Europe/Israel Enterprise/Tech Weekly

The Angle Issue #27: June 5, 2018

Good Tuesday morning - and welcome to Issue #27!  Hello from Healthrow - where, in about an hour, I'm flying to Lisbon for the Lisbon Investment Summit. I'll be moderating a panel on building defensible enterprise tech products. Thrilled to have Cristina Fonseca of Talkdesk, Louise Lindblad of Valispace, and Joao Menano of James on the panel. If you are around - give a shout!

The big news this week was Microsoft's $7.5B acquisition of GitHub. Software is indeed eating the world - and software development is eating a larger and larger piece of both productivity and infrastructure pies. Analysts will debate the price for some time to come - but the decision to acquire the world's leading developer platform play for both open source and closed-source code seems like a pretty smart move to me. Details below. 

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

From the blog

There are only three startup stages. In my view, and despite all the semantic chaos (seed, pre-seed, post-seed, early A....) there are really only three "stages" for venture-backed startups, and they are all defined by the Series A round: The defining characteristic of early stage is that the company is not ready to start building out the machinery of growth. In the enterprise context, this means the company is still lining up the evidence and traction it needs to justify the Series A: building product, deploying product with early customers, demonstrating product/market fit, proving out the sales dynamics that will support efficient growth, and making sure that the team is in place to execute. 

2017 EU+IL VC Data. $20.3B of VC investment summarized in 74 slides. 

Europe/Israel Enterprise/Tech

• Denmark/SMB Markeplace. TradeShift announced a $250M round led by Goldman Sachs. They are building a marketplace for SMBs to trade with each other.

• UK/Financial Automation. The UK's Dealflo was acquired by US company VASCO for $55M. Dealflo is an enterprise fintech software provider that helps with the automation of onboarding, identity verification, and anti-fraud.

• Israel/GPU Databases. SQream announced a $26M round led by Alibaba.

• Spain/Trucking. OnTruck raised a $29M round for its marketplace for (excess) trucking capacity

• Israel/Flying machine. Tactical Robotics demonstrated a new concept twin ducted-fan flying machine.  

• Israel/Quantum Security. How Israeli academia is pursuing quantum security.

• Israel/Computer Vision. Why unit 9900 might be the next unit 8200.

Worth reading

• One powerpoint to rule them all. Mary Meeker's annual insanely great powerpoint about everything tech was released this week. You can watch a video of her presenting it here. I'm not even going to try to summarize it. Download it. 

• Git what you can git. Microsoft acquired GitHub for $7.5B on Monday. According to A16Z, which raised eyebrows when they invested $100M in the company back in 2012: "By combining the GitHub platform with Microsoft’s cloud offering, Satya Nadella and team aim to build the future of software development. GitHub brings the largest software code base in the world (over the past five years, user growth exploded to 28 million and GitHub has become the platform for all developers) to Microsoft’s Azure cloud platform while also staying open to all other clouds. The focus on the developer doesn’t change and there is a commitment to remaining an open platform." According to Microsoft: “Microsoft is a developer-first company, and by joining forces with GitHub we strengthen our commitment to developer freedom, openness and innovation,” said Satya Nadella, CEO, Microsoft. “We recognize the community responsibility we take on with this agreement and will do our best work to empower every developer to build, innovate and solve the world’s most pressing challenges.”
  The real question here is what does this mean for open source - and Wired has a good piece on that. 

• What does 1M SaaS ARR look like? The amazing Jason Lemkin with a highly analytical post in which he looks at 24 SaaS companies at $1M in ARR in great detail. Takeaways: They burned on average $70K/mo at $500K ARR and $90K at $1M ARR; average MoM growth rate was 20%; high NPS is an important early predictor of later growth. 

• Don't fake it. Just make it. Brad Feld responded to John Carreyrou's book on Theranos with an important blog post: "Entrepreneurship is incredibly difficult. Among other challenges a founder has is balancing the vision of what is being created compared to what exists today. At the very beginning of the journey, this is easy because it’s obvious that it is all aspirational. But, as things progress, the substance of what has been created so far starts to matter, especially as the founder needs to raise more money to continue to fund the aspiration goals. The best founders that I’ve worked with combine a mix of their aspirational goals with a real grounding in the current reality of where the business is. They know that their aspirational goals are goals – not current reality."

