Europe/Israel Enterprise/Tech Weekly

The Angle Issue #41: November 5, 2018

This was a week that solidified the triumph of open source in the enterprise. The major headline, of course, was IBM’s massive $34B acquisition of Redhat, the third biggest M&A transaction in the history of US technology. But there was also Hashicorp’s $100M round and — right here in Europe — Neo4j’s $80M round.

The wisdom and strategy of IBM’s takeover of Redhat will be debated for a long time — and we won’t know until long after the ink is dry. Ben Kepes has a fairly negative view on the acquisition: “This deal is, in my view, at best neutral for IBM. It is, however (and also in my view) negative for Red Hat who will now suffer through a long and convoluted process to first seek regulatory approval and then integrate into the mothership. Meanwhile, the best and brightest within Red Hat will quietly (or not so) look elsewhere and jump ship.” Redpoint’s Tomasz Tunguz was more positive, pointing out that “three of the largest software acquisitions of the last ten years have been open source.”

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If you are building an enterprise tech startup in Europe or Israel, please let me know…

From the blog

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

1Q18 & 2Q18 EU+IL VC Data.
$12.7B of VC investment summarized in 70 slides.

Europe/Israel Enterprise/Tech

• Israel/Security. Israeli security giant Checkpoint acquired Dome9 Security for approximately $175M. “Dome9 develops SaaS-based cybersecurity technology for multi-cloud deployments across Amazon AWS, Microsoft Azure and Google Cloud.”

• Sweden/Graph Databases. Graph database titan Neo4j raised $80M. (Congrats, Emil!) “They have been successful with around 200 enterprise customers to their credit including Walmart, UBS, IBM and NASA. He says their customers include 20 of the top 25 banks and 7 of the top 10 retailers. This year, the company began expanding into artificial intelligence. It makes sense. Graph databases help companies understand the connections in large datasets and AI usually involves large amounts of data to drive the learning models.”

• Israel/Personalization. Dynamic Yield raised $38M to continue building out its website personalization platform. “Dynamic Yield says it works with more than 220 global brands, and its tech reaches 600 million unique users each month, across 10 billion page views and 600 billion “events” on those pages. It claims its AI-based personalization technology can lift revenues (or other engagement metrics) by 10–15 percent.”

• Israel/Blockchain. Starkware raised $30M from an A-list of investors including former Sequoia partner Matt Huang’s new fund and Coinbase founder Fred Ersham. According to Calcalist, “founded earlier this year by UC Berkeley researcher Alessandro Chiesa, Eli Ben-Sasson and Michael Riabzev of the Technion Israel Institute of Technology, and CEO Uri Kolodny, StarkWare develops technology for blockchain-related privacy and scalability issues based on zero-knowledge proof, a mathematical tool developed in the 1980s. The company employs 16 people in central Israeli city Netanya.”

• Israel/Industrial Drones. Airobotics raised $30M.

• UK/Crypto Regulation. The UK government’s “Cryptoassets Taskforce” has published a report of its initial findings and recommendations: Here’s the money-quote from the forward: “There is limited evidence of the current generation of cryptoassets delivering benefits, but this is a rapidly developing market and benefits may arise in the future. There are substantial potential risks associated with cryptoassets, and the most immediate priorities for the authorities are to mitigate the risks to consumers and market integrity, and prevent the use of cryptoassets for illicit activity.”

• Sweden/UK/Digital Currency. Sweden plans to launch a crypto e-Kronaand the UK canceled plans to launch a gold-backed digital currency.

• UK/Internet tax. Apparently, Brexit isn’t enough of a threat to the UK’s role in the global digital economy, so the government has decided that now would be a good time to impose a tax on online business. UK chancellor Philip Hammond announced that “the UK will, in April 2020, introduce a digital services tax on search engines, social media platforms, and online marketplaces.” I don’t question the need to tax online businesses (that loophole has been open for too long), but I do question the timing.

• Israel/Cybersalaries. Rumors of a $1M compensation offer by a private company for a soldier serving in one of Israel’s elite tech units are highlighting how hot the Israeli security labor market has become. “As the allure of the private companies increases, much like its U.S. counterpart, Unit 8200 has increasingly found it difficult to hold on to its best talent, [Brig. Gen. (ret) Ehud] Schneorson said. In an attempt to make the service more appealing, Schneorson said, the unit’s command went as far as tailoring career paths for some of the more senior unit officers. There is also what is dubbed by officials as a “time-capsules plan”, allowing career soldiers in cyber and tech units to take a leave-of-absence for up to two years to work in selected tech companies.”

• UK/Deepfakes. How UK technology company Serelay is fighting Deepfakes.

• Israel/Automotive. Triggered by a joint VW/Mobileye announcement of plans for autonomous taxis in Tel Aviv, nocamels has a good look at the burgeoning mobility tech sector in Israel.

