CEAS Investments’ Ronnie Martinez: ‘Novel Critical Infrastructure’ Will Thrive Even When Markets Turn
Ronnie Martinez, associate at CEAS Investments, explains how market shifts — including technology change — create openings for what she calls Novel Critical Infrastructure. These solutions solve core business problems and often drive new capabilities or efficiencies. Examples include middleware that enables enterprises to harness 5G networks’ capabilities and marketing technology that helps direct-to-consumer brands understand their data without relying on cookies.
KEY POINTS FROM RONNIE MARTINEZ'S POV
Why is this an important thesis moving forward?
By definition, companies in this category will enmesh themselves in “mission-critical” areas of an industry, or provide value that wasn’t feasible in the past, or both. “These businesses solve fundamental problems within an industry’s infrastructure and/or offer a solution that wouldn’t be possible before now due to technological advancements or market maturity,” says Martinez. “The best ones have a front-end solution that seems simple and intuitive to use because of all the complex work that’s been done behind the scenes by the team. This can be true in infrastructure, middleware, and applications.”
Because of these attributes, these are companies that can become indispensable once they gain adoption. Relatedly, of particular interest are companies with business models based on consumption-based pricing (e.g. volume of API calls) or tiered subscription pricing according to the number of users, says Martinez. They may use product-led growth, enterprise sales strategies, or both. “These business models have proven to reduce friction for customer adoption,” she says, creating “the opportunity for large upsells and expansion. Solutions that provide irreplaceable value will thrive even when the market turns and costs are being cut.”
What are some of the specific applications or use cases that can illustrate this thesis?
Middleware that allows enterprises to unlock 5G network capabilities. “As enterprises have implemented their own private 5G networks, there is a need to build and use applications that are ‘network-aware,’ and harness these new advanced network capabilities,” says Martinez.
“Our portfolio company Shabodi has built what we consider a new middleware layer that allows developers to optimize development time and resources with a network-agnostic solution. We believe it can become a crucial part of enterprise infrastructure for private 5G networks, enhance ROI, and unlock new capabilities. A solution like this would not have been possible before the technological advancements of 5G."
Addressing Hospitality Tech fragmentation. Hospitality companies typically rely on a maze of applications, Martinez points out. Restaurants, for example, might need separate tools for their point-of-sale, reservations, ordering, delivery, even scheduling and training processes. “When it comes to digital operations, having all of these fragmented horizontal solutions makes it hard to manage analytics and run operations efficiently,” explains Martinez.
“Our portfolio company Marqii is solving this problem starting with menu management, review and reputation management, location data, and basic analytics. Being able to control all of this data from one centralized place, with real-time syncing to a restaurant’s cloud-based point-of-sale, keeps the data consistently accurate everywhere online. Inherently, this accuracy also boosts local SEO. This saves time, eliminates manual processes for employees, and boosts customer satisfaction.”
Marketing Attribution for DTC Brands. “In a world without cookies and where data privacy is at the helm, marketing attribution is on the minds of everyone in the direct-to-consumer space. Apple’s iOS 16 with Private Relay limits advertising data so that third-party applications can’t see personal information, and Google announced that it will be getting rid of cookies by the end of 2024 (it is not the first browser to do so — see also, Safari and Brave).”
“We recently invested in Prescient AI, a company building out what we think will become a critical piece of the marketing tech stack. Any brands looking to leverage continuous AI learning to understand their data using a proven probabilistic model without being reliant on cookies will need this solution. The internet is evolving to anonymity and marketing tech stacks need to evolve as well.”
What are some of the potential roadblocks for this thesis?
Adept solutions are not immune to market timing risks. “Given that these solutions are being built on the back of new technologies or shifts in markets, if new innovations aren’t timed correctly, they could fail. Starting to sell into a market that isn’t mature and ready for your solution can stunt or completely stop your company from scaling. If you don’t come in early enough, someone else is going to build a solution that the market needs before you,” says Martinez.
Successful startups require teams composed of both technical and industry experts. “These solutions not only require technical expertise, but also sector or industry expertise to be able to recognize how and why novel solutions are possible and warranted. It’s a tight balance, but when you get it right, it fortunately helps mitigate the market timing risk to some extent.”
VISUAL: HOW SHABODI’S AEP SUPPORTS ENTERPRISE INFRASTRUCTURE FOR 5G NETWORKS
Shabodi’s Application Enablement Platform (AEP) exposes network capabilities to developers as Restful APIs. These simple APIs abstract the complexity of underlying 5G network infrastructure while taking full advantage of its capabilities, irrespective of the underlying network carrier or equipment provider.
(See here for the source article for this graphic and more of Ronnie Martinez’s coverage on CEAS’ investment on Shabodi)
IN THE INVESTOR’S OWN WORDS
I’m always looking for new solutions in highly technical domains that fit seamlessly into existing behaviors while providing obvious value in time savings, efficiency, and new capabilities.
This often presents itself as a developer tool or a solution for non-technical users with a very sleek and intuitive front-end.
Most of these tools sell as a SaaS solution. Sometimes these solutions are API-led, as is the case with Shabodi’s Application Enablement Platform, (AEP), and — another CEAS portfolio company — Fivetran’s data pipelines, which run powerfully but quietly in the background. With the high cost and limited supply of developers, data scientists and engineers today, any products that can help businesses by becoming ‘novel critical infrastructure’ are fantastic investment opportunities.
Jill (Greenberg) Chase, investor at CapitalG, assesses the feasibility of several business models amid a massive wave of funding into the AI/ML space. Across different delivery modes and business models, large standalone businesses will be built on differentiation....
John Cowgill, Partner at Costanoa Ventures, points to some of the more overlooked and contrarian business models within this closely watched ecosystem. As the space matures, competition between emerging companies and quick-to-adopt incumbents will determine the winners...