What's 🔥 in Enterprise IT/VC #221

The developer first dilemma, the value of patience, and why going enterprise too early can be hazardous to your health ⚠️

Talk about paying it forward on price? Yes, it’s getting bonkers out there and some folks using 2022 and beyond ARR to justify pricing now.

Bilal Zuberi @bznotes

$2m ARR. $400m price. Surely all is well.

So top of mind for me this week besides the peaceful transition of power, thankfully, has been the multiple conversations I’ve had with developer first founders and working backwards from their A round to the start of the company. The common theme that really struck me is something I’ll call the “developer first fundraising conundrum.” In particular, what are the metrics to go from first round to Series A? Do I focus on winning the ❤️ and 🧠 of developers or enterprise design partners? Can I do both? The more you spend on one, the more it takes away from doing the other as we must all remember that time, focus and resources are finite, especially at the very beginning. So here goes…

Ed Sim @edsim

1/ A story on developer first products on day 1 + the road to your next round… You want to be/are a dev first product. You focus on one developer, solving their pain, having them come back over and over again. However there is falloff and lots of features to add - user ❤️

Ed Sim @edsim

2/ Enterprise 1, then Enterprise 2 knocks on your 🚪 They ask for all the enterpriseready.io features you will need You have limited cycles + need to manage resources appropriately Each new enterprise design partner + feature takes away from user ❤️ Which path to take?

enterpriseready.ioEnterpriseReady - Build SaaS Features Enterprises LoveA guide for SaaS companies to build the features that enterprises love.

By the way, these are happy problems to have - when a developer finds you and escalates it to the enterprise level in which case you are sent for a security review and you learn the only way a larger company can consumer your service is with SOC 2 compliance and an on-prem version. There are ways around this but as you can imagine this can be a massive distraction and not every customer is the right customer for you.

Ed Sim @edsim

3/ Working backwards, which is better? I can certainly say which is harder and more valuable in the long term… 3-5 design partners at next round, some nice logos, but one off acquisition engine? True developer first motion, product for 1 developer who can’t live without it

My two cents is if you can pull it off and if you have a “true” developer first product versus one that is really for operations and you’re trying to shoehorn into a dev first motion is to be patient.

Ed Sim @edsim

4/Incredible patience, perseverance, focus on 1 user needed for true dev first motion Temptation for enterprise design is there but every second u spend on that means less engineering cycles for dev first product Stay the course…don’t be tempted…

Read the 🧵 for the rest…

To be clear, I don’t want to be prescriptive, just sharing the different paths. If you decide to go more top down, my two cents is to focus on fast moving tech companies who can make quick decisions. And while nice to get some validation like this, investors want to see the engine and momentum when they write a check - where will the next 5-10 come from and what is your engine to deliver those leads. Which goes back to my point, if you can build that developer ❤️, that is one of the most incredible engines out there.

In order to get there, there will be no shortage of 💰 for your first round but as JJ, founder of OSS Capital, says:

Founders who raise meaningful capital from VC well before even possessing a basic understanding market dynamics will be forced to have full clarity on those issues in short order, and if they are not able to graduate and grow into investor expectations within 1-2 years at most, they will experience very painful misalignment conversations... which will cause them to betray social contracts and principles set in place with other key stakeholders in their open source ecosystems.

This initial 💰 from the wrong partner could also lead you to destroying longer term value by monetizing too early. There are so many amazing examples of companies that stayed the course and focused on true developer ❤️ before going enterprise too early from MongoDB to Twilio to Elastic Search to Github to HashiCorp to Snyk and more. Trust me, all of them were faced with the developer first fundraising conundrum and held off as long as possible and focused on winning the ❤️ and 🧠 of developers before focusing on the enterprise.

Patience matters - case in point 👇🏼

Mitchell Hashimoto @mitchellh

11 years ago today I pushed the first commit for Vagrant. I didn’t know what a virtual machine was, I barely knew Ruby, I had never done any ops, I was still a 20 year old university student. Follow your dreams, it isn’t easy, but it can be done.

github.comInitial commit · hashicorp/vagrant@050bfd9Vagrant is a tool for building and distributing development environments. - hashicorp/vagrant

As always, 🙏🏼 for reading and please share with your friends and colleagues.

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Scaling Startups

1. 👇🏼 Must read from Andy - so simple yet so powerful when it comes to leadership

   Andy Weissman @aweissman

   You'll Figure It Out

   

   blog.aweissman.comYou’ll Figure It OutI’m sure we’re taller in another dimension You say we’re smaller and not worth the mention - Frank Ocean When I worked at AOL, we typicall...

