Small and medium-sized businesses are the lifeblood of the economy. In the U.S., more than 30 million SMB companies employ more than 60% of the workforce and account for about 40% of U.S. GDP.
From this foundation, we’ve seen the rise of the SMBTech ecosystem, which includes a range of companies that support and enable SMBs in the digital era. This was not always the case—SMBs were slower to adopt technology, infrastructure costs were high, and the unit economics proved to be difficult in courting SMBs as customers.
The tech landscape
Four major changes in the tech landscape have contributed to building scalable solutions for SMBs:
- Cloud: Spurred on by Amazon’s AWS and Salesforce, the advent of cloud services significantly lowered infrastructure costs and saw a huge transition to cloud adoption.
- Mobile: The creation and popularization of the smartphone fundamentally changed the way everyday consumers interact with technology on a daily basis.
- Digital: Social media and telecommunications encouraged businesses to go online and leverage advertising tools and customer interaction opportunities.
- Payments: The digitization of payments made it easy for people to send and receive money around the world, and SMBs could integrate payments in their offerings.
Over the past few decades, increased accessibility to technology has created a friendlier environment for starting a business. While it may have previously been cost-prohibitive to create a product and sell it from a shop, open a salon, or build a restaurant, today’s landscape looks different.
With everyday consumers adopting technologies at faster rates than ever, it’s only natural that businesses are leveraging the same technologies to succeed. Today’s SMBs can access crucial business tools from Day One—things like contactless payments, software stacks, supply chain management, online ordering and more. Having this kind of support early on helps give SMBs the space to innovate and thrive.
Big players, small players
By building comprehensive communications and advertising tools, large companies like Google, Salesforce and Facebook (Meta) had already inadvertently created solutions for SMBs, allowing SMB employees to interact with one another or their customers, and to advertise products and services online. Even within the SMBTech industry itself, giants have emerged, with Shopify providing e-commerce capability, Stripe with payments, Square and Toast with point-of-sale, and RingCentral with cloud phone systems. But these companies only skim the surface of disruptors within the SMBTech industry.
Just like their customers—the SMBs—these SMBTech companies often have the same scrappy can-do mentality, working to identify the pain points of their users and tailoring tech-enabled solutions to counter them.
The past few years saw the growth of vertical-specific solutions, including:
- Odeko* for coffee shops;
- Squire for barbers;
- Truckstop.com for trucks; and
- Slice* for pizzerias.
Function-specific solutions have also been prominent, including:
- Canva and Figma for design;
- Drata* for security;
- Shopmonkey for shop management;
- Notion for productivity;
- Calendly for scheduling;
- Melio for vendor payments; and
- OpenPhone for phone systems
No matter what type of small business you’d like to start, there is almost certainly a tech stack waiting to support you.
How the pandemic accelerated adoption of SMBTech
During the COVID-19 pandemic, small businesses were hit the hardest and many were forced to close their doors. Those able to stay afloat moved to innovate as fast as they could, and benefited from access to technology such as online ordering and digital payments.
SMBTech companies also struggled during the pandemic, with SMBs needing to cut costs to stay open. As most small businesses realized the need for tools and applications almost overnight, some services couldn’t keep up with the increased demand. According to an October 2020 report by Hello Alice and GGV Capital, about 75% of small business owners intended to spend more on technology in 2021.
Other SMB companies quickly offered outsized support, creating products and services that helped businesses stay in operation. Technologies such as contactless payment, online ordering, improved supply chain management, and core software stacks were quickly prioritized and deployed by SMBTech companies.
Introducing the SMBTech 50
GGV Capital has believed in the potential of this category for many years, including launching the SMBTech Index and the premier SMB-focused thought leadership event, SMBTech Summit, three years ago. GGV has also been longtime investors in the SMBTech sector with companies such Brightwheel, Drata, Electric, and Homebase.
This is not a unique position in the VC world; the SMBTech sector is poised for incredible innovation and growth. To recognize the success of the SMBTech industry, GGV—in partnership with Crunchbase—launched the inaugural SMBTech 50, the first list to recognize the growth and potential of startups that serve small and medium-sized businesses. An incredible group representing the 50 companies traveled to New York City in April to ring the closing bell at Nasdaq MarketSite to celebrate the excitement for the sector.
Today, people are adapting to a new normal that’s riddled with ongoing supply chain disruptions, inflation concerns, geopolitical conflicts and other challenges. If we are to believe small businesses will thrive on the other side of the pandemic—local restaurants, florists, coffee shops, gyms, salons, etc.—we also have to believe in the tech supporting all of the entrepreneurs and small business owners who drive our economy. The future is bright for SMBTech.
Anyone with a Crunchbase Pro or Starter account can follow the SMBTech50 list and track the companies here.
*Represents a company in GGV Capital’s portfolio
About the authors
Jeff Richards, Managing Partner at GGV Capital
Richards joined GGV Capital in 2008 as a managing partner and focuses on enterprise/cloud and marketplace investments. He led GGV’s investments in Appirio (acq by Wipro), Belong, BigCommerce (NASDAQ: BIGC), BlueKai (acq by Oracle), Boxed, Brightwheel, Buddy Media (acq by Salesforce), Coinbase (NASDAQ: COIN), Electric.ai, Evolv OnDemand (acq by Cornerstone), Gladly, Handshake, HotelTonight (acq by Airbnb), Lambda School, Mindee, Namely, People.ai, PlushCare/Accolade (NASDAQ: ACCD), Slice, Tala, Tile, Vic.ai, Workboard, and Zylo.
Prior to joining GGV, Richards founded two software companies: R4, a supply chain SaaS business acquired by VeriSign (NASDAQ: VRSN), and QuantumShift, a telecom software business backed by Texas Pacific Group. Earlier in his career, Jeff worked in Asia and Latin America with PricewaterhouseCoopers.
Tiffany Luck, Investor at GGV Capital
Luck joined GGV Capital in 2018 and is focused on enterprise SaaS, the API economy, and SMBTech. She led GGV’s investments in Mindee, Pinwheel, Stream and Yac and serves on the board of directors or as a board observer. She is also a board observer for or actively involved with GGV’s investments in Belong, Electric, Fairmarkit, Handshake, Vic.ai and WorkBoard.
Prior to joining GGV, Luck was with Morgan Stanley‘s Technology Investment Banking Group in Menlo Park, California, where she worked on several major transactions, including GitHub‘s sale to Microsoft for $7.5 billion. Prior to Morgan Stanley, she spent time at Amazon and worked with several venture-backed startups.
Chelcie Taylor, Investor at GGV Capital
Taylor joined GGV Capital in 2021 and is focused on SMBTech and the API economy. Since joining GGV, she has worked closely with Jeff Richards and Tiffany Luck to launch GGV’s API Index and SMBTech 50. She also was a member of the deal team for GGV’s investment in Pinwheel.
Prior to joining GGV, Taylor was the director of strategic initiatives at ViacomCBS, reporting to the chief people officer to design and implement key employee programs in organizational design, learning and development, diversity and inclusion, as well as recruitment.
