Europe/Israel Enterprise/Tech Weekly

The Angle Issue #59: For the week ended September 24, 2019

Good morning from London. 

After a very busy summer (three new investments...more on that later), we're gearing up for an even busier autumn at Angular. Last week, I was in Paris at a VC "unconference" hosted by The Family, a Paris-based startup acceleration guild with a presence in London and Berlin. I gave a talk on what sets the Israeli startup eco-system apart and learned a bit more about what's driving the French eco-system. On Monday of this week, I was at the Entrepreneur First demo day in London where about 25 startups from across Europe presented. (For a taste of their philosophy, read this recent piece by Nicolas Colin). Next week, I'll be in Madrid at South Summit. If you know of any interesting startups or investors that will be there (or are in Spain/Madrid in general) please let me know. 

The biggest story this week - which is still dramatically unfolding as I write this - is the crisis of confidence in WeWork. While WeWork is unique in many ways - and completely different from the company Angular typically backs - the governance crisis faced by WeWork may turn out to be a seminal event in the history of the tech bubble of the past ten years. The era of the cult of the founder may be ending. Long live profitability and unit economics. For the best and most thoughtful analysis of WeWork (and many things tech) check out (1) Scott Galloway and Kara Swisher's "Pivot" podcast and (2) Scott's twitter feed. Here's a killer post on WeWork by Scott. 

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

Technology for Trust. Why we invested in Vault Platform (read about the follow-on round here)

Stop counting unicorns. How fund economics are inflating the private tech market and wrecking companies.

2015-2018 Europe & Israel Venture Data: $25.1B of 2018 VC investment summarized in 83 slides.

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

• Netherlands/Devops. Gitlab raised $268M at a $2.75B valuation for enterprise-grade version control. 

• Switzerland/Deskless. Beekeeper raised $45M for a communication platform for deskless workers.

• Finland/Feedback. HappyOrNot raised $25M for customer satisfaction terminals.

• Israel/Optics. Dust Photonics raised $25M for optical modules for data centers and HPC.

• UK/Greece/Data pipeline. Lenses.io raised $7.5M for advanced data pipeline tools.

• Israel/Conversational Interfaces. Facebook bought ServiceFriend 

• Ireland/Venture. A review of the Irish VC funding landscape: numbers are down, but more seed deals are taking place.

• Israel/Venture. An interview (in Hebrew) with Adam Fisher of Bessemer, arguably the best individual VC investor in the country. 

• France/Government Support. French President Emmanuel Macron announced the availability of $5.5B in new debt capital to help grow startups in France.

Worth reading

Enterprise/Tech News

• Enterprise IPO Season. Procore, a construction software vendor, is expected to go public soon. DataDog went public and surged 39% to nearly $11B in valuation.

• Two new enterprise unicorns. Stripe, the payments company with Irish roots raised $250M at a $35B valuation and DataRobot raised $206M for democratized machine learning.

• Quantum supremacy? A team of Google researchers claims they have achieved it. Quantum Supremacy is "is the point at which a quantum computer is shown to be capable of performing a task that’s beyond the reach of even the most powerful conventional supercomputer. The claim appeared in a paper that was posted on a NASA website, but the publication was then taken down. Google did not respond to a request for comment." IBM also announced a next-generation quantum computer as well.

• RPA. Sifted takes a close look at RPA and asks if it can live up to the hype. "Around half of global businesses recently polled by Pegasystems, a US-based RPA company, said that bots were harder to deploy than they originally thought. It typically takes around 18 months to get the bots working."

• AI: moonshots vs. low-hanging fruit. The WSJ takes a look at AI in the enterprise and finds lots of activity, few moonshots, and several challenges. "Early AI adopters struggle with an array of basic challenges. The most common ones, each cited by about 40% of respondents to the 2018 survey, were implementation difficulties, integrating AI into the company’s roles and functions, and data privacy and related data issues—not surprising for a complex technology in its early stages. Most current AI projects are focused on augmenting the capabilities of the workforce.  Automation to cut jobs received the lowest rankings among the list of top AI benefits, the choice of only 24% of respondents. However, the vast majority of respondents agree that AI is transforming many jobs, leading to moderate or substantial changes in roles and skills."

