Europe/Israel Enterprise/Tech Weekly

The Angle Issue #51: For the two weeks ended March 6, 2019

After a great week in Berlin last week, I’ll be in Tel Aviv on March 17–31 and happy to meet over a coffee and some enterprise/deep tech conversation.

Angular will also be participating in a panel discussion with a few other great folks from Yotpo, Schear Immigration, and Nextage to talk about the process of scaling from Israel into the US. Register here and lets meet there.

The best piece of startup-related content this week comes from Mark Suster — and it’s not one piece — it’s a series. Mark has authored a series of posts advising founders on how to run effective board meetings. He has released eight of the planned 20 pieces. All of them are worth a read.

Stop counting unicorns. Maybe it’s because I hung out with a ton of GPs and LPs in Berlin last week, but my attention kept getting drawn to the inflation in the VC market that we are all living through. Until we have some evidence that we can trust these valuation marks, I think we’d all be better off if we stopped counting unicorns and started reporting revenue, EBITDA, and unit economics. My view is that two things are happening simultaneously: (1) There are new opportunities to build more value faster than ever before (winners will be bigger and faster) and (2) there is also a massive bubble in private market valuations — especially in tech. A lot of this is inflation due to “fund economics” — venture funds with too much money to deploy are cramming capital into companies and driving valuations up, stacking up preferences, diminishing governance, and diluting board quality. For early-stage founders, the on-ramp to this treadmill comes surprisingly early. Founders need to think holistically about value creation, value-added, experience, and values alignment. And this thinking needs to start early and stay front of mind. Once it gets underway, the impact of mispricing compounds. If a company is 2x over-valued in 2019, it will be under pressure to be 2x over-valued in 2020 & 2021. But the revenue (and profit) gap between valuation and economic reality will keep growing — and pressure to over-spend will become overwhelming — as the company tries to catch up with its valuation. On the DNA side, the effect is similar. And all of this can start as early as seed. Adding an over-sized investor with a poor understanding of your business and market, unrealistic targets, and perhaps different values will immediately alter board dynamics, usually irrevocably. Founders: stay hungry, stay humble, stay sane. Are you really in a market where capital will determine success? Do you really believe that if you hit the right milestones, you won’t be able to raise? Do you understand fully the risk you are taking by signing that term sheet? Your fiduciary duty is to sustainably and rationally grow your business and maximize shareholder value over the long run. It is NOT to maximize your short-term paper valuation at the expense of putting the entire enterprise at risk. Align yourselves with investors, advisors, board members, and executives who are experienced in building real value over time; who will stand by you in tough times if the fundamentals justify it; and who will not lie to you or to themselves about your business.

If you are building an enterprise tech startup in Europe or Israel,
please let me know… Now let’s get to the news.

From the blog

2015–2018 Europe & Israel Venture Data: $25.1B of 2018 VC investment summarized in 83 slides. Show some twitter love by clicking here.

A Security Layer for the Physical World: Why we invested in DUST Identity

Angular’s first investment: Why we invested in Aquant.io

Europe/Israel Enterprise/Tech

• USA #1. Angular’s view — and it’s born out by tons of data (just ask me!) — is that European and Israeli enterprise startups can’t afford to ignore the US market if they want to scale into global category leaders. This week, Bloomberg had an interesting piece on why the opposite is not true: many US startups can ignore the rest of the world for quite some time, apparently, and get away with it.

• UK/Brexit. How the UK tech scene is trying to stop Brexit.

• Israel/Security. Palo Alto Networks acquires Demisto for $560M for intelligent automation of security processes.

• Israel/Data. Google acquires Alooma for an estimated $150M. (Congrats, Yoni!) Alooma provides a data migration (cloud-based ETL) solution.

• Italy/Crypto. Coinbase acquires Neutrino for its blockchain tracking tech.

• France/Insects. Ynsect raised $125M (not a type-o) for insect-based protein. Being a vegetarian never seemed more appealing.

• UK/Security. Sequoia backs the UK’s Tessian with $42M to stop human error in email.

• Finland/VR. Varyo ships its $6K enterprise-grade VR headset.

• Israel/RPA. Kryon raised $40M for RPA.

• Sweden/Israel/Data. Qlik, born in Sweden, acquired Attunity (Nasdaq: ATTU), born in Israel, for $560M.

• Israel/Customer Analytics. Walmart buys Aspectiva for an undisclosed amount.

• Israel/bridges. How the Peres Center for Peace is bringing Israeli Arabs and Israeli Jews together to build smarter cities.

• Israel/CFIUS. The Israeli government signaled that it would follow in the footsteps of the US CFIUS program and implement some sort of national security review of certain technology investments. This is not a surprise, but it does offer more evidence of the worrying trend towards technological nationalism.

