What's 🔥 in Enterprise IT/VC #320

Snyk's 🎁 to 🦄 Founders - on down rounds and thinking LT 📈

Dec 17, 2022

Hi all! As much as we celebrated 🦄 status, we should also not be afraid to 💪🏼 on down rounds which aren’t so down and which are clean with no special terms just like every previous round. What I’m talking about is Snyk’s latest Series G round of $196M at a $7.4B valuation, down 12% from its previous round. Nope, I’m not sad about it - I’m ecstatic. Tis the holiday season and this is Snyk’s gift to you.

Ed Sim @edsim

💪🏼 congrats @snyksec! Headline says down round but should be about @snyksec growing >100% YoY w/>130% net retention. Huge warchest for more acquisitions in 2023 + prep for long term. Clean terms, no structure!!! keep building!

Snyk @snyksec

We've announced a Series G funding round. More details from @TechCrunch's @ron_miller here 👇 https://t.co/TbvAxFyq1O

There is way too much emphasis on valuations and not enough on company performance. OnlyCFO nails how folks should really think about Snyk’s latest round.

OnlyCFO @OnlyCFO

Only a 12% down round is an amazing accomplishment (assuming there isn't much structure to the deal). Synk is one of the fast-growing companies in the world. If they are willing to take a down round, then so should you.

techcrunch.comSnyk scores another $196M as valuation drops 12% to $7.4BSnyk took another $196M in funding with a 12% drop in valuation, a trade-off it was willing to make to add more cash to the balance sheet.

Ed Sim @edsim

@OnlyCFO Agreed! This is clean as can be - there is zero structure and same as last round. Great opportunity for us to pad the balance sheet. And how bout that >100% YoY growth with >130% Net $ Retention?

And I’ll be honest, most 🦄 who are still growing >50% a year can raise a round of financing and keep their latest valuation if they choose but that will require a ton of structure on preferred equity like 2-3x liquidation preferences and full ratchet antidilution provisions which reset the price to the next round price. Other choices include companies taking structure debt to maintain its current price but that will be top of your preference stack loaded with financial covenants and ARR goals which if not met could mean the debt holders could take over your company. Who the hell wants that just to maintain a price which is not real?

Folks like Chris get it.

Chris Conforti @Chris_Conforti

Comments from Snyk’s CEO resonated with me... Ignore the stigma associated with a down round and do the right thing for the business. I expect more late stage companies to follow suit next year

Snyk @snyksec

We've announced a Series G funding round. More details from @TechCrunch's @ron_miller here 👇 https://t.co/TbvAxFyq1O

Here’s a bit more from Snyk’s blog post - the company is building a war chest for opportunistic strategic acquisitions. Along those lines, there won’t be any debate on what Snyk is worth when acquiring a company since the company just reset the bar at a fantastic valuation in a crappy market.

The funding provides even more fuel for Snyk’s continued efficient growth in 2023. The investment will drive noteworthy product innovation, allowing the Snyk team to enhance and expand, both organically and inorganically via strategic acquisition, its industry leading Developer Security Platform. Snyk’s unique developer-first solutions will continue redefining the application security and cloud security markets, ensuring developers are empowered to fix issues where and how they work, while security teams have the visibility, developer awareness and governance required to drive DevSecOps success.

And here’s a quote from myself in the release - the market is early, the company is executing and has become a true platform.

“As Snyk’s first investor, it’s been incredibly rewarding to see the developer security market mature over the last several years,” said Ed Sim, Founder and General Partner, boldstart ventures. “As global enterprises across all industries digitally transform, Snyk is the only solution that equips developer and security teams to find and fix vulnerabilities throughout the entire development process.”

Founders and investors, don’t focus on short term valuation metrics if you can make a decision for the long term which will help even create more value. Congrats Snyk! We’re 🔥 up to be on this journey from the beginning and to continue with another check.

As always, 🙏🏼 for reading and please share with your friends and colleagues.

Scaling Startups

This is an important read from the founder of Oculus and Doom on why he’s leaving Meta and more importantly on efficiency. Founders even with many years of runway, don’t just carry folks for the sake of it - the more people you have the slower you move as more folks need to buy into decisions and more meetings are had to get to consensus and so on and so forth
John Carmack @ID_AA_Carmack
I resigned from Meta, and my internal post got leaked to the press, resulting in some fragmented quotes. Here is the full thing:
facebook.comUpdate Your Browser | Facebook
1:55 AM ∙ Dec 17, 2022
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I have mixed feelings. Quest 2 is almost exactly what I wanted to see from the beginning - mobile hardware, inside out tracking, optional PC streaming, 4k (ish) screen, cost effective. Despite all the complaints I have about our software, millions of people are still getting value out of it. We have a good product. It is successful, and successful products make the world a better place. It all could have happened a bit faster and been going better if different decisions had been made, but we built something pretty close to The Right Thing.
The issue is our efficiency.
Some will ask why I care how the progress is happening, as long as it is happening?
If I am trying to sway others, I would say that an org that has only known inefficiency is ill prepared for the inevitable competition and/or belt tightening, but really, it is the more personal pain of seeing a 5% GPU utilization number in production. I am offended by it.
[edit: I was being overly poetic here, as several people have missed the intention. As a systems optimization person, I care deeply about efficiency. When you work hard at optimization for most of your life, seeing something that is grossly inefficient hurts your soul. I was likening observing our organization's performance to seeing a tragically low number on a profiling tool.]
We have a ridiculous amount of people and resources, but we constantly self-sabotage and squander effort. There is no way to sugar coat this; I think our organization is operating at half the effectiveness that would make me happy. Some may scoff and contend we are doing just fine, but others will laugh and say "Half? Ha! I'm at quarter efficiency!"
It has been a struggle for me. I have a voice at the highest levels here, so it feels like I should be able to move things, but I'm evidently not persuasive enough. A good fraction of the things I complain about eventually turn my way after a year or two passes and evidence piles up, but I have never been able to kill stupid things before they cause damage, or set a direction and have a team actually stick to it. I think my influence at the margins has been positive, but it has never been a prime mover.
This was admittedly self-inflicted - I could have moved to Menlo Park after the Oculus acquisition and tried to wage battles with generations of leadership, but I was busy programming, and I assumed I would hate it, be bad at it, and probably lose anyway.
More on productivity and efficiency
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Marc Benioff just told Salesforce & Slack employees he’s concerned they’re not being productive enough and asked if it was because of the flexible office policy. “New employees (hired during the pandemic in 2021 & 2022) are especially facing much lower productivity,” he wrote. 1/ https://t.co/VoIVrjPcnN
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Don’t underestimate @elonmusk. https://t.co/AlTe71g8zQ
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And the final one…
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Based on the conversations I’ve been having lately with people leaders and company execs, I think we’re in the middle of a substantial change in how companies are thinking about performance management.
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I’ve been using Readwise for years and loving this product so far for my personal productivity
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Huge news: after 1.5 years of private beta, thousands of testers, and a looot of incredible work by the team... @ReadwiseReader is finally in public beta! Save everything to one place, highlight like a pro, and replace several apps with one.
readwise.ioReadwise Reader: The first read-it-later app built for power readers.Save everything to one place to overcome content overload, search instantly, and highlight like a pro.
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