Reflections on a business software and services review platform, a blue ocean strategy scale-up that just completed a $30M series B round.
The Ballad of G2Crowd
Along came a G and a 2.
“O”, said Gartner. “Ow”, said Forrester. “Row”, said IDC.
“Crow”, said all 3. Then they said it again and again and again.
“Quiet!” said the Crowd … “We’re listening to a new G now.”
Maybe I’m making up too many bedtime stories for my 4 year old daughter these days, but last week felt like a pivotal milestone in another fable driven by data science and the voices of software users. Some genuinely good guys got paid to accelerate what they do for software procurement. G2Crowd raised the sum of $30M (and probably a glass) with Accel, LinkedIn, Pritzker Group Venture Capital Group and its own serially successful founders.
G2Crowd is only 5 years old. This year it predicts it will receive and listen to 225,000 detailed, structured, trustworthy, fact-based reviews. That would be a 2nd consecutive year of 200% growth. If it maintains that rate of growth over the next 3 years, that becomes 6 million reviews. The growth rate will vary of course, but we’re probably looking at millions of reviews. 2020 hindsight should make impressive viewing. These are carefully vetted, highly detailed, mostly structured reviews on a huge range of business software and services. If we narrow information down to very high business value, that’s vast data within that category.
The One-Eyed Analyst
This event also heralds a slow decline for the One-Eyed Analyst. In the future we’ll be waving goodbye to these gigantic magicians. They had a great run, but their model is older and slower now. And their vision is narrowing in the context of accelerating innovation. Belief in the mythical powers of these beasts (translating into massive marketing muscle) will linger for quite some time yet (and some of them will continue to grow for a time), but the demise of this human guru model is written in algorithms. In time I believe it’ll be a waste of time reading me too i.e. if I continue to write about this stuff. Gartner, in particular, has a war chest big enough to get ready to compete in a future scenario where G2Crowd’s model becomes a more universal, multiplayer one. The One-Eyed Analyst has to evolve into something else or die raging against the light. Buyer beware of the change in motion. Opinions are cheaply held, but expensively given. And tis far better to part with dubious convention than valuable currency. Embrace companies that not only love problems, but love solving them with validated, crowd-sourced data.
Exploding Choice and Pragmatic Advice
If you want to assess software, you should check to see if the category you are addressing is well covered by G2Crowd … in the same way that you would assess a company’s internal culture using Glassdoor. It doesn’t vet its reviews as closely as G2Crowd, but overall (for companies with some sort of scale) it’s a pretty good indicator of where a company is in terms of employee satisfaction. If they make their employees successful, they’re more likely to do the same for you over the long haul. Customer deafness is not an attribute of these companies. They amplify the value of data and learn continuously from the voice of the crowd.
The timing is perfect to use big data and smart algorithms to tackle a problem of exploding choice, accelerated constantly by rapid innovation. Not that G2Crowd (or any software) will cover you if you lack clarity of purpose, self-awareness and a culture of innovation. There’s no panacea for that. If you have a clear understanding of who you are as a company and where you want to get to, then you put yourself into a position to select the best software possible for your business.
Once in that position, choose your advisors well. When you choose G2Crowd, you choose to listen to the voices (individual and aggregated) of those who have gone before you. And those voices have significance in categories well covered like Project Management, Business Intelligence, CRM and Collaboration. If you’re looking for advice on some of the more vertical specific software categories like Travel Management (for example), good luck with that. That’s just one of the reasons investment to accelerate faster makes sense for them.
Blue Oceans, Clouds and Crowds
Validated reviews and customised recommendations were driven by the consumer web. This model inevitably extends into the world of B2B software. There’s no “if” to that endgame. We’ve experienced this scenario play out with other tectonic shifts. Cloud computing is an obvious example. Amazon, when it was almost purely a consumer play (in the days long before AWS), showed the world how to build and rapidly scale a business in the cloud. It offered retail as a service in an almost infinitely scalable way. It took a Salesforce to gamble on the timing being right to prove that the cloud was the future of B2B too. I still remember the idea of a software as a service becoming dominant being laughed at when I was part of Salesforce in startup days.
Salesforce will hit a run rate of $10B/annum next quarter and is widely predicted to maintain an average growth rate of 20%+ over the next 5 years. Meanwhile Oracle is in a vulnerable place with a stack of solutions that don’t stack, but soldiers forward with a huge amount of spending on armies of sales people and lawyers. SAP doesn’t really know how to communicate its solutions very well and is only comfortable in large enterprises with lots of spare money and time for never-ending projects. Microsoft, on the other hand, has learned a lot from Salesforce. It’s still behind them for SaaS and PaaS, but way ahead of other legacy companies in that regard.
