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What's 🔥 in Enterprise IT/VC #223
We're past the age of decacorns 🦄 - what's the new bar for enterprise outliers?
The ☁️ and enterprise software market continues to be on 🔥 in 2021. First, who would have thought that when Jeff Bezos stepped down as CEO of Amazon that the head of Amazon Web Services would replace him? That’s exactly what happened and shows the ever growing importance of the ☁️ at Amazon and overall. Second, who would have thought that we’d have a number of pre-IPO fundings in the $30 billion range for enterprise software companies. That’s exactly what happened this week with both Databricks and UIPath at $28 billion and $35 billion respectively. 🤔 about those numbers for a second…🤯
When I started boldstart in 2010, our goal was to partner with technical enterprise founders armed with an idea and a slide deck on day one and 🙏🏼 that we would get one, just one, $1 billion company per fund where we had close to 10% ownership on exit. With those numbers, one could create a significant return of capital on a small fund size. 11 years later, and it’s clear that I dramatically underestimated how big and how fast some of these enterprise software companies would become. I wasn’t thinking big enough! The goalposts seem to keep moving for what a category creating, private enterprise software company is and the growth and valuations they are realizing. Here’s a slide from our boldstart annual meeting in June 2020 - notice the valuations (courtesy of SaaStr). Here, I was suggesting the equivalent of the $1 billion exit en years ago has become a $10 billion one, a decacorn.
And 8 months later, look at the valuations 😲 (from Meritech). Forget about 🦄 or decacorns, the new mythical creature is a pentacontacorns (yes a mouthful). Clearly the new investors in UIPath and Snowflake are thinking much larger outcomes.
Working backwards from IPO, this has a dramatic effect on valuations all the way back to the seed and Series A rounds. There is so much capital trying to get ownership as early as possible in the next potential pentacontacorn (ok, we need a better name 😬) that valuations are inflated across the board. Fund sizes keep increasing and the question we all need to ask is, will this last and is this sustainable?
If you look at numbers on ☁️ spend from Ron Miller at Techcrunch, for example, then the answer is yes.
So much more to chew on and think about as 2021 evolves.
As always, 🙏🏼 for reaching and please share with your friends and colleagues!
Best quote from Elon Musk on Clubhouse:
Jeff Bezos letter to employees as he promotes Andy Jassy to CEO - all about invention!
Today, we employ 1.3 million talented, dedicated people, serve hundreds of millions of customers and businesses, and are widely recognized as one of the most successful companies in the world.
How did that happen? Invention. Invention is the root of our success. We’ve done crazy things together, and then made them normal. We pioneered customer reviews, 1-Click, personalized recommendations, Prime’s insanely-fast shipping, Just Walk Out shopping, the Climate Pledge, Kindle, Alexa, marketplace, infrastructure cloud computing, Career Choice, and much more. If you get it right, a few years after a surprising invention, the new thing has become normal. People yawn. And that yawn is the greatest compliment an inventor can receive.
and to close out…
Keep inventing, and don’t despair when at first the idea looks crazy. Remember to wander. Let curiosity be your compass. It remains Day 1.
And here’s why crazy is good!
Mitchell Hashimoto from Hashicorp shares how he turned down a $50 million offer in the early days - smart move but also shows the importance and value of knowing what your mission is - it’s not about the money but the mission and if the mission succeeds, all else will come. Must read 🧵
Data from Sapphire Ventures and its venture fund portfolio - founders, remember that ultimately if you want venture financing, this is what VCs need to deliver back to their LPs/investors
No surprises – venture continues to be a power law business. Outlier breakouts are still needed for outsized performance.
Among our funds that are marked at 3x TVPI or higher, the top value driver company currently represents ~50% of the funds’ total value on average. The top two value drivers represent a whopping ~60%, and the top three drivers represent ~70%.
Across Sapphire Partners’ entire portfolio of over 2,000 underlying companies, the top five companies represent 15% of our total value and the top two companies represent 11%.
Swing for the fences everyone!
