Europe/Israel Enterprise/Tech Weekly

The Angle Issue #56: For the lunar month ended June 24, 2019

Hello from Tel Aviv, where I'll be based for the week before heading out to Berlin next week for TOA and a number of startup meetings. There are still some slots on my calendar in Berlin - so if you are an early-stage B2B/enterprise founder or investor - ping me! I'll also be back in Tel Aviv for much of July and August so let me know if you feel like chatting about enterprise tech startups with an ice cold Americano (the coffee, not me).

As you might have noticed, the newsletter has not been coming out as regularly as I would like. This is due to a number of factors (exploding air conditioners and sick toddlers among them). But mostly - it's due to an insane business travel schedule that I was keeping while simultaneously completing four transactions for Angular (two new in the UK and Finland, and two follow-ons in Angular's existing portfolio).

What keeps me going here is knowing that the newsletter is enjoying a very high open-rate and click-through rate - and that in meeting after meeting, I get feedback that this is a useful summary of the more important things that took place in European/Israeli enterprise land. Some people have even asked me who I get to write it for me. The answer is that I'm doing this entirely by hand - and that's also why I can't promise to deliver it to your inbox every week without fail. I think that with Angular entering a new phase (more on that soon), I'll be able to get this out on a more regular basis. 

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

• Fiverr IPO. It's not exactly enterprise, but Fiverr, an Israeli online marketplace for freelance services founded in 2010, went public on the Nasdaq. The shares popped about 90% on the first day of trading, bringing the company's market cap to just over $1B. Adam Fisher, the Bessemer Partner who led Fiverr's Series A in 2011, outlined his decision process in a blog post this week. "While a couple of partners loved Fiverr and ordered multiple $5 gigs (such as the one below from Byron Deeter), others were horrified. I remember partners saying things such as, “The novelty will soon wear off” or “It’s likely just tchotchke,” a Yiddish term for a miscellaneous thing. I knew that eBay had started with Pez dispensers and YouTube with home videos, so seeing some novelty gigs on Fiverr didn’t concern me."

• UK/RPA. UK-based RPA leader Blue Prism acquired another UK RPA player, Thoughtonomy, for $100M to add additional AI capabilities to its offering. According to Techcrunch, this is notable "given the position of Blue Prism within the RPA landscape. The company is one of the more legacy providers — one of the consequences of being an early mover — and while that gives it a clear advantage of showing it has staying power, in the world of software that can be a more challenging sell when younger companies are building tech from scratch on newer frameworks."

• Europe/Sellouts? Sifted looks at whether or not the commonly held US view that European startups sell out too early is still true. 

• France/Israel/Security. Vade Secure (of France) raised $80M and Ironscales (of Israel) raised $15M, both to combat phishing with AI.

• Israel/Bigger rounds. If this panel at Calcalists' event is any indication, Israeli VCs are getting increasingly comfortable with larger rounds and higher valuations. 

Worth reading

Enterprise/Tech News

• The risk of the "new stack." Morgan Stanley published new research arguing that highly agile "new stack" approaches to software development are increasingly recognized as key drivers of corporate success. "“Much like cybersecurity over the past decade, we believe software development is emerging as a board-level discussion,” says Keith Weiss, head of Morgan Stanley’s U.S. software research team. “Business leaders increasingly recognize the close tie between how quickly a company can bring new software to market and their level of differentiation and competitiveness.”In response, more companies are adopting new concepts such as agile development and DevOps—what Weiss and his team call “New Stack” software development methodologies—that drive higher developer productivity, more complete automation and, ultimately, faster software development."

• Slack's IPO seen to have broad implications for enterprise workflow.  The WSJ interviewed a number of experts on what the lessons of Slack's success are for the enterprise. "“What we’re seeing now is enterprises wanting to bring context and intelligence into the equation,” said Amy Chang, senior vice president of Cisco’s collaboration technology group. “Chat alone is nice, video alone is nice, but what moves the needle is having it all integrated and simple,” she said. Much of the growth in the collaboration market is being fueled by the spread of cloud computing, said Larry Cannell, research director for collaboration and content strategies at Gartner Inc. “The speed to market and availability of these products are a far cry from where we were just a few years ago,” Mr. Cannell said. “Vendors are able to innovate quicker and iterate more often.” Mr. Cannell said Slack’s main appeal for CIOs is that it moves office communications away from an individual worker’s inbox and into a broader channel. That dovetails with a trend to tap expertise across business divisions and foster group productivity, he said."

• Big data acquisitions. Semil Shah looks at the massive recent acquisitions of Looker and Tableau. "The “Cloud Wars” between Google, Microsoft, and Amazon seem to have entered a new phase. One battle area involves the concept of “multi-cloud,” where companies and developers increasingly do not want to be locked-in to one cloud platform and thus want to be free to move their data and services between and across different cloud environments. Products like Looker already have this mindset baked in, and on the heels of Google’s Anthos announcement, we are moving toward a world where even the incumbent cloud giants will allow their users to (somewhat) seamlessly move between different cloud environments. I expect to see more blockbuster M&A in this broad category."

