What do a 2003 BMW and Microsoft Excel have in common?
David Peterson

I’m not much of a petrol head, but I found myself absolutely engrossed by the first episode of the new podcast Car Show! with Eddie Alterman.

(Stick with me. I’ll bring this back to enterprise software in a minute, I swear.)

Host Eddie Alterman kicks it off: “Today’s cars are digitally remastered to perfection with all kinds of automated wizardry. All kinds of management software. And with all the flaws removed.”

He continues:

“Pre-millennial cars are mostly just straight- forward mechanical parts. Straight up analog. By the sheer empirical evidence — like acceleration and fuel economy — the notion that the new digital car is better than the analog one is manifestly true.

And yet…here we are behind the wheel of a 2003 BMW E39 M5. And here I am with the claim that it is still, almost 20 years later, the best sports sedan of all time.”

Alterman goes on to explore why the 2003 BMW E39 M5 is better, in his opinion, than the 2022 BMW M5 Competition, despite being far older and with far less behind-the-scenes software magic. Is his love for the 2003 M5 just nostalgia? Or is there something to it?

The whole episode is worth a listen. But I wanted to share one section in particular.

After driving the 2003 M5, he takes out the 2022 M5. About the 2022 M5, Alterman comments that while it’s “perfect, airbrushed, flawless,” there’s a “nagging video game-like simulation to the whole thing” because of the move from analog to digital.

In the 2003 M5, the shifter, steering, braking, suspension and rear differential were all mechanical. In the 2022 M5, they’re all digital. In addition, the 2022 M5 is loaded with a whole host of digital features like electronically controlled all wheel drive, lane keeping software, automatic emergency braking, blind spot warning… the list goes on and on.

At first glance, these may seem like positive developments. But something about the addition of all these digital features, Alterman argues, fundamentally changes the way the driver relates to the car. It feels like the process of driving is now being “managed” by code and electronics. All the code, all the non-mechanical interfaces…they act as a “layer of mediation between the car and the driver.” The result is that there’s a gap between how the car performs (acceleration, horsepower etc.) and how it makes you feel.

True to form, as I was digesting this episode, I immediately thought of Microsoft Excel.

(Don’t say it. I’m embarrassed about it, too.)

Excel is software at its most raw. Excel gives you powerful primitives, a workspace in which to play, and then lets you run wild. There are no obvious guardrails, and no strict onboarding flows that force you down a single path. And there’s something utterly freeing and energizing about that. Let’s be honest, millions of people don’t use Excel every day because they’re forced to. They use it because they love it.

Microsoft Excel is the 2003 E39 M5 of software.

Whenever I open up a piece of enterprise software that has been overly optimized to get me to click that button, and then that button, and then upload that file, and then… I think that I know exactly how Alterman feels driving the 2022 M5. I feel managed. Yes, I’m safe. I won’t break anything. I won’t veer off the golden path. But I also don’t feel, well, much of anything at all. Certainly nothing close to love.

That’s not to say there isn’t a market for that type of software. (The Toyota Corolla is the best-selling car of all-time, remember!). But in my opinion, finding the right balance between power and flexibility on the one hand, and safety and guardrails on the other, is the critical design challenge for modern enterprise software companies.

So, to the companies revolutionizing [insert industry here] by democratizing [insert technology here], can you do so in a way that leaves your users feeling empowered and energized rather than managed and disconnected? Can you build a 2003 E5 rather than a 2022?

As a city dweller, I won’t be buying a car anytime soon, but I can’t help but be utterly enthralled with software that attempts to evoke the power, flexibility and sheer intuitiveness of the 2003 M5. So if that’s what you’re building, let’s talk!

David

EVENTS

Jun 22 / The Importance of Culture and Values As You Scale a Business
Oren Kaniel, Co-Founder & CEO, AppsFlyer

FROM THE BLOG

Fewer, but Better Than Ever
The Israeli tech eco-system ponders a slowdown in startup creation.

Success Can be About Less Than You Think
Don’t fall victim to unfocused ambition.

Why Building a “Compound Startup” Might be the Next, Great, Non-Obvious SaaS Play
Or why “just focus” might be bad advice.

Enterprise & Deep Tech VC in Europe & Israel 2021
A data-driven look at a record-setting year.

EUROPE & ISRAEL FUNDING NEWS

UK/Payments. Modulr raised $108M for its API payments infrastructure solutions.
Israel/Mobility Software. Optibus raised $100M for its cloud-native AI platform that makes public transportation smarter, better and more efficient.
Netherlands/Employment. TestGorilla closed $70M for its pre-employment screening software to objectively consider and weigh candidates based on assessments instead of CVs.
UK/Financial. Elwood Technologies closed $70M for its market access platform that provides low-latency connectivity to global crypto exchanges.
Israel/Construction. Buildots raised $60M for its AI-enabled construction process management platform.
Germany/IT Infrastructure. SysEleven has been acquired for $53M by Secunet Security Networks for its managed Kubernetes and cloud service provider platform.
Austria/Marketing CMS. Storyblok raised $47M for its headless CMS platform connecting developers and marketers.
Ireland/Energy Services. Urbanvolt raised $38M to help companies finance and installs solar panels.
Israel/Blockchain Security. Certora raised $36M for its security analysis solutions for smart contracts.
UK/SaaS Purchasing. Vertice raised $26M for its tech-enabled SaaS platform helping businesses reduce their annual software spend and simplify the purchasing process.
Ireland/Supply Chain. Keelvar raised $24M for its sourcing optimization software.
Israel/New Diary. Imagindairy raised $15M for its crypto-based treasury and payment solutions for businesses and partners.

