What's 🔥 in Enterprise IT/VC #222
🥾Bootstrapping works, the value of constraints + the scrappiness of not raising too much 💰, Qualtrics, Calendly...
Many of my weekly updates include financings for enterprise startups not because that is the end goal, but more because capital allows startups to grow and to use as a proxy of how companies may be performing. That being said, not enough is written about bootstrapping 👢. This week 2 initially bootstrapped companies had significant funding events (there it is once again!) as Calendly raised at over a $3 billion valuation and Qualtrics went public and is now at a $27 billion market cap. Both were bootstrapped and both, not coincidentally, were in underappreciated markets which drew little venture capital funding back in the day. Calendly was started in Atlanta/Ukraine and Qualtrics in Salt Lake City, Utah.
Before diving into Calendy and Qualtrics, I was curious about the origins of the word bootstrap so here it is from Wikipedia.
Tall boots may have a tab, loop or handle at the top known as a bootstrap, allowing one to use fingers or a boot hook tool to help pulling the boots on. The saying "to pull oneself up by one's bootstraps" was already in use during the 19th century as an example of an impossible task. Bootstrap as a metaphor, meaning to better oneself by one's own unaided efforts, was in use in 1922. This metaphor spawned additional metaphors for a series of self-sustaining processes that proceed without external help.
The key point for startup founders is “to better oneself by one's own unaided efforts” or no capital. I was talking to a fellow investor the other day and what scares me the most right now is zero stage startups raising too much capital outside of the gate. Necessity is the mother of all invention and when life is too cushy, one can lose that scrappiness. Trust me, having been through the first bubble in the late 90s, I’ve seen and been a part of that. Ryan Smith from Qualtrics talks about the DNA that was forged in the early days from this 2015 interview:
“You really have to kind of be blunt, eat what you kill,” Smith said onstage at TechCrunch Disrupt SF 2015. “It forces constraint, and when people are constrained, they get extremely creative and scrappy. It’s everything — it’s hustle, you gotta be innovative. ‘Were going to this trade show, figure out, can you can get this booth for free because we can’t afford it.’ It’s built into the DNA that we area actually running a solid business model.”
Qualtrics is a platform that makes it easier to monitor and “improve the vital signs of a company,” he said. It was founded in 2002, and it wasn’t until May 2012 when it raised its first massive round of funding — a $70 million series A from Sequoia Capital and Accel Partners.
Tope Awotona from Calendly talks about his early days - yes, a lack of money forces one to find a way…and now the company is at over $100mm ARR
But Awotona's thoughts veered back and forth from determined—to desperate. He had done something perilous and uncommon even in the world of venture capital. The now 39-year-old had poured every single penny in his own wallet and more into his startup idea, quitting a stable job in the sales department of cloud services company Dell EMC, emptying out his retirement, maxing out credit cards, and taking out expensive small-business loans to found a company that had yet to post any revenue. And he was no software engineer: He needed a business in Kiev to help him build out the tech behind his scheduling software company dubbed Calendly.
Awotona now credits that early lack of cash that as being a huge benefit to his business model. Calendly’s base version is indeed completely free—but that was in part because at inception, Awotona didn’t have the money to build a payments rail for the project. The lack of cash, “forced me to double down,” Awotona says
Also a great 🧵 here:
Constraints are good and can help you build the right DNA for your business. So before taking way too much cash and dilution than you need on day one, think again as there are lots of benefits of not taking too much too soon. The other point here is that the venture capital market is getting more and more efficient and data driven. Companies from Atlanta and Utah are no longer secrets and if you have a company with a SaaS app or an OSS company growing on Github, you will be found!
As always, 🙏🏼 for reading and please share with your friends and colleagues.
