Think differently
David Peterson

Back in 2012, I led growth and expansion at a company called CompStak. CompStak is a commercial real estate data company. At the time, we were focusing on crowdsourcing valuable CRE data (specifically, lease comps) from brokers and appraisers using a “give to get” model (i.e. users submitted comps, we verified the details, then users could get access to comps in return). We had just launched our second market, and I was brought on to expand our footprint as quickly as possible.

After a few weeks on the job, I walked into the CEO’s office and eagerly presented my ambitious plan to launch 5 markets in the next 12 months.

He turned around and asked me what I needed to do to launch 30.

This was both incredibly frustrating, because it just seemed impossible, and instructive, because it forced me to completely change how I thought about the problem.

My initial plan had been focused on excellent launch execution. I had taken the lessons learned from our previous launches and extrapolated out from there. The key, I knew, was solving “the chicken or the egg” problem in each market. We needed data before we could launch, but we needed users to give us that data. How we did this in the past was with on-the-ground meetings and events. Given that, I figured we’d need one manager for each launch, and perhaps some support from a new marketing hire. Each launch would also need support from the data team, so we might need an additional hire there as well.

That plan, I’m confident, would have enabled us to launch 5 cities in the next 12 months. Maybe a few more. But, not only did it require new hires (when we didn’t have the money to spare), there’s no way it would have gotten us close to 30. To hit that many markets we needed to approach the problem from a new angle entirely.

I was reminded of this experience recently when I came across the question Peter Thiel famously asks founders: “What’s preventing you from achieving your ten-year goals inside of six months?”

Now what’s the benefit of asking this sort of question? It won’t magically unlock your ability to do 10 years of work in 6 months like some sort of productivity skeleton key, that’s for sure. But it will force you to think differently.

For myself at CompStak, I realized that if we were going to launch 30 markets, there was no way we could launch them from scratch one at a time. We needed to start “seeding” markets in advance, gathering interest (and data) from users ahead of time. How’d we do that? We ran a competition. Markets competed against each other. Each market was scored based on our data coverage of that market. Once a market crossed a threshold, we’d launch it. Users who loved the idea of bringing transparency to their market, could now impact the speed with which we launched, by collecting and sharing data with us directly.

Now, I’ll be the first to admit that this didn’t work perfectly. We still needed to “blitz” the market with a few events and marketing activities before launching to get our awareness up. But we didn’t need to hire a bunch of new people because we were starting at 80% rather than zero. And that made a huge difference in our launch pace.

I’ve been thinking about this experience a lot lately when chatting with founders. Invariably, founders I meet with, whether in the portfolio or not, come with an incredibly thoughtful product and growth plan. I can’t fault it. The plan makes sense. The numbers line up. It’s good! It might even work.

But, in the back of my head, I’m just thinking of myself, proudly showing off my expansion plan, not realizing that it was good, but not great, in a business where good just isn’t good enough. So I invite you to ask yourself Thiel’s question and see if it helps you think differently, just like it did for me back in the day.

David

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Germany / DefenseTech. Helsing raised €450M, led by General Catalyst, alongside Elad Gil, Accel Saab, Lightspeed, Plural and Greenoaks, for its European-focused AI-powered battlefield software.

Israel / SaaS. Buildots raised $60M, led by Viola Growth and O.G. Tech, to bring its AI-powered construction management software platform to Europe and North America.

Italy / Cybersecurity. Exein raised €15M, led by 33N, for its IoT cybersecurity company, specializing in securing device (e.g. robot) software.

Belgium / Devtools. Soda raised $14M, led by Singular, to bring its data quality platform to the United States.

Germany / FinTech. Lemon Markets raised €12M, led by CommerzVentures, for its “brokerage-as-a-service” platform, which enables any company to offer investment products.

Israel / AI-as-a-service. Enso raised $6M, led by NFX, for its platform designed to give SMBs access to a variety of AI agents trained on specific tasks across marketing, sales and admin.

UK / Cybersecurity. Tracebit raised $5M, led by Accel and Tapestry VC, for its canary-based intrusion detection platform.

ENTERPRISE/TECH NEWS

Google eyes Wiz. The Wall Street Journal has reported that Google is in talks to purchase Israeli cloud cybersecurity company Wiz for $23 billion. The company’s growth trajectory is, by any measure, remarkable. “Wiz’s annual recurring revenue hit $100 million 18 months after its founding, the company said, and grew to $350 million in 2023.” Israeli business newspaper Calcalist covered the significance of the potential transaction as well as the importance of Google in the Israeli startup scene. “Beyond the fact that it will be Google's largest acquisition ever, it is also the largest acquisition of an Israeli company, surpassing the record currently held by Mobileye, which was sold to Intel for $15 billion in 2017…Google's interest in Wiz is clear in light of the cyber fever that has been ongoing for the past year. Palo Alto Networks, which announced its "platformization," has already become a company worth more than $100 billion in terms of market capitalization. Microsoft purchased the previous startup of Assaf Rappaport and his partners, Adallom for $320 million, establishing its cyber division, which has already become a business worth more than a billion dollars. Meanwhile, companies like CrowdStrike and its competitors are starting to swallow up other firms, leaving Google behind. In such a situation, $23 billion—almost double Wiz's last valuation, and after a 60% jump in Google's stock over the past year to a value of $2.3 trillion—is not a big story.”

