What's 🔥 in Enterprise IT/VC #168

Enterprise tech raised more than consumer for first time in five years - why?

The headline from Bloomberg says it all, “Everyone Wants a Piece of Enterprise Tech Companies: Last year enterprise tech startups raised more cash than consumer tech companies for the first time in at least five years.”

And then you have WSJ writing about Sequoia financing more enterprise software companies from it’s growth fund. Having been investing in enterprise for 24 years now, my fear radar spikes as it’s becoming way to 🔥. While I am long term bullish on enterprise IT spend and the idea that every company is a software company, I also fear when too much 💰 chases a sector as valuations go up and returns go down. 

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Scaling Startups

  1. Rahul (Superhuman, a portfolio co) crushed his talk at the a16z Summit this past November - really interesting how he brings in video game concepts into software, more around psychology versus gamification, sparking joy for end users

  2. VCs are just tired” says Danny Crichton from Techcrunch - while title does sound like it comes from the Onion, Danny does drive home one point - post seed, VCs are becoming more data driven as everyone has same information and harder to build long term relationships leading to these compressed and intense fundraising cycles.”

    “Ironically, the “tired” line was something I used to hear from seed investors, who constantly had to churn through dozens of under-hearted startups to find the gold. Now, I’ve heard this language more and more from later-stage VCs, where the Excel spreadsheet drives the valuation more than a relationship with a founder — and everyone can read the gridiron of SaaS metrics.”

  3. Startups should rethink what the meaning of a “launch” is - such an amazing thread…


Enterprise Tech

  1. This Gartner chart says it all - 10.5% growth for enterprise software to $503 billion

  2. Privacy of our health data is a human right - this will be a battleground to pay attention to in 2020 and will also determine some of the winners in the cloud wars. Read on for a full expose on what Google is capturing and how they are using our health data. Epic Systems, one of the largest medical records vendors, just also announced it will stop working with Google Cloud likely because of data ownership.

    On its website, Google’s cloud computing division until recently listed as a customer the large nonprofit health system Kaiser Permanente, something hospital representatives say isn’t accurate. Google removed the listing after inquiries from the Journal. 

    “We are not actively doing anything today with Google,” says Kaiser Permanente vice president Elizabeth McGlynn. “We have to be very clear about who shares our values about protecting patient privacy. Not every tech company can satisfy that standard, and a lot of them come with baggage they have earned.”

  3. Pretty awesome profile in WSJ CIO Journal on Manjit Singh, Toyota North America CIO, in how he is working with earlier stage startups and firms like boldstart where he just joined our advisory board. As a FYI, we are seeing this across the board in enterprise tech land. The pace of change is accelerating in software and it has become incredibly difficult for large enterprises to keep track of what’s happening. Combined with the fact that it’s difficult to hire the best of the best engineers means that they are looking more towards VC firms to help filter the signal from the noise.

    In the past, enterprises favored services from established vendors. “There was always some level of hesitancy about engaging with startups,” said Manjit Singh, group vice president and chief information officer of Toyota's North American unit.

    But in recent years, Toyota has become more interested in working with startups, in part because consumers are demanding that the company innovate faster than ever before. Within the past year, the company has been more willing to take bets in partnering with startups that have only landed their first or second round of funding.

  4. What happens when your application goes from monolith to microservices in terms of APM and Observability? How do you rethink this to go from tracking each service with lots of small pictures and no big picture? Ben Seligman of Lightstep nails it in this thread…also good read to understand

  5. Merci Victoria Grace from Lightspeed nails it with her market map on Workplace Collaboration Startups. Great to have 3 of our portfolio companies on there as well; Superhuman, Front, and Cycle.


Markets

  1. New Relic CTO and CRO both resigned this past week as the company cut its forecast for the year back from $600mm to $586 - $593 million. I’m sure they are feeling pressure from Datadog and others in the market.

  2. Will be interesting to see how Slack holds up as Microsoft goes on an aggressive advertising campaign starting this weekend during the NFL playoffs…

What's 🔥 in Enterprise IT/VC #167

With the new year and new decade come ideas on self improvement and how to do things better. From a business perspective, it seems like belt tightening is the focus for many growth companies in the consumer space. This week alone 3 Softbank companies have announced layoffs to try to get costs under control - Zume, Oyo, and Lime. It’s not a surprise as you can’t give away dollar bills for $0.50 forever. The real question is if this hits the enterprise sector as the later stage growth VCs feel the pain from their consumer investments and start focusing across the board on costs. You all know my perspective, things should never ever get to that point and balanced growth and prudence is ALWAYS the name of the game.

