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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.
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…
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.
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.
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 👇🏼
As always, 🙏🏼 for reading and please share with your friends and colleagues.
👇🏼 Must read from Andy - so simple yet so powerful when it comes to leadership
I want to see the true “you”
Choose your board wisely - great 🧵
Founders, those early rounds of dilution can add up
🧵 from cofounder of Loom, start planning for success early
Databricks raising at $27 billion??? (Newcomer)
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.
Don’t forget internal APIs - great 🧵 started by James Watter (VMware)The New API Economy is based on the internal APIs inside your enterprise. The first wave got the external focus dead wrong IMHO.What does the phrase "API economy" mean to you?API Evangelist @apievangelistand most APIs still in REST! Lots of startup opportunity ahead in the API space...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/cZDnbcaEopR Arni @r_arni
Full report from Postman here.
Elastic Search finally changed its OSS licensing to prevent hosted commercial use i.e. AWSAnd 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)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)
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.
Solid post from Rak Garg at OpenView on the unbundling of Splunk with a nice mention of portfolio co Wallaroo
Enterprise vs consumer - big hits in consumer like Doordash and other than snowflake, value more spread across enterprise - more from Scale Venture Partners
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.