Emergence Capital
Emergence Capital co-founder Emergence Capital
- Emergence Capital founder Gordon Ritter led the firm's first investment in 2003, when it put $1 million into Salesforce in a deal valuing the company at about $140 million. A year later, it went public at $1.1 billion, making for a nice payday.
- Now, Emergence Capital is a leading investor in
enterprise startups. - Ritter says that "coaching startups," which use your own information to help you get better, could be the next big thing in enterprise software.
Way back in 2003, Gordon Ritter led his firm Emergence Capital's first-ever investment: a $1 million secondary share investment in a pre-IPO startup called Salesforce, in a deal valuing the company at about $140 million.
In 2004, Salesforce.com went public in a blockbuster IPO that valued the company at $1.1 billion, making for a nice payday for Emergence.
Salesforce has since gone on to even greater heights, currently valued at $79 billion.
And for its part, Emergence has gone to make more investments in hot cloud-computing companies serving the business software market, like the $1 billion video chat startup Zoom or the HR startup and future IPO candidate Gusto.
Now, Ritter thinks he's ready for history to repeat itself.
In the same way that the success of Salesforce legitimized the cloud software market, Ritter thinks there's another big shift on the horizon.
The short version is an idea he refers to as "coaching networks" - tools that gather data on your personal habits, compare them against the statistically-proven best way to do things, and figure out how to constructively guide you towards success.
To Ritter's mind, this idea of "coaching" is actually a subversion of the business model pioneered by Facebook or Google. In his estimation, those large technology platforms provide all kinds of incentives for you to share your data with them. But rather than give that data back to you in a useful form, it's used for advertisers to sell you things.
So Ritter sees opportunity in business software companies that can apply a similar philosophy: take in all the data on a user you can, and package it all up in a way that helps you get better at whatever it is you're doing.
Put another way, the central question that a coaching network should answer: "What are the things you're doing that aren't to your advantage?"
Ritter provides an example from his own portfolio: Textio, a startup which provides a tool for writing analysis. Specifically, if Textio detects you're using language in a job posting that statistically makes women less likely to apply, like "ruthlessly" or "wickedly," it dings you and suggests you find an alternative.
In the longer run, Ritter says the sky is the limit for Textio. Right now, it's hyperfocused on that job-listing space. But in the same way that Salesforce started with a very focused tool for salespeople, and later expanded into a platform and into new product lines like marketing and productivity software, Textio could one day analyze any kind of writing.
And in that sense, he says, Textio is poised for growth. Because pretty much everybody, in every line of office work, has to do at least a little bit of writing, he says, Textio could have mass-market appeal. Indeed, he likens Textio CEO Kieran Snyder to the leader of Salesforce, saying she's the "Marc Benioff of the this next phase" of workplace software.
This kind of specialized approach is very much characteristic of this next wave, says Ritter. He uses the metaphor of a piece of toast. Most tech companies, including Salesforce and even up-and-comers like Slack, are "peanut butter" on that toast, stretching themselves thin in the pursuit of covering every possible use.
Textio, and startups like it, can thrive in the nooks and crannies under the peanut butter, he says. "This is how these companies are going to compete against the big boys," Ritter says.
And yet, the challenge ahead will be to figure out ways to make that data as good for productivity as Facebook is at selling advertising.
"The challenge is, you have to be useful," says Ritter.