“Maybe I’m an idiot, but I have no idea what anyone is talking about. What is it? It’s complete gibberish. It’s insane. When is this idiocy going to stop?”
Larry Ellison on Cloud Computing in 2008
But wait a second. These are just my opinions. And I’m encouraging you to look at the data rather than analysts. The irony is not lost on me. However large organisations of the scale I’m discussing do not change at pace (no matter how innovative) and will be a lot easier for humans to deconstruct for a long time yet. So there is a place for traditional analysts after all. It’s the individual software and services they (and smaller entities) offer that change at an ever increasing pace. Not just the vast number of apps, but the frequency of releases and updates. That’s where all of us struggle to get a handle on things.
It’s impossible to project a decade into the future of software procurement, but I would not be surprised to see a similar scenario where only one of Gartner, Forrester and IDC will be playing catch-up with the G2Crowd model in a smart way. Culturally it’s very difficult for these companies to change as they need to slowly kill a large piece of their value proposition to morph effectively. Precisely the conundrum that Oracle, SAP, Microsoft and others selling huge on-premise contracts faced at the start of this millennium.
Understanding as a Service (UaaS) is here to stay. There was always going to be an Amazon, and then a TripAdvisor (etc) before we’d see a G2Crowd. Not that TripAdvisor validates recommendations very effectively. It doesn’t, but most people find it a very useful service. It seems very possible that, in time, small and medium sized organisations will initially crown G2Crowd a dominant player. Then slower moving enterprise scale companies will follow suit. Building a culture of innovation and rapid cycles of product development is best done in tandem with a large number of smaller customers.
A culture of trust is another link between Salesforce and G2Crowd. They both took the decision to wire their brand equity inseparably to trust. In Salesforce’s case they made the uptime of their servers public on trust.salesforce.com. If you can’t hide, you have to up your game. Embracing transparency made Salesforce stronger. They were forced to make their platform much more robust and scalable than it had been previously. G2Crowd built trust into their DNA in a very different way. They avoided the hugely tempting, but ultimately compromised model of affiliate revenue used by the likes of Capterra. G2Crowd can’t barter trust for short-term gain. This is a key element in their virtuous circle of improvement. And it also positions them much better in the value chain.
“We don’t have advertising or give preference to companies who pay us … and we don’t do lead generation.”
How does one solve the problem of personalisation? How does one find the ‘right’ software for one’s needs? It’s one thing to have ratings and comparisons powered by the voice of customers. That’s already a massive step forward. It’s another thing to empower a business to select the right software for its industry, for its specific needs, for its particular vision, for its internal culture etc. How do you match a trustworthy, knowledgeable, specialised consultant in that regard? Not easily. G2Crowd has some filters, but its only made modest progress on that one. It does, however, have a lot of smart people working systematically on that problem every day. The lightly-personalised category recommendations part of their vision is a reality and already highly useful and reliable. However, I believe that a much deeper personalisation is the next phase of their evolution.
Gartner’s Alive and has a Big Kick
Many software companies will continue to run around building relationships with large analysts. I’d even go as far to say that many medium and large software companies absolutely should continue to do that. The age of the Marketing Quadrant won’t disappear overnight. There’s huge value in featuring on the top right of a Gartner quadrant. And there’s often intrinsic value in their analysis when comparing well established software. But its still a bit of a black box.
Does the traditional analyst know many of the great smaller, agile, hyper-innovate, software companies out there? Can it keep up with a small minority of big players that manage to build a culture of fast innovation? Of course not. How could they have the capacity to know the small guys? How can they keep up with rapid change? Not possible with the traditional model.
“Have I, in my poor old motion, the expedition of thought? I have speeded hither the very extremest inch of possibility.”
William Shakespeare (Henry IV, Part 1)
Early Adopters are the Best Reviewers
Sophisticated innovators and articulate early adopters know the new apps that traditional analysts miss. They love to examine and review things too. They are very hands-on and insightful. When the number of these extra-smart user voices amplify into significance, the G2Crowd model is positioned to present that valuable aggregate voice. Within those software and service categories it presents it’s analysis in a comprehensible, digestible, trustworthy fashion …usually a long time before a large analyst could give a credible opinion.
