Europe/Israel Enterprise/Tech Weekly

Angle The Issue #57: For the period ended July 29, 2019

Hello from Tel Aviv - Angular HQ for the day is Cafe Zorik. 

Congratulations to Ophir Gaathon and the rest of the Dust Identity team on their $10M Series A led by Kleiner Perkins and including investments from both Lockheed and Airbus. "Dust Identity’s tagging technology could eventually help secure the increasingly long and complex supply chains that global manufacturers rely on. Producers of complex products like airplanes or electronics would be among the biggest potential users of the company's technology, which emerged research into the quantum properties of diamonds by Dust Identity CEO Ophir Gaathon and his cofounders Jonathan Hodges and Dirk Englund." Angular is thrilled to be a small part of this story. Read about our investment thesis here.

The New Yorker poked some fun recently at startup culture.

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

• Germany/Freight Forwarding. Sennder raised $70M for an online platform for freight forwarding.

• Israel/Spain/Corporate Travel. TravelPerk added $60M to its previously announced Series C.

• UK/Contact Management. ContractPodAI raised $55M for AI-powered contract management software.

• UK/Greece/IoT. Balena raised $14.4M to simplify IoT device management. "The number of devices on Balena’s platform is growing at a rate six times year-over-year and that customer acquisition is on the upswing. Balena now counts Bosch, Booster, Allscripts, Tapp, Zume Pizza, OpenDoor, Sonder, smart home systems company Dwelo, smart roof startup Sense, HVAC monitoring and controls provider Enerbrain, and smart building controls developer Mount Kelvin among its customer base....Balena’s eponymous platform builds on Docker, Git, Yocto, and other open source technologies to solve common problems in IoT device deployment. It offers a workflow targeting embedded Linux systems with a console that lets developers push updates to thousands of devices at once, and that delivers visibility into the health of device fleets."

• Israel/Supply Chain Security. Dust Identity raised $10M to secure global supply chains with diamond dust.

• Israel/YC. The famed Bay Area Accelerator will be interviewing applicants in Tel Aviv in September. 

• France/US/Tech Trade War. France passed a controversial tax on tech companies, which is expected to hit US companies hard. The US government promised a response. 

Worth reading

Enterprise/Tech News

• Salesforce slowdown? The Information digs into Salesforce's gradually slowing growth numbers and lower EV/FCF multiple relative to peers. "Investors may also be worried about the risks of the Tableau deal. Not only is it much bigger than previous acquisitions, it takes Salesforce in a new direction. The acquisitions of recent years enabled Salesforce to diversify from its original business of selling software that companies use to manage their sales teams. The purchases of InStranet, ExactTarget, Demandware, Heroku and MuleSoft laid the foundations for the company to offer customer service, marketing, online shopping, app development and integration software products, respectively. Each of the services acquired became part of the Salesforce platform, making it easier for Salesforce customers to sign up for them. Tableau is a little different. Its service will continue to operate on its own independent platform, though Salesforce will acquire its customer base so it can market its other services to Tableau customers—and vice versa. Whether that cross-selling of products will generate enough incremental business to justify the price paid for Tableau—a 42% premium over where the company’s shares traded before the deal—is a central question for investors."

• Ten years of DevOps. CIODive takes a look at DevOps on the movement's 10-year anniversary. One of the piece's conclusions is that security is an increasingly critical part of successfully implementing a "DevOps culture." "From a startup perspective, introducing security into the DevOps process is easy because the extra person is creating bandwidth for coding, DJ Schleen, a DevSecOps advocate, told CIO Dive. But with larger organizations, distributed worldwide, different development teams do different versions of DevOps pipelines and practices, he said. Some adopt security and some don't, which is challenging for the security teams managing the programs."

• Artificially Secure. Australian/Israeli researchers demonstrated how AI-based cybersecurity approach can be relatively easily duped. "Researchers in Australia say they’ve found a way to subvert the machine-learning algorithm in PROTECT and cause it to falsely tag already known malware as “goodware.” The method doesn’t involve altering the malicious code, as hackers generally do to evade detection. Instead, the researchers developed a “global bypass” method that works with almost any malware to fool the Cylance engine. It involves simply taking strings from a non-malicious file and appending them to a malicious one, tricking the system into thinking the malicious file is benign."

• Good dog. Datadog, which was most recently valued at over $600M, prepares for an IPO.

• From Windows to the Cloud. The Economist argues that a shift in emphasis from Windows to the Cloud is behind Microsoft's recent resurgence. In other Microsoft news, the company announced a $1B multi-year investment into OpenAI, an initiative led by Elon Musk and Sam Altman to shape the direction of AI research.

• A voice-powered future? European VC Mangrove published some thought-leadership on the coming importance of voice interfaces, expected a trillion-dollar market by 2025. 