• Germany/The Other Amazon. The Business of Fashion has a great profile of Zalando and how they are working to out-Amazon Amazon in Europe. “We did a bigger strategy around 2013 to 2014 and one of the basic insights coming out of this was that there will be a major shift in the fashion industry towards total digitization. We also examined how ecosystems had evolved in different geographies. We specifically looked at China and how well companies such as Alibaba or WeChat developed ecosystems by platforming their assets. We also thought about how, when we only offer a wholesale proposition to fashion brands, they will always try and invest around us in order to gain more control and a better understanding of the value chain. We would rather present them with opportunities that solve problems and align our incentives and assets, so we decided to go from being a retail company enabled through technology to a technology company that enabled retail.”

Worth reading

Enterprise/Tech News

• Hashicorp. The US open source tooling company raised $100M.

• Headspin. At the very least, the branding team at Headspin seems to have gotten the company’s name right. The company, which emerged from stealth last year, has raised a $20M Series B at a $500M valuation(dilution of 4%). Founder & CEO Manish Lachwani was previously the architect of Amazon’s Kindle and CTO of Zynga among other things. Headspin provides an AI-based approach to mobile app testing: “HeadSpin works with Tinder, DocuSign and some 200 other app providers, allowing the companies to test and monitor their apps in real time and on real devices before, during and after an app is released. The AI-enabled platform gives developers the ability to experience their app just as any regular user would and highlights high-priority issues so companies can quickly resolve customer’s problems at scale.”

• Five Enterprise IT Predictions form Gartner. They are: (1) AI projects will continue to look like “alchemy” and be poorly understood by organizations, (2) block projects will suffer from “privacy poisoning,” (3) internal enterprise offerings will increasingly be offered as externalized revenue centers, (4) the digital giants (MSFT, GOOG, AMZN) will control 40% of the IT market, and (5) cybersecurity breaches will lose their impact as the industry becomes increasingly jaded. More color here from CIO Dive.

• Google’s #MeToo Moment. 17,000 Google staff walked out to demand better handling of sexual misconduct allegations.

• In-gathering of the tech execs. Israel might finally make it easier to impact non-Israeli talent to the country’s exploding tech sector.

How to Startup

• The metrics. This week’s must-read item is an 80-page slide deck by Andrew Chen, an Uber executive who joined Andreesen Horowitz as an investing partner in February. It’s a super thoughtful examination of how investors and CEOs should use metrics to track and drive growth. Here’s a sample: “The first thing to ask for is the product’s Acquisition Mix. This is a look at signups broken down by channels/loops and by time period (ideally weeks). I’m looking for signals that the dominant channel(s) are proprietary and repeatable. Ideally they are loops. I want low platform risk, where there isn’t a dependency on a larger company that might change their mind. (I.e., Instagram, Google SEO, etc.). A good mix might be 33/33/33 where you have a third organic, plus two loops, like viral and SEO.”

• Martin Casado of A16Z on going from product to sales. The whole thing is definitely worth a read, but here is one gem among many: “I’m a fan of the first sales hire being a strong senior sales rep who will carry a bag and close deals. A good “first sales rep” will find ways to get you in front of the right person — they’ll reverse engineer the org chart; they’ll find strategic initiatives that align with the product; they’ll sniff out budget and champions within the account. They’ll even help negotiate the price and navigate procurement. But they don’t typically “sell” — that’s the founder’s job.”

• Do you have a thesis plan? My friend Roy Bahat at Bloomberg Beta one why every founder needs a thesis plan (as opposed to a “business plan.”) “Start with a list of guesses. Make two columns. Label one “Guess” and the other “Burn.” Write your list of hypotheses you intend to validate, in the rough order you intend to validate them — with a burn rate for each phase. Some of these hypotheses — or guesses, if you prefer fewer syllables — get de-risked (venture term of art alert!) in parallel, others one after another. You can group some guesses into categories (e.g., “Product-Market Fit” or “Profitable Growth”).”

• Worst. M&A. Ever. CB Insights provides a list of 37 of the biggest corporate M&A flops in history.

• Forcing a subscription model. My friend Amit Karp of Bessemer on how he looks at non-recurring revenue.

• Which messaging app? If you are wondering which messaging app to use for what, Jeremy Liew of Lightspeed has the definitive flowchart.

How to Venture

• Creating a surplus. VC master (and VC master blogger) Fred Wilson explains in his typically cogent style why “creating surplus” is a strong framework for evaluating opportunity. Check out the amazing graph in the post.

• Eastward! Ophelia Brown, founder of Blossom Capital, presents some evidence that European founders are returning to Europe to launch their businesses. The data is anecdotal, but the anecdotes are real. The “rise of rest” is a global phenomenon. The ability to raise capital and scale in Europe/Israel versus the US is one thing. The wisdom of doing so, however, is a case-specific question.

• Getting into Venture. My friend Stephanie Manning at Lerer Hippeau blogs on how to get into the VC field.

Portfolio News & Jobs

SiSense CEO Amir Orad was interviewed by Insight.

Front launched a new version.

— Portfolio Jobs —

Vault is hiring developers for front end and back end. Location flexible.

Cloud66 is hiring software engineers in London.

Datos is hiring a BD lead in the US.

Moltin is hiring for multiple roles in the US and UK.

Resin is hiring globally.

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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