“ Bigmouth strikes again
And I’ve got no right to take my place
With the human race”
Unicorns and Good Guys
As a software vendor or service provider, if you want to feature strongly in a G2Crowd model, you’d better know your customer, tailor your solution for their success and never stop listening and iteratively improving. This model encourages software entities to make better products and to keep their ears free of wax. This is as it should be and that’s why I call them the good guys. Accel has invested in a string of unicorns including Atlassian, Slack, Dropbox and Facebook. G2Crowd’s vision could be fundamentally bigger than 3 of them, Facebook being the obvious exception. This company appears to have miles to go before it sleeps and the road is rising in synch with it. Some studies show timing to be the most prolific startup assassin, but in this case it may be a growth hormone. G2Crowd is, like all strong scale-ups, an innovation and execution machine, but it appears to have timed its stage entrance perfectly. Many have said smart procurement can’t be resolved with software, but G2Crowd is now well positioned to be the pioneering vector through which software will eat that particular morsel of our experience.
What could stop G2Crowd becoming a billion dollar company? The valuation wasn’t made public, but given the latest investment and how they are trending, their current value is probably somewhere between $150M and $300M. There’s still a long way to go and some serious threats. G2Crowd will need to resist a take-over and manage it’s relationship with LinkedIn very carefully. This is the third big play by these founders. Big Machines was gobbled up by Oracle for about $400M. Steelbrick was acquired by Salesforce for a similar figure, an incredibly favourable price. Steelbrick was built on the Salesforce platform. Salesforce is a really positive corporate citizen, but it’s not Mother Theresa. Nor would their investors want it to be. Steelbrick was a unicorn in waiting, but Salesforce was in a position of power. Just 17 months later Marc Benioff would almost certainly not want to part with Salesforce CPQ for $1B.
G2Crowd is swimming in much bluer waters from a competitive perspective. I don’t know how much power has been given to Accel, but I hope the founders will not cede control as easily this time around. The last 2 companies were amazing success stories. Who wouldn’t love to build and scale a $400M company? Nevertheless, in my opinion, both of them could have become far bigger entities.
It’s obvious why a Gartner would covet G2Crowd, but I don’t see that in the near term for cultural reasons . Gartner’s incredible performance over the last 7 years also makes it very unlikely. Since February 2009, they’ve grown over 1,000%. I might be beating the future of their business model up, but I take my hat off to them for execution. 1000% growth in 88 months to a $10.69B dollar business also tells you something about the demand for analytics, research and software/service selection. The market is red hot.
G2Crowd’s technology partner and new investor LinkedIn might be the likeliest suitor. Can G2Crowd resist Microsoft (LinkedIn (LinkedIn’s investment arm))? Microsoft’s current acquisition drive is unlikely to abate anytime soon. Being coveted by world class companies is the type of problem almost any company would love to have.
I’m not talking in a vacuum here. G2Crowd is one of the the sharpest instruments in my toolset when I put together a solution for our clients in AppSelekt. As stated I can’t use it for all vertical (or even horizontal) categories of software yet, but it covers a lot of valuable ground. I’ve also used G2Crowd as a key source when accurately predicting the fortunes and misfortunes of companies. A good example is Revisiting Rocks Thrown at the Cloud 12 months later.
Like a broken record I’ll say again that some day I’ll get one of these wrong. And the day will come when you shouldn’t even listen to me. In the meantime I’ll state confidently that if G2Crowd is not acquired in the next 3 years, it will be a unicorn.
Time is our only currency. Trustworthy crowd-sourced advice is our safest council. G2Crowd’s model saves us more time and offers better guidance than a traditional analyst model. This model is the stuff data scientists should be dreaming of and building. The good stuff. G2Crowd is the data science antithesis of that hugely intelligent, but horribly manipulative organisation known as Cambridge Analytica.
Good guys v Goodfellas. G2Crowd’s model illuminates and empowers rather than obscures and manipulates. The latest round of funding allows them to shed light at faster rate.
“Dispassionate objectivity is itself a passion, for the real and for the truth.”
“From the dark end of the street
To the bright side of the road”
Van the Man
Postscript: I do happen to believe strongly in this particular model for software selection, but it’s a little tongue in cheek too. Don’t take the One-Eyed analyst image too seriously. I’m talking about the model, not the consultants. It’s the Wizard of Oz quadrant I’m really after here. In reality many of the traditional analysts will continue to grow for some time. They address in their own way a major problem that is growing. They will have to evolve, but some of them will do just that. Many of the traditional analysts will be able to work extremely effectively in partnership with G2Crowd and it’s growing data. All of them have some amazing consultants on their books. Its the Muscular Magic Marketing Quadrant this article is really trying to explode.
Live long and prosper! Stephen Cummins, May 30th, 2017