On the self improvement side, I’ve shared a few articles that may help you personally and professionally. The first is saying No to Negativity and the second is that you can get ahead by being inefficient. The first is quite clear but the second may be counterintuitive so please read on!

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  1. Great advice going into 2020 - don’t let negative biases rules your thinking, just say No.

    Our minds and lives are skewed by a fundamental imbalance that is just now becoming clear to scientists: the negativity effect. Also known as the negativity bias, it’s the universal tendency for bad events and emotions to affect us more strongly than positive ones. 

    To counteract, authors suggest:

    Remember the Rule of Four. Many studies—of spouses’ interactions, people’s diaries, workers’ moods, customers’ ratings—have shown that a negative event or emotion usually has at least three times the impact of a comparable positive one. So to come out ahead, we suggest keeping in mind the Rule of Four: It takes four good things to overcome one bad thing.'

  2. In the world of startups, what I often see is the “perfect is the enemy of the good.” Everyone is striving to the best and most efficient but Shane Parrish (Farnam Street) shares why that is not necessarily the best thing to pursue all the time. He believes we can “get ahead by being inefficient.”

    Inefficient does not mean ineffective, and it is certainly not the same as lazy. You get things done – just not in the most effective way possible. You’re a bit sloppy, and use more energy. But don’t feel bad about it. There is real value in not being the best.

  3. The team at 645 Ventures does another deep analysis on market dynamics; this time covering The Top Five Myths About Building Billion-Dollar Startups. My favorite is Myth #2, Top VC Firms Don’t Miss Billion Dollar Startups at the Early Stage.

    At the seed stage, only 31% of the companies raised capital from one of these top 70 firms. Almost 70% did not have one of these firms in their cap table at the seed.

  4. Don’t forget the value of product marketing, an often misunderstood and super important role


Enterprise Tech

  1. from the New Stack, senior IT exec survey shows large enterprises continuing to build and not buy new software - more here

    Spending on Custom/Bespoke Software Increases Without Putting Pressure on IT Budgets
  2. Product led growth cos need to keep investing in product as one of main differentiators versus incumbents - great breakdown from the Information

  3. Year in review for privacy preserving machine learning (PPML) from Jason Mancuso (dropout labs, a portfolio co). Here’s why PPML is important:

    If the field of machine learning is set to revolutionize industries in the ways many expect, it will need massive amounts of data. Two of the highest barriers to such a revolution would be the high costs of both accessing and operationalizing that data. Many in our PPML community have maintained that improved privacy and security infrastructure for machine learning will be necessary to overcome these barriers. This is especially relevant for sensitive datasets that could, for example, accelerate the discovery of life-saving treatments, or help diagnose and correct prejudiced behaviour in existing systems. By building the infrastructure to enable secure and privacy-preserving access to data, the PPML community can create a beneficial and equitable future for machine learning in society.

  4. 👇🏼💯

  5. Win ❤️ and 🧠 of developers and you win the enterprise. Just caught up with Hashicorp’s year in review and this stood out.

    Expanding our commercial footprint. We continue to make inroads with large enterprise customers, adding hundreds of new customers in the last year. We now count more than 100 of the Fortune 500 and over 200 of the Global 2000 among our commercial customers. These accomplishments are a testament to the expertise and dedication of our field teams and supporting functions that provide excellent prospect and customer experiences. HashiCorp products enable the world's largest businesses to adopt a cloud operating model, and this commercial success allows us to continue to invest in making our products better for everyone.

  6. The evolution of RPA from macros to data and web scraping, BPM and RPA. What’s next? Great summary along with the origin stories of the big 3, UIPath, AA, Blue Prism. I got my start in software development back in early 90s through learning Visual Basic so I could write hard core excel macros to automate parts of my job at JP Morgan and certainly see a day when end users will be able to drive more of that without huge integrations.


Market

  1. Unicorns or Big Tech?

  2. What IPO when you have Insight! This week alone Insight agreed to acquire Veeam Software in the cloud data backup space for $5 billion and Armis in the IoT security space for $1.1 billion.

  3. 60 Tech IPOs potentially ready to go in 2020. The first few will set the barometer for the rest of the year as 2019 wasn’t so 🔥 in terms of performance which means bar is set much higher.

    Of the 20 tech companies that went public in 2019 before the WeWork debacle, 16 saw their market values slide afterward by an average of 23% by the end of the year. That too was out of whack with tech stocks in general, and the rest of the market. The Nasdaq Composite rose 10% during the same period.