• Burn baby burn. Dave Kellog with a scorching teardown of Domo's S-1 Filing. It's a long read. It's awesome. And I'm going to read it again. Here's his summary: "One thing is clear.  Domo is not “hot” because they have some huge business blossoming out from underneath them.  They are “hot” because they have raised and spent an enormous amount of money to get on your radar. Will they pull off they IPO?  There’s a lot not to like:  the huge losses, the relatively slow growth, the non-enterprise retention rates, the presumably high CAC, the $12M in FY18 churn, and the 40x voting rights, just for starters. However, on the flip side, they’ve got a proven charismatic entrepreneur / founder in Josh James, an argument about their enterprise customer success, growth, and penetration (which I’ve not had time to crunch the numbers on), and an overall story that has worked very well with investors thus far. While the Emperor’s definitely not fully dressed, he’s not quite naked either.  I’d say the Domo Emperor’s donning a Speedo — and will somehow probably pull off the IPO parade."

• VC's midlife crisis? The big news in the valley was that SV Angel, the firm founded by legendary seed investor Ron Conway, announced they wouldn't be raising another fund and would be reverting to writing smaller checks from their own balance sheet, albeit under the "SV Angel name." There are a lot reasons why this shouldn't be big news, but it is. It seems to capture the zeitgeist of nervousness that prevails in the valley these days. Have the good times gone on too long? Is there too much money chasing too few deals? Will liquidity ever return in enough volume to put some cash back in the pockets of LPs? Fred Wilson blogged on the inflation of seed round valuations. Micah Rosenbloom of Founder's Collective tweeted out that the VC industry has entered a full-on midlife crisis. It's rare that I link to a tweet...but he does seem to have touched a nerve, triggering a number of responses, including this great post by Semil Shah. 

• Semil Shah is on a blogging roll. Why should I blog when I can just link Semil? He wrote two awesome pieces last week. The first was in response to Micah's mid-life crisis tweet (see above). The second was about some heuristics he uses to identify the quick kill. Interestingly, they are related. The proliferation of seed activity and deal flow has made it harder for VCs to spend quality time with companies in their deal flow - and more and more of us are relying on "quick kill" heuristics to get through the day.

• So Sorry. Steven Sinofsky's compilation of observations from this year's Code Conference focused on the number of apologies issued by tech CEOs. 

• Disappearing telephone culture. An interesting view on how the culture of telephone conversation and "answering" is disappearing. A lot of the impetus behind conversational UX, I think, comes from this cultural shift we are undergoing.

• What exactly is B2B2C? A16Z provides a very clear definition (it's not necessarily what most people think). "[B2B2C is] where your company sells a product/service to a business, gaining customers and/or data from that business that you get to keep and use. And where, most importantly, that group of customers becomes untethered from the middle B — at some point, they recognize that YOU (the first B!) are the product they use."

• BMC comes rolling up. With KKR's purchase of BMC from other PE holders, analysts are think the company might embark on an acquisition spree, which would be good news for IT infrastructure startups. 

• Timing is everything. NFX's Pete Flint provides a framework for thinking about market timing. He sees optimal startup market timing as a function of three things: (1) economic impetus; (2) Enabling technology; and (3) Cultural acceptance.

• Invisible asymptotes. Does your product's adoption contain within it the seeds of slower future growth? Eugene Wei, an early Amazon employee and currently head of product at Flipboard ruminates on what he calls invisible asymptotes. Well worth a long read - but buckle up. 

• Robotics inflection point. Sanjit Dang of Intel Capital highlights reasons why he believes we are at an inflection point in demand for robots: energy storage, compute power, data storage, expanding use cases, and intelligence at the edge. 

• Is Kubernetes just a prelude to serverless? James Governor thinks so: "The danger is in winning the battle, you lose the war. So Kubernetes won. But there are loud, smart, influential voices out there arguing that in winning a battle (with Docker) Kubernetes has in fact already lost the war to serverless." 

• Sales QBR best practices. Graham Neray of MongoDB on how to run a quarterly business review (QBR) for a SaaS sales team.

• AI: 1; Doctors: 0. A new study shows AI is better than doctors at diagnosing skin cancer.

Portfolio News

Aquant announced a new partnership with Rational. "RATIONAL’s service organization is seeking to minimize repeat service visits to improve our customers’ experience,” said Sidney Lara, RATIONAL Vice President of Service for North America. “We are eager to leverage our historical data and Aquant’s predictive analytical capabilities to make smarter, data-driven decisions that improve the service our customers receive.”

A Q&A with Moltin. "Moltin is an API-first digital commerce solution that enables retailers to build distinctive shopping experiences and embed them into any device, channel or experience. It combines an extremely flexible set of APIs, microservices architecture, developer toolkits, and pre-built applications to make commerce development simple, lightweight and fast."

Chorus got named in a piece in Forbes by Eric Yuan (CEO of Zoom) on how AI is impacting the workplace.

Google published a Cloud66 case study.

Resin blogged on how to deploy an edge workflow using Losant.