So my two takeaways are this; build your people engine early from day one, culture, hiring, retention and over time as you scale and do not rule out the right acquisitions for talent, roadmap, acceleration, and more.
As always, 🙏🏼 for reading and please share with your friends and colleagues.
Downloads of #Terraform were pretty slow early on — so slow that @mitchellh & @armon even considered killing the project. But by 2016 downloads began to increase rapidly, thanks to a growing ecosystem and community.
What's next? Join us at #HashiConf https://t.co/B4LQkXl3Bc https://t.co/DXNusjQ7uD
June 7th 2021
23 Retweets136 Likes
Patience also required when creating new categories and privacy tech is here to stay - from Axios and read Future of Privacy Forum report (linked below) for more - also shoutout to BigID one of the market leaders (a portfolio co)
What's happening: The companies that help other companies process, maintain, and legally maximize use of consumer data are in high demand, and collectively need to mature, according to a Future of Privacy Forum report shared first with Axios.
Some of the largest players — such as BigID and OneTrust — have multi-billion-dollar market caps on their own.
Venture capital investment remains high: According to TechCrunch, about 207 privacy startups have together raised more than $3.5 billion in funding.
Private equity firms are buying up smaller niche firms to provide suites of services to compete with the biggest companies.
Just a reminder of importance of cyber security and resiliency engineering as JBS was shut down due to a cyberattack, shutting down a huge portion of beef processing industry and Fastly went down due to a single customer triggering a bug
Although it seems they weren’t down for long, the impact it would have had will be huge, especially on e-commerce sites,” said Naomi Aharony, the agency’s managing director. “With our research estimating Amazon could have potentially lost $6,803 every second it was down, it’s clear an investigation will want to be made to find out what happened.
I’m not a crypto investor per se, but love developer first infrastructure. So awesome to see @blockdaemon (a portfolio co) raise its $28M Series A led by Greenspring and including Goldman Sachs - heroku for blockchain is real!
First quarter ARR was $652.6 million up 64%. We delivered record incremental ARR, which grew 55% to $72.1 million. We ended the quarter with more than 8,500 customers with great new logos including a flyboard Global Healthcare Exchange overstock Ralph Lauren, Siemens Mobility and the State of North Carolina.
Expansion metrics remain best-in-class as existing customers accelerated their adoption of our platform and deployment of our software robots. We now have 1105 customers that account for at least $100,000 in ARR, up sequentially from 1002 including 104 customers at a million dollars plus up sequentially from 89. Notable new logos and customer expansions during the quarter included; first Verizon Communications, which became a customer in July 2019 to support their attended automation needs.
😲 Atlas hosted db already over 50% of revenue in 5 years!
This is a tale of two open source data 🦄 - Cloudera and Confluent, both classic Silicon Valley open source infrastructure success stories born out of web scale needs at the biggest Internet companies. Cloudera, founded in 2008 by 3 engineers from Google, Yahoo, and Facebook, was one of the fastest growing and early open source data success stories as Yahoo was one of the first companies to use Hadoop for data analysis along with Facebook. It's first round was aised in 2009, hit $116M subscription revenue by 2016, went public, but eventually struggled as Apache Spark and Databricks grew over time. This past week Cloudera was taken private at $5.3B (more from CNBC). While a huge initial success, Cloudera was not able to sustain its momentum.
Cloudera has struggled as a public company since holding its IPO in 2017. The company, along with Hortonworks, came to the market as a leader commercializing the open-source analytics technology called Hadoop. Cloudera and Hortonworks merged at the beginning of 2019 in what ended up as a $3 billion deal, well below where the companies had been valued years earlier.
Competition has ramped up in the cloud database and analytics market, both from infrastructure vendors like Amazon, Microsoft and Google and from emerging companies like Snowflake and Databricks.
Switching gears, Confluent just filed its S-1 and is another example of amazing OSS cos being born out of web scale pain, in this case Linkedin.
While there are other places to go for a full S-1 breakdown, I always love reading S-1s more for the story and how the bankers and companies take infrastructure software and simplify it for Wall Street into digestable soundbites. So here are some random thoughts:
Confluent S-1: open source mentioned 88x, developer 68x, cloud 391x, Gartner 25x, and on premise with 12x
Cloudera S-1 (March 2017): open source mentioned 195x, developer 13x, cloud 268x, on premise 0x
Even though the bulk of revenue for Confluent is not ☁️ yet, it’s clear that is part of the the IPO story.
Set Data in Motion
We have pioneered a new category of data infrastructure designed to connect all the applications, systems, and data layers of a company around a real-time central nervous system. This new data infrastructure software has emerged as one of the most strategic parts of the next-generation technology stack, and using this stack to harness data in motion is critical to the success of modern companies as they strive to compete and win in the digital-first world.
Also paints picture of why real time
The operation of the business needs to happen in real-time and cut across infrastructure silos. Organizations can no longer have disconnected applications around the edges of their business with piles of data stored and siloed in separate databases. These sources of data need to integrate in real-time in order to be relevant, and applications need to be able to react continuously to everything happening in the business as it occurs.
Amazing run from 2014 to 2021, about 5 years to get to $100M in ARR 😲
But notice in the highlights, $ based net retention not mentioned because frankly it is going down albeit on a higher base:
This expansion effect is reflected by our dollar-based net retention rate as of December 31, 2019 and 2020 and March 31, 2021 of 134%, 125%, and 117%, respectively.
