VC-backed Innovators Are Bringing Big Opportunity To The Channel

There is a big gap between the innovation coming out of venture capital-backed companies and the channel, giving solution providers the opportunity to bridge that chasm and integrate cutting-edge technologies into their solutions.

That's according to Dave O'Callaghan, former IT sales and channel executive and now managing partner at Vation Ventures, a Denver-based consulting firm with a focus on helping innovators connect with customers and solution providers.

O’Callaghan, who previously served as senior vice president of the global partner organization at VMware and as vice president of worldwide commercial sales at Cisco, Sunday told an audience of solution providers at this week’s NexGen 2018 Conference and Expo that there is a lot of innovation happening but that they need to make sure to find what fits their market.

[Related: 2018 CRN Tech Innvovator Awards]

Seeking innovative technologies has been a key to success at BBH Solutions, said Ray Ortega, CTO at the New York-based solution provider and managed services provider.

Ortega looks at new innovative companies on a regular basis when finding new hardware and services to bring to clients. "We're looking at new ways to build new services engineers can support and marketing can sell," he said.

He cited Pax8, a Greenwood Village, Colo.-based distributor of cloud services and a platform for taking those services to clients.

"We got on Pax8 early with them," he said. "We were looking for a better way to bring in products more easily. With most vendors, it's hard to get on-board easily. It can be next to impossible."

BBH Solutions recognizes that it takes on a percentage of risk when bringing on innovative companies. "We do this to mitigate our clients' risk at the end of the day," he said. "And we are very transparent with clients. We have to be. That's how we retain our clients."

From the venture capitalist perspective, finding a company innovative enough to invest in can be like spotting the proverbial needle.

For instance, one investment company, Menlo Park, Calif.-based Mayfield Fund, looks at 9,000 potential deals in a year, but only actually does 12 in that time, he said. "You have to be more successful than Tiger Woods to get funded," he said.

Venture capital companies are looking at a wide range of technologies, including human impact, drones, e-sports, voice recognition, robotics, machine learning, deep learning, ambient voice, and autonomous vehicles, O'Callaghan said.

Other key trends, including artificial intelligence and machine learning, big data and analytics, IoT and decentralized data, quantum computing, and security in everything, are also attractive to investors, O'Callaghan said.

Those investors in general follow what he termed the "50-40-9-1" rule.

For each 100 investments made, 50 will fail, 40 will break even, 9 will result in doubling and tripling of the investment, and one will be a Google, a Cisco, or a Palo Alto Networks, he said.

"Your job is to figure out who you can be successful with," he said.

Solution providers need to look at where they lie on the adoption lifecycle curve of innovations, O'Callaghan said.

About 2.5 percent of businesses are true innovators, which can be a tough place to be, he said. "If you are going to invest only in innovations, your customers also have to be innovators," he said.

About 13.5 percent of businesses are early adopters, while 34 percent of businesses are the early majority, which include those who may be investing in innovative companies like Cisco, which have been around for some time. "If you just adopt Cisco now, you will be like penguins dropping off the cliff," he said. "If you can move over to the early innovator [category] you are going to do very well margin-wise."