YSL Europe/Israel Enterprise/Tech Weekly

The Angle Issue #16: February 26, 2018

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If you read one thing this week - don't. Listen to this instead: A16Z's podcast is always good, but this discussion between Martin Casado of A16Z and Michel Feaster of Usermind is an absolute gem. The topic is category creation for enterprise startups. Nothing is more important to a startup's ability to create value than the processes of creating a category. Get that right, and the sky is the limit. The only thing that matters in startup life is capital efficient growth into category leadership.

Other big themes this week were the Dropbox S-1 and the emergence of what I called "hybrid AI systmes of intelligence" but Gordon Ritter calls "coaching networks" and Nicky Case calls "AIA Centaurs." Check it out below...

Please feel free to email me with comments - and if you like this - please forward to friends and subscribe if you haven't already. Thanks!

From the blog

2018 EU+IL VC Data. $20.3B of VC investment summarized in 74 slides. 

Europe/Israel Enterprise/Tech

• Israel/Semiconductors. CTech argues that when multinational corporations think chip design, they look to Israel and provides a set of articles on the topic. Yes, it's true, Israel has emerged as a semiconductor powerhouse. But if you look at the money flows and the exit numbers, it's far from clear that that sector is going to drive a lot of growth going forward. 

• Ireland/Semiconductors. Irish chipmaker DecaWave raised a $30M round and plans expansion, including in China. The company's principal product is an indoor positioning system (IPS) with 10 cm accuracy. 

• France/IoT. French IoT networking giant Sigfox missed its 2017 revenue targets, but has aggressive plans for 2018 which hinge on 5G. The company generated $50M of revenue in 2017 and connects 2.5M objects through its network.

• Israel/Spain/Automotive. Spanish automaker SEAT demonstrates using Israel's eyeSight Technologies to monitor drivers' line of sight and detect loss of alertness.

• Israel/The China Question. TOI cited new data from IVC and argues that China is playing a minor role in Israel's tech economy, responsible for only 5% of the M&A volume. Globes also provided detailed coverage of the same data. 

Worth reading

• Dropbox S-1 Teardown. Tomasz Tunguz at Redpoint came out with a detailed teardown of the recently filed Dropbox S-1. Highlights: 500M users, 2% conversion to paid, $1.1B in revenue in 2017, 35% revenue CAGR 2015-2017. The real headlines here, I think, are declining CoGS (in absolute terms) and very impressive sales efficiency (1.1 compared to 0.4 for Box). Jeff Bussbang at Flybridge also put out a great teardown of the same S-1. He highlights negative churn and relatively low dilution for the founders.

• AI Centaurs. Nicky Case at MIT writes thoughtfully and beautifully about how human+machine hybrids (centaurs) are often more powerfully intelligent than pure AI. He argues that "AIs are best at choosing answers. Humans are best at choosing questions"  and suggests that what really matters is the process by which humans and computers work together to arrive at answers. Nicky traces the evoultion of of Intelligence Augmentation (IA), how that morphed into artificial intelligence (AI), and suggests that AIA (Artificial Intelligence Augmentation) is next. "IA can give AI the human partnership it needs in order to remain aligned with our deepest goals and values. And in return, AI can give IA some new replacement wheels for the bicycle of our mind." In a related development, MIT Technology Review reported on a Google project call PAIR (People + AI Research). PAIR's goal is to make it easier for humans to work with AI systems, and the first release is a visualization tool that can help human operators handle outliers better. 

• Or maybe we can call Centaurs "Coaching Networks." Gordon Ritter of Emergence took the hybrid human+AI theme further this week, highlighting "coaching networks" as the next big theme in enterprise software: "Coaching networks are enterprise applications that collect and analyze human behavior, and then guide their users toward behaviors that achieve better outcomes. The network element is the collaboration and computing framework that enables the collection and analysis. The coaching component is the iterative improvement that stems from applying that analysis." I was pysched to see Chorus.ai in his short list of examples. Gordon put out a short deck that outlines this thesis, which is available here.

• Optimizing a B2B website for conversion. Iris Shoor, CEO of Oribi, offers five often overlooked optimization opportunities for B2B websites. My favorite tip is removing the menu from certain pages to maintain better control over user flow.

• Breaking down Red Hat's acquisition of CoreOS. A detailed look at why Red Hat spent $250M to buy CoreOS. In one word: Kubernetes. 

• Oracle gets SaaSy. CIOdive argues that Oracle may need to concede defeat in the IaaS space, but will fight tooth and nail to maintain a place at the SaaS table. The company's SaaS strategy includes leveraging automation at the DB level to encourage adoption of cloud-based SaaS products by its customer base.

• Seed is a phase, not a round. Hunter Walk argues this case compellingly in this outstanding blog post. The real problem, I think, is the co-opting of every formerly useful phase for describing a round type or a stage. 

• Internet of chips. Researchers at MIT have developed low-power chips for IoT security.

Portfolio News

Chorus.ai is highlighted by Gordon Ritter of Emergence as a classic example of a coaching network.
Front CEO Mathilde Collin on what she actually does all day as CEO.
Jonathan Saring of BitSrc on what music can teach us about how we share code.
Innovid is hiring a cloud infrastructure developer.
A killer profile of JFrog (in Hebrew).