Cloud offering is key piece of this story along with open source roots:
Our offering can be deployed either as a fully-managed, cloud-native SaaS offering available on all major cloud providers or an enterprise-ready, self-managed software offering. Our cloud-native offering works across multi-cloud and hybrid infrastructures, delivering massive scalability, elasticity, security, and global interconnectedness, enabling agile development.
Our open source roots are a key driver of our go-to-market success. Apache Kafka has become the industry standard for data in motion. It is one of the most successful open source projects, estimated to have been used by over 70% of the Fortune 500. Modern applications are expected to integrate with Apache Kafka, and the technical skill set for Kafka has become a critical requirement in the industry. Confluent’s products provide the capabilities of Apache Kafka but do so on a platform built for the cloud, complemented by connectivity to the larger enterprise, and with the ability to process and govern at scale. The developer community understands the benefits of a complete platform for data in motion. Consequently, software developers within our prospective customers’ engineering or IT departments are often very familiar with our underlying technology and value proposition and evangelize on our behalf.
From a revenue perspective, growth is still solid but slowing down so therefore the prospectus breaks down into different categories to show outperformance
Our revenue was $149.8 million and $236.6 million in 2019 and 2020, respectively, representing year-over-year growth of 58%, and $50.9 million and $77.0 million for the three months ended March 31, 2020 and 2021, respectively, representing year-over-year growth of 51%.
The ☁️ is the future and but the numbers are still so small as a relative percentage of the overall numbers. However, this could be a Mongo Atlas story where the cloud overtook the on premise version in a matter of years.
Increasing Adoption of Confluent Cloud
We believe our cloud-native Confluent Cloud offering represents an important growth opportunity for our business. Organizations are increasingly looking for a fully-managed offering to seamlessly leverage data in motion across a variety of environments. In some cases, customers that have been self-managing deployments through Confluent Platform subsequently have become Confluent Cloud customers. We offer customers a free cloud trial and a pay-as-you-go arrangement to encourage adoption and usage over time. We will continue to leverage our cloud-native differentiation to drive our growth. We expect Confluent Cloud’s contribution to our subscription revenue to increase over time. Our Confluent Cloud revenue grew 454% from $2.6 million in 2018 to $14.4 million in 2019, 117% from $14.4 million in 2019 to $31.4 million in 2020, and 124% from $6.2 million during the three months ended March 31, 2020 to $13.9 million during the three months ended March 31, 2021.
In risk factors, Confluent further highlights dependence on the enterprise ready, self managed software offering.
Our business is substantially dependent on Confluent Platform, our enterprise-ready, self-managed software offering. Confluent Platform contributed 89% and 85% of our subscription revenue for the years ended December 31, 2019 and 2020, respectively, and 86% and 80% of our subscription revenue for the three months ended March 31, 2020 and 2021, respectively. We expect to continue to rely on customer adoption and expansion of Confluent Platform as a component of our future growth.
The developer first gotomarket along with the moat of community and open source is super important:
End-to-End Approach to Go-To-Market Built for the Unique Customer Journey of Data in Motion.
Data in motion has a unique customer adoption and expansion journey within organizations and our go-to-market mirrors this distinct journey. The widespread adoption of Apache Kafka by developers, and the self-service adoption possible with our cloud product and community downloads, ensure that awareness, mindshare, and adoption begin as new applications are conceived, often long before our sales efforts begin. Our enterprise sales force takes these many initial engagements and helps them progress to production use cases and paying customers with a committed contract. We then drive expansion across the company and help the platform transition from serving individual disconnected projects to being used as a cross-enterprise platform. We believe our expertise is vital to companies who wish to successfully navigate this transition as they reorient their business for data in motion.
Our approach to supporting this end-to-end customer journey is a significant competitive moat for us. Legacy technology vendors cannot easily rebuild their go-to-market to support high volume, low-friction open source and SaaS lands. Startup companies cannot muster the full spectrum of go-to-market tactics and resources needed to support this journey or the heavy investment in customer success required to take customers to scale. Even though large cloud providers have broad go-to-market capabilities, these capabilities are generally focused on the broader transition to the cloud addressing hundreds of products and services. We believe they take a broad but shallow approach that is not built to focus and support the specifics of the data-in-motion customer adoption journey and cannot easily be repurposed without a larger remaking of their go-to-market strategy.
Amazing that this all happened this past week as it shows that sometimes early success does not mean enduring success and that open source is here to stay! Now let’s keep an eye out for Databricks which is supposedly filing soon.
As always, 🙏🏼 for reading and please share with your friends and colleagues.
P.S. We’re hiring an Associate at boldstart ventures!
Sales intelligence and engagement space on 🔥 as Gong raised another $250M at over $7B valuation (tripling its valuation) from Franklin Templeton and insiders like Sequoia and Tiger and Outreach raised $200M at a $4.4B valuation from Premji, Steadfast and Tiger and Sequoia
Chaos Engineering is just the beginning and the evolution towards Resilience Engineering has just begun.
Balance between reliability and engineering velocity
Together, we must be able to learn from mistakes more easily and continuously. Mistakes are part of life. To blindly and untruthfully improve everything now and make even the last small service highly available is not the right decision and leads to even more unnecessary complexity. We need a guide through our complex systems that helps us better assess risk. An overview of the current resilience, vulnerabilities and what impact they can have is necessary to set the right priority. Today the impact of failures can be mitigated and we as developers, SRE and Ops can all learn to get consistently better at this
Developers, developers, developers (more from Stack blog) as it is acquired for $1.8B by Prosus
Our intention is for our public platform to be an invaluable resource for developers and technologists everywhere and for our SaaS collaboration and knowledge management platform, Stack Overflow for Teams, to reach thousands more global enterprises, allowing them to accelerate product innovation and increase productivity by unlocking institutional knowledge.
