2014 witnessed the sector’s highest funding volume till date, with startups in the space raising over $2B of which industry leader Dropbox raised $850M in two deals
With investors such as Sequoia Capital and Accel Partners looking keenly into the Enterprise Collaboration space, the sector has seen increasingly a good deal of funding activity over the last few years. The popularity of startups in the space, comes at a time when enterprises are constantly looking towards improving employee productivity, while enabling them to better work together and collaborate to meet business objective.
Riding on this trend, startups in the sector have been successful in attracting investor interest, especially in the last two years (2014-2015), where ~$3B was invested, which forms a significant portion of the $6.3B invested since 2010. 2014 in particular saw a peak with $2.1B invested during the year through 96 deals.
While at first glance, 2015 has seen a significant drop in funding over 2014, we have to consider that 2014 witnessed two companies seeing a large scale deals during the year; Dropbox raised $850M in 2 deals, and Atlassian raised $150M, meaning that these two companies alone raised $1B in 2014. If these deals were to not be considered, 2015 has kept pace with the overall funding trend the sector has witnessed since 2012.
Notable rounds during 2015 includes Slack’s Series E raise of $160M from Andreessen Horowitz, Accel Partners, Kleiners Perkins Caufield & Byers, DST Global, GV, Social Capital, Spark Capital and Index Ventures among others. Symphony also raised $100M in an unattributed round from UBS, Natixis, Lakestar, Merus Capital, Google and Societe Generale.
Apart from deals mentioned above, 2015 witnessed a majority of Early Stage rounds, with FileChat, Guru and Frame.io receiving Seed funding, while WeTransfer, ThinkTank, and BetterCompany received Series A funding. But with 2015 seeing 35 early stage rounds, we are witnessing decline in these deals since 2013. Early stage funding rounds increased during 2010-2013 as the number of companies founded have also increased, and 2013 witnessed a peak with 88 early stage deals with startups in the Messaging and chat room, conferencing sectors seeing a majority of the funding.
Average Late stage funding rounds have remained at around the 20 range over the 2010-15 period, with startups in the Project management and conferencing sectors receiving large chunk of late stage funding rounds during 2014-15.
2013 which witnessed the highest number of early stage deals, also saw the highest number of companies being founded, as well as the highest number of companies funded. Since 2013, however, the number of companies founded has been on a decline.
2013 saw the formation of startups from different sectors, with the Messaging and Chat room category and Project Management segments leading the pack.
Business Models in Enterprise Collaboration
Looking closely into the business models in the Enterprise Collaboration space, startups in the File Synchronization and Sharing, such as Dropbox, box, Hightail, and Egnyte, have received the highest funding. The Conferencing segment follows with startups in the segment raising $1020M, and sees the highest number of acquisitions followed by the File Synchronization and Sharing sector.
In fact, Exit activity in the space has also been high as has been lot of strategic acquisitions happening across the various business models. 2015 witnessed the highest number of acquisitions at 19.
Over the years, there has been increase in number of companies offering SaaS based solutions, with a large number of companies now preferring to adopt SaaS based applications because of subscription pricing, scalability and other benefits. But there will still remain a significant number of companies who prefer to have on-premises solutions to have better control over their data and other security concerns.
Another key driver for investments in the industry will be Analytics, as there is now a greater emphasis on measuring and reporting which will allow organizations to track performance, make adjustments and drive deeper engagement with collaboration platforms.
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