What's 🔥 in Enterprise IT/VC #159

It was a big week for me as we announced our two new funds @boldstartvc, $157mm to back enterprise founders from day one to scale (Medium, Techcrunch). We raised $112mm for boldstart iv to partner with founders at pre-product/formation stage and $45mm to continue investing in our top companies in later rounds. Amidst all of this, I wanted to thank my friends at Andreessen Horowitz for inviting me to their summit, a16z’s flagship annual event for portfolio companies, CIOs, and institutional investors. Great content, people, and learnings all around. What’s clear is that folks are still bullish about enterprise tech, but cautiously so and the discussions around balanced growth continue to resonate.

This week’s newsletter skews towards the Scaling Startups side with nuggets of wisdom on hiring and focusing on product. Datadog crushed its first earnings release post IPO and shows the continued power of product led growth and developer first models.

Finally, if you like the new format or content, please share and ❤️ above!

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Scaling Startups

1. This is where many founders misfire, trying to do too much themselves and not spending enough time on creating exponential value, hiring comes top of mind in my experience which is not emphasized enough

   Alexandr Wang @alexandr_wang

   Simple rule for founders: Only spend your time on things whose value compounds exponentially. They don't need to scale, but they need to compound. Examples: - Hiring - Culture - Code - Understanding of customer - Internal memos - Relationships - Internal alignment

2. Especially in early days…

   Aaron Levie @levie

   I’m not sure I’ve seen a startup become successful *because* they got a high valuation. Premature valuations and oversized fund-raises more often distort a startup’s business model, employee expectations, execution, and ecosystem’s economics. Grow thoughtfully, folks.

3. Tomasz from Redpoint nails it in the Most Frequent Mishire in Startups (first head of marketing); we both lived this firsthand in a joint portfolio company. Do you hire a product marketing person first to focus on who target customer is, value prop, etc or demand gen?

4. 👇🏼💯 - in early days, focus on product!

   Andy Johns @ibringtraffic

   Most startups should not have a growth team. It leads to incremental thinking at a time when you’re expected to grow 3x+ every 12-18 months. In most cases, a bunch of a/b tests won’t give you that velocity of traction. Your best bet is big bets on new feature innovation.

5. What comes before product-market fit? David Ulevitch and Peter Lauten from a16z lay out why product-user fit must come first. Sage advice as their is no market without power users from which you can learn, iterate on product, etc.

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Enterprise Tech

1. Docker going back to its roots to focus on “advancing developers’ workflows when building, sharing and running modern applications. As part of this refocus, Mirantis announced it has acquired the Docker Enterprise platform business.” Would the story be any different if Docker did not move to the enterprise so quickly and just monetized small amounts from many? Or did they give away too much as open source? We’ll never know but let’s see if they can find a way to monetize the core developer first model.

2. Collaboration and productivity software continue to dominate headlines. Pretty amazing that Notion has over 1 million users and just 9 engineers and is worth $800mm. For what it’s worth, Atlassian is worth $30 billion now selling an average ticket price of $5k per customer.

3. Dimitri Sirota from BigID (a portfolio co) dropping wisdom on California privacy laws; “these aren’t just checklist rules, needs complete rethinking of what data is and how it should be treated”

4. William Morgan founder of Linkerd, one of the very first service mesh projects, breaks down what it is and why you need it (hat tip to Shomik Ghosh).

5. Great news for enterprise IT spending; I still believe no matter what economy we live in, that spending to create more efficiencies will not go away. “Over the next five years, the enterprise IT market is expected to grow at roughly twice the rate of annual world-wide gross-domestic-product growth, up from less than 1½ times the rate in the early 2000s, according to IDC.”

6. Low code, no code is all the rage. When WSJ CIO Journal covers it for enterprise automation, it sounds like its moving beyond startup land. Also more from Microsoft on their Power line to create citizen developers.

7. Great read on how Microsoft tracks nation state hackers and also another reason why MSFT won the $10 billion Pentagon contract. Telemetry from Windows software equals lots of visibility and data which is great for machine learning.

   “There’s a perfection required in the bounds of attack and defense,” Lambert told me. “To defend well, you have to be able to attack. You have to have the offensive mind-set too; you can’t just think about defense if you don’t know how to be creative about offense.”

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Markets

1. Datadog crushed its first earnings release as a public company with revenue of $95.9 million, up 88% year over year and it now has 727 customers with ARR of at least $100k, up 93% year over year. Pretty amazing for a developer first, product led growth model.

2. Sapphire Ventures breaks out “Which investments generate the greatest value in venture: Consumer or Enterprise?” As you may imagine, consumer is more hits driven while enterprise has a broader distribution of succcess but top 5 outliers represent 9% of the overall value creation since 1995 while top 5 consumer is 36%.