🤯 Celonis, process mining software, now valued at $11B - amazing that in the early days it was one of the few startups to be on SAP’s price list, the SOLEX program, and much of the early ARR was SAP dependent but the company has done an amazing job over time diversifying that base and growing - great story by Alex Konrad (Forbes)
Founded in 2011 as a way to bring more data-driven rigor to the consulting work that Rinke and his co-founders were taking up, Celonis got its start when its founders looked to incorporate a then somewhat obscure method of scanning IT log data to map out a company’s processes, called process mining, into their student consulting work.
Shunned by venture capitalists for its first five years due in part to the somnific powers of the phrase “process mining,” Celonis built up a clientele of other European heavyweights before raising a Series A of $27.5 million in 2016…
This is always a huge milestone for any company whether you are bottoms up or top down. As the enterprise dollars get bigger, appearance on the Gartner Magic Quadrant matters. Also if you see above, Gartner, along with IDC, is one of the key firms used to quantify market sizes for IPO prospectuses. So this can be a whole post unto itself (see a 2010 blog post from yours truly) but suffice to say, talking to analysts when creating a new market is a waste of time in early days. But once you get a dozen customers then you can start prepping them for your way of thinking and make them feel like it is their own. You then need to figure out if a “new category” or part of an existing one but regardless, startups are expected to be a Visionary on the far right and only over time do you rise to top right with revenue scale. Anyway, huge congrats to Snyk (a portfolio co) as they are a Visionary and also scored highest where it wanted it to in 3 critical capabilities: developer enablement, software composition analysis (SCA), + container security.
We pioneered the world’s first purpose-built AI-powered extended detection and response, or XDR, platform to make cybersecurity defense truly autonomous, from the endpoint and beyond. Our Singularity Platform instantly defends against cyberattacks - performing at a faster speed, greater scale, and higher accuracy than possible from any single human or even a crowd.
Key stats - $161M ARR (run rate at end of Q1), 116% YoY Growth, 124% Net $ Retention, 4700 customers. Recognized revenue for 2021 was $96M and gross margin only 51%
Happy Memorial Day Weekend to those who celebrate. This marks the first days of summer vacation and let’s see if there are any letdowns in the fast 🏎️ and furious venture financing markets. Having been up late last night helping one of our founders sign a term sheet before the weekend kicked in, I can tell you that it is not - this past week has been on absolute 🔥 and I do not see this slowing down any time soon.
Lately, product has been top of mind for me, as it usually is. I’ve written so many times about product in this weekly and thought I’d summarize a few 10k foot maxims when thinking about product, esp. when investing in founders with no product 😄. Warning I am not a product guy and just sharing some thoughts from a day one investor.
Product velocity (Paul Graham) + hiring velocity - can’t get first without right folks onboard from day one, best founders need to incorporate because they have 3-4 builders (eng, design) ready to join BEFORE funding
Is there a typical profile for the founder of a future 🦄? Not really according to Ali Tamseb who is a partner with DCVC and the author of Super Founders (more from Forbes) which analyzed over 30,000 data points to reach his conclusions.
85%: the percent of such companies that had competitors at launch.
30%: the percent of founders who had worked in the same industry before.
17%: the percent of unicorns over the past 15 years that outright failed.
4%: the percent of college dropouts, less than the number of PhDs.
1.6x: how much more likely a founder with a previous startup failure was to reach a $1 billion valuation compared to a first-timer.
from VMware CEO, Raghu Raghuram - I am seeing multicloud in our portfolio come up more and more FWIW
We are at the dawn of this multi-cloud era of computing.
Post spin, we will be the only stand-alone cloud company that has the necessary strategic partnerships with all the major cloud companies and all the leading infrastructure companies to deliver on a truly customer-centered multi-cloud vision.
Thought provoking post from Martin Casado (a16z) on benefits of ☁️ early in a software company’s journey and how it can be a huge tax as companies scale - Martin also lays out $ benefits of repatriation and why it’s so important as companies mature and their growth slows and the importance of gross margin magnifies
The exact savings obviously varies company, but several experts we spoke to converged on this “formula”: Repatriation results in one-third to one-half the cost of running equivalent workloads in the cloud. Furthermore, a director of engineering at a large consumer internet company found that public cloud list prices can be 10 to 12x the cost of running one’s own data centers. Discounts driven by use-commitments and volume are common in the industry, and can bring this multiple down to single digits, since cloud compute typically drops by ~30-50% with committed use. But AWS still operates at a roughly 30% blended operating margin net of these discounts and an aggressive R&D budget — implying that potential company savings due to repatriation are larger. The performance lift from managing one’s own hardware may drive even further gains.
👇🏼A primer on chase engineering and what’s next for resiliency from Nora Jones, founder of Jeli.io, an incident analysis platform (portfolio co) and formerly head of Chaos Eng at Slack and prev. Sr. Dir. Chaos at Netflix. So much goodness here and if interested at all in this space, this is a must read. Chaos is great but also need to know what experiments to start with vs. randomly breaking things which is why Nora believes that incident analysis must come first:
Instead of helping companies break things, it focuses on incidents where things break all by themselves, then figuring out what happened and how to keep it from happening again.
