Europe/Israel Enterprise/Tech Weekly

The Angle Issue #37: September 10, 2018

Peak Valley? Not so fast. The Economist leader and cover story last week are important for anyone building a tech company outside the US. They are equal parts right and wrong. As an American who has staked my entire career (and fund) on investing in deep tech startups outside the US (specifically Europe and Israel), my take on this is mixed.

What the Economist got right:

• The Silicon Valley eco-system has been awash with cash for a long time now, and — consequently — the cost of living and operating a business there have skyrocketed to unsustainably high levels

• Brilliance and great entrepreneurship are democratically distributed (see the article linked below on Sweden)

• A company doesn’t need to be born in the Valley (or ever move there) to be successful — and the technologies pioneered in the Valley itself are helping drive this trend and make that easier than ever before.

• Everyone is starting to realize this. American founders are increasing starting companies outside the valley and — sometimes — outside the US. Founders all over the world are getting into the game. VCs (and LPs) from the US are seeking investments around the world.

• Innovation is getting harder — at least in the short term. We’ve lived through a Cambrian explosion of cloud-driven SaaS/mobile innovation — but those relatively “easy” days are behind us. As I’ve argued elsewhere, the challenges of building large defensible technology business are increasing — and that is going to make life harder for startups in the Valley (and everywhere else).

What the Economist got wrong (or didn’t consider):

• As Fred Wilson pointed out in his response to the Economist, all things are not equal: “There is a much higher density of talent, capital, employment opportunity, and basic research in Silicon Valley versus other locations. When I say density, I mean physical density.” Fred’s right. The density of talent in the Bay Area is unparalleled — and the speed with which a Silicon Valley startup can get from a standing start to funding, or from product launch to relevance in one of the world’s largest single economies (the US) is still astounding.

• The recent shift away from the valley and towards the “rest” of the US (and the world) does not mean that the valley has somehow lost its magic — just that it’s gotten overheated. We’ve seen this cycle before — and will see it again. But the tech industry (and all of its participants) benefits from having a central hub — and the valley serves that function brilliantly.

• The transition into the US market is a challenge, but for enterprise tech startups, in particular, nothing can accelerate their pathway to global dominance as dramatically as a successful US market penetration.

In the meantime, if you are founding a startup in Europe or Israel (or know of one that is going to change the world) — please let me know…

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Please feel free to email me with comments (or startups) and if you like this — please forward to friends. Thanks!

From the blog

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

Europe/Israel Enterprise/Tech

• Netherlands/Israel/Search. Elastic, pioneer of the open-source ELK (Elastic-Logstash-Kibana) Stack which provides developers with an efficient way to build full-text search into their applications, filed for an IPO on the NYSE. Not only does this create another enterprise tech $1B+ exit on this side of the Atlantic, but it’s an example of a hybrid European/Israeli team that ultimately built its business in the US and conquered a global market with unique technology. The company is doing around $160M in revenue (nearly double last year’s figure), is loosing around $18M per year, and has raised just over $100M since inception in 2012. For more, check out the company’s history page or their Wikipedia entry.

• Germany/IoT. Berlin-based Relayr was acquired by Munich Re for $300M: “The pair have been partnered since 2016, when the insurance firm invested in relayr’s Series B, but say they see the acquisition strengthening Munich Re’s financial and insurance offerings while also offering a route to expand relayr’s middleware business via leveraging the insurance group’s large client base.”

• Sweden/Big Exits. VentureBeat has a detailed and thoughtful look at how Sweden is emerging as one of Europe’s true tech hubs — and, critically, it is about a lot more than financing. “The big success stories, like King, Spotify, and iZettle, are creating huge pools of talent that young companies can draw upon. The result is entrepreneurs who not only have much bigger ambitions, but the experience to successfully scale companies on a global basis.”

• Switzerland/Decentralization. DFINITY raised $102M from A16Z and Polychain for a decentralized cloud computing infrastructure platform. This is the second round of funding and follows a $61M round earlier in 2018. The company’s vision appears to be to build a decentralized cloud computer that can securely process transactions much faster than the traditional bitcoin/ethereum blockchains.

• Sweden/Exoskeletons. Sarcos Robotics raised $30M for its industrial/military exoskeleton systems.

• Netherlands/Recycling. Black Bear raises $13M for its “Tires to Carbon Black” technology.

• Switzerland/Drones. Auterion raises $10M for open-source drone software.

• UK/AI. Prof Jim Al-Khalili, incoming president of the British Science Association, warns that without greater transparency and public engagement the full potential of AI may not be realized.

• UK/Flying Taxis. A prototype flying eVTOL taxi takes to the air over the Cotswolds.

