Back in the saddle.
Gil Dibner

While the threat of more lockdowns continues to hang over Europe, travel has returned to our lives at least for now. This fall, I’ve spent time in Copenhagen, Belfast, and Berlin — with travel to Tel Aviv and Paris coming up.

First: if you are based in Tel Aviv and/or Paris and running a deep tech / enterprise startup and want to meet up — please let me know! I’m in Tel Aviv meeting companies November 20–26 and in Paris on Nov 30 and Dec 1. It’s never too early — but it’s often too late — so let’s talk.

Second: I thought I’d share some thoughts from the three cities I’ve most recently visited.

Copenhagen. I’ve decided to double-down on Copenhagen as a focus city for me. It’s a gateway to the Nordics, a B2B-heavy eco-system, and a city small-enough to cover reasonably effectively from a standing start. After three days spent meeting VCs and companies, my main take-away is that I can’t wait to come back, and I think it’s probably only a matter of time until we make our first investment in Denmark. The quality of teams I saw there was incredibly impressive — and the ambition level of the Danish tech ecosystem has clearly risen to a global level. It was sobering, therefore, to learn that over 45 foreign (non-Danish) VC funds have participated in early-stage financings in Denmark over the past twelve months. In other words, as a VC operating in Europe — you can pick your markets and you can build relationships to generate great dealflow — but if you think there are undiscovered eco-systems or hidden caches of startups that your competitors have not yet located, those days are long gone.

Belfast. We’ve recently made an investment in Belfast, and we are super excited by what they are building. Our trip to Belfast was primarily to meet the team there and work with them a bit. We did, however, stop by the annual startup event run by Catalyst in Belfast called “Inbound Investors.” While the quality of the teams we’ve seen in Belfast is very high, the overall level of VC investment activity in the region remains low — particularly in comparison to booming levels in so many parts of the world. Here, it seems, the tech ecosystem is still where much of Europe was about ten years ago and where Israel was about 30 years ago: still almost entirely dependent on government assistance in some form or another and — for the most part — still working hard to make people pay attention. The visit was a reminder to me that we can not take the heady state of European and Israeli venture for granted. Just a few short years ago, most people thought we were crazy. That said, the world is starting to pay attention to Belfast — as Tiger’s recent $15M investment in Cloudsmith demonstrates. We can think of at least one more Belfast company that we think is going to make major waves.

Berlin. David and I were in Berlin last week for SuperVenture, which is easily the best LP-GP summit for venture capital in Europe. We also had dinner with one of our Berlin portfolio companies. For me, the key take-aways from the conference were three:

• GPs are raising a ton of capital. Rumors fly extra fast at conferences, and we heard about a lot of VC managers raising new funds that are massively larger than their previous efforts. It’s unclear to me how wise or sustainable this is — but it certainly means that firms are aggressively jumping from one swim lane to another. Sometimes, it means that our competitive set is changing. On balance, this is a good thing for firms that stay focused.

• Crypto is distorting capital flows. We heard about Crypto from GPs, LPs, and technologists. Three vignettes: (1) A GP telling us that he’s expecting huge paper markups from a company that is unexpectedly issuing a coin, (2) LPs telling us that GPs are shovelling capital at crypto opportunities at a dizzying pace, and (3) a technologist — one of the smartest ones I know — adamantly telling us that while there may be some speculative use cases for crypto, he can not see any technically valid reasons to build on it from an engineering standpoint. I don’t know where the truth lies — but I will keep looking. What I can say is that the noise level is rising as people move increasingly larger piles of capital around. As the paper returns rise, a chorus of incredulity from some corners is beginning to rise as well.

• Portfolio construction that stands the test of time. We had several deep conversations with some wise and experienced LPs. In these conversations, a common theme emerged: the current climate is unprecedented and can not last forever. When the tide goes out, the old principles of portfolio construction (ownership, conviction, concentration) are going to separate the winners and losers. The times when it is hardest to stay focused are exactly the times when it is most important to do so.

It’s good to be moving around this amazing continent again and seeing people in person.

If you’re building the next big thing in real technology, let’s meet for a coffee or — at least — over zoom. Hit me up at [email protected]

EVENTS

Dec 2 / David Peterson on Joining Angular and How the Future of Enterprise will be “Customer-Built”
David Peterson, Partner, Angular Ventures

Dec 8 / Fireside Chat with Leigh Moore, VP of Marketing at Snyk
Leigh Moore, VP of Marketing, Snyk

FROM THE BLOG

The Long Road to Creating a Category:
Category creation strategy, with a little inspiration from Apple.

Three Methods of Venture Capital:
A guide to navigating a manic market as a venture capitalist (part 1).

Back to Basics — My VC Manifesto:
A guide to navigating a manic market as a venture capitalist (part 2).

How the “No Code” Design Paradigm is Revolutionizing Enterprise Software:
Companies like Figma, Airtable, Notion, and Zapier are doing much more than vanilla PLG.

EUROPE & ISRAEL FUNDING NEWS

UK/Space Systems. Inmarsat has been acquired for $7.3B by Viasat for its satellite-based communications services to shipping, aviation and government departments.
Belgium/Data Tooling. Collibra raised $250M for its tools to find, understand, access and analyze data in the organisation.
Israel/Community Management. OpenWeb raised $150M for its platform that allows publishers to foster and engage with online communities while maintaining civil discourse, increasing user retention, and reducing toxicity.
Israel/IT Infrastructure. ControlUp raised $100M for its monitor and improve desktop computing performance across disparate work environments
Israel/Self Driving. TriEye raised $74M for its sensing technology that can be used to help autonomous and driver assistance systems to see better in adverse conditions.
Germany/Crypto Infrastructure. Matter Labs raised $50M for its software solution that is looking to provide an Ethereum Layer 2 scaling protocol.
Germany/D2C Logistics. Hive raised $33M for its platform helping direct-to-consumers brands manage their offering customers logistics centres, storage solutions, customised analytics, and forecasts and operations optimisation suggestions.
Israel/Code Documentation. Swimm raised $27.6M for its solution to prompt developers to include documentation, make it easier to create it, and even let them know when it’s fallen out of date.
UK/Frontline Productivity. Blink raised $19.5M for its platform for frontline workers to use and engage with the various IT services used by their organizations, as well as with each other.
UK/In-Game Ads. AudioMob raised $14M to help develop an in-game audio ad network.