It took Google Cloud about 18 months to launch Datashare, Christin Brown, the firm's global financial services industrytechnical solutions leader, told Insider.
Much of that time was spent engineering the pipes that automate the transformation of data submitted by providers. The process includes standardizing various data sets into a uniform format so consumers can analyze and handle data across providers in a consistent way.
That "secret sauce" was the heaviest lift from an engineering and software development perspective, Brown said. The data transformation takes place automatically at the time of ingestion into BigQuery, a data warehouse that also offers analytics and machine-learning tools.
Yes, I’m obsessed with Backstage.io, the open source developer portal from Spotify - great read from Roadie.io and how Expedia is using backstage to manage 20k micro services, 400 unique developer tools, 3000 APIs and more than 1000 bespoke libraries 😲
They are measuring a number of concrete KPIs to establish their level of success with Backstage.
Raw user load. How many internal developers are using the platform and how often.
The number of APIs tracked. While they did have an existing registry which could provide a list of components in Expedia Group, no such list of APIs existed. This list is being built up from scratch in Backstage as developers use the tool.
Change in the time to first and tenth commit. By extracting the time that an engineer joins the company or switches team, and matching that against their commit history, Mike and Erik are measuring the decrease in the time to 10th commit during onboarding.
Box beats Q1 expectations delivering over $202m of revenue, up 10% YoY and here is earnings transcript - Aaron is so good at nailing big themes for the public investors and great to see him laying out his big vision for Box, the Content Cloud for enterprises.
Our strategy is well aligned to three major trends that are driving the future of work. First, work is being defined by hybrid work environment. In a recent Gartner study, more than 80% of company leaders surveyed said they plan to allow employees to continue working remotely at least some of the time. Even as offices open back up, traditional physical boundaries will continue to blur and enterprises will need to empower collaboration both internally among virtual and distributed teams, and externally with partners, customers and suppliers to get work done from anywhere.
Second, we know that the future of business will be cloud and digital first. Customer and partner interaction will increasingly be executed digitally from the onboarding of employees to automating workflows with partners. These workflows must function using multiple cloud-based application, access to content in a single unified platform across a multi-cloud environment is critical to ensure productivity and business success.
And finally, data security, compliance and privacy remain more important than ever. Governments across the world are enacting new data privacy requirements and as recent cyber attacks, such as the SolarWinds and Colonial Pipeline events have shown, cybersecurity threats are affecting all enterprises, and creating significant business disruption. Content integrity is an absolute requirement. Content is the lifeblood of a company and any breach that threatens the security of content can cause irreversible damage to the enterprise.
Creative destruction in one pic - Turnover of the Top 50 Largest Companies has been incredible - about 60% every decade and yes, tech and finance dominate (Bloomberg)
The world’s biggest businesses were doing fine until Covid-19 arrived. Now they’re doing even better.
The top 50 companies by value added $4.5 trillion of stock market capitalization in 2020, taking their combined worth to about 28% of global gross domestic product. Three decades ago the equivalent figure was less than 5%.
We all live in a product led growth world! What a week this week as there have been some marquee financings from Loom, Pitch, and Dooly (a portfolio co) along with Monday filing an S-1. Bottom line, investors are throwing big 💰 at these companies because of the incredible growth and efficiency from a PLG model. Notice how all have a huge collaboration element as well, so fitting for a hybrid working world.
First up is Loom, a workplace video messaging platform, which raised a $130M round led by Andreessen Horowitz more than quadrupling its valuation from a year ago to $1.5B 🦄.
The company has achieved true viral status, a rarity in enterprise software, growing active users 900% year-over-year. It’s now used by 10+ million people across 120,000 companies and 192 countries to get work done wherever, whenever – without sacrificing creativity, productivity, or culture.
Loom grew revenue by more than 1,100% this past year, adding enterprise customers including Netflix, Atlassian, JLL, Twitter, Olympus, Procter & Gamble, and Lacoste. Spanning all geographies, departments, and titles, users rely on Loom to share updates, provide feedback, communicate with customers, and augment meetings. Its asynchronous video messages accelerate the speed of information sharing while also fostering cultures of connection and engagement.
Next up is Pitch, a collaborative presentation platform or next gen Powerpoint, raised $85M led by Tiger Global. No data or metrics shared other than plans to go enterprise with a big vision to boot.
“In our first six months since launching Pitch, we’ve primarily focused on teams of up to 200 people, primarily in small and medium-sized companies, but also larger enterprises,” Pitch cofounder and CEO Christian Reber told VentureBeat. “We aim to be fully enterprise-ready in 2022 and are already implementing improvements to support larger workspaces with significantly bigger teams, as well as meeting enterprise-grade standards.”
Finally, a huge congrats 👏🏼 🎊 to Dooly, (boldstart portfolio co) which is building a connected workspace for revenue teams and raised an $80M Series B led by Spark Capital and including Tiger Global, Greenspring and others.
Dooly has posted strong numbers driven by high adoption and word-of-mouth referrals. The number of organizations using Dooly has increased about 10-fold to 500 since early 2020, including Asana and BigCommerce, while the individual user count has expanded by a greater rate, 10,000-plus people. More people signed up in March than in all of 2020, Mr. Hartvigsen said. He said Dooly benefited from the pandemic as salespeople affected by budget cuts and travel restrictions flocked to online tools to increase their productivity. “Were we a beneficiary of a really rotten thing for mankind? Yes,” he said.
