December 14, 2012, 9:34 AM — The swell of early- and midstage venture capital continues to swamp the enterprise space. It's where the money is, with worldwide enterprise spending accelerating to pass $2.6 trillion in 2013, according to Gartner. The smartest VCs like Philly's First Round Capital (backers of Bazaarvoice, Gigya) are making enterprise-focused partner hires. They're competing for enterprise deals with everyone from Silicon Valley archangel Ron Conway to Microsoft; the latter teamed with seed fund TechStars to start the enterprise-focused Microsoft Accelerator.
Venture capital, like any asset class, tacks quickly to take advantage of prevailing winds. With Wall Street down on recent consumer Internet IPOs and enterprise M&A picking up, "the momentum/late-stage investors have moved from consumer to enterprise," writes Fred Wilson, whose Union Square Ventures is the smartest early-stage money on the East Coast. In 2012, VC consumer bets were off 42 percent as VCs watched enterprise get all the upstream loving -- from Cisco buying cloud-based Meraki Networks for $1.2 billion to enterprise scoring decent IPO floats like Demandware, Workday, and ExactTarget.
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No wonder enterprise angel-round valuations are rising to a median premoney valuation of $2.7 million, according to Halo Report. Venture investment in enterprise startups was the only area that didn't see a decline in the third quarter, according to Dow Jones VentureSource. Innovation shifts investment priorities. "IT will experience greater change in the next five years than there has been in the last 30 years," says Jim Kissane, partner at Stone Key Partners, a strategic financial adviser. And change means the sort of disruption that VCs love to fund.