• The email drain. You are not imagining things. A new Adobe study finds that email is sucking up an average of 5 hours of employee time per day.

• Microsoft vs. Slack.  Microsoft's "Teams" collaboration software seems to have overtaken Slack, at least in large enterprises. "[Microsoft] says that more than 13 million people are using Microsoft Teams daily, along with more than 19 million weekly active users. This is the first time Microsoft has revealed an active user count, and the company’s previous update was that 500,000 organizations were using the service back in March. This figure is above the more than 10 million people who use Slack daily."

• Devops deluge. Silicon Angle argues that devops professionals are drowning in massive quantities of operational data, which is forcing them to rethink how to handle this data. "The sheer scale of enterprise data being generated in companies like Google and others is driving many firms in the solutions space to offer autonomous tools for managing the massive volume of information. This is creating new questions of organizational responsibility and culture as DevOps shoulders much of the overall management workload. “DevOps are running autonomously; they’re doing their own thing so they can move quickly,” Gohring noted. “But is there anybody overseeing the application that’s made up of maybe a thousand microservices? In some cases, the answer is no.”"

How to Startup

• You'd rather be a pegasus than a unicorn. Jason Calacanis, a Silicon Valley-based angel investor and podcast host who has gradually won me over with his thoughtful commentary, argues that startups that can use cash flow to grow without external financing are the ultimate value creators. 

• The three rules of freemium. Christoph Janz of Point Nine offers three rules for identifying when freemium business models make sense: (1) margins must be high enough to sustain it, (2) the free plan and paid plan must attract similar enough users for free-to-paid conversion to be realistic, and (3) the product must be at least somewhat viral.

• The viral coefficient. Ashley Smith, a venture partner at Openview, explains the "K factor" - the viral coefficient and how it drives the mathematics of viral growth. The piece also breaks down several types of viral growth: word of mouth, incentivized word of mouth, demonstration virality, infectious virality, 

• Why lower valuations can be better for founders. Founder collective argues, in a clever comic strip, that there are many cases where smaller rounds at lower valuations are better for founders. "...a valuation too far beyond a startup's progress can be a trap."

• SaaS metrics at your fingertips. Yasmin Razavi of Spark made a cool nocode app that brings publicly traded SaaS company metrics right to the palm of your hand.

How to Venture

• Firm returner. Hunter Walk argues that while returning the fund is nice, returning the firm is better (and possible). "But the other day I was doing some math for fun – what would a Homebrew investment need to pay out in order to not just return the fund it was in, but return the firm? By that I mean earn back every dollar our LPs have committed to us across our multiple funds ($210 million). And wondering how many firms have experienced a “firm returner” and what’s the latest in a firm’s lifecycle this has occurred (obviously it gets more difficult as you have more AUM. A multi-decade firm would need to likely make billions in a single investment to “return the firm.”) As I thought about it more I realized it was likely more common than I’d originally speculated since we all know firms that have had a 5-9x fund within their first few several raised.

• An interview with Sarah Guo of Greylock. The Greylock partner talks digital transformation and enterprise software with Forbes. "It is not just about moving a few ERP or CRM systems to the cloud. We are going to see more categories that matter in SaaS than there were in the traditional enterprise software world, which I find extremely exciting."

• The SaaS correction of 2019. Tomasz Tunguz of Repoint looks at the decline in value in publically-traded SaaS companies and finds an average decrease of 19% in forward multiples over the past three months.

Portfolio News

ServiceFriend was acquired by Facebook.

Balena released the first fully functional 64-bit OS for the Raspberry Pi 4