Other metrics have turned heads among investors. The product’s net promoter score, a measure of user recommendations, is 79, which is high. Its “net revenue retention” or the amount of recurring revenue from existing customers, is well above the norm at 162 per cent, meaning existing customers on average increase their spend on its products by 62 per cent year over year. Customers use Dooly 2.5 to five hours a day on average, Mr. Hartvigsen said.
Moving on, Monday filed its S-1 - lots of trends to watch here, concept of WorkOS, low code no code, product led growth metrics. I share some of the 🔑 nuggets on the business below.
monday.com democratizes the power of software so organizations can easily build software applications and work management tools that fit their needs. We call our platform ‘Work OS’, and we believe we are pioneering a new category of software that will change the way people work and businesses operate.
Our platform consists of modular building blocks that are simple enough for anyone to use, yet powerful enough to drive the core functionality within any organization. Our platform also integrates with other systems and applications, creating a new connective layer for organizations that links departments and bridges information silos.
Notice the delineation on Net $ retention with a caveat of >10+ users to get to 121% - overall net $ retention is at 107% which makes sense given high churn of SMBs. Datadog which is best in class is still over 130% NRR.
Customers with more than 10 users are the core focus of our sales and marketing efforts; therefore, their Net Dollar Retention is a key metric we measure. We expect the percentage of ARR attributable to customers with more than 10 users and the Net Dollar Retention Rate for these customers to continue to increase. Additionally, our Net Dollar Retention rate for all of our customers was 100%, 105% and 107% for the three months ended December 31, 2019 and 2020 and March 31, 2021, respectively.
Here’s another great slide on product and growth:
Outline of Monday GTM Motion:
Sales and Marketing
We employ a hybrid approach to sales and marketing, combining an extensive self-serve funnel with direct sales from our partners and sales team.
With our bottom-up marketing approach, we initially target customers on the team level. We cast a wide net of performance-based marketing, brand advertising and organic marketing across several digital and offline channels.
Because of this wide reach, our marketing efforts bring a variety of leads, from small businesses to Fortune 500 companies. Upon discovering our platform, customers enroll in a 14-day free trial of our Pro plan, after which they are prompted to either continue with our Free plan for small teams (limited to two users) or pay for one of our four paid subscription plans. As these customers convert and realize the benefits of our platform, they invite more teams to join. As a result, we also benefit greatly from viral, word-of-mouth marketing.
As our self-serve funnel customers grow, and as part of our flywheel sales approach, our sales teams actively monitor customers’ usage patterns and engage to help them achieve their goals and become more successful. Our sales team is comprised of account executives and account managers, who are segmented by region and customer size. Our account executives are primarily focused on acquiring new customers while our account managers are primarily focused on helping existing customers expand their usage within their organization.
Also remember PLG does not mean no sales, trick is knowing when to “assist” on an account. Monday has invested significant 💰 scaling its sales headcount. As a founder, you need to know when to lean in and invest more $$$ to scale growth.
In mid-2018, as we experienced rapid growth and demand for our platform through our self-serve funnel, we began investing in building out and scaling our sales, customer success and partners teams. We are still in the early stages of building out and scaling these teams, but we believe there is a significant expansion opportunity within our customer base to continue to grow our platform. In order to realize this opportunity, we have more than doubled our sales and customer success teams from 154 employees at the end of 2019 to 365 employees as of March 31, 2021.
In addition, a significant investment has been made to target accounts > 10 users to start and results in higher ARR and $ net retention.
Historically, customers would adopt and expand on the platform on a self-serve basis, independent of any assistance. In addition to our self-serve funnel, as of 2018, we began to invest in our sales, customer success and partners teams to help our customers obtain more value out of the platform. As a result of the investments described above, we have seen significant growth in the customer spend from our cohorts during the first 12 months of their subscriptions to monday.com. For example, the new ARR generated from our 2018, 2019 and 2020 cohorts was higher than the new ARR generated by our 2016 cohort by 6.7x, 16.0x and 27.1x respectively. Additionally, we have also seen the rate of expansion from our 2017 and 2016 cohorts accelerate in recent years due to our sales and customer success teams helping them gain more value out of the platform. For example, our 2016 cohorts grew 21% and 29% for the years ending 2019 and 2020, respectively, while our 2017 cohorts grew 21% and 33% for the periods ending 2019 and 2020, respectively.
This also includes upselling additional products into the Monday installed base resulting in a high attach rate.
As a result, as of April 30, 2021, 96% of our enterprise customers use monday.com for at least two Product Solutions and 63% of our enterprise customers use monday.com for at least three Product Solutions.
Important to note that when it comes to PLG, analytics and understanding key metrics around the top of funnel, usage, expansion, predicting churn is a must have.
Our in-house business intelligence tool, BigBrain, supports our data-driven culture by providing every monday.com employee easy access to all of the Company’s core data that is required for their job. We believe this allows our employees to work efficiently and provides them the ability to do their job the best way possible.
BigBrain collects and processes data from over 200 million events per weekday from multiple separate sources and aggregates it into one place that every employee can access. This enables our team to analyze and make informed decisions based on transparent data, in real time. BigBrain includes various tools such as a landing page generator, an AB test tool and media buying statistics tracking, all of which were built by our in-house team. BigBrain also aligns our team around key performance indicators (“KPIs”) and metrics. We proactively connect employees to the business status by sending a daily SMS with high-level KPIs and strategically distributed data dashboards powered by BigBrain throughout our offices.
