Fighting the Current
Gil Dibner

A few days ago, I was on the Tel Aviv beach with my wife and daughter. It was a glorious late summer day and the normally calm sea was full of energy. Waves crashed over the breakwaters and splashed onto the sand. I held my daughter tight in the waves for a few minutes before realizing that the water was too rough for my five-year old. After she was safely back on land, I ventured back into the water, just to experience the current. I stood — or tried to stand — in what couldn’t have been more than three feet of water, maybe two. The water was moving so powerfully sideways along the beach, that it was just impossible to hold a position. For a few minutes, in the safety of very shallow water, I just let the water race past me, dragging me inevitably and inexorably across the sand.

That sensation — of an unstoppable current of incredible power — felt like a physical metaphor for what the tech and venture world is going through now. Valuations, round sizes, portfolio sizes, fund sizes, even exit sizes are increasing with a speed and consistency that feels as unstoppable as it is unprecedented. A rising tide is rapidly lifting all boats, even as it drowns out the old earned wisdom of decades of entrepreneurship and venture capital.

This week, I stumbled across two interviews on the Strictly VC podcast. One was with Jeff Clavier of Uncork. The second was with Mark Suster of Upfront, who blogged some of his observations on the changing venture landscape here. Both are sort of Jedi Masters of the old school of venture capital. I’ve been lucky to benefit from some of Jeff’s generous guidance and wisdom in setting up Angular Ventures. I’m not sure Angular would have existed without his very early support. I met Mark only once at a conference. I’m sure he doesn’t remember me, but he is as charming in person as his online persona would suggest. What is remarkable about these two podcasts is to see these two giants of venture capital struggling to make sense of the changing environment we are all experiencing. What parts of the old wisdom do we keep? What do we discard? Which changes are permanent? Which are not?

Here, for example, is Mark Suster, in his blog post, wrestling in public with the question of valuations and potential: “By definition — I’m over-paying for every check I write into the VC ecosystem and valuations are being pushed up to absurd levels and many of these valuations and companies won’t hold in the long term. However, to be a great VC you have to hold two conflicting ideas in your head at the same time. On the one hand, you’re over paying for every investment and valuations aren’t rational. On the other hand, the biggest winners will turn out to be much larger than the prices people paid for them and this will happen faster than at any time in human history.” In other words, yes, things are a bit crazy right now, but some of that apparent insanity is actually rational — and it is our job as founders and VCs to try as best we can to walk that line. Valuations are just one dimension where the waters are swirling and the tides are shifting. Everywhere you look, founders and VCs are reinventing the business. The best ones, like Jeff and Mark, are struggling to hold on to the right bits of hard earned wisdom from previous eras.

In the end, despite the changing landscape, it’s back to basics for VCs like Mark and Jeff. Here’s Mark again: “We are mostly running the same playbook we have for the past 25 years. We back very early stage companies and work alongside executive teams as they build their teams, launch their products, announce their companies and raise their first downstream capital rounds. That used to be called A-round investing. The market definition has changed but what we do mostly hasn’t. It’s just now that we’re Seed Investors.” This is exactly what we are doing at Angular Ventures — first-check, high-concentration, high-conviction investing. If we have the chance to be that first partner to a founding team in which we believe, we will stop at nothing to help them build and win. If we don’t have the chance to back them at that stage (or if we can’t reach the necessary level of real conviction), we’ll stay on the sidelines and keep looking for the right opportunity to run our playbook.

As for me, I’m flying back to London this week with a little scar on my foot. The current pushed me onto a rock. It was even stronger than I thought. With luck, it will help remind me to respect the power of the change we are witnessing, even as we stick to our guns on the elemental basics of what we do and how.

EVENTS

Sept 29 / Fireside Chat with Ben Braverman, Chief Customer Officer at Flexport
Ben Braverman, Chief Customer Officer, Flexport

Oct 13 / Fireside Chat with Leigh Moore, VP of Marketing at Snyk
Leigh Moore, VP of Marketing, Snyk

Oct 20 / Building Developer Products and Communities
Amir Shevat, Head of Product — Developer Platform, Twitter

FROM THE BLOG

Why we Invested in CruxOCM:
Robotic Industrial Process Automation

The Great Acceleration of Seed Investing:
Can seed funds and accelerators work together?

