As a firm that focuses half of our energies on enterprise tech investments, we’ve long been focused on the inevitability of cloud-delivered software to optimize business processes across all verticals, sectors and enterprise sizes. The explosive growth of the SaaS landscape in recent years confirms there’s nothing particularly contrarian about that view. We’ve spent a lot of time in recent years focused on places where the cloud revolution is impacting SMBs - our investments in Bench and TheSquareFoot, plus a couple more that are still in stealth, are testament to that focus. SMBs will spend $55 billion on cloud services in 2016 - a number that’s still growing an astonishing 40% per year - and by 2020, nearly 80% of SMBs will be using cloud services of one sort or another, up from 37% today. Today’s professionals have come to rely on any number of cloud apps, from enterprise-only SaaS solutions like Salesforce, Trello and the omnipresent Slack, to products that have both B2B and B2C applications like Dropbox and Google Apps.
But what happens when that software goes haywire? Relentless eye-rolling when the wifi goes out (again), hushed profanities when password issues halt productivity, helpless but nonetheless violent gesturing when your Google Sheet disappears mysteriously into the ether. Password issues? Argh. And then, of course, the head-banging and tears following an unbearably drawn-out or unproductive customer service call - if you can even find someone to talk to at many cloud companies. None of us are immune to these episodes that have come to define our IT experience. Sure, it almost always works. But with today’s professionals using between 10 and 16 cloud apps - many of which are mission-critical to day-to-day execution of their job - the potential for crippling problems is ever lurking, especially as this number continues to rise.
These pain points are particularly acute at SMBs without the resources for in-house IT support. Instead, their most common option is to make use of one of the fragmented landscape of small, independent IT consultants or managed service providers (MSPs). These consultants often have limited availability, stretching themselves thin across their client list so as to maximize their own profit. They generally handle ongoing support requests via a “hotline” approach, wherein clients log a ticket for basic support issues, and twiddle their thumbs while they hope and wait for that call to come back. But even that call is merely the beginning of an uncertain process toward resolution.
But imagine a scenario in which you can avoid the dreaded support call and immediately have your issue resolved via a quick online chat. This simple premise is the vision of founder Ryan Denehy and the inspiration for our latest investment in Electric, a 24/7 automated intelligent support channel for immediate response to customer IT enquiries. Using a Slack interface, customers will be able to chat directly with a support specialist (an intelligent bot for low-level support, but escalating to a human if need be) for an instant response to their enquiry. It’s the stuff of dreams.
Fundamental to the viability of Ryan’s vision is the fact that 91% of support tickets are for incidents that have been solved previously at some point in the past 30 days, most of which have a highly repeatable resolution process. And 84% of support tickets are for straightforward troubleshooting, configuration or networking issues. As he dug into this market, Ryan realized that stats like these make the needlessly prolonged customer service paradigm maddeningly outdated, and he set out to change the game.
Electric is standing on the shoulders of some big trends. First, as enterprise technology gains momentum in the SMB market (and everywhere, really), the ubiquitous need for support services - which are frequently only minimally provided by the software vendors themselves - also increases. Some reports quote spending on SMB IT support to be as high as $25 billion in 2016.
Secondly, artificial intelligence is working its way into more and more business processes every day. From sales prediction engines like 6sense to the world’s first disaster prediction engine Banjo, to those trying to conquer the world of emotional intelligence like ID Avatars, this futuristic technology is finding its way into almost every corner of our universe. But from a SaaS perspective, it’s the mundane, repeatable tasks that affect professionals every single day - basic tech support being an untouched opportunity to date - that stand to gain in a big way from AI innovation. Vinod Khosla, former Sun Microsystems founder, recently stated that 80% of a company’s IT staff can be “highly leveraged, maybe replaced, by AI-type systems.” Enter Electric!
There are a number of AI players that have capitalized on this notion of automating highly repetitive day-to-day tasks. X.ai is a perfect example here, having revolutionized online scheduling with the now-familiar Amy/Andrew Ingram avatar. Since launching just two years ago, the company has seen considerable success, and given us a vision of the future. DigitalGenius - an AI platform for customer service agents - has also elevated mundane tasks and has seen similar success. That rep you call at the bank today is armed with far more data and intelligence than s/he was just a few years ago.
We believe that Electric is poised to take advantage of a similarly large opportunity by serving as the fundamental technology layer that keeps the wheels spinning - and replacing the ornery IT guy on the other end of the line. The company offers a simple value proposition that any technology user can get behind, and at a fraction of the cost of traditional MSPs. As Tim Gunn would say, this is quite literally a “make it work” moment.
Electric launched last week, wisely choosing high-growth SMBs in New York City as its first customers. Home to over 7% of the nation’s SMBs, and offering unparalleled access to enterprise technology customers of all sorts, New York City provides Electric with a rapt audience of would-be customers eager to alter the status quo in IT support.
Under the helm Ryan Denehy, an exceptional repeat founder, we have full confidence that Electric is going to completely reinvent the user experience for SMB IT. Ryan knows customer service; he has over 12 years of experience in the field, having co-founded and run customer support at in-store analytics startup Swarm Mobile, which he led to a successful Groupon acquisition in 2014. At Primary, we love investing in founders who have identified a problem and are so passionate about fixing it that they make it their life’s mission to find an effective and scalable solution. Ryan is a prime example of this, taking the customer-centric principles that he utilized at Swarm and applying them to the universally dreaded IT support realm with Electric.
Electric has an immense opportunity before it, and we’re excited to watch it take the SMB market by storm. As enterprise technology investors, users and evangelists, we’re proud to have invested alongside Bowery Capital in this game-changing solution. But maybe as much as anything else, we just can’t wait to become customers!