Market Breakdown

Notion breaks the internet-based services market into six segments as follows:

We believe all these six segments are large, fast growing markets with great potential for disruption. However, we are most focused on what we call our Tier 1 segments: Communication & Collaboration, Enterprise Productivity and Security & Content Management.

Each of these sectors typically offers repeatable internet-based services and is more focused on the B2B market than on the consumer side. These are the sectors that we know best and are therefore where we’re best qualified to make the right investment decisions and help companies be successful.

Internet-based Communication & Collaboration is making remote working both more affordable and more effective for businesses. This is making budget owners question things like the need to make fixed line phone calls, to always be in one office and to travel extensively for face-to-face meetings. You only have to look at developments in areas such as VoIP, video and web conferencing, and the wide range of on-line collaboration tools now available to know there is something profound going on and the gap is closing between virtual and physical working.

Security & Content Management is a market we know very well having built MessageLabs into the largest security SaaS company in the world. Cloud computing and the internet has presented us with lots of new security challenges such as the management of on-line identity, the fast spread of malware and the need to protect your company’s information assets. As we start to rely on an ever-increasing array of devices and, at the same time, start to store more and more information in the cloud, the need for good security is an important and growing one. We believe that this market will continue to evolve and we will be presented with new challenges giving rise to further opportunities for innovation.

Enterprise Productivity is where the majority of the largest, pure-play SaaS vendors reside, including Salesforce, SuccessFactors and Netsuite. This sector covers all the standard business productivity applications that are increasingly being made available over the internet including CRM, ERP, accounting, office suites and supply chain management. Despite the success of many of the publicly listed SaaS companies, the market is still dominated by the established traditional software vendors. But we believe that the majority of these major software implementations fail to live up to expectations, are poorly integrated with other systems and are generally difficult to access on-line. These factors make this market ready for further disruption as businesses see the advantages of a cloud based model that is easy to set up and available from anywhere for a fixed monthly cost. This is especially true for new businesses that do not have the baggage of legacy investments.

The Tier 2 sectors are a slightly lower priority for us for a number of reasons:

Media & Marketing companies are unlikely to interest us if their models are based on selling advertising as again we don’t know this market very well. However, when a business in this sector is mainly B2B focused, selling a subscription-based service and generating recurring revenues then this would be of interest.

Platform & Infrastructure is a market that we know well through our experience with Star, one of the largest cloud services companies in the UK. Notion still has a major shareholding in Star and remains closely involved with the business. Businesses in this sector often require significant capital expenditure to build out their offerings, whereas at Notion we like highly capital efficient models and high margins. As such our focus in this sector tends to be around cloud-enabling technologies rather than deep infrastructure plays.