Angular’s Brand Strategy:
Revisiting our brand as we launch our new website

Why we Invested in Levity.ai:
A no-code ML-powered workflow on every desktop

EUROPE & ISRAEL FUNDING NEWS

Germany/Website User Data. Contentsquare acquires Hotjar a digital experience analytics company to expand its reach from enterprise to SMB.
Germany/Amazon Roll-Ups. Berlin Brands Group raised $700M to continue buying up smaller brands that sell on marketplaces like Amazon and using technology to run and scale them more efficiently.
Israel/Open-Source Security. Snyk raised $530M for its security solutions for vulnerabilities in open-source libraries.
Israel/Payroll HR. Papaya Global raised $250M for its cloud-based payroll and payment management platform.
Germany/Employee Coaching. CoachHub raised $80 for its digital business coaching platform.
Spain/SME HR. Factorial raised $80M for its HR process management platform.
UK/ML Tooling. Peak AI raised $75M for its AI platform to help weave its way into more enterprise applications.
Denmark/RPA. Leapwork raised $62M for its process automation platform.
Israel/Quantum Computing. Quantum Machines raised $50M for its quantum orchestration platform using classical hardware and software infrastructure to help run quantum machines.
Israel/Automotive Security. Upstream Security raised $62M for its cloud-based cybersecurity solution purpose-built for protecting connected vehicles from cyber threats.
Norway/Auto Accounting. Vic.AI raised $50M for its autonomous accounting and financial intelligence AI platform.
Latvia/Print on Demand. Printify raised $45M for its platform that lets e-commerce and creators offer products that can be printed on-demand.
Netherlands/Unified Customer Service. Trengo raised $36M for its platform that aggregates all communication channels in one inbox to efficiently collaborate within customer-facing teams.
Germany/SME ERP. elopage raised $37.5M for its payments platform for digital entrepreneurs, creators, SMEs and enterprise businesses.
Germany/SME Construction. Capmo raised $30M for its all-in-one construction management platform for European SME’s.
Germany/Driverless Cars. Vay raised $30M to continue its mission to develop driverless technology for self-driving cars.
Israel/Spend Management. PayEm raised $27M for its spend and procurement platform for multinationals that helps finance teams get their job done and done quickly by offering control, transparency, and automation to company spending.
France/Expense Management. Mooncard raised $24M for its expense management firm that lets companies issue payment cards and an accounting application for expense reports and professional expenses in real-time.
Sweden/Alternative Cheese. Stockeld Dreamery raised $20M for its alternative cheese products via a fermentation process that uses pea and fava bean protein.
Israel/Sales Enablement. Walnut raised $15M for its platform to help create more interactive product demos.
UK/Industrial SaaS. Monolith AI raised $11.7M for its AI platform to help engineers improve the product development process.
Israel/Design SaaS. Anima raised $10M for its design-to-development platform. In the process of building software, Anima allows designers and engineers to collaborate better and faster.
Switzerland/Cap Table Management. Ledgy raised $10M for its equity management platform (similar to US-based Carta) that automates a number of equity-related business processes, provides various financing rounds options, and manages investor relations.
Germany/Computer Vision. Mobius Labs raised $6M for its computer vision training platform with a no-code focus that lets non-technical but domain people use the platform.
Germany/ML Tooling. Explosion raised $6M for its developer tools for AI and machine learning and natural language processing. The company’s products include spaCy, an open-source library for advanced NLP and Prodigy, an annotation tool for radically efficient machine teaching.

WORTH READING

ENTERPRISE/TECH NEWS

Israel’s Brain Drain. Sparks Consulting Group research has uncovered that concerns about a brain drain of Israel’s top tech talent are well founded, as only 20,000 people drive Israel’s tech industry. “Brain drains can be expressed in more talented people moving to multinational giants like Google, Facebook, Amazon and Apple who offer fantastic conditions and salaries. These corporations may work in Israel but their IP is transferred abroad. The other option is physical migration of these talents to other tech centers like Silicon Valley.” With this trend only continuing, Sparks’ CEO states that the solution will likely entail enlarging the group of Israeli tech talent by bringing in more groups currently underrepresented in Israel’s tech ecosystem.

Fundamentals. Redditors on the now infamous r/WallStreetBets subreddit like to eschew “stocks only go up” — and, as of late, they’ve been largely right. Is there still a connection between fundamentals and valuations? Stocks don’t always go up forever, as markets painfully learned in the past. “Yahoo was once worth $125 billion and AOL $200 billion during the dot-com bubble. Both are worth 99% less today. Tesla CEO Elon Musk recently tweeted, “I thought 1999 was peak insanity, but 2021 is 1000% more insane!” Remember, when the selling starts, fear of missing out turns into fear of losing everything as speculators jump like rats off a sinking ship. Today’s negative real yields don’t reflect reality. The Fed has warned it plans on tapering bond and mortgage purchases later this year. Someone is at least reaching for the punch bowl. The compass may stop spinning soon. Until then and always, stick with fundamentals.”

HOW TO STARTUP

Hyperscaling. Hopin’s growth, from $0 to $7.75B in 2 years, has been nothing short of astronomical. Dave Schools, Hopin’s first full time employee and their Head of Marketing, shares thoughtful lessons he’s learned so far working at Hopin since the early days. “The key to early-stage rapid growth is to not just think and talk about ideas but to attach everything you spend your time on to its external impact on the customer and on revenue. Don’t waste time with grand plans and six-month strategy decks at this stage — they’ll need to be updated or thrown out completely as changes happen rapidly and it’s impossible to predict anything beyond a quarter. If you’re doubting that previous statement then you’re not experiencing early-stage hyperscaling. It’s a tough spot to be in because you need to be thinking two steps ahead while always delivering on the now.”

HOW TO VENTURE

Venture Corporation. Andreessen Horowitz has been on a hiring spree, recruiting new partners and former government officials, writers, editors, and more. With now about 261 people working there, per their company page, A16Z is no longer building a venture capital firm. “It is building a new type of company with a thick management layer that helps support its multiple portfolio companies with marketing, legal, lobbying, and technical resources. It’s no longer venture capital; it’s a venture corporation.” A16Z is focused on differentiating itself through its platform and startup support endeavors in large part to be more attractive and valuable to entrepreneurs — increasing the likelihood it won’t miss out on the biggest winners.

PORTFOLIO NEWS

CruxOCM raised $9M total in venture financing, with the latest round led by Bullpen Capital.

Vault Platform’s CEO, Neta Meidav, shared how apps can move the #MeToo movement forward.

Snyk raised $530M at a $8.5B valuation to protect applications.

JFrog acquired Upswift, bringing software updates and container deployment for IoT devices to developers.

Front released a report on how to build a high-performing team.