What's 🔥 in Enterprise IT/VC #226

😲 $1 Trillion of ☁️ spend up for grabs in next 10 years, Enterprise Tech 30 + power of PLG + OSS

While tech stocks were battered this week from the threat of rising interest rates, I keep reminding myself that we are still in the early innings of the ☁️ . Along those lines, McKinsey came out with a bullish report on ☁️ spend citing $1 trillion across Fortune 500 companies will be up for grabs over the next 10 years.

And in the next 5 years alone, Google believes the ☁️ market will grow by another $500 billion (see SaaStr post).

So if we extrapolate that number out, we get over $1 trillion of spend again over the next 7-9 years. Bottom line, regardless of how stocks behave due to interest rates, there is a shit ton of revenue up for grabs.

Even ☁️ companies that are focused on SMBs can find a way to navigate and grow vs. AWS, Azure and GCP. Digital Ocean just filed its S-1 and is a developer and community first cloud provider for SMBs. It’s a great read to see how DO competes with a focus on simplicity, support, community and open source software. In 9 years, the company has built a customer list of 570k with a developer first learning community of over 34k dev tutorials and technical guides, and hit over $357 million in ARR. One key area to watch though is net retention rate which is well below the best in class enterprise cos like datadog at 130%+.

While net retention may limit upside here, what I love most is the scrappy playbook that DO created with a focus on content marketing and user tutorials which serves as an engine for growth. There is much that developer first founders can learn from their content and SEO strategies.

Shifting gears, the 3rd Annual Enterprise Tech 30 is out and thanks to Wing for producing this. I had a chance to participate as a voter, and I must say the original list was quite impressive and left out lots of amazing names. That being said, here’s a snippet of the mid stage companies who have raised $25 -100mm and congrats to Superhuman (a portfolio co).

Of note, 80% of the Enterprise Tech 30 use a PLG (product led growth model) and 36% are open source. Other trends include 29% in data, 32% in productivity/collaboration, and 16% in cloud security.

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

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Scaling Startups

1. Must read 🧵 from Michell at Hashicorp on why either fully remote or all in person are the way to go. Joel Sposky from StackOverflow always talked about this and would go to extremes, for example, where all video meetings would require folks in person to go back to their desk to make it feel like everyone was not together. This will be a big problem for many and I encourage you to think through this.

   Mitchell Hashimoto @mitchellh

   I think a lot of companies declaring they’re now “remote” are gonna hit an abrupt cultural wake-up call if they allow folks to ever return to an office. It’s very hard to mix paradigms and if it isn’t done thoughtfully, the WFH folks are going to quickly feel 2nd class again.

2. Great advice for all SaaS founders - I go to #1 and #2, product leads growth and happiness and pick the right customers and say no to the wrong ones, especially early on

   dharmesh @dharmesh

   In a SaaS business, approximately 100% of your energy should be spent on things that increase retention: 1) make the product better 2) sell better fit customers 3) invest in education 4) proactively reach-out to those not getting value 5) increase adoption of "sticky" features

3. Sign of the times - easier to get seed funding than coverage in @TechCrunch for your seed round!

   alex @alex

   note for early-stage startups

   

4. Remember, you don’t have to raise boatloads of 💰💰💰 to build a killer business

   Zachary DeWitt @ZacharyDeWitt

   Zapier raising less than <$2M and being valued at $4B+ is one of the most amazing stories in tech...

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Enterprise Tech

1. Great🧵on all of the challenges with data integration and engineering…

   Eric Sammer @esammer

   Over the last few weeks we've interviewed dozens of mid- to large-sized companies about their data integration and engineering infra here at @Decodableco. Here's a 🧵 on what we've learned...