What's 🔥 in Enterprise IT/VC #166

boldstart 2019 review and 2020 enterprise predictions

Happy New Year and decade to all! May this be a healthy and prosperous one for all of my readers. As promised from last week, here is my annual recap on boldstart in 2019 and thoughts on What’s 🔥 in Enterprise for 2020. Warning, I’m a VC so some of these trends may be biased 😃 as I name a portfolio company or two in each thread, but I hope it will at least give you a window into how we are thinking about this upcoming year. Here’s #8 on what to expect in 2020:

8. Rise of FinOps: As cloud and SaaS continue to dominate, the sheer costs of cloud hosting are becoming a bigger and bigger line item under cost of goods sold. While version 1.0 was all about analyzing cloud spend reactively, the next generation will need to be proactive and help companies set policies upfront and understand, control, and manage these costs dynamically. FinOps helps companies address this problem as it’s incredibly complicated for someone in finance to know why costs spiked because a new product release was made or because data science used more GPUs to train their model. Coordinating all of these processes and allowing companies to set policies while providing self service will be the basis of many new companies in 2020. With infrastructure as code rising, we believe that the opportunity to proactively manage and codify this is already happening and that’s why excited about companies like Env0 (a portfolio co).

Continue reading…

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Scaling Startups

  1. must read from one of the best CEOs in enterprise tech, founder/CEO of MySQL one of first commercially successful open source companies and now CEO of HackerOne. I had the pleasure of being an investor in one of his former companies Eucalyptus Software which was sold to HP.

  2. Love this post from Lan Xuezhao from Basis Set Ventures on what traits make a successful founder.


Enterprise Tech

  1. Cyber security and nation state risk will be an ongoing theme in the next decade. First let’s start with Iran. Given the incidents in the past few days, it’s pretty clear that we can expect a massive cyber attack from Iran. Likely targets will include mission critical industrial control systems and financial services.

    One such avenue could be Triton which was hailed as the world’s most murderous malware. It’s designed to disable safety systems to prevent catastrophic industrial events.

    At first, Triton was widely thought to be the work of Iran, given that it and Saudi Arabia are archenemies. But cyber-whodunnits are rarely straightforward. In a report published last October, FireEye, a cybersecurity firm that was called in at the very beginning of the Triton investigation, fingered a different culprit: Russia.

    On a less threatening front, the WSJ has a deep dive into the Cloud Hopper attack orchestrated by Chinese (WSJ Paywall, try Verge for a summary as well) intelligence services and Yahoo news has an expose on how hard it is to maintain cover for spies in the digital age.

  2. A decade in review in software development and infrastructure from Cindy Sridharan - she is spot on with much of her highlights.

  3. Where does the RPA market go in 2020. Can bots evolve from mimicking tasks to taking on jobs? In addition as the number of bots scale in an enterprise

    "Few tools exist today to govern what bots do in the workplace," FortressIQ's Chowdhry said. For instance, a bot that is responding to an inquiry could wrongly answer several hundred questions to a customer without any oversight. Additionally, since bots are expected to work 24/7, when they break or stop due to an unforeseen reason, there's usually no human available to pick up the work, thus resulting in loss of overall productivity. This problem will become more serious as bots continue to rapidly grow in the enterprise.


Markets

  1. Small is the New Big Thing - interesting article from Ruchir Sharma, Morgan Stanley’s Chief Global Strategist, on what the next decade may bring

    These forces conspire to unseat the global giants, which are mainly American. The United States market accounts for well over half of the global value of stock markets, and has never been more expensive relative to other national markets. But remember, churn is the norm. Among the world’s 10 largest companies today, only one (Microsoft) was on the top 10 list in December 2009.

    If the usual pattern holds, it’s likely that America will peak and smaller nations and companies will make a comeback. If the 2010s were a golden age for the world’s largest economy and its megacorporations, the 2020s are likely to be remembered as the decade when smaller was beautiful again.

  2. The Information predicts Slack will be acquired in 2020 with potential suitors as Amazon, Cisco, and Salesforce. Competition from Microsoft means sales and marketing expenses increasing, growth slowing.

    The company’s annual sales grew 110% in fiscal 2018, which ended last Jan. 31, from the prior year. In fiscal 2019, that figure fell to 82%. In its most recent earnings report, Slack forecast that revenue growth for fiscal 2020 will fall even further to around 55%. Meanwhile, its net loss rose to about $88 million in the third quarter, from nearly $48 million a year earlier.

What's 🔥 in Enterprise IT/VC #165

the decade that enterprise tech became 🔥

Happy Holidays and Merry Christmas from my cat Spike (for those who celebrate)! Hopefully you are spending time with your family and friends and recharging your batteries for the beginning of a new decade. The next week will be rife with predictions and mine will come out in the next couple of days. All I can say is that this is the decade that enterprise technology became cool and part of me wishes we were back to the earlier days when consumer got all of the headlines.

