Kevin Spain

This post originally appeared in GigaOm.

Over the last few months, I’ve had several conversations about mobile business applications that remind me of early discussions and debates around SaaS a decade ago. When Emergence first invested in Salesforce.com in 2003, we heard all kinds of reasons why Software-as-a-Service wouldn’t work. Yet, cloud-based computing enabled a fundamental shift in software design, go-to-market strategies, and cost structure. Today SaaS companies are quickly coming to dominate the business application market.

I feel like we are on the cusp of a similarly fundamental shift in business software. Once again, the change is about rethinking business applications, but this time it is with a mobile lens. When talking with companies that don’t have a specific mobile strategy, I keep hearing about how mobile is just a feature of cloud-based applications. Yet when we meet with entrepreneurs who are building “mobile-first” business apps, we can see a completely different way of thinking: Leveraging the unique capabilities of mobile devices is at the core of every decision they make.

At Emergence, we have put together a first cut at defining the emerging mobile business app landscape based on conversations with over 100 early stage companies. Here’s a look at our findings:

Vertical apps: field-based, on the go

Vertical apps are defined by their singular focus on industries that have a substantial cohort of non-desk workers. Real Estate is a great example. The industry has been notoriously slow to adopt new technology, but in the last two years there has been an explosion in mobile-first technology solutions. For example, Cartavi’s mobile solution for real estate transactions gives agents, buyers, sellers, and related parties (mortgage banks, title companies, etc.) the ability to store, access, update and share transaction documents in the cloud.

On the construction side of real estate, PlanGrid is eliminating reams of paper-based blueprints and change orders with a rich mobile app built specifically for the iPad. Given the field-based nature of the work and its traditional reliance on paper-based solutions, it makes sense that real estate is one of the most crowded boxes on the Emergence mobile business app landscape.

Healthcare and education are other verticals that are particularly well-suited to mobile business solutions. In these sectors, most mobile business apps are enabling entirely new forms of communication, rather than replacing paper-based solutions. Doximity offers a professional networking solution for physicians that hasn’t existed before (Disclosure: The author’s firm, Emergence Capital Partners, is an investor in Doximity). More than 160,000 doctors have joined the network and over 75 percent of their engagement is through mobile devices.

Other vertical categories including restaurants, transportation and hospitality have begun to attract attention, and we predict that we will soon see more apps in the manufacturing, retail and agribusiness verticals, given the “always on their feet” nature of the workers in these sectors.

Horizontal apps: innovating on existing services

Looking at horizontal apps, most start-ups emerge in three sub-sectors: productivity; mobile marketplaces; and sales, marketing and services. A defining characteristic of the companies in the productivity space is their focus on leveraging the native integration of email, desk and calendar in mobile devices. For example, Tylr Mobile has recently launched a new mobile app for salespeople called Workinbox that directly connects salesforce.com data with email. Another young company, Cloudmagic, has developed mobile search capability that allows users to find names, documents, or other files stored in any of your cloud-based applications (e.g. email, calendars, Box, Evernote).

In the mobile marketspace sector, many business apps share a heavy reliance of location-based services. There are several promising car service companies such as Uber, Flywheel, Hailo, and Taxi Magic that enable drivers to find passengers through a marketspace leveraging GPS data. Another interesting company, Quri, has developed a mobile platform that uses both GPS data and mobile cameras to crowdsource in-store intelligence for consumer brands.

Within the sales, marketing & service, ServiceMax, has developed a mobile solution that helps companies manage the entire field service process including scheduling, parts and contracts (Disclosure: The author’s firm, Emergence Capital Partners, is an investor in ServiceMax). The company sells into over 20 verticals, and its bookings increased over 150 percent relative to last year. As we think about the other horizontal sub-sectors, some companies that stand-out have found innovative ways to use mobile cameras (Expensify, Flint), alerts (PagerDuty), and even the headset jack (Square).

Unsolved challenges remain

At Emergence, we feel optimistic about the tremendous growth in mobile business applications that we have seen over the last 12 months. However, like all nascent categories, there are many unsolved challenges. Distribution issues come up during every conversation we have with entrepreneurs. All mobile business app entrepreneurs want to figure out how to leverage mobile app stores more effectively, but most struggle to do so.

In addition, founders are working through the question of whether to native-build mobile business apps or to use a browser-based approach. To date, I have found that native apps tend to provide a better user experience. Further, business users often like access to their applications even when they don’t have connectivity – which makes native apps a better choice today. However, developing and maintaining native apps across multiple platforms is challenging and costly. I am hopeful that the evolution of HTML5 will help entrepreneurs achieve the benefits of both.

As we look ahead, we know the mobile business app landscape will continue to evolve. We realize that we have likely missed some great companies, so please let us know if we missed you. Or if you are thinking about other ways to categorize the companies, it would be great to share ideas.

Recently, I put together a Meetup for folks interested in mobile business applications.  My theory is that the next several years will see the creation of exciting mobile-first and mobile-only applications for business.  I wanted to connect with entrepreneurs and others who shared this view.  I wasn’t disappointed.  We had dozens of great people come by.

Dave Barrett, CEO of Expensify, was kind enough to present to the group on what has driven his company’s success on mobile.  For those of you who don’t know Expensify, it’s a fast-growing expense reporting app that makes getting reimbursed by your employer a breeze.  Their app is fantastic.  If you haven’t checked it out, I recommend you do so.

Despite the fact that you can sign up and use Expensify via both mobile app and Web, 80% of Expensify’s new customers come from mobile app stores.  Dave credits this largely to two things.  First, a big part of expense reporting is submitting receipts.  Capturing receipts with the camera on your phone makes complete sense — and this is what initially causes people to look for an app like Expensify in an app store.  To this point, Dave mentioned that Expensify really started to take off when auto-focus cameras began appearing on smartphones.  Proof you never know what might be a catalyst for your business.

