On 30 May 1999, Manchester City were 2-0 down in the last minute of the Second Division play-off final, and staring down the barrel of a second consecutive season in English football's third tier. Less than 15 years later and, as I write, the club is one win away from a second Premier League title in three years.
Their rise back to a summit they last occupied in the 1960s began in the dying minutes of that final 15 years ago, when two late goals and a penalty shoot-out saw them ultimately get the better of Gillingham and gain promotion. But however fondly they remember the players who got them back into the top flight, City fans will appreciate that the likes of Shaun Goater and Kevin Horlock were unlikely to fire them to the next level of competing for league titles and European trophies.
The turning point came with the club's 2008 buyout by the private equity investment vehicle of Abu Dhabi royal Sheikh Mansour. For City - and its new-found rivals in Manchester, Madrid, and Milan - money changed the game.
And venture capital (VC) cash could be set to have a similar effect on the IT industry, with a number of comparatively huge investments recently being made in young vendors. Having far greater funding will surely allow start-ups to grow faster and better compete with incumbent giants.
The concern for the value-added channel is that, like the footballers who took Manchester City from the third tier to the top division, they will be jettisoned by vendors in favour of bigger names with more clout.
One of the most eye-catching recent VC investments in a start-up vendor was the $225m (£134m) in series F funding pumped into Pure Storage last month by T. Rowe Price, Tiger Global, and Wellington Management Company. Prior to the new cash influx, the California-headquartered flash specialist had already drummed up about $250m in outside investment - far more than many companies generate before listing publicly. Indeed, the levels of investment and the company valuation of $3bn are more reminiscent of an initial public offering (IPO) than of a private equity deal.
Chief executive Scott Dietzen claimed that the IT space has never witnessed a time of such great change at such a fast pace. He asserted that all the market's existing titans are being affected.
"We have major disruption coming from the likes of cloud, the internet of things, and big data, as well as flash memory," he said. "I cannot think of an incumbent vendor that is not being profoundly disrupted, and we are seeing investment in a number of upstart companies."
Nutanix is another young vendor to have attracted big investments from the VC community. The storage virtualisation outfit raised $101m in series D funding in January, taking its running total to more than $170m, and valuing the company at about $1bn. Like Pure, the Silicon Valley firm was founded just five years ago.
Steve Kaplan, vice president of channel and strategic sales, claimed the trend of bigger investments in start-ups will increase, as it can offer backers a huge return quickly.
"Savvy entrepreneurs have realised that they can deploy a formulaic approach to entrepreneurship, where funding a confluence of brilliant founders - along with start-up veterans in engineering, sales, marketing, finance, demand generation, operations, services and so on - results in a short-term yet meteoric return on their investment. I certainly expect the trend to not only continue, but accelerate," he said.
Tech players in the UK are also noting an uptick in investors in the IT world. Nick East, chief executive of Bath-based cloud firm Zynstra, which was founded in 2011, claimed that changes to tax laws have benefited early-stage investment.
"The seed and VC market has felt increasingly buoyant over the past 12 months," he said. "At the seed level, changes in tax incentives have brought more angel investment appetite into the start-up market. Although Silicon Valley and Israel get the limelight, there is plenty of innovation and funding in other geographies, not least here in the UK."
City of London-headquartered learning-based software platform provider The Outside View is another IT start-up from these shores to claim that, while well-funded Silicon Valley outfits are garnering all the attention, their counterparts in this country are also enjoying increased backing. In the coming years UK firms will be able to lean on VC cash to compete with US firms on their own turf, predicts CTO and co-founder Chris Bracegirdle.
"There will be a growth in venture funding in the UK as we seek to compete with Silicon Valley in terms of innovation," he said. "The UK has some of the greatest technical talent, and this is highlighted by the number of new start-ups entering the market. We will start to see UK companies crossing the pond and supplying to the US, funded by venture capital."
While a bigger war chest might allow start-ups to be more effective in competing with larger, established rivals, the concern for the channel - particularly those specialised in bringing bleeding-edge tech to market - is that this will mean they invest in their own sales engine, or choose to partner with resellers and distributors offering more scale.
Jason Dance, managing director of distributor Big Technology - part of the pan-European Exclusive Networks group - claimed that, for some aggressive players with significant backing, the temptation may be to spend on building their clout internally. Differences between how the distribution channel works on either side of the Atlantic could also be problematic for European channel firms, he claimed.
"If you look at the distribution landscape in the States and compare it with EMEA, it is just viewed as banking, logistics, and warehousing. If a vendor does not need those services, the margin expectation will become less and the vendor owns more of the sales cycle," said Dance.
But he stressed that mainland Europe, with its patchwork of different cultures and economies, will also see US vendors calling on those with local expertise.
"The senior VPs are English-speaking and [the EMEA operations] are UK-based. But outside the UK there are a lot of other challenges," he said.
Bruce Hockin, who founded distributor channelfusion a year ago, claimed there will always be a need for a channel that can position a vendor's product as part of an end user's wider IT infrastructure.
"Start-ups do not come to the market with a range of hardware and software, a big services play, and an integrated ecosystem. A lot of their technology may be exciting, but it needs to be built around a solution, and they need the channel for that. They also lack the relationships which a channel can offer, helping them get their message out there and scale quicker," he said.
He added that channel firms would rather partner with a vendor that has received a hefty eight-, or even nine-figure injection of funds, as those trying to build a business with much smaller backing will inevitably fall by the wayside.
"In the storage market companies that are getting $5m, $10m or $15m in total funding will not survive in the long term, and the channel will struggle to leverage the opportunity as they cannot build momentum and witness a sustainable return," he said.
Scott Dobson, founder of Cloud Distribution, claimed that "less experienced start-ups may think having more money means they spend on more staff and infrastructure". But he stressed that those run by wiser heads will always see the greater value in investing in building a marketing head of steam through the channel. Dobson added that smaller channel players can still provide greater value than bigger, less nimble rivals.
"The bigger guys are not that well set up to generate [demand], as they deal with bigger end users that are more risk-averse. The smaller, more agile channels are experienced in opening doors for new technologies, and are the best route for start-up vendors," he explained.
"Technology is moving so quickly, and every 18 months there is a reinvention of the firewall. Things are moving faster and faster and everything is evolving so much more quickly, that they have to get a product out there much more rapidly, and the big players do not have the engine to do that. I'm not just talking about distribution, but the channel as a whole."
Another worry for smaller players is that if greater funding allows start-ups to float or exit another way more quickly, then the value-added channel players that helped build their brand will have no chance to recoup what is often a big investment in technical expertise and demand creation. Dobson admitted this is an unavoidable concern, but claimed that the channel will always prosper if it focuses on doing what it does best.
"Trying to calculate before the event what the ROI is going to be on a vendor is very difficult. Take [wireless vendor] Meraki, which was our big success in our early years. When they were acquired by Cisco, we thought we had had it. We had invested so much, we would have been in trouble if they had chucked us out. But two years on and we are still a Cisco distie," he explained.
"You cannot know whether an acquisition [of a vendor partner] will be detrimental or beneficial. But if the products and vendors you have partnered with are floating or getting acquired, you are clearly choosing the right technologies, so you cannot beat yourself up about it. That is the nature of the beast. As long as you're not standing still and sticking with the same products, and are looking at new start-ups, and you have something to offer them, there will always be a place for the channel."
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