This week’s news shows the continued impact of enterprise companies in YC through the years (close to 70% now), the amazing growth opportunities still remaining in the cloud, and a great tweetstorm for what’s need in dev tooling.

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Scaling Startups

  1. 🤔 Deep thoughts from Maria Popova from brainpickings - The Shortness of Life: Seneca on Busyness and the Art of Living Wide Rather Than Living Long - Maria hits a point that we should all think about, time is not a commodity and we need to treat it preciously and allocate accordingly. Seneca goes deeper here:

    People are frugal in guarding their personal property; but as soon as it comes to squandering time they are most wasteful of the one thing in which it is right to be stingy.

  2. There has been an ongoing discussion on how much people should work, especially in their 20s. IMO, this is all ridiculous. People should do what makes them feel good and there are no hard and fast rules as every person and company is different. Tobi Lutke who is founder/CEO of Shopify has a great tweet storm about how he built his culture and company


Enterprise Tech

  1. If you believe what happens at YC is a leading indicator for what happens in the technology and seed VC markets, then you’ll want to read Eric Feng’s post (former partner at Kleiner Perkins) where he analyzes YC deals over the last 13 years. No surprise here as enterprise gained momentum in the YC classes over the years and IMO this will continue into the next decade.

  2. Google evolves zero trust framework from BeyondCorp to BeyondProd for how they manage cloud native security - must read thread (hat tip @shomikghosh21) with full paper here

  3. Must read tweet storm on what’s needed for future of dev tooling, more abstractions, better resilience engineering, code search…

  1. WASM (web assembly) approved by W3C in past two weeks - if you don’t know what it is, it’s powerful, a performance optimized VM that runs in any browser, really helps push the vision of the browser being an OS, a world where the native desktop could disappear

  1. “AI has a privacy problem and how to fix it” from Kyle at Venturebeat - must read on privacy preserving machine learning, wouldn’t it be great if we could live in a default encrypted world where models could run and train on encrypted data, that’s why I’m excited about portfolio co @dropoutlabsai

  2. It’s been much ado about nothing when it comes to voice technology and the enterprise in particular. Geekwire has a great article on the future of Cortana (Microsoft) which “could include new capabilities to better read and summarize emails, text messages and other types of communications for users on the go.” Summarization is a great use of Cortana but there is still that privacy thing folks have to worry about, especially when it comes to enterprise data.

  3. Decade in review for cyber security from Popular Mechanics (🎩 tip Brian Lozada) and what’s next - quite frightening indeed when it comes to the battlefield.

    Increasingly, the military see cyberspace as an additional ‘domain’ alongside air, land, and sea. But it's a battlefield where skirmishes are fought without war ever being declared, and an adversary never fully known. 

    Any future war is likely to include cyber attacks as well as physical ones. In many ways, the 2010s for cyber feel like what the 1910s were for aviation during WW1. While air forces made up only a tiny section in the U.S. Army before the Great War. it rapidly grew until it became key aspect of modern warfare by mid-century. 

    In a couple decades, cyber warfare might become the deciding factor between who wins and who loses.

  4. It’s a pipe dream, but love the idea of Walmart thinking of renting out computing infrastructure from its stores for edge use cases.

    Walmart’s stores could also act as a base for potentially profit-making technology infrastructure or business-to-business services.

    In edge computing, computing power is physically close to where data is being collected—in contrast to cloud computing, in which computing power is located in distant server farms, slowing down processing.

    A robot scans for product levels at the Natrona Heights supercenter. PHOTO: ROSS MANTLE FOR THE WALL STREET JOURNAL

    More devices such as drones, autonomous cars and sensors collect large amounts of data that could be processed by edge-computing systems.


Markets

  1. Decade of the Cloud - insane shift from legacy to cloud and SaaS growth has been unreal with much more room to 🏃🏼‍♂️in the next decade.

According to Synergy Research, 2019 revenue from enterprise software-as-a-service (SaaS) will exceed $100 billion, up from less than $4 billion in 2009. Adding up all layers of the stack, from the underlying infrastructure to the applications, IT service firm Gartner says cloud revenue will end the year at $214.3 billion, jumping to $331.2 billion by 2022.

In a $3.7 trillion global IT market with low single-digit expansion, annual cloud growth of greater than 15% is leading investors to bid up the cloud standouts in both the public and private markets.

