I've been working in the VC world for about the last 60 days. Having been an officer of two publicly traded companies, I've never had to get VC cash, and this experience is opening up my eyes to some truths about this space and how it's funded.

While SOA and SaaS were hard sales just 6 months ago, today it’s a very a different story. Now that money is flowing back into the VC community, creating "overhang," the land grab is clearly around the SaaS and SOA spaces, and startups that could not get funding before Christmas, are finding the required capital today. Other hot spaces for VC include Web 2.0 anything, which is what any Web-based technology is calling themselves these days, no matter what they offer (topic for another blog entry).

This is a good thing; I believe that both the SaaS and SOA technology offerings have real value to the customer, in essence solving a real problem. Moreover, SOA is so far reaching that amounts of capital required are going to be above average, and the number of years to in the market are going to be long, relative to more "traditional dot COMs" of days gone by. It's a very different problem than just standing up a nice interactive Web site.

However, the fundamental value of this technology is there, and as the market works itself out, we'll find that many businesses large and small will grow dependent on SOA as a notion, as well as the technology that supports it. There will be no inflection point; it's going to be steady growth over the years. That’s the nature of complex technology.

So, the VC community is doing the right thing by understanding this trend, and investing in the right companies who can make this happen. The trick is steering the companies down some pretty intense rapids for the next few years, making sure that they remain strategically focused on the larger value of SOA and SaaS. That's how you win the game, at the end of the day.

Posted by Dave Linthicum on May 24, 2006 05:44 AM