WORTH READING

ENTERPRISE/TECH NEWS

2022 state of crypto. a16z shared their 2022 State of Crypto Report, an annual overview of trends in the crypto industry. While the entire report is worth reading, one of their most important key takeaways is that web3 is much better for creators than web2 — “according to [their] analysis, web3 paid out $174,000 per creator, while Meta paid out $0.10 per user, Spotify paid out $636 per artist, and YouTube paid out $2.47 per channel. Web3 is tiny but mighty.”

2022 SaaS crash. While tech and high growth stocks have been particularly hit hard this year, one of the hardest hit tech sectors has been SaaS. Meritech’s chart-rich 2022 SaaS crash report highlights that the past six months have been the largest period of value destruction in the history of public SaaS. In fact, “the average company market cap is down 57% from its 12-month highs. Forward revenue multiples have fallen on average by 67% from their 12-month highs and for some companies by almost 90%.” How much worse could it get? Meritech looks to data from the 2008 crisis to answer this question. While “10x NTM revenue was once deemed a historical terminal multiple for the best companies”, Salesforce, one of the few great SaaS companies born before 2008, dipped as low as 1.5x NTM during the Great Recession. The median today among public SaaS companies is 8.8x NTM… implying a far greater SaaS valuation pull back is theoretically possible.

How this ends. The brilliant Fred Wilson attempts to answer the million dollar question — how will the current economic crisis end and how long will it last? According to Fred, the downturn will last for some time — likely till the economy and inflation both slow down — and stocks truly bottom out. “We need to be patient. None of this is going to happen fast. I would be planning to ride this thing out for at least eighteen months or more.”

HOW TO STARTUP

Operating during a downturn. David Sachs, from Craft Ventures, shared his take on the current downturn, what caused it, and how to survive it. The entire video is worth watching, but if you’re short on time, a core takeaway is that the fundraising bar has gone way up. David shared key metrics startups should strive to hit to improve their fundraising prospect in this environment.

Cash management. In the early days of the pandemic when the market was wavering, Gil shared how startups can survive the economic crisis. As the market continues to sour, much of the advice shared around cash management may be worth revisiting.

• “Runway. Make sure you know when you run out of cash (including how much it will cost you to conduct an orderly shutdown of your business if it comes to that).

• Stress-test your runway calculations for several scenarios. What if revenue growth is much worse than expected? What if it’s zero? What if you freeze increases in spending?

• Consider slowing down any increases in burn rate. It’s easy to raise burn-rate, but very hard to reduce it. We will all be smarter in one month than we are today — so any spending increase that you can delay is worth delaying, even slightly. Any spending cuts you were planning to make in any event should probably be accelerated.

• Close the deal. If you are fundraising right now, do everything you can to complete that fundraising as quickly as possible.

• Keep your milestones and collateral current. Make sure you have a clear sense of what milestones you think you need to hit in order to raise your next round — and think about how those milestones might change if your revenue plan is delayed. Maintain a skeleton fundraising deck at all times that outlines the key elements of your story. You never know when you’ll need it or want it.

• Plan ahead. Start planning your fundraising a bit earlier than you might otherwise have planned: 6–8 months before your cash-out date as opposed to 4–6 months. Start getting to know the right investors early.

• Report. If you haven’t already implemented a steady cadence of monthly reporting to your existing investors, now would be a good time to develop that discipline. You may need their support and the better you are communicating — the better.”

HOW TO VENTURE

Investor warnings. As the market continues to drop, many VCs have begun advising their portfolio companies on how to survive the downturn. For example, Reach Capital advised CEOs to “account for an extremely capital constrained environment, even for companies with strong growth rates” and “diversifying your growth channels, finding more organic ways to grow your business, cutting marketing spend that is inefficient…”. In ‘The Upside of a Downturn’ Lightspeed encouraged their portfolio CEOs to cut non-essential activities like “testing new marketing channels, hiring new engineers to build a product extension, or entering a new geography”. All signs point to the fact that we are entering a make or break period — one where investors’ guidance and support of their portfolio companies may be more important than ever.

PORTFOLIO NEWS

Planable’s CEO, Xenia Muntean, covers how a business should go about choosing its tool stack.

Levity shared how AI automation can help non-profit organizations deal with highly sensitive data.

Snyk appointed Adi Sharabani as their new CTO.

Front experimented with flexible Fridays for their employees and found it boosted recruitment, retention, and employee happiness.