• Israel/Food. A new food tech hub is being established in the northern city of Safed.

Worth reading

Enterprise/Tech News

• Atlassian Buys Opsgenie. Atlassian launched it’s “Jira Ops” product to help engineering teams respond to and resolve incidents. Together with this announcement, the company also announced the acquisition of Boston-based OpsGenie for $295M, a company which provides “next-generation” (collaborative) incident management tools. Bloomberg has more.

• Ben Evans on Tesla, Software, and Disruption. It’s a great read. Here’s the beginning: “When Nokia people looked at the first iPhone, they saw a not-great phone with some cool features that they were going to build too, being produced at a small fraction of the volumes they were selling. They shrugged. “No 3G, and just look at the camera!” When many car company people look at a Tesla, they see a not-great car with some cool features that they’re going to build too, being produced at a small fraction of the volumes they’re selling. “Look at the fit and finish, and the panel gaps, and the tent!” The Nokia people were terribly, terribly wrong. Are the car people wrong? We hear that a Tesla is ‘the new iPhone’ — what would that mean?” Click here to read the rest.

• Enterprise tech IPOs. CIO Dive looks at six recent enterprise tech IPOs, including Safe-T, from Israel.

• An application monitoring unicorn. Pager Duty raises $90M at a valuation well north of the $1B mark.

• NY = AI. How NY’s AI boom is impacting startups and salaries.

• AI in the workplace. The Economist wrestles with the impact of AI on work: “The march of AI into the workplace calls for trade-offs between privacy and performance. A fairer, more productive workforce is a prize worth having, but not if it shackles and dehumanises employees. Striking a balance will require thought, a willingness for both employers and employees to adapt, and a strong dose of humanity.”

• Goldman Bails on Crypto. The storied investment bank seems to have decided to back away from setting up a crypto trading desk for the moment, sending crypto markets into further distress.

How to Startup

• Sales lessons. A16Z provided 16 mini-lessons on sales. Each is about two minutes long and they are all well worth a listen.

• What went wrong for Apttus? Ben Kepes takes a look at the quote-to-cash company that tried to go big or go home by taking aim at SalesForce. It’s a sobering read: “Here’s the thing, though. When you’ve been well-funded by venture capital (Apttus has taken nearly half a billion dollars in funding) your options are few and far between. Either a monster trade sale or a successful IPO. Both of which are predicated on commercial metrics — applicability to an acquirer’s existing business for the first, and good revenue and growth prospects for the second. Apttus, sadly, didn’t really tick any of those boxes.”

• Is the lean start-up dead? Steve Blank offers a compelling argument that the trend seems to have shifted in the direction of … not-so-lean startups — at least in certain cases: “In short, Lean was an answer to a specific startup problem at a specific time, one that most entrepreneurs still face and which ebbs and flows depending on capital markets. It’s a response to scarce capital, and when that constraint is loosened, it’s worth considering whether other approaches are superior.”

• Send in the reinforcement. James Currier of NFX explains what “reinforcement” is and why it’s the key to building an iconic tech company: As a regular pilgrim to the temple of barriers to entry, I fully agree: “The idea behind reinforcement is this: whenever a company adds a new defensibility — either scale, brand, embedding, or network effects — its existing defensibilities become even more powerful. On top of that, reinforcement makes it easier for that company to add further defensibilities — leading to compounding returns.”

• How to retain sales employees. Openview Ventures highlights the reasons sales people quit (it’s not money) and suggests some ways to retain them.

• Never give up. The story of Conductor’s 10-year journey to an exit, as told to David Skok of Matrix.

• Buying our your investors. Why Buffer spent $3.3M buying out their VCs.

• Uber for Watch Out! Andrew Chen of A16Z on why “Uber for X” startups tend to fail.

How to Venture

• Conviction. Semil Shah on what conviction really means in early-stage investing.

• All that glitters. A look at the melt-down of one of Silicon Valley’s most promising VC firms.

Portfolio News & Jobs

An interview with Joe Caprio, VP Sales at Chorus. “We use AI extensively at Chorus and we built our entire onboarding program internally. We bring in new reps with a fully built-out list of best practices with real examples and utilize automatic notifications, including competitor names on a first call, discount mentions in the last call, and customers expressing frustration during onboarding. It is all shipped automatically to the team for remediation. At the end of the day, we’re turning a live conversation into text and then organizing that text into specific categories using AI. Chorus.ai is rooted in AI and machine learning.”

Moltin was named a key player in Gartner’s Hype Cycle for Digital Commerce report.

Datos is hiring a BD lead in the US.

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

Resin is hiring globally.

Angular Ventures

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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