• The dangers of automated thinking and "intellectual debt." The New Yorker argues that adoption of AI/ML can lead to increased levels of "intellectual debt." "Intellectual debt accrued through machine learning features risks beyond the ones created through old-style trial and error. Because most machine-learning models cannot offer reasons for their ongoing judgments, there is no way to tell when they’ve misfired if one doesn’t already have an independent judgment about the answers they provide. Misfires can be rare in a well-trained system. But they can also be triggered intentionally by someone who knows just what kind of data to feed into that system."

How to Startup

• Moving beyond LTV/CAC for SaaS. In the alphabet soup of SaaS metrics, the LTV/CAC ratio has long been king - offering a compellingly simple shorthand for the health and potential attractiveness of a business. But as experienced practitioners know, nothing is ever really that simple. Enter Michael Gilroy of Canaan Partners with a well-argued post suggesting that LTV/CAC is too one-dimensional to be used alone. "The challenge with LTV/CAC is that it’s too static of a formula to analyze businesses that are now dynamic across cohorts on all of the important SaaS metrics and variables (ARR, CAC, churn, up-sell, etc)." Gilroy argues for "cohort payback" as a key metric. "One thing that is a constant in every business type regardless of model is payback. It still remains true that you always want to payback your acquisition cost within the first 12–18 months (shorter end for SMB, longer for enterprise). Additionally, you can keep it simple and say that the 3x target referenced in my original post remains the same. But, instead of LTV/CAC, that is now the minimum target cumulative cohort payback within the first 3.5 years. If your cohort composition skews more consumer and SMB, that number should be closer to 3 years, and for pure enterprise it can be extended towards 4. But again, by definition these cohorts will generally include all customer types, so 3.5 years is a good assumption."

• Raising a Series A Away from Home. Rob Go of NextView writes about what it takes to raise a Series A far from your home base. He highlights a few key challenges and strategies: (1) the need to overcome the credibility gap that founders face when they are far from home, (2) the reality that - where you are from - you are looking for a "true believer," (3) leveraging your existing relationships to "expand your network of influence," and (4) establishing yourself as an authority on your area. You can read the whole post here.

• Managing conflict. First Round Capital published a series of tips on how to manage conflict in work/startup settings. These are useful tools for founders both within their companies and on their boards - and good reminders about this sort of stuff can never come too often. "When leaders are unwilling or unable to talk about tough issues, co-founders fight, high performers quit, equally talented people get fired unfairly, projects fall apart or miss deadlines, cultures turn toxic, morale suffers, people leave, and companies implode."

• Avoiding venture. Sifted published a detailed account of how and why one Dutch company decided to avoid VC financing. The article doesn't do a particularly good job of exposing both sides of the issues raised - and there are plenty of good reasons for some of the "venture terms" that this company rejected - but the piece does help illustrate just how much the European VC community needs to work to overcome decades of mistrust with founders and explain the pros, cons, and logic of VC financing.

How to Venture

• Who is bypassing seed funds and why? An interesting twitter discussion sprung up this week in response to a tweet by Semil Shah suggesting that more founders in the Bay Area are bypassing seed funds entirely. It's worth a read as it highlights the current environment facing both seed founders and seed backers. Here's a link to the tweet and the discussion.

• Intel Capital, a case study in corporate venture. A detailed history of Intel Capital, one of the more significant corporate VC's operating today.

Portfolio News

Dust Identity raised $10M to secure global supply chains with diamond dust.

Snyk added Peter McKay as CEO, alongside founder Guy Podjarny. "Over the past 18 months the company has grown significantly, moving from just 18 employees to 150 as its open-source software development approach to security has taken hold in the marketplace. McKay is someone who makes sense for the job, given he has been involved with the company as an investor since its early days, and has known Podjarny in various roles for 15 years."

Planable CEO Xenia Muntean discusses the future of marketing management. [video]

Balena raised $14.4M to simplify IoT device management. "The number of devices on Balena’s platform is growing at a rate six times year-over-year and that customer acquisition is on the upswing. Balena now counts Bosch, Booster, Allscripts, Tapp, Zume Pizza, OpenDoor, Sonder, smart home systems company Dwelo, smart roof startup Sense, HVAC monitoring and controls provider Enerbrain, and smart building controls developer Mount Kelvin among its customer base....Balena’s eponymous platform builds on Docker, Git, Yocto, and other open source technologies to solve common problems in IoT device deployment. It offers a workflow targeting embedded Linux systems with a console that lets developers push updates to thousands of devices at once, and that delivers visibility into the health of device fleets."

Siemplify was named a finalist in the first annual "Black Unicorn" cybersecurity awards.