We believe BigBrain supports our core product by paving the way for quick-to-market, efficient and high-quality execution. It also aligns with our values of transparency and trust within the monday.com culture.
Monday also has made a significant investment in brand, advertising and marketing. PLG does not happen just by word of mouth and when companies scale they need to keep reaching more users.
Sales and marketing expenses were $191.4 million for the year ended December 31, 2020, an increase of $72.9 million, or 61%, compared to $118.5 million for the year ended December 31, 2019. This increase was primarily driven by an increase of $30.8 million in marketing, advertising and brand costs
Just for comparison’s sake, here Asana spent $106M in Sales and Marketing in its prior YE, having doubled its investment.
Sales and marketing expenses increased $53.7 million, or 103%, for fiscal 2020 compared to fiscal 2019. The increase was primarily due to an increase of $26.1 million in personnel-related expenses as a result of higher headcount and sales commissions for our sales personnel and $7.0 million in higher tender offer-related stock-based compensation expense, an increase of $13.7 million in advertising expenses for our marketing programs, an increase of $7.2 million in fees to marketing vendors, and an increase of $3.6 million in allocated overhead costs as a result of increased overall costs to support the growth of our business and related infrastructure.
More on the PLG motion and need to invest in growth.
Self-Serve Funnel Complimented by Expanding Sales-Led Motions
Our focus on seamless adoption of our platform starts with ensuring that customers can easily and independently get up and running on our Work OS. This is accomplished through a self-serve funnel where virtually any user can sign up and immediately gain value, regardless of their technical skills.
Once customers adopt the platform and realize its value, their usage often grows organically, expanding across use cases and departments. As this expansion takes place virally, it is also accelerated through our sales-assisted motions and our partners network. Our customer success teams engage with our customers in an effort to help them grow and achieve their business objectives through our platform. This has created a successful growth cycle: the more value customers gain from our platform, the more new users and use cases are added by such customers, which in turn adds even more value to our customers.
Get users in with an app, get them to stay with the platform, custom building blocks, etc for stickiness.
Spells out massive TAM
The markets in which we operate are extremely competitive, fragmented and subject to rapidly changing technology, shifting user and customer needs, new market entrants and frequent introductions of new products and services. Moreover, we expect competition to increase in the future both from our existing competitors and from new market entrants, including established technology companies who have not previously entered the market. Our competitors include the following:
companies that primarily offer project and work management solutions, including application of processes, methods, skills and knowledge to achieve specific objectives. This includes companies such as Asana, Inc., Wrike Inc., SmartSheet Inc., Notion, Inc., Citrix Systems, Inc., Zendesk, Inc. and Freshworks Inc.; and
companies that offer Product Solutions across other use cases we serve, such as customer relationship management solutions, software development tools and marketing campaign management. This includes companies such as SugarCRM, Pipedrive, Zoho, Inc., Atlassian Corporation PLC (Jira), Procore Technologies, Workday, Inc., BombooHR, LLC., Hootsuite Media Inc. and Adobe Experience Cloud.
As always, 🙏🏼 for reading and please share with your friends and colleagues.
KubeCon Europe 2021 Wrapup from Daniel Bryant, Ambassador Labs (h/t Gareth Rushgrove) - great to see user experience for developers matters and emphasized this year.
Here are our key takeaways from KubeCon EU 2021:
Developers, and developer experience, within cloud is a big deal
End users are making a big impact in the cloud native world right now
Networking in the cloud (and K8s) is still evolving
Open standards are providing key abstractions, extensibility, and innovation
Control planes are where the most end user value is being created
Anyone can (and should) contribute to the community: Docs are a great place to start
Cybersecurity spend is at an all time high yet…”On average, 64% of CISOs surveyed said they felt like their organization is at risk of suffering from a material cyberattack in the next 12 months, with more than 65% of CISOs from the U.S., France, UAE, Australia, Sweden, Germany, U.K. expressing this fear.” (Proofpoint survey)
And more from Nikesh Arora, CEO of Palo Alto Networks, on the rise of ransomware from the earnings transcript this past week:
After the December SolarStorm attack, we saw an acceleration in attacks throughout our third quarter and after the quarter closed.
These range from software supply chain attacks like SolarWinds and to run somewhere attacks like on your pipeline. Ransomware especially has been in a spotlight recently. And data from our own Unit 42 shows that the average ransom paid in 2020 tripled from 2019. And in 2021, it's more than doubled again.
The highest demand we've seen is $50 million, up from $30 million in 2020, with organized groups with near nation-state discipline perpetrating coordinated attacks. The targets are not only corporations, with healthcare and pharma is a focus with the pandemic, but also government organization and shared infrastructure. The reason for this vulnerability is deep-seated. Organizations run their operations on technology that is decades old, sometimes predating the Internet.
RPA space continues to be hot but expect a wave of consolidation - latest on Google Cloud - don’t be surprised if they enter with a big acquisition one of these days - from Thomas Kurian
The first step is to use data to understand what the most valuable processes might be to automate. This may be driven by cost reduction or seeking competitive advantage by speeding up, for example, the process of originating a loan compared to competitors.
The second step lies in finding the best way to automate the business process. Process mining and process discovery can find ways to reduce certain steps from the process. These can be implemented with RPA and low-code tools.