  1. Which investors are poised to win in 2020 with the most potential IPOs?

What's 🔥 in Enterprise IT/VC #164

Understanding the true cost of delivering enterprise software

Top of mind this week was Martin Casado’s tweet on enterprise software margins for companies in the 30-40% range. I highly recommend diving deep into that thread. My two cents are that he is spot on with the idea that we have to reframe what enterprise software margins are in the world of SaaS. That being said, 30-40% is low and companies need to understand their true COGs and properly adjust how they charge customers to bring back to a much higher number.

Back in the day when software was created and licensed, margins were in the high 90s as there were no ongoing operating costs since the customer had to manage on-prem. In todays world of SaaS, it’s important for companies to know what the true cost of services are. While it sounds straightforward, it gets much more complicated with API connections and distributed services to track and then if you layer on trying to understand how much each customer is costing you, it turns into another deep exercise. Segment wrote a great article about how they tracked true cost and improved gross margin by 20% in 90 days- it’s messy and and gives you an idea of what’s needed. 🤔 who’s going to build software to help do this automatically?

Happy Holidays to all and I’ll be back next week with my year in review and what’s next for 2020 in enterprise!

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Scaling Startups

  1. 🚀 Inspiration - Patrick Collison from Stripe shares a list of “people quickly accomplishing ambition things together” - Eiffel Tower, Apollo 8, Disneyland

  2. Jerry Colonna, one of the top CEO coaches, shares what it means to be a leader. I’ve known Jerry for many years since we served on a board together in the early 2000s, and all I can say is he’s fantastic to work with. He’s currently coaching one of the boldstart founders and he’s made a huge impact. Some folks can dismiss CEO coaching as soft, but what I can tell you is the transition from engineer to founder to CEO is difficult and for many, leadership does not come naturally. It can be a learned trait and one that we should all be working on continuously.

    “How do you know if a leader’s character warrants following?” I asked him.

    “You ask yourself, ‘Do they say what they mean? Do they mean what they say?’ and ‘Can I trust them?’

  3. A players - stretch for them!


Enterprise Tech

  1. Martin Casado from Andreessen Horowitz nails it when discussing gross margins for SaaS companies today versus in the first generation. I highly encourage you to read this thread as we see this across the board in our portfolio companies.

  2. Where are we in the DevOps and Cloud adoption curve? Read InfoQ’sSoftware Trends 2019 report. Of note for those following emerging areas like Chaos Engineering, the authors have moved Chaos into early adopter territory and added “Resilience Engineering” as a new category in the Innovators section. SRE is an area getting lots of attention as of late from the venture community.

  3. What’s top of mind for CISOs? Read YL Ventures Q4 Summary on the biggest pain points and where $ are being allocated. It’s no surprise that cloud security, data security, and privacy and regulations are some of the top concerns, esp. as CCPA kicks in on January 1.

  4. NeurIPS recap - machine learning at scale is hard, we’re still have a long way to go to be truly human, more discussion on neuromorphic computing or mimicking biology to for more breakthroughs

    But he noted that the technique yields highly specialized results; a system trained to show superhuman performance at one videogame is incapable of playing any other. “We have machines that learn in a very narrow way,” Bengio said. “They need much more data to learn a task than human examples of intelligence, and they still make stupid mistakes.”

    Bengio and Aguera y Arcas both urged NeurIPS attendees to think more about the biological roots of natural intelligence. 

  5. Tremendous insight at the Uber Engineering blog year in review, companies like Chronosphere in the observability space have recently launched from open source software developed at Uber; also a great example of how tech companies use content marketing for recruiting top engineers

  6. While this newsletter is about enterprise tech, I did want to share this Star Wars trailer with you. What’s fascinating is this was debuted inside of a video game, the Fortnite community. It’s mind-blowing to think of this as a compelling and new distribution mechanism inside of a video game. It’s all about power of community and engagement.

  7. There has been lots of discussion around security shifting left at point of creation and development versus after the fact. Some call this Sec DevOps and others just call it DevOps. I highly encourage listening to Guy Podjarny of Snyk’s interview on Software Engineering Daily if you are interested in understanding how to secure the software supply chain from cloud infra to APIs and open source. I’m biased as I’ve been an investor since Day one but this is a must listen.

  8. What are the Top 47 Enterprise Startups to work for in 2020 according to Business Insider? Great to have two of the boldstart portfolio cos among the esteemed group, Snyk and Front.


Markets

  1. Deep read from The Information on Google’s Deadline to beat AWS and Azure in cloud by 2023…or lose funding

  2. Semil Shah from Haystack picks Superhuman (a boldstart portfolio co) as his Breakout Tech Company of 2019 citing unbundling of G-Suite, huge TAM (total addressable market), and Prosumer growth

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