WORTH READING

ENTERPRISE/TECH NEWS

The World Ahead. As we head into the new year, the Economist shared 22 emerging technologies to watch in 2022. Some of these technologies, like quantum computing, will be truly revolutionary. Quantum computing has been anticipated for decades, but when will it become a reality? “One measure of a quantum computer’s capability is its number of qubits. A Chinese team has built a computer with 66 qubits. IBM, an American firm, hopes to hit 433 qubits in 2022 and 1,000 by 2023. But existing machines have a fatal flaw: the delicate quantum states on which they depend last for just a fraction of a second. Fixing that will take years. But if existing machines can be made useful in the meantime, quantum computing could become a commercial reality much sooner than expected.”

B2B SaaS is Eating the World. Boston Consulting Group published their latest global tech report, which ranks the top 100 technology companies founded in or after 2005 on the basis of growth in their average annual valuation. B2B SaaS topped the list as the dominant category, representing one third of the companies. The category has been a key driver of the global enterprise tech space since 2005. This trend is likely to continue as a recent BCG survey showed that “IT spending on B2B software is expected to rise, on average, by 3.4% in 2021, or 1.9% over 2020 levels.”

Increased Conflicts. Index’s Mike Volpi shares his view in The Information on how there will likely be increased conflicts between growing enterprise software companies. “In the enterprise infrastructure world, the biggest companies right now do one of two tasks: They’re either in the data business or they’re in the workflow business. Salesforce, Atlassian and ServiceNow are examples of workflow companies. But the world of data and the world of workflow are coming very close together, because data is the trigger that creates workflow. So my guess is you’re going to see some level of conflict between the likes of Atlassian and ServiceNow and the people that are more in the data business, like Datadog and Snowflake and Elastic. I think that there’s going to be an increasing amount of conflict, because these software systems used to be pretty disconnected, but now they’re very, very integrated.”

HOW TO STARTUP

Usage-Based Pricing. Openview’s Kyle Poyar shared their terrific 2021 State of Usage-Based Pricing report to better understand adoption of this pricing model and how it’s evolved over time. Check out the highlights here and the full report here. 45% of SaaS companies have adopted this pricing model, up from 34% last year. One of the many interesting facets driving the growth of UBP at SaaS companies is that “the seats are empty. If you look at SaaS trends like automation, AI & APIs, the value of software products doesn’t scale with more humans logging in (it might even be the inverse in some cases). SaaS vendors need to align price with customer value.”

HOW TO VENTURE

$100M Seed Rounds. USV’s Fred Wilson thoughtfully explains how once seed rounds are valued at $100M post money, these investments have an incredibly low probability of returning the fund for their seed-stage investors. According to Fred, the math simply doesn’t add up for these highly valued seed rounds to be financially wise investments. Then why are some investors investing in these rounds? Fred states “one has to ask the question, what are the investors expecting? A $100 billion outcome? Doubtful. Less dilution, maybe. A different power-law distribution? Don’t count on it. I think they are being delusional, comforted by the likelihood that someone will come along and pay a higher price in the next round. But it seems that person may also be delusional. Because when you model things out, the numbers just don’t add up.”

Venture Capital’s New York Moment. Many top VCs are now choosing to be based in NYC, rather than the SF Bay Area. This trend has increased substantially during the pandemic, with increased location flexibility. ““The reason VCs are moving here now is because they’re allowed to. The Bay Area has lost its stranglehold on tech,” adds Logan Bartlett, a partner at Redpoint who initially planned to move to San Francisco upon his hiring, before opportunistically staying put “People want to be in NYC for lifestyle reasons and because no one wears a Patagonia vest.”” Lifestyle reasons aren’t the only driver of VCs’ migration east. In the last decade, the NYC tech ecosystem has evolved drastically and become the center of gravity for crypto, ad tech, ecommerce, digital health, etc. With many founders now choosing to base their startups in NYC, “if you don’t have someone in New York, you’re going to miss out”, according to Lightspeed’s New York-based partner Justin Overdorff. For Angular, NYC has always been the center of gravity of our US operations, with one of our team members, Anne Blum, based there full time and helping portfolio companies on the ground.

Sequoia’s Fund Structure. Last month, Sequoia announced that it was abandoning the 10-year venture fund model. Replacing it with a single open-ended fund, the Sequoia Fund, that will raise money from LPs and then funnel that capital down to a series of smaller funds that invest by stage. While many initially saw this as revolutionary, some are now arguing that their new fund structure is a natural progression, rather than a game changer. “Venture’s significant growth in the last decade-plus have made this change in fund structure for large firms like Sequoia almost inevitable due to the way these firms now operate — making the public market not nearly as attractive as the more sheltered private market and the capital now there.”

PORTFOLIO NEWS

Levity published the ultimate guide to getting started with No-Code AI.

Datos Health’s Chief Strategy Officer, David Yavin and Vice President Sales, Tom Spalla, will be discussing how healthcare organizations can improve patient care with remote patient monitoring on December 9th. Register here to join the webinar.

Front’s CEO, Mathilde Collin, argues that the future of work is flexibility, not the 4-day week.