2022 wiped $7.4 trillion off global equity markets. Consumer tech got cut in half. Crypto collapsed. SPACs became a punchline. And through most of it, the best enterprise software companies kept growing revenue at 20 to 40 percent annually, widened their gross margins, and renewed contracts that were signed before the rate hikes started.
That is not luck. That is structure.
We have been investing in enterprise software since 2009. The macro backdrop has shifted a dozen times. What has not shifted is the fundamental dynamic: large organizations are deeply dependent on the software that runs their operations, deeply reluctant to rip it out, and continuously willing to pay for tools that demonstrably reduce cost or risk. That combination — sticky demand, long contracts, high switching costs — produces a risk profile that has no real equivalent in other software categories.
The Switching Cost Is Not Hype
When a bank runs core treasury operations on a platform, or a hospital network manages clinical workflows through a vendor, the cost of switching is not a line item anyone can calculate cleanly. It involves retraining hundreds of people, rebuilding integrations, and accepting operational risk during transition. That reality translates directly into renewal rates. Our portfolio companies that sell into regulated enterprise verticals — healthcare, financial services, manufacturing — consistently show net revenue retention above 120 percent. Not because of aggressive upsell tactics. Because customers add users and modules as they go deeper.
Consumer software does not have this. SaaS tools aimed at individuals or small teams churn when the product gets boring or cheaper alternatives appear. Enterprise software churns when the CFO retires and a new procurement cycle opens — and even then, the incumbent usually wins.
What the Numbers Actually Show
There is a common misconception that enterprise software is "slow growth." The ceiling is lower, the argument goes. You are not going from zero to a billion users overnight. That is true. What is also true is that the floor is dramatically higher. In our experience underwriting deals, best-in-class consumer apps show median NRR around 95 to 100 percent. Our enterprise software portfolio median is 118 percent. That compounding difference, held over five to seven years, produces better outcomes for investors even if the peak revenue multiples are narrower.
Timing also matters less. A consumer hit launched during a bull market can flounder if the cycle turns before it achieves escape velocity. An enterprise product sold into a large organization during a downturn often does fine — because the cost-reduction angle gets stronger, not weaker, when budgets tighten.
The Budget Cycle Is a Feature
Enterprise procurement operates on annual cycles tied to fiscal planning. That means a vendor who closes a $400,000 deal in Q4 is not going to see that revenue evaporate in Q1 because sentiment shifted. The revenue is locked. The renewal conversation happens a year from now. For a fund manager, that predictability has significant portfolio construction implications. We can model the next twelve months with reasonable confidence. We cannot do that with consumer apps.
Budget cycles also create a natural forcing function that filters out weak products. An enterprise customer who has been using your product for eighteen months and is about to renew has a very different relationship with it than a consumer who downloaded an app three weeks ago. The feedback loop is longer but the signal is much stronger. When an enterprise customer renews and expands, it means the product actually integrated into operations. That is a fundamentally different validation than a good app store rating.
Where We Are Concentrating Right Now
We are not indiscriminate buyers of anything that calls itself enterprise software. There are crowded markets — certain CRM adjacencies, mid-market HR tools — where the investment case has weakened considerably. The categories where we see the best risk-adjusted opportunities right now are infrastructure software (the plumbing that sits between the hyperscaler and the application layer), security and compliance tooling, and data infrastructure products that serve the need for real-time operational intelligence rather than just reporting.
These markets share a common trait: the incumbent solutions are old and the replacement cycle is still early. Companies running on decade-old monitoring stacks or compliance frameworks built for on-premise auditing are not happy with what they have. They are actively evaluating replacements. That is a very good environment for a well-positioned Series A company with a focused wedge.
The volatility in public markets is not a reason to retreat from enterprise software. If anything, it is a reason to get more concentrated. When growth capital gets expensive and LPs demand discipline, the funds that survive best are the ones whose portfolio companies can demonstrate real retention economics — not hockey stick projections built on free-tier acquisition. We built this firm around that conviction. Nothing we have seen in the last five years has changed it.