What is VMware’s new CEO Raghu Raghuram plans as a standalone company? (Business Insider) - multicloud, more focus on developers, and more M&A
VMware's top goal is to become a leader in multi-cloud, Raghuram said, where customers can easily use its software to run their applications on any (and as many) clouds as they want. The firm will "build aggressively" to get there, he added, and expects the journey to span years
VMware plans to continue building on some strategies it's already laid in place. It recently started a business unit called the Modern Applications Platform Business Unit to build cloud and developer applications that help customers update their technology. This business unit has seen "tremendous" growth, Raghuram said.
VMware may also do some M&A in the coming years, Raghuram said. It's looking for companies that could help its customers build modern applications and run them on the cloud – which would complement VMware's home-grown technology, Raghuram said.
Did someone say hybrid work? Super cool on what’s coming from Microsoft Teams…
This too shall last longer as hedge funds are continuing to go earlier and earlier and invest more 💰 in private companies (from the WSJ)
Lone Pine is increasing to 15% from 5% the amount its hedge fund and long-only fund can invest in private companies, with investors opting into the increased exposure. Flight Deck Capital LP, a San Francisco fund started by Jay Kahn, launched May 1 with $250 million and the ability to invest a quarter of its assets under management in private companies. Mr. Kahn previously led or co-led most of the private investments at Light Street Capital Management and also invested in public companies.
Private investments have gained in popularity as several hedge-fund firms with significant private-investing efforts have posted some of the best returns in the industry. Tiger Global Management LLC, a pioneer in the hybrid approach that began investing in private companies in 2003, Coatue Management LLC and D1 Capital Partners LP have all boosted their returns by investing in private companies.
To the above point: Growth Firms, Not VCs, Are The Most Active Investors In New Unicorns This Year, And They’re Doubling Down (Crunchbase News)
I remember 10 years ago when enterprise founders would meet with the largest companies and many were still not ready for SaaS and the ☁️. The smart founders would continue to push the envelope to find the early adopters who were willing to go for the more efficient model and avoid doing anything on-prem at all. Despite the fact that SaaS rules, there is still tons of software out there that is 100% on-prem and this week AWS released AWS SaaS Boost as an open source reference environment to help software vendors (ISVs) easily and quickly migrate their existing on-prem solutions to a SaaS delivery model.
AWS SaaS Boost is a ready-to-use open source reference environment that helps you as an Independent Software Vendor (ISVs) accelerate your move to Software-as-a-Service (SaaS). From small specialized software businesses to large global solution providers, AWS SaaS Boost helps you accelerate moving your applications to AWS with minimal modifications. Build, provision, and manage your SaaS environment with greater confidence based on AWS best practices and proven patterns from hundreds of successful SaaS companies.
AWS SaaS Boost takes on the heavy lifting of launching your SaaS offering by guiding software builders through the migration and operational processes, making your move to SaaS as frictionless as possible. It provides you with ready-to-use core elements such as deployment automation, analytics and dashboards, billing, and metering.
So if SaaS has won, why is the demand for on-prem software rising? (see report from Replicated with Dimensional Research surveying over 400 professionals who work at commercial enterprise software vendors)
And how should startups handle the dreaded, “I’ll buy your software if you deliver it on-prem” request? Should they keep saying “No” to the large enterprise customers or is there another more modern way? Let’s dive deeper.
If you see from the above chart, most vendors selling software on-prem still need at least a week or more to deploy their solution meaning high cost of doing business. In addition, as a company scales and grows, they end up having to manage hundreds or thousands of ❄️ meaning each on-prem solution is custom for each customer. This is why most SaaS vendors will say NO to anything on-prem as it is so much more scalable and easier to write once and deploy to the cloud versus install, help maintain, and troubleshoot lots of on-prem installations all with bespoke environments.
That is until Kubernetes and Replicated came around to help “unlock the opportunity for modern on-prem software allowing vendors to deliver and manage Kubernetes apps anywhere.” 50 of the Fortune 100 already consume software from vendors who deliver their on-prem version via Replicated.You can find more here on their open source project, kots (kubernetes off the shelf) on how you can deliver a kubernetes application for enterprise installation as a modern on-prem app that comes will all of the enterprise ready bells and whistles like SSO, RBAC, audit logs, change management, etc.
Software vendors with a Kubernetes application can package their app as a Kubernetes-off-The-Shelf (KOTS) software for distribution to enterprise customers as a modern on-prem, private instance. The packaging process leverages several KOTS components (some optional, some required). For context, Replicated KOTS is made of several purpose built, open source components, but should be thought of in two distinct (but highly integrated) categories.
Using Replicated, an independent software vendor can still maintain one code base and not several custom versions depending on each customer, thus removing the high cost in delivering and installing software on prem and managing and maintaining different software versions over time. The net result is that rather than shipping the data to the app, Replicated ships the app to the data . Truly though, the debate about SaaS vs. on-prem really should not be one as it’s all just cloud native leveraging Kubernetes. Keep an eye out for this over time as security, data protection, and privacy drive more “on-prem” growth in the years to come.
As always, 🙏🏼 for reading and please share with your friends and colleagues.
What are some characteristics we look for when funding newly created companies? Can founders hit the ground running on day one? Many of the best start their companies because they need capital to hire the backlog of folks willing to join right away - understanding how the founders met them, the quality of the future hires, and how they think about hiring is a huge look into the future.