The second reason Expensify sees strong customer acquisition on mobile is the fact that it comes up highly in app store rankings for terms such as “expense” and “receipt.”  I hear very few mobile business app companies talking about app store optimization (ASO) right now.  However, based on what Dave is seeing, I suspect this will soon change.

If you’re looking for tips and tools for managing ASO, check out the App Developer’s App Store Optimization Cheat Sheet that Apptamin refreshes regularly.  It’s a great resource.

Those of you who know me know I’m a bit of a productivity geek. I’m a fan of Getting Things Done. I try many new to-do list and other productivity-enhancing tools on a regular basis. And I’m proud to say that I adhere to the Inbox Zero philosophy of ending the day with no more email to process.

So it may come as a bit of a surprise to some that I’ve decided to make a major change to my email habits. I’m now going to only check most email twice a day.

What inspired me to make this change was an experience that I had this past summer when I visited Yosemite with my family. We stayed at a lodge that had no Internet access in the guest rooms. I could access email when we had breakfast and dinner at the main dining area, but at no other times. After a couple of days of withdrawal from my regular chronic email checking routine, I realized that nothing fell apart by only being able to log in twice a day. And, once I got used to the change, I actually felt much more relaxed and able to enjoy my time away. My family also noted how much more present they felt I was when I wasn’t constantly picking up the iPhone.

Coming back from our vacation, I didn’t yet have the conviction to make a twice-per-day online routine a regular thing. So, I slipped back into my old habits. However, over the recent holiday, I finally managed to read Tim Ferris’ The 4-Hour Workweek (I’m late to the party, I know). In the book, he recommends checking email twice daily at most. I saw this as validation that I should give this change a real shot.

Now you’ll notice I mentioned that I’ll only be checking *most* email twice daily. Email from the highest-priority people in my life (my family, my partners, my portfolio company CEOs, etc.) will still get a very fast response. I’ve enlisted the help of Apple’s new VIP functionality in iOS and OSX to make sure messages from these folks get through to me immediately. And, for everyone else, you’ll still hear back from me within a day.

I’m excited to give this a real shot. Having been doing this for a week already, I can tell you it’s not an easy change to make. But I’m excited to see if it brings the benefits I’m hoping for (a more relaxed mood, more mental energy to focus on important tasks at hand, and a feeling among those important to me that I’m there and available to them).

I sometimes hear folks say that the reason for successful startups’ momentum is luck.  Sometimes I hear that success is due to the strength of a company’s idea.  And other times I hear people state that it’s the backgrounds of the founders that enable a young business to succeed.

Of course, all of these are important.  But the common ingredient I see across the most successful startups we work with is hard work.  Damn hard work.  A drive among the founding team that is unstoppable.

I believe the reason for this is rooted in the concept of entropy.  If you have a scientific background, you probably know that entropy is a corollary of the second law of thermodynamics.  Basically, entropy is the inclination of matter to revert to a state of chaos over time.

My sense is that the idea of entropy applies to business as well.  There is a tendency for things in a business — big or small — to fall apart.  A company’s original strategy eventually becomes irrelevant as their market changes.  Teams often have to be upgraded as a company scales.  Products that were state-of-the-art become dated as technology advances.  None of this gets fixed without a ton of time and attention from a company’s leadership.

Addressing the basic entropy that exists in a business is in and of itself a huge task.  Ask any public company CEO.  However, as an entrepreneur, you also have to create a company out of nothing more than an idea.  Doing one of these tasks well is often challenging.  Doing both requires a work ethic that very few possess.

I’ve seen many entrepreneurs raise follow-on rounds during my time in the venture world. And while I’ve seen many different fundraising strategies used, there’s one that I’ve seen reliably produce good results time and time again. Here it is:

1. Assemble a list of all potential new investors. Leverage your board and all of your existing investors to help ensure you have the most complete list possible. Don’t forget about potential strategic investors.
2. Perform some basic research on the firms on this list. Are any investors in competitive companies? Remove them. Do any focus on stages or geographies that make them a poor fit? Remove them, too. The goal is to end up with a list of firms that you wouldn’t mind telling about your company — and who won’t have any obvious objections to taking an initial meeting.
3. Stack rank the remaining firms based on whatever criteria you feel appropriate. Are you looking for a top-tier brand? Seeking a firm that is hands-on? In need of a team that really understands your space or can address a gap on your board? Score the firms on the list in each of the areas that matter to you, add up the points for each firm, and arrive at a total score for each investor. Now sort the list in decending order by total score.
4. Add individual partner names to the list. Are there specific partners in a firm who would cause you to increase the firm’s score? If so, include those folks’ names on the list and adjust the score appropriately. If not, work your network to determine who the best partner would be for your company.
5. Start fundraising by reaching out to the top five firms on your list. Use your network to ensure you receive warm introductions to the right partners. Contact them simultaneously and aim to have inintial meetings with them in the same week. Get feedback from them as quickly as possible.
6. The minute you receive a turndown, reach out to the next firm on your list. Repeat this whenever an investor drops out of the process. Aim to keep five investors in your process at all times. More than this is hard to manage. Fewer than this is likely to result in no term sheets or too few term sheets to enable a competitive process.
7. One final hack. If you use this methodology, you may find yourself at different stages with different investors at any point in time. You will often be asked by investors where you are in your fundraising process. Be careful what you share. If investors feel they are too far ahead of others, they may stall. If they feel too far behind others, they may feel they won’t be able to catch up in time to be considred. Manage your communications on this topic carefuly.

Do you have any other fundraising tips? Feel free to share them in the comments.