• Israel/Moonshot. Launched on a SpaceX rocket on Feb 21, an Israeli effort seeks to become the first privately-funded effort to land on the moon.

Worth reading

Enterprise/Tech News

• It’s Facebook’s workplace, we just work here. Facebook announces 2M paying users of Workplace. “More than 150 companies have 10,000 users or more on the platform, according to the announcement. In the last year, the company has added high-profile customers including AstraZeneca, Delta Air Lines, Vodafone and Nestlé.”

• Cloud costs — justified. A detailed tweetstorm by Hemant Mohaptra of Lightspeed explaining just why Lyft pays AWS $100M a year. Definitely worth a read. For more, the information covered sky-rocketing cloud costs in detail this week: “In their rush to catch a new wave in tech, some businesses have moved old applications to the cloud without rewriting them, resulting in inefficient software that can rack up higher costs. Some miscalculated their computing needs. Cloud services offer heavily discounted pricing — as much as 75% — if customers pay in advance for set amounts of computing capacity. But if customers end up using more than they expect, they have to buy more at a much higher price.”

• Microsoft’s enterprise hardware renaissance. The software giant released two pieces of hardware geared at enterprise developers. The first, Hololens 2, is an enterprise-grade AR headset. The second is a revamped version of the Kinect 3D camera, released this time as dev kit for enterprise applications.

• Humanity + AI. A16Z on why humans and AI are better together.

• If you can make it here… How NYC became a tech hub. “The story of tech’s ascent in New York stretches back nearly two decades. It was a bumpy path, with progress both by design and serendipity. DoubleClick, a survivor of the dot-com crash and a digital advertising pioneer, and Google, which made an early bet on the city, played key roles. And the Bloomberg administration also made smart policy moves.”

How to Startup

• Running effective board meetings. The best piece of startup-related content this week comes from Mark Suster — and it’s not one piece — it’s a series. Mark has authored a series of posts advising founders on how to run effective board meetings. He has released eight of the planned 20 pieces. All of them are worth a read. Here’s a taste from “how to stop your board meeting from going down a rat hole:” “So here it is in a nut shell. The reason most meetings that go down rat holes end up there is that you have one of the archetypes above who take a meeting off track. Often they do it with good intentions and are willing to behave when asked. Too many CEOs see it as their responsibility to answer every question asked, whether germane to the agenda or not. The problem with this is that it both disrespects the time of every other board member AND it reduces the time a board has to function productively as a group. And the problem is that most board members would rather bite their lips than to speak out against the time waster.”

• Three-year org chart. Brad Feld of Foundry Group on why every CEO should build a three-year org chart — and how to go about it: “Close your eyes and image three years into the future. You are three years older…Open your eyes. Your business is somewhere between two and three times bigger than it was when you closed your eyes. Do not look at your old org chart from three years ago. Draw a new org chart. This time you can have empty boxes and TBH. You still don’t want dotted lines if you can help it. Once again, go two levels down. But start with the CEO box. Are you still in it?”

• How to hunt elephants. Jon Lehr of Workbench on how to engage with large enterprise customers. The money quote: “You need to know who is just grinning at you and who has real budget.”

• The elephants will waste your time. Hunter Walk on avoiding time-wasting meetings with customers that are too large. He offers four great pieces of advice: (1) you don’t have to take the meeting, (2) make sure the right people are in the room, (3) don’t “over-ass” it (you’ll have to read it), and (4) view every meeting as a potential recruitment opportunity as well as bivdev.

• IPO extinction? Openview on the death of the VC-backed IPO. “The decline in the number of publicly-listed companies has affected companies of all sizes, but Micro- and Small-cap companies have been hit hardest, having seen declines in excess of fifty percent since 1997. At the same time, the broader Private Equity market (including LBO and VC) has seen near record levels of capital commitments, and most importantly, record distribution levels…But why is this happening?”

• Cocktail party pitch. Upfront’s Mark Suster on the cocktail party pitch (video).

• YC applications for Summer 2019 are open. If you click this link to apply, please also email me. :)

How to Venture

• The doubling model. Fred Wilson breaks down how he thinks about value creation and valuation.

• Everything summarized. Louis Coppey of Point Nine summarizes everything in a tweet.

• A consumer angle. Sunstone becomes Heartcore, the “Angular Ventures” of European consumer tech.

I am the founder of Angular Ventures, a specialist early-stage enterprise tech VC firm based in London and Tel Aviv. Angular backs companies born in Europe or Israel with the ambition to define a category and achieve global leadership, usually by starting with the US market. You can follow me on Twitter and Medium. If you are running an early-stage start-up in the enterprise space anywhere in Europe or Israel, I’d love to hear from you to see if Angular can help. You can find a list of past and current portfolio companies here.

Yours,
Gil Dibner

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