White House signs Executive Order to improve our Nation’s Cybersecurity - expect much more focus on security focused on the “software supply chain” from vendor risk analysis like Security Scorecard (a portfolio co) to third party API analysis - more 💰 will be flowing into cyber security startups
New player in DevOps space as ServiceNow acquires observability platform Lightstep - this is the beginning of many more acquisitions from ServiceNow and great for developer first companies as another large player on the scene
ServiceNow isn't worried about Lightstep's competition. The company is aiming to bolster DevOps engineers' ability to build, deploy, run and monitor cloud-native apps. CJ Desai, chief product officer for ServiceNow, told ZDNet the goal is to "transform software development like we transformed IT."
Desai said the appeal of Lightstep is that it offers visibility into the full software stack without bouncing between platforms. ServiceNow will combine its AIOps and IT workflow automation tools to "seamlessly connect insight with action across all the tools, people, and processes involved in delivering digital customer experiences," said Desai. "With this acquisition, observability is no longer restricted to just DevOps."
CircleCi raises $100M as DevOps continues to be on 🔥 - more from TechCrunch and also my colleague Shomik Ghosh who led one of the earlier rounds while at his prior firm. As I like to say, it’s not the TAM you start with but the one you exit with and in CircleCI’s case, the market grew super fast and they executed like crazy.
Huge congrats to CircleCI on their $100M Series F led by Greenspring Associates at a $1.7B valuation!!
CircleCI's story is one of perseverance and great leadership. Through multiple early funding rounds, investors asked questions about size of the market, whether a standalone CI/CD company would exist, and worried that competitors would crush Circle by offering base level CI for free.
Through it all, the leadership team led by Jim Rose kept an intense focus on the north star of user engagement and developer experience. This led to a re-platform in 2017, pricing change to usage-based pricing, and much more that would sometimes anger users immediately even though it was in their best interest long term.
This funding round is a testament to the team's focus and mission to bring the best CI/CD experience to developers!
Fantastic read on consumption-based pricing with Mike Scarpelli, CFO of Snowflake and current Snyk board member - from Anoushka Vaswani (Lightspeed)
Anoushka: How has this pricing model impacted Snowflake from a team and organizational structure?
Mike: It changes your compensation plan for sales reps. You can’t pay everything on new deals. You have to pay on consumption. Every one of our reps has a big consumption quota. We fundamentally want our reps to be involved in customer success.
We don’t believe companies should have a separate customer success function. The first thing we did when Frank joined Snowflake was we blew up was the customer success function. You are either going to do support, sales or professional services. Customer success is not accountable for anything.
You may hear some pushback from your salespeople and you will also have some portion of your salesforce focused on landing new accounts. However, a bigger percent of your commission dollars are going to be tied to consumption.
In the SaaS world, your FP&A group can develop a forecast in a silo in isolation from salespeople. The days of FP&A doing forecasting in this manner are gone. Our revenue and FP&A team is aligned with sales and our sales reps. The group has a regular cadence review of our top 50 to 100 customers. Our FP&A group spends a lot of time with salespeople to understand every element of our large accounts and the trends happening with consumption.
Who knew - Paypal only has 20% of compute in cloud with plans to migrate all of its compute over time - still so much more 💰 to spend - Google Cloud for the win
PayPal in 2017 moved software development and testing to Google Cloud and last year moved some payment processing for the Western U.S. from its own computer infrastructure to the cloud-service provider, although it declined to provide specifics. The company said about 20% of its processing volume last year was handled in the cloud.
Snyk (a portfolio co) buys FossID to expand developer first security to C/C++ and here’s one reason why (more on the NewStack)
Datadog last week on Q1 earnings - continues to perform at a high rate with 51% YoY growth in ARR, new logo ARR, usage growth, and net expansion >130%
To summarize Q1, at a high level, revenue was $199 million, an increase of 51% year over year and above the high end of our guidance range. We ended the quarter with 1,437 customers with an ARR of $100,000 or more, up from 960 last year. These customers generate over 75% of our ARR. We have about 15,200 customers, up from about 11,500 in the year-ago quarter.
This means we added about 1,000 customers in the quarter, making it another strong quarter of adds and consistent with the last few quarters. We also continue to be capital-efficient with free cash flow of $44 million. And finally, our dollar-based net retention rate continues to be over 130% as customers increase their usage and adapted our newer products. In addition to that, the positive business trends from recent quarters have continued in Q1.
And this is what is a huge driver, not just usage but attach rate of selling additional products
Additionally, 25% of customers are using four or more products, which is up from only 12% a year ago. And we also have hundreds of customers using six or more of our nine generally available products. But it's still early. We think this is an interesting proof point that shows the continued sell opportunity in our customer base.
Always great to see what Digital Ocean is doing as a public company as their core market is serving developers and SMBs - revenue up 29% to $94M, new customer accounts up 7%, net dollar retention was 107% up from 100% last year, and ARPU increased by 20% - serving individuals and SMBs so hard but great to see the progress
Second, net dollar retention, or NDR, is an important driver of the quality and sustainability of our growth. And we are focused on improving it from recent years in the 100% area. In Q1, NDR was 107%, a 600 basis point improvement over Q1 last year. This metric is a strong indicator of the quality of our service to our customers and their willingness to stay and expand with us. We remain focused on specific initiatives to improve fulfillment of customer needs on our platform and believe they will deliver improving NDR as we progress through 2021.
Third, revenue per customer or ARPU, is an indicator of our ability to drive growth within our customer base. And is reliant both in our ability to continue to add new products and capabilities to our platform, as well as our success in adding larger SMBs through our nascent sales effort.