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Europe/Israel Enterprise/Tech Weekly

The Angle Issue #66: For the week ended November 27, 2019

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Angular Ventures
November 26, 2019

Europe/Israel Enterprise/Tech Weekly

The Angle Issue #66: For the week ended November 27, 2019

Good morning from the Shoreditch Grind, one of iconic cafes of the London tech scene's hub in Shoreditch. When I first came to London, the Old Street "roundabout" was the hub of London's emerging tech scene, and London was the clear hub of Europe's emerging tech scene. As recent data shows - for example in Atomico's insanely good, insanely long, and insanely detailed annual deck on European tech, this is no longer the case. London is one hub among several, and great investors from across Europe and across the US are increasingly scouring the entire continent for the next great opportunity - which, as we all know by now, can come from everywhere. It's a great time to be a founder in Europe or, frankly, anywhere.

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

Launching Angular Ventures I. What we do, why we exist, and how we got here.

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
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

  • Germany/Data. Celonis raised $290 million for its Big data process mining solution for its enterprise customers

  • Israel/Sensors. Vayyar Imaging raised $109 million to expand its 4D radar imaging sensors.

  • UK/Data Labelling. CloudFactory which taps a small army of workers around the world to label, augment, and enrich AI testing and validation corpora has raised $65 million.

  • Germany/Insurance. Vouch Insurance which has built a platform offering business insurance for startups is being backed by Y Combinator to the tune of $45 million.

  • Israel/Security. CyCognito has raised $23 million from Lightspeed for its security analysis service that simulates the work of a cyber attacker in order to detect an organization’s weaknesses

  • Sweden/Security. Detectify raised $21M for an ethical hacker network.

  • UK/Marketing. Decibel has raised $20 million for its software that measures experiences on websites & apps - and aims to predict conversion.

  • Israel/Adtech Security. Cheq raised $20 million its AI and Natural Language Processing (NLP) capabilities to combat ad fraud and ensure brand-safe environments for online advertisers.

  • Israel/Log Analysis. Coralogix raised $10M for its ML-powered automatic log analysis tool.

  • France/Admin Tooling. Forest Admin raised $7M for its dev-oriented admin interface.

Worth reading

Enterprise/Tech News

  • ML Arms race. This week, the major cloud PaaS vendors took further steps to solidify their positoining as the leading "ML PaaS" vendors as well - as the battle for that space heats up - and as ML increasingly becomes a critical driver of cloud spend. Microsoft is playing up "ML Ops" and Google is emphasizing "AI explainability."  A dive into the details suggests that both offerings leave much to be desired - but make no mistake about it - the giants are coming for your ML tools - and MLPaaS is the new PaaS. 

  • The enterprise is cool again. The good news is that this piece in the NY Times quotes my friend Jonathan Lehr of Workbench. The bad news is that when mainstream journalists tell you what you are doing is cool again, it probably won't be for long. Definitely worth a read to get a sense of the enterprise VC zeitgeist in the US. "Start-ups are increasingly writing software that allows mainstream companies to do things that the consumer internet giants pioneered, like constant online monitoring of how people use products, regular updates and personalization. In addition, as banks, manufacturers, hospitals and others struggle to make sense of their digital data from the web, online forms and sensors, they need the help of tech companies."

How to Startup

  • Benchmarking Sales and Customer Success. My angel investment, Chorus, released a ton of data on the State of Conversational Intelligence. As Tomasz Tunguz points out, "Some of the data reaffirms rules of thumb. For example, the typical win rate of a sales qualified lead is 19%. Other data points are surprising. For example, the average SDR dials 106 people to schedule one meeting. And the typical sales manager reviews only 8% of calls, but the best managers spend much more."

  • The product-market fit journey. Adam Fisher of Bessemer provides a super helpful framework for thinking about product-market fit, and warns against the seductive dangers of the "sexy story." He writes that "the Sexy Story startups in the top left quadrant also don’t realize they are in this position until too late. These startups have a compelling vision and a sexy story that resonates in the media and among investors. As a result, money comes to them easily, press coverage is free and customer leads flow in. However, something is amiss, and it is typically evident in challenging unit economics, an inability to monetize a free user base or an inability to expand beyond early adopters."

  • Why most B2B startups fail. According to a broad survey of B2B companies, the top three reasons for failure are: (1) no market need, (2) ran out of cash, and (3) not the right team. I would argue strongly that #2 is basically a proxy for either #1 or #3. You could also get cute and argue that #1 is really a proxy for #3 as well. So in the end, it's all about team. 

  • Gross margins matter. A great post by Villi Iltchev of Two Sigma on the importance of gross margin. He makes a number of non-obvious points. For example: "It turns out gross margin is really hard to improve. Startups often naively assume that with scale, gross margin will improve, and are surprised a few years later when they realize there is very little in their control to move margins. In SaaS, reaching scale counterintuitively does not provide much leverage, but oftentimes puts downward pressure on gross margin as the complexity of running massive multitenant apps increases. This is certainly the case for public SaaS companies, which by the time of IPO are already locked into their gross margin profile." But this point is the real gem: "...many SaaS companies will actually never generate meaningful profit. Let’s go over my assumptions and explain why. Even the largest SaaS companies have a hard time getting G&A below 12%, so that is about as low as it gets. I have assumed a modest R&D expense of 15%, which is far lower than the vast majority of public SaaS companies (and probably constitutes the bottom of what is realistic). Between G&A and R&D, that is 27% of margin gone. Thus, to have a profitable SaaS company on low gross margin, you have to be doing something different on the go-to-market side and acquiring customers very efficiently." 

How to Venture

  • Softbank under fire. Ok, so maybe this is not how to venture. "Investors have also criticized SoftBank’s plan to help raise cash for a second Vision Fund by lending billions of dollars to its own executives."

Portfolio News

Portfolio Jobs

Apply to all Angular Ventures portfolio companies with one short application. 
 
Aquant.io

Crux OCM 

DUST Identity

Valohai

Vault Platform

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