This week we’re introducing our updated SurePath SMB Index. Since we first introduced the index in 2016, the SMB Software Index has gained over 100% (it was up over 10% in February alone), compared to the S&P 500, Nasdaq, and Dow Jones indices, which gained only between 40–50% over that same period.
To us, this exceptional performance makes perfect sense. In 2017, we laid out several trends we expected to play out in the SMB software market in our SMB Software Market Thesis: though the SMB market is already large and global, it is about to grow significantly due to changing demographics and a change in the nature of work. Given that most categories of software for SMB have been around and will continue to be around for a long time and unlike consumer and enterprise tech markets, it is virtually impossible to dominate the SMB market due its size and global nature. And, lastly, since there is no one dominant consolidator in SMB software, a massive opportunity exists to create one or more comprehensive systems of record for the SMB space.
Our expectation of growth driven by macro trends in demographics has played out in the market as seen in the multiple IPOs involving software companies that specifically serve SMBs and take advantage of changes in the nature of work, including Dropbox, DocuSign, Ceridian, Eventbrite, SurveyMonkey, and Lightspeed. These are companies that are making it easier for SMBs to move faster (Dropbox and DocuSign), gather feedback from customers and employees (SurveyMonkey), improve the current and prospective employee experience (Ceridian), sell to customers easier and more efficiently (Lightspeed), and more.
2019 is expected to be a blockbuster year for tech IPOs, and we foresee a handful of additional SMB software companies potentially going public this year and beyond, including PagerDuty, InVision, Squarespace, Freshworks, and more.
Our prediction of consolidation has played out in terms of actual market activity including several acquisitions involving some of the original constituents of our SMB Software Index, including ShoreTel (acquired by Mitel), Web.com (acquired by Sirus Capital), FirstData (acquired by Fiserv), and Mindbody (acquired by Vista Equity Partners). We foresee further consolidation in the space in 2019 and beyond.
All in all, we continue to be incredibly excited about the SMB software and its continued evolution. You can follow the updated SurePath SMB Software Index, here.