Five levels of AI. Antti Karjalainen of Sema4.ai wrote about five levels of agentic systems, ranging from “fixed automation” to true “autonomy.” According to Karjalainen, the current state of the art is level three, what he calls “Plan and Reflect.” “These agentic systems can create plans based on given intents, execute them, reflect on their success, and modify plans mid-execution if necessary. Many of today’s advanced AI agents operate at this level, capable of multiple reasoning cycles and planning to achieve desired outcomes.”

“What trillion-dollar problem will Al solve?” Jim Covello, head of Goldman Sachs’ equity research team, has questioned whether AI will ever generate enough value to justify the investment levels we are seeing. In a report released recently, “GS Head of Global Equity Research Jim Covello goes a step further, arguing that to earn an adequate return on the ~$1tn estimated cost of developing and running AI technology, it must be able to solve complex problems, which, he says, it isn’t built to do. He points out that truly life-changing inventions like the internet enabled low-cost solutions to disrupt high-cost solutions even in its infancy, unlike costly AI tech today. And he’s skeptical that AI’s costs will ever decline enough to make automating a large share of tasks affordable given the high starting point as well as the complexity of building critical inputs—like GPU chips—which may prevent competition. He’s also doubtful that AI will boost the valuation of companies that use the tech, as any efficiency gains would likely be competed away, and the path to actually boosting revenues is unclear, in his view. And he questions whether models trained on historical data will ever be able to replicate humans’ most valuable capabilities.” For more on the great AI debate, check-out the latest BG2Pod (starting at minute 22).

Reports of the death of software are exaggerated, at least according to Christoph Janz, founder of Point Nine and one of the most highly respected SaaS investors. “If you think about what people do when they use a business application, a significant part of it is looking up some information from a database (e.g. a customer record in a CRM), doing some action (e.g. sending an email to the customer) and updating the database (e.g. updating the CRM). With a very large context window, RAG, or other techniques to make data accessible for an LLM, you can imagine a future version of ChatGPT acting like an application based on high-level instructions that you provide in natural language. The way you’ll interact with this “application” could be a combination of natural language (you tell the AI what to do, via text chat or voice) and a UI that the AI creates on the fly based on the input it needs from the humans. If you think this is far-fetched, ask ChatGPT to act like an address book, enter some contacts, and look up some “records” from your “database” based on different criteria. You might be surprised how well this works already today. Now here comes the big “but”. What I described is, of course, a simple “Hello World” type example. To go from here to a serious, multi-user workflow solution with integrations, user permissions and complicated business rules, let alone to something that can replace, for example, a CRM, ERP, or HR system in an enterprise, is a huge leap.”

HOW TO STARTUP

How to hire a CEO. Vinod Khosla, a legendary investor, wrote a great piece on how to hire a CEO, something that many thoughtful founders may find themselves contemplating. “Instead of writing a spec, which generally looks like god in hard to meet form, start with a dozen top resumes that you can annotate. Highlight positive and negative experiences and characteristics to create a spec based on realistic candidates, and then hand these markups to your recruiter. I find recruiter specs too generic and mostly worthless.”

HOW TO VENTURE

Small hit rate. Ed Sim, founder of Boldstart Ventures, wrote in his weekly newsletter that VC has reverted back to being extremely challenging. “For all of the enterprise startups funded over the years, the fact remains, only 72 public software companies have valuations >$5B!!! In addition, the large majority were created pre-2010. To give you a sense of the mismatch between private and public markets, there are now >1,500 unicorns so that is a lot of inventory to work through. The bigger point is that investors need to sharpen their pencils and portfolio models. Once upon a time 10+ years ago, having a portfolio company reach a $1B valuation was an incredible, outlier outcome. Then in the ZIRP era, the goalposts moved as VCs adjusted terminal values in their models thinking that the one $2-3B outlier was possible in each portfolio and then that became $5B as unicorn after unicorn was created. This led to investors paying up well ahead of revenue and earnings and then it all changed. It turns out that $5B valuations while nice on paper requires real companies with real revenue and profitability…The downstream effects are enormous. This impacts fund sizing or the number of ginormous outcomes funds need to deliver returns the LPs want. Or this could indicate more ownership needed in the 1-2 outliers a fund has. And many are also going earlier in the race to be first to get ownership and pole position to keep investing in winners over time…”

Some great podcasts. It’s hard for this newsletter format to link to podcasts, but a few really great ones have dropped recently. Some recent great ones include this interview with Mike Maples of Floodgate by Samir Kaji and this interview with Pat Grady of Sequoia by Harry Stebbings.

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