2. I want to see the true “you”

   Ed Sim @edsim

   Founders, overrated, VC twitter advice on startups…incl. my own 😃 Underrated - just being you. Twitter advice won’t teach you authenticity, instinct (product/mkt), + scrappiness. All 🔑 foundations for going from 🤔 to 🦄 Seeing too many preproduct founders overengineer story

3. Choose your board wisely - great 🧵

   Todd McKinnon @toddmckinnon

   You should never be bored with your Board. A mistake CEOs can make is underutilizing their board of directors. Boards aren’t just for corporate governance; they can be a competitive differentiator. Lessons learned over the years building a strategic Board of Directors ⬇️

4. Founders, those early rounds of dilution can add up

   TZ @TZhongg

   Interesting data on how much founders make at IPOs 💰 (created by @yourfaveVC)

   

5. 🧵 from cofounder of Loom, start planning for success early

   Shahed Khan @_shahedk

   THREAD: Wealth tips for founders & early employees... • Secondaries • Tax benefits • Hiring a CPA / Financial Advisor • Diversifying • Tools I use • and more...

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Enterprise Tech

1. Databricks raising at $27 billion??? (Newcomer)

2. How VMware is trying to be cool for developers (The Information) and Craig McLuckie (one of creators of Kubernetes) spells out the classic tension I often write about in this newsletter, centralized control and policy setting from IT and the need for self service for developers.

   There is often tension between the two groups. Cloud developers generally seek to move as quickly as possible to build and update applications, while IT departments tend to proceed more cautiously, partly because they’re often in charge of tracking the usage of cloud services for accounting and regulatory compliance purposes. In pursuing the cloud crowd, VMware has to make sure it doesn’t alienate the IT folks that account for most of its business.

3. Don’t forget internal APIs - great 🧵 started by James Watter (VMware)

   James Watters @wattersjames

   The New API Economy is based on the internal APIs inside your enterprise. The first wave got the external focus dead wrong IMHO.

   

   API Evangelist @apievangelist

   What does the phrase "API economy" mean to you?

   Ed Sim @edsim

   and most APIs still in REST! Lots of startup opportunity ahead in the API space...

   

   

   R Arni @r_arni

   While a lot of folks think of APIs as "external facing" what we at @VMwareTanzu see is consistent with what the @getpostman 2020 report shows: https://t.co/YwCFFtJouU. The continued rise of internal APIs: https://t.co/cZDnbcaEop

   Full report from Postman here.

4. Elastic Search finally changed its OSS licensing to prevent hosted commercial use i.e. AWS

   Shay Banon @kimchy

   And to be clear, this change most likely has zero effect on you, our users. It has no effect on our customers that engage with us either in cloud or on premises. Its goal, hopefully, is pretty clear. (3 of 22)

   Shay Banon @kimchy

   So why the change? AWS and Amazon Elasticsearch Service. They have been doing things that are just NOT OK since 2015 and it has only gotten worse. If we don’t stand up to them now, as a successful company and leader in the market, who will? (4 of 22)

   Shay Banon @kimchy

   Our license change is aimed at preventing companies from taking our Elasticsearch and Kibana products and providing them directly as a service without collaborating with us. (5 of 22)

5. Service meshes are great but also add complexity. David Mooter, Senior Analyst at Forrester Research, nails it as he writes about focusing on, you guessed it, the developer experience first. (🎩 Gareth Rushgrove)

   Vendors that believe service mesh is merely about connectivity miss the point. The fundamental value of microservices (and cloud in general) is greater agility and scalability from smaller deployable units running on serverless, yet the programming constructs we’ve needed for decades haven’t gone away. Many advancements in cloud technology are filling in the constructs we lost when migrating from monoliths to cloud-native. Vendors that make the microservice developer’s experience more on par with that of traditional software development, without sacrificing the benefits of microservices, will have the winning products.

   In sum, the service mesh should be a platform feature, not a product category — as far out of sight and mind from the DevOps team as possible.

6. Solid post from Rak Garg at OpenView on the unbundling of Splunk with a nice mention of portfolio co Wallaroo

   Rak Garg @rak_garg

   1/ Super excited to announce the launch of my newsletter: Rak's Facts! First post on unbundling Splunk just dropped. New logging infrastructure, affordable data lakes, and more flexible orchestration tooling will redefine SecOps 👇 rakgarg.substack.com/p/the-great-sp…

   

   rakgarg.substack.comThe Great SplunkbundlingLogging infrastructure & the SIEM stack weren’t built for 2020. Splunk dominates this category, but will get disrupted by best-of-breed tooling.

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Markets

1. Enterprise vs consumer - big hits in consumer like Doordash and other than snowflake, value more spread across enterprise - more from Scale Venture Partners

   

2. 🤔 Gitlab?

   Chamath Palihapitiya @chamath

   I’m finalizing an investment in “???” and will be leading their PIPE so it will soon be public. Best SaaS company I’ve ever seen/invested in - and, as a public company, it will comp per the table and chart below. One-pager to come soon.

   

   

3. Holy SPACs! (via Bloomberg)

   SPACs were already looking frothy last year, when they accounted for about $78 billion of issuance in North America, or about half of all money raised in IPOs. But things have gotten even crazier since then.

   So far in 2021, almost 60 new SPACs have together raised about $17 billion, or more than $1 billion for each day the market was open. Market participants say SPAC IPOs tend to be several times oversubscribed, and no wonder: SPACs have usually “popped” in the first days of trading. On average each of this year’s SPAC cohort has gained about 8%, according to Bloomberg data.