2. Convergence of top down to shift ⬅️ is happening in security, finally as Palo Alto Networks CEO Nikesh talks about this in the most recent earnings. This is the beginning of a decade long shift so strap on your seatbelts and get ready 🚀 - read

   Ed Sim @edsim

   Great to see the shift ⬅️ movement being embraced by the largest security cos like @PaloAltoNtwks We are still in early innings 4 developer first security, fixing errors b4 production, pushing more secure code faster, expect a flurry of activity in 2021 fool.com/earnings/call-…

   

   Ed Sim @edsim

   more on the opportunity from @nikesharora

   

3. 10 Years of Open-Source Visualization…great read from Mike Bostock, creator of D3.js - for me, this is powerful, remember it’s about the long ground game to get individual users, user by user onboard, to learn from each dev or bug fix and consider as an opportunity to turn into an ally…

   Ed Sim @edsim

   💯best OSS founders focus on the ground game, one user at a time with each interaction with a developer as an opportunity to not only learn but also turn into a contributor, tweet, video or more - takes time but tried and true, read on for other lessons from @mbostock @d3js_org

   

   

   Mike Bostock @mbostock

   It’s been ten years since I pushed the first release of D3.js to GitHub. Have I learned anything? I hope so… but it’s a journey. https://t.co/MM4K870IiJ

4. While Coinbase is prepping for a monster IPO which could hit $100 billion of market cap, don’t forget the developer opportunity for blockchain as Muneeb points out. This is also why I’m so excited about Blockdaemon (a portfolio co) which is like the Heroku of blockchain.

   Muneeb @muneeb

   Dear developers, There is $1 trillion in Bitcoin crypto capital that you can program in smart contracts to build a new Wall St. Opportunities like these come once in a lifetime. Talk to us. Cheers, Muneeb with laser eyes.

5. 👇🏼Love this - look at pauses, reduce friction in sales process - all about increasing time to value!

   Basic Maslow @monkchips

   the new @googlecloud is defined thus

   

6. History lesson on DevOps, HugOps and what’s next with influencers like John Allspaw, Werner Vogels, Adam Jacob, and Nora Jones who runs Jeli (a portfolio co)

   Jones: We need to be asking different questions and we need to give more people seats at the table. I've been at way too many organizations where the incident was just the [site reliability engineers] in the room. It should have had marketing in the room, it should have had PR in the room, it should have had customer service in the room, it should have had leadership in the room. But it's thought of as kind of an SRE issue, like SREs have to prepare for any type of situation that gets thrown their way.

7. Scary thought of week - deep fakes are coming…

   Mckay Wrigley @mckaywrigley

   See this video of Tom Cruise? Well, it’s not Tom Cruise. It’s AI generated synthetic media that portrays Tom Cruise onto a TikTok user using Deepfakes. Seeing is no longer believing.

   

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Markets

1. Amazing run that keeps getting stronger for Salesforce (🎩 ShomikGhosh21)

   Sudheendra Chilappagari @webaficionado

   It's 2pm PT = Salesforce earnings call :) $21.3 billion in revenue in FY21 (~24% Y/Y) 🙏 Little-known fact? Service Cloud is bigger and growing faster than the Sales Cloud. And Platform (Force.com, Tableau and Mulesoft) is their #1 revenue driver.

   

2. Speaking of Salesforce, Slack is now at $1 billion ARR run rate 😲

   Ron Miller @ron_miller

   Slack reported earnings today and surpassed $250M quarterly revenue, putting them on a $1B run rate for the first time. My favorite stat: Over 106 Paid Customers with greater than $1 million in annual recurring revenue, up 51% year-over-year. That is a substantial Slack bill.

3. Huge flip from professional services to pure subscription - early days complicated enterprise software may require services and all good if end game is to eventually flip over to subscription - plan is working

   Jamin Ball @jaminball

   At IPO, 66% of Workday's revenue came from subscriptions (34% professional services), and they had 54% gross margins and (4%) FCF margin Today they reported Q4. 89% of their revenue was subscription, gross margins were 72%, and FCF margin was 45%. Incredible scaling $WDAY

4. Digital Ocean S-1 - positioning itself as the ☁️ for SMBs

   DigitalOcean simplifies cloud computing so developers and businesses can spend more time building software that changes the world. With its mission-critical infrastructure and fully managed offerings, DigitalOcean helps developers, startups and small and medium-sized businesses (SMBs) rapidly build, deploy and scale applications to accelerate innovation and increase productivity and agility. DigitalOcean combines the power of simplicity, community, open source, and customer support, so customers can spend less time managing their infrastructure and more time building innovative applications that drive business growth.

   

5. 😲 Coinbase S-1 (not enterprise, but just look at numbers)

   Myles Udland @MylesUdland

   Coinbase — $1.28B in 2020 revenue. Profitable. 43 million active users. sec.gov/Archives/edgar…