Scaling Startups
🎧 Podcast alert: enjoyed our wide ranging conversation on why technical founders, it’s not the entry TAM but exit TAM that matters, importance of product + hiring velocity, my mental model for enterprise investing on day 1
Shreyas from Stripe nails it again…
👇🏼 join us for this one…
👇🏼 calling all developer first founders, join next week to hear from @adamd + @ellenchisa on building a technical content program that is not only strategic, but wins ❤️ 🧠 of devs+ the orgs that they are building, lessons learned from @zapier @SendGrid @darklang + moreNext week I'm going to interview @adamd about dev content strategy for our friends @Boldstartvc! (We'll cover all the things I wish I knew pre-@darklang). Feel free to dm me questions in advance: https://t.co/QSVCozEdix
Ellen Chisa @ellenchisa👇🏼 Must read…
So ❤️ this - hiring matters and treating your hiring plans like content marketing for your product is key and when others talk about you and spread the love, there is no better recruitment engine. Pscyhed to see portfolio co Jeli.io on here and yes, the company was inundated with some amazing candidates
Interesting companies that aren’t FAANG to work for in no particular order: @stripe @twilio @jeli_io @SADA @Netlify What are yours?
Enterprise Tech
The State of Chaos Engineering from Gremlin is out. As mentioned in a number of my prior newsletters, I’m a huge fan of chaos but more importantly I’ll call it resiliency engineering. Gremlin has done a great job taking what Netflix started with ChaosMonkey back in the day and AWS is now coming out with offerings that are developer first which I believe will be a huge need for the industry. Also keep an eye out for companies like Steadybit.io, formerly Chaosmesh, as it continues to push resiliency testing left.
Tomasz from Redpoint has a great summary of the report 👇🏼
From early Jan (h/t Ellen Chisa) - the rise and fall of InVision - sad story but lessons to learn - lost its way with product, did not innovate fast enough…”Poor product strategy. Growth plan based on aspiration, not backed by data or solid plan”
Speaking of why Netflix is always up, here’s a great 3 minute overview of their edge architecture
Microsoft Azure which is now >$15 billion revenue! - Developers, Developers, Developers - Satya from the Q4 Microsoft Earnings call
As software developers become critical to value creation in every industry, their productivity is key to business performance. We have the most widely used and loved tool chain to help developers rapidly go from idea to code and code to cloud. With the world's most popular code editing tools, Visual Studio as well as VS Code, developers are more productive than ever. With GitHub, more than 70% of the Fortune 50 build software together.
And with Azure, they have the best-in-class services to build cloud-native apps and modernize existing ones. New code scanning capabilities in GitHub help developers find security vulnerabilities before they reach production. And new integrations between GitHub and Power Apps enables professional developers and domain experts to collaborate. At the PaaS layer, we are innovating to help developers build modern applications.
Datastax which is commercializing the open source Apache Cassandra database is HUGE!
This move comes right as Datastax is also now, for the first time, announcing that it is cash-flow positive and profitable, as the company’s chief product officer, Ed Anuff, told me. “We are at over $150 million in [annual recurring revenue]. We are cash-flow positive and we are profitable,” he told me. This marks the first time the company is publically announcing this data. In addition, the company also today revealed that about 20 percent of its annual contract value is now for DataStax Astra, its managed multi-cloud Cassandra service and that the number of self-service Asta subscribers has more than doubled from Q3 to Q4.
“We looked at how a lot of developers are building on top of Cassandra,” Anuff, who joined Datastax after leaving Google Cloud last year, said. “What they’re doing is, they’re addressing what people call ‘data-in-motion’ use cases. They have huge amounts of data that are coming in, huge amounts of data that are going out — and they’re typically looking at doing something with streaming in conjunction with that. As we’ve gone in and asked, “What’s next for Datastax?,’ streaming is going to be a big part of that.”
If you’re wondering where I’m investing these days, read this 👇🏼 on the Datadog/Snyk partnership and Datadog’s launch of it’s new Vulnerability Analysis GitHub Action - world is shift ⬅️ to developers from ops
“We’re moving towards a world where security, testing, and even responsibility for production operations are shifting left towards the developer. Partnering with full-stack monitoring leaders like Datadog makes it easy for developers and DevOps teams to incorporate critical operations tooling as part of their everyday work environment, so teams can focus on delivering value, at greater velocity."
Developers understanding and mastering codebases is so tough and can be the difference between 3-12 months of onboarding time. Keep an 👀 out for this over time…as per James Governor, Analyst with RedMonk
Markets
😲 Microsoft and Azure growth…
I couldn’t resist - here’s a great thread on Gamestop
