emerging platforms we are excited about include wearables (which will be common in both our personal and professional lives), robots, drones, and sensors.

Even satellites are an area of possibility now that they’re no longer prohibitively expensive. Skybox, a company recently acquired by Google, sells low-cost access to satellite imagery, making it possible for farmers to monitor crop health, mining companies to explore new sites and transportation companies to optimize logistics. As hardware costs continue to drop and access becomes pervasive, we expect to see industry-specific applications built upon space imagery and other data.

Software tackling neglected industries

Dozens of industries are still held captive by terrible software. Among them:

• Banking, which continues to be controlled by core vendors like FIS, Fiserv, and Jack Henry. These companies use their footprint in core transactional systems to cross-sell mediocre point solutions. We believe next-generation solutions like nCino and Q2 can take market share from the cores.
• Asset-heavy industries like oil and gas, mining, agriculture, manufacturing and industrials have historically lacked innovative software startups altogether. This will change. Many of the trends we have discussed — including mobility and hardware platforms — are particularly well suited for these markets.
• Government is responsible for more IT spending than any other industry but is dominated by dinosaurs like Tyler Technologies, Constellation, Infor, and SunGard — all of whom are focused on cash flow and not innovation. We expect companies like Socrata and OpenGov will shake things up.
• Local services are all about small and medium-sized businesses (SMBs), which have historically lacked access to software. With the cloud making it easy to sell software to SMBs, we’re seeing a wave of solutions emerge for local restaurants, yoga studios, hotels and retailers, including companies like Square, Mindbody, Revel and Booker.
• Health care is a trillion-dollar-plus industry that continues to be largely operated with paper, fax and the phone. Large electronic medical record companies like Epic and McKesson built out their systems in the 1970s and 1980s, and we see opportunities for newer software companies such as athenahealth, DocuTAP, and Modernizing Medicine to gain share.

Occasionally, an application is so revolutionary that it can transform the way an entire industry works. This is perhaps the most compelling opportunity.

Uber is perhaps the best example of this. Uber didn’t build a software application to connect livery companies with passengers. Instead, it used technology to reshape the industry and fundamentally change how we book cars. Amazon uses technology to reimagine retail. Airbnb challenged the hospitality sector. And Lending Club reinvented how borrowers access capital.

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Reimagining an industry isn’t easy. In fact, for most entrepreneurs, it’s virtually impossible. But if you can find a field that needs disruption (and may not even realize it), that’s a good start. The few who manage to capture big parts of those value chains can see tremendous upsides.

Brian Feinstein is a partner in Bessemer Venture Partners‘ Larchmont office. Brian focuses on consumer Internet and enterprise software investments and leads the firm’s efforts in Brazil and Russia.

Trevor Oelschig is a partner in Bessemer’s Menlo Park office, focused primarily on cloud software and infrastructure.

This is the final installment in a three-part series on industry clouds. Check out the first and second parts if you haven’t already.

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