Odoo: Rebundling Application Software

Many of us are familiar with former Netscape CEO Jim Barksdale's oft-repeated claim that successful businesses stem from either bundling or unbundling. Over the past few decades, there have been countless examples of these cycles across media and tech. Just think about how CDs unbundled into single-song purchases before rebundling into all-you-can-eat streaming services.

Unbundling cycles tend to be driven by new technologies that allow startups to differentiate based on product quality, distribution, and economics. In turn, startups often compete by positioning against the "bundled" or "unbundled" status quo.

The last decade's era of "best of breed" SaaS applications provides a canonical example of an unbundling wave. The SaaS model eased barriers to software development, implementation, integration, and maintenance. This shift in technology allowed vendors to compete with incumbents by carving out increasingly niche areas from dominant software suites from providers like Oracle and SAP. This model of success has become the unquestioned template for venture-backed application software companies. While a proven path to company building, it's one that prioritizes incrementalism over fundamental disruption.

As a market matures and competitors converge in features, the center of gravity shifts back towards the natural scale advantages of bundles: lower prices, tighter product integration, and differentiated LTV profiles. Over time, these product and go-to-market barriers compound in a powerful way. Today, offering a SaaS solution is a prerequisite rather than a differentiator, and most longstanding horizontal application software segments (ERP, CRM, Finance, etc) have reached an asymptote in quality with solutions converging. Rather than another decade of increasingly niche point solutions, we believe the next wave of breakout software winners will offer disruptive pricing and a level of product integration and automation unmatchable by a web of third party tools merely stitched together. This is especially true in the SMB segment where cost and ease of use are king.

We are excited about the "return of the suite" and have been investing on this thesis for years in companies such as CrowdStrike and Freshworks. Multiple large global winners will be built across categories and segments that pursue this playbook. Odoo will be one of the breakout successes that capitalizes on the rebundling of application software.

Introducing Odoo

CapitalG partner Alex Nichols pictured in Odoo's offices with Odoo Founder & CEO Fabien Pinckaers.

Odoo's vision is both easy to understand and wildly ambitious: What if every piece of business software was built on the same data model and could connect natively?

Odoo has spent two decades building this tightly integrated suite of business management software (Finance/ERP, CRM, Supply Chain, HR, and more). Odoo's solution is highly differentiated in both its ease of extensibility and strength of out of the box inter-product integration.

ERP/business management software has low penetration in SMBs today. SAP and Oracle, the giants in the business management suite market, have focused on multi-million, multi-year projects and have optimized their products and businesses around this segment. Going "top to bottom" in this market has failed because heavy legacy products are unappealing to smaller companies both in terms of cost and ease of use. Instead, most SMBs rely on a mesh of standalone apps which miss the workflow, automation, and reporting benefits that come from applications being natively integrated across the same data structure.

Odoo is expanding the global ERP market through a combination of multiple 10x improvements: It is 10x easier to use, 10x more integrated, and 10x cheaper.

Odoo was built from day one with this multi-product vision in mind. It builds apps natively on the same underlying data structure and workflow components, unlocking efficiencies in R&D as well as cohesive product integration and automation. Imagine being able to tie email marketing campaigns to generated revenue or automatically updating financial statements from invoices sent from the CRM. All out of the box. Unsurprisingly, most of Odoo's customers use a large number of their products.

Odoo's open core model is also a key to its success. While Odoo's R&D team has been building both deep and broad for nearly two decades, Odoo's community is its force multiplier. More than 100k developers in the world make a living working with Odoo. As a result, there are nearly 50,000 apps in Odoo's marketplace vs. only 7,000 in the Salesforce AppExchange.

This model has helped Odoo cultivate a robust service provider ecosystem. Odoo has many thousands of implementation partners across 100+ countries who evangelize the product and drive a substantial amount of Odoo's growth. Odoo has emerged as a wonderful platform on which entrepreneurs across the globe are building vibrant services businesses.

Odoo is one of the most international businesses we've ever seen, with years of compounding growth in almost every country in the world. Odoo's approach of building the product "bottoms up" has made the platform unique: It is just as compelling for a 10 person single-location local retailer as it is for a 1,000 person multinational industrial business. There are tens of billions of dollars in market opportunity both in expanding the greenfield long tail and in encroaching on SAP/Oracle's slow-rolling cloud transition.

This diversity of successful customers is a testament to the power of Odoo's community, the strength of its product, and the differentiated value it brings to customers.

Two decades in-and the journey is just beginning

Odoo Founder & CEO Fabien Pinckaers is ambition incarnate. Ever since founding the company as TinyERP in 2005, he has maintained a consistent and clear-eyed vision for disrupting large ERP incumbents by coupling ease-of-use with disruptive pricing. Odoo is tackling an audacious vision, and Fabien has had the grit and focus to spend the last two decades dedicated to building an "n of one" company while only raising €10M of primary capital in the process. Fabien optimizes for the long term and embodies a rare combination of patience and urgency. Each of the core members of Odoo's highly cohesive leadership team have been at Odoo for 9+ years.

Despite the huge success to date, Odoo is just scratching the surface of its potential, and we believe the team is on the path to building one of the world's most consequential software businesses. We couldn't be more excited to partner with Fabien, Alessandro, Antony, and Sebastien on their journey.

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