Coaching and Intangibles
In the past few months, startups building in and around professional coaching and talent development have surprisingly stood out to me. Prior to joining Haystack, I wasn’t aware of how central the human capital management function was to the modern enterprise. For example, earlier this year, coaching platform BetterUp (backed by firms like Lightspeed and Threshold) announced it tripled revenue growth. Tiger just led a Series C in Lattice, which builds products for employee performance and engagement. Investors are pouring money into this category. Companies, big or small, are shelling out. I’ve brainstormed a few reasons this is happening, along with some potential friction points as the market continues to grow.
1/ The Importance of Intangible Assets: In the past decade or so, there’s been an increasing amount of economic research (see: “Intangible Capital and Economic Growth”) devoted to the understanding of intangible assets — things that are harder to quantify like organizational knowledge, goodwill, and brands. This is in juxtaposition to what normally falls under capital goods i.e. property, plant, equipment. Academics mostly argue that investments in the intangibles meaningfully contribute to return on capital and company growth. Companies can now justify increasing spend in systems encapsulating the intangibles, whether that’s a coaching platform for mid-level managers or HR software with knowledge capture for 1:1s.
2/ SuccessFactors Rehash: SuccessFactors is a Web 1.0 company that went public in 2007 and was ultimately bought in 2011 by SAP. Coming out of the dot-com boom, it was among the first to introduce the taxonomy of performance and talent management captured in digital records to the business environment. SuccessFactors typically serves large enterprises, and as part of an older Silicon Valley giant, has gotten a little sleepy with respect to product innovation. Some of the newer platforms can offer similar core capabilities to SuccessFactors, but with a fresh coat of paint (attention to last mile of UI/UX, mobile-native, SaaS integrations).
3/ Emergence of Consumer “Mindfulness” Brands: Subscriber bases for consumer health and wellness applications and services are surging. Headspace counts subscribers in the millions. Calm is worth over a billion dollars. These companies, guiding consumers in meditation techniques and overall mental wellbeing, aren’t just feel-good stories. They’re large businesses with adoption from coast to coast. You could blame it on the millennials, but there’s real money in this category. End users continue to bring products and services into the workplace, and many people today join companies based on a belief about the potential for personal and professional development.
4/ All Along the Ladder: Coaching and talent development services aren’t just for the C-suite anymore. These products are touching orgs top-down, bottoms-up, orthogonally, etc. Companies claim they want to develop all of their talent, from employees to managers to executives. Whether this is a marketing message is to be determined, but I have seen products for all rungs of the ladder. Furthermore, it seems as if professional development, as a function or business activity, isn’t just for large enterprises. I’m seeing startups adopt these services earlier for founders, scale-ups providing rescues and structure for managers, and large enterprises creating holistic systems around performance and development. If you want to dig deeper, Clearbit founder Alex Maccaw, who works with Valley legend Matt Mochary, has a great article on CEO Coaches.
5/ Tool or Network?: This dialogue also tends to take a turn as a meme into the LinkedIn 2.0 or LinkedIn killer conversation. Backtracking a bit, I’m mostly speaking to tools focused on boosting employee performance, finding a new job, coaching through conflict resolution, etc. These are solutions within the realm of human capital management. Some believe that the LinkedIn killer i.e. the next professional network or identity solution could form as the by-product of the adoption of one of these tools, a tool-first motion. I won’t pretend to have an answer, but I think the question of whether a better online professional network will form from something that’s utility-first (tool) or social-first (network) is a good one.
As always, I’m continuing to develop my thoughts in this space, and I’m open to having a conversation about it. Feel free to DM me on Twitter if you want to chat more.