At least that's what many start-ups are learning. Bill Tomeo, CEO of TellSoft Technologies Inc., recalls how his Colorado Springs-based online voice service started as a traditional product that was licensed to a server. TellSoft is one of many emerging companies that have taken the ASP route. That's because by late 1998, venture capitalists like Trinity Ventures LLP in Menlo Park, Calif., began avoiding companies that insisted on developing and marketing packaged software. This new venture-capital investment philosophy is a key component of an overall shift in business models that's been inspired by the Internet.
Venture capitalists say they're motivated by the global trends they see in business today.
Those trends point to more and more outsourcing of information technology functions. This radical shift in the way large companies invest their capital makes the proliferation of ASPs inevitable, because corporate IT increasingly will focus on core business projects and outsource everything else. People think we're well into these things. Gus Tai is seeding many of the upstarts that are part of this transformation. This shift in thinking among venture capitalists is no minor phenomenon, argues another Trinity general partner, Tod Francis.