• What does enterprise blockchain actually mean? My friend Gideon Greenspan just published a clear-eyed view of what blockchain actually means for the enterprise and how it works in practice: "Every application implemented on a blockchain must answer a crucial question: Why use a blockchain instead of a centralized database or file server? Blockchains will always be slower, less scalable and more complex than centralized systems, as a result of their fundamental design. So if you have a suitable trusted intermediary who can host an application centrally, you should use it! The only reason to use a blockchain is if there is a strong motive to avoid this kind of centralization. In practice we see four main types of motive appear: (1) Commercial concerns. The participants in a network do not want to grant too much power to a competitor or some other central body, who could charge a lot for the service. (2) Regulatory requirements. Some regulation prevents the deployment of a centralized system, or would render it too expensive in terms of compliance. (3) Political risks. There is no place where the database could be hosted that would be politically acceptable to all of its users. (4) Secure replication. Multiple copies of the data need to be stored for redundancy, so using a blockchain provides the additional benefit of proven synchronization and tamper resistance."

• The autonomous future is not quite here yet. Two long reads in the NY Times (about driverless cars) and the Telegraph (about pilotless aircraft) suggest these are several years (if not decades) away from mass adoption. From the NY Times: "A growing consensus holds that driver-free transport will begin with a trickle, not a flood. Low-speed shuttles at airports or campuses may be the early norm, not Wild West taxi fleets through Times Square. Operational boundaries will be enforced by the electronic leash of geofencing."

• What do devops do all day? The WSJ profiles the devops role at Amazon. 

• 333 pages of internet trends. In case you haven't seen it, Mary Meeker's latest treasure trove of internet data is available. Please consider if you really need to print it out. ;)  Enterprise founders should check out the sections on Freemium (slide 99) and Data (slide 132).

How to Startup

• Bessemer updates its 10 Laws of Cloud. They are all good, but Law #2 is my favorite: "Law 2: Growth at optimal cost. Efficient growth is when growth in topline revenue reflects the dollars invested in the business. Companies with large existing market opportunities can justify higher burn rates if they also have rapid customer and revenue growth rates. For market creators, businesses must keep burn low as buyers emerge and revenue grows. When it comes to revenue growth in the early stages of a company, efficient growth is more important than profitability."

• When a co-founder can't scale. Founder Collective, a super thoughtful VC, wrote a comprehensive post on how to handle situations where a company is scaling but one of the co-founders is not rising to meet the challenge. They offer a number of ways to address the issue - and highlight the pygmalion effect: "This is typically one of the most emotionally taxing challenges a startup will face. Strive for calmness, fairness, and balance through the process. Make sure all feel heard. It’s important for the founder who is scaling to retain a sense of humility. It could be that the successfully scaling founder was legitimately better suited to being a CEO, but they should also be cognisant of the fact that they may have been given more opportunities to develop and more attention from the board, known as the Pygmalion Effect. Learning curves aren’t all linear. It’s rare but don’t be surprised if, as the company grows, the founder who wasn’t scaling manages to catch up and become a perfect fit for a key role in the maturing organization."

How to Venture

• Andreesen's rainmaker. A great profile in Forbes of Jeff Jordan, managing partner at A16Z. "Wisdom and the ability to discern patterns aren’t foolproof, of course, and Jordan found this out the hard way. The same year he invested in Airbnb and Pinterest he also staked an e‑commerce startup called Fab.com. Andreessen Horowitz led the investment round, meaning it put its imprimatur on the deal. It eventually pumped $40 million into the young company. Jordan saw the positive telltale signs of growth: The company’s CEO, Jason Goldberg, said at the time his company was generating $100,000 in online sales per day. Fab would eventually reach a valuation of almost $1 billion, and then it began to falter. It expanded prematurely into international markets and spent too heavily on marketing. “Cake-layering” and otherwise leveraging a growing user base didn’t work for Fab, and the company sold its assets in 2015 for $15 million. Jordan, who calls the Fab experience “painful as hell,” feared for his job. He recalls that three other VCs who backed Fab exited their firms soon after. “Boom. Boom. Boom,” he says, forming a finger pistol and loudly firing three bullets. Jordan remembers walking into Andreessen’s office to ask, “Anything I should know?” Andreessen’s response: “Are we still in Airbnb? Are we still in Pinterest? Okay, you can stay.”"

• Startups are Risk Bundles. I noticed this post (from 2016!) by Leo Polovets of Susa this week. In it, he argues that one effective way to think about how VCs make investment decisions (and - I would argue - how CEOs should make management decisions) is to think about companies as "bundles of risks." Leo describes how VCs actually tend to the think about derisking ("Do investors really think like this? Oftentimes yes, but more qualitatively than quantitatively. Will margins be 40% or 35%? Is the likelihood that a team will break up 40% or 60%? No one really knows. So investors use their gut to categorize risks as low, medium, or high. The more high risks there are, the lower a company's expected value.") and provides two common pitfalls to avoid. The first is spending resources addressing minor risks that do not concern investors. The second is fundraising after a major initiative fails: "The best times to fundraise are 1) when your traction is great or 2) when you're about to do something that might make your traction great. The worst time to raise is when you just tried something major and failed." The post is well worth a read. 

• Don't fear the distribution. My friend Shuly Galili of Upwest Labs shared her thoughts on the global seed stage VC ecosystem: "Yes, it is still crucial to have a foothold in the U.S., mostly on the business side of the company, as this is where so many potential customers are — but having a distributed team is no longer viewed as a red flag to many investors."

• Tweet of the week. My favorite tweet this week was from Rolf Mathies, founder of Earlybird, the Berlin VC: "Important to remember in VC partnerships when there is a lot of arguing: 'When two men in business always agree, one of them is unnecessary.‘ Ezra Pound"

Portfolio News & Jobs

Planable on Instagram marketing trends (video).

Congrats to Rollout, a previous angel investment of mine, on their acquisition by Cloudbees.

- - - Portfolio Jobs - - -

Aquant is hiring. R&D in Israel and Sales, Marketing, and Customer Success in NY.