What’s a Founder-in-Residence? Well, we just brought on Ellen Chisa, cofounder of portfolio co Dark in the dev tools space and product lead at companies like Kickstarter and Lola (SaaS travel) previously. Here’s her AMA and post on what the role entails and why and here’s our post.soo... I was not planning on this, but I ended up getting a job! 🎊 I'm now a founder-in-residence : ellenchisa.com/log/boldstart I know this type of role is pretty opaque, so consider this an open AMA about what it is, how you get into something like this, etc.
Welcome to the @boldstart team Ellen!
In enterprise software when it comes to go-to-market, one must think long and hard about entry point and distribution. In order to get big, startups need to focus from the very beginning and think about their initial wedge, nail that, and over time think about how to become part of an embedded workflow which creates more stickiness. A great real-time case study is Box.
This week, they announced their new end-to-end product, the content cloud. However, for 10+ years, they first nailed the enterprise file sharing piece and fended off Google, Microsoft and others and put a huge hurt on Dropbox. Imagine if they tried to do too much too early? Now with a massive and happy installed base, they unveiled their Act II starting with Box Sign going after a piece of that $50 billion market cap of Docusign.I’m incredibly excited to announce that’s Box has acquired SignRequest, a leading esignature innovator, and that we’ll be launching Box Sign this summer. Box Sign will be *included* in all Box’s business and enterprise editions. Learn more here:At Box, we’re building out the *end to end* content cloud. One platform for security, privacy, compliance, workflow, collaboration, and now signatures. Excited to work with the amazing SignRequest team to make this happen and bring Box Sign to our customers ASAP.
It’s a pretty slick UI and platform for sure with slick messaging - the file as the container of data to do anything. It’s a big bet, and let’s see if they can upsell their existing installed base over time and replace, the best of breed apps that many orgs are already using.
Information security market (Pitchbook - preview) and funding 📈
Information security venture funding set a record in 2020, with $9.9 billion invested in the sector—a 16% increase in deal value year-over-year, despite a decline in deal count. Largely insulated from the pandemic, the market grew steadily last year and is projected to reach nearly $207 billion by 2024.
Sierra Ventures CIO Survey - here are a few nuggets…still more room to grow in the☁️ and new tech of interest is infra as code, k8s (still early), and automation…no surprises
SAP acquired Signavio (missed that last week) for $950 million to enter the automation and process mining space.
Question is what will happen with their Celonis relationship which is a SAP Solex partner (on price list) and rode wave to massive growth on the back of SAP (Enterprise Irregulars)
Celonis, that until now, enjoyed a close and successful partnership with SAP. In addition, Celonis has cultivated many strong partnerships with the likes of Accenture, Cognizant, Genpact and IBM. Will they gravitate towards as SAP-owned Signavio? And will SAP’s army of customers really take this seriously enough to fight their CFOs for yet more cash to pump-prime the Waldorf machine? The depressing answer for both SAP and Singavio is simply: no one really cares.
So while Celonis has the better product, will SAP distribution win? Great to see FortressIQ (a portfolio co) here as they are a Signavio partner so the next few months will be interesting for sure.
The hottest UK enterprise tech startups to watch in 2021 (Computerworld) - Behvox, Cutover, Graphcore, Hopin, Snyk and Tessian
The 20 Coolest Cloud Monitoring And Management Companies Of The 2021 Cloud 100 (CRN) - congrats to SpectroCloud (a portfolio co) with a truly agnostic and easy to use K8s managed service
And while kubernetes has won, it’s still not developer friendly and overkill in most cases - 🧵
IBM Blockchain Is a Shell of Its Former Self After Revenue Misses, Job Cuts: Sources (Coindesk) - Not a surprise but bummer to see - IBM did so much to get enterprises thinking about blockchain although still limited use cases outside of payment and supply chain perhaps.
If IBM’s blockchain innovation work is now confined to some R&D, and does not even extend to consulting, as one of the sources said, this sounds an ominous note for the enterprise blockchain space in general – perhaps particularly for the Hyperledger collection of blockchains, to which IBM was a key contributor.
Jamin is my goto source when it comes to earnings
How long will the SPAC boom last? (The Information)
Too many SPAC dollars in search of a supply-constrained pipeline of IPO-worthy deals can give rise to a funding environment that lends itself to a higher pool of potentially less promising deals,” said Hwang. "We’re operating in a highly optimistic market right now.