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Europe/Israel Enterprise/Tech Weekly

The Angle Issue #64: For the week ended November 6, 2019

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Angular Ventures
November 06, 2019

Europe/Israel Enterprise/Tech Weekly

The Angle Issue #64: For the week ended November 6, 2019

I had a chance this week to reflect on "AI" as perceived by the venture community. In my mind, the biggest misconception in "AI" is that algorithms or even data create value for investors. That was true for a brief window of time when AI was truly novel, but it was barely true then. Product, marketing, and sales activities that drive efficient revenue scaling and high margins are what really drive value. If this sounds like traditional enterprise software/SaaS that's because it is exactly traditional enterprise software/SaaS. This is, however, one exception: it's sometimes possible for an enterprise-oriented AI company to use its AI/ML/DL capabilities in a way that makes its own sales process more efficient - and that can be truly magical. 

The key question is not how your algorithm/data/architecture drives value for customers. This very important, but it is assumed and - more often than not - a commodity. The key question is how these things drive your SALES machine. Do they make it easier for your sales team to close leads? Do they make your product more engaging or addictive to the enterprise user? Do they allow your team to deliver working demos with measurable ROI on real customer data faster? Does your product generate truly new data (through user engagement) that creates internal network effects? Does your product create legitimate external network effects that drive stickiness and create competitive moats? (rare but powerful). It's worth remembering that in enterprise software, a less efficient competitor, a systems integrator, or a professional services shop can almost always provide equal if not greater short term value to a customer on a per-customer basis. But categories aren't won on a per-customer basis. They are won by scaling product sales across a wide and growing set of customers in as efficient a way as possible. If your AI/ML/DL product architecture can help you do that, you may have a shot at greatness.

I'll be in Tel Aviv next week - mostly scheduled already, but have a few slots left open to meet startups - please reach out if you are working on something amazing. 

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

From the blog

US incorporation? Just do it. Why nearly all enterprise tech companies should incorporate in Delaware.

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.

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

  • Israel/Security. ObserveIT was acquired by Proofpoint for $225M.

  • Israel/Adtech. Appsflyer is in talks for a $200M round.

  • Israel/Fraud Prevention. Riskified raised $165M for retail fraud prevention.

  • Israel/Payroll. Papaya Global raised $45M for global workforce management.

  • Sweden/Open Source. Grafana raised 24M for open-source analytics.

  • Israel/Customer Experience. Namogoo raised $25M. "Founded by Chemi Katz and Ohad Greenshpan, Namogoo provides client-side technology that gives online enterprises visibility, efficiency, and governance over their websites and applications ecosystem, enabling improved digital customer experiences and business results."

  • Israel/Invoices. Stamply raised $25M for cloud-based invoice management.

  • Israel/Automotive. Tactile raised $9M for in-vehicle data analysis. "Tactile Mobility, which was founded in 2012 by Boaz Mizrachi, Yossi Shiri, and Alex Ackerman, provides tactile sensing and data analytics solutions for smart and autonomous vehicles, municipalities, and fleet managers. An in-vehicle software module running on an ECU or aftermarket device collects data generated by a car’s non-visual sensors, and it applies AI models to generate insights including (but not limited to) road quality, tire grip, RPM, paddle and gear position, wheel angle and speed, vehicle weight, and other vehicle- and road-specific metrics."

  • Romania/RPA. UIPath lays off 11% of its workforce. I haven't found any context as to why this happened - if you know - please share!

  • France/Germany/Cloud. The governments of France and Germany are working to encourage home-grown rivals to the US cloud giants.

  • Israel/Foreign Investment. Under pressure from the US government, Israel forms a panel to evaluate Chinese investments into local companies. "Its function is to help regulators to incorporate national security considerations in the process of approving foreign investments in the finance, communications, infrastructure, transportation and energy sectors"

Worth reading

Enterprise/Tech News

  • The end of per-seat pricing? Jake Saper of Emergence Capital makes a powerful case that AI-driven enterprise software is rarely compatible with per-seat pricing models. I have been making this argument in a piecemeal way to SaaS CEOs over the past few years - but Jake brilliantly ties the argument together: "Traditionally, the functionality of software hasn’t changed with usage. Features are there whether users take advantage of them or not - your CRM doesn’t sprout new bells and whistles when more of your employees log in. It’s static software. And since it’s priced per user, a customer incurs more costs with every user for whom it’s licensed. AI, on the other hand, is dynamic. It learns from every data point fed into it, and users are its main source of information. Usage of the product makes the product itself better. Why, then, should AI software vendors charge per user, when doing so inherently disincentivizes usage? Instead they should design pricing models that maximize product usage, and therefore, product value."

  • OS secure chips. Google announced Open Titan, an open-source project designed to lead to safer semiconductors.

  • Future of work. Sam Lessin at the Information looks at three key drivers of the future of work: (1) new key technologies that make it easier to measure, standardize, and automate; (2) new business practices such as remote work, and (3) social changes such as a shift in power towards employers. This one is well worth a read. "In the last year, however, it feels like the future-of-work narrative has shifted toward more immediate and practical applications of technology that will be available soon—“near in technology”—to disrupt traditional work. There is an acknowledgment that machine learning and AI are powerful extensions of systems built on deterministic computing, not a fundamental disruption as a new, intellectual prime mover."

  • Hybrid for the win? Microsoft's strategy to win the enterprise cloud market revolves around the hybrid cloud. "Microsoft said on Monday that it would expand its Azure offerings to target customers interested in hybrid cloud systems. Microsoft has been offering its Windows operating system to run on customers’ servers for decades. But two years ago it began allowing customers to run part of its Azure cloud on in-house equipment that is built to Microsoft specifications, enabling those servers to work seamlessly with Azure data centers. Now Microsoft is adding new versions of those certified servers, which it calls Azure Stack. Among them is a “ruggedized” version, more robustly constructed to withstand tougher environments to appeal to military users. Microsoft just won a contract valued up to $10 billion to provide cloud infrastructure to the Pentagon, which is expected to have hybrid cloud features because some military information is too sensitive to put into the cloud. The company is also introducing a system called Azure Arc to let more of its cloud-based database applications run within customers’ data centers."

How to Startup

  • The Gross Margin Problem. This week's must-read piece is by David Sacks of Craft Ventures, who suggests that software can no longer be assumed to be a high-margin business - and how CEOs navigate that possibility is critical to their long-term success. "But when software started eating the world, everything changed. Software was just one component of the service being offered. Software might be the disruptive element but it wasn’t the source of unit economics. These new “tech-enabled” businesses had major COGS (e.g. leases at WeWork; drivers at Uber)."

  • Things fall apart. The SaaS Playbook argues that "things fall apart at 5M ARR."

  • What is product marketing? OpenView provided a great overview of this area, the first in a four-part series.

  • Building an international team. How Honeybook created a "one-office mindset" across a globally-distributed team.

  • Get your hands off my color. Lemonade goes to war with Deutsche Telekom over the color magenta.

How to Venture

  • It began with a Macchiato. The story behind Pietro Bezza's investment in TrueLayer.

  • How do you venture? Finn Murphy of Frontline ruminates on the many paths to success in venture as he works to define his own.

Portfolio News

Portfolio Jobs

Vault Platform

Aquant.io

DUST Identity

Valohai

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