What's 🔥 in Enterprise IT/VC #260

🙏🏼 5 years of What's 🔥!!! IT Spending 💰 forecasted to grow 📈 at fastest rate in over 10 years!

As I’m writing this from 30k feet enroute to Miami for some meetings with enterprise founders, yes, enterprise founders, I wanted to take this time to 🙏🏼 all of you for reading, listening, and sharing your thoughts with me on the What’s 🔥 journey. Today marks a huge milestone as issue #260 represents 5 years of weekly rants and emails! On the one hand 5 years seems like quite a long time, and on the other hand, it feels like it has just flown by.

As I reflect on the last 5 years, what stands out the most to me is that we’ve moved from a world where developer tooling and infrastructure software was a backwater, unsexy area to invest to one that is driving massive value where terms like DevOps are regularly tossed around on CNBC. Just 5-6 years ago, New Relic was one of the gold standards of DevOps public companies with a market cap north of $2B and now it’s only worth $5B as companies like Datadog at $40B+ and Gitlab at $15B plus have accelerated past New Relic as the new leaders. Given how much has changed since I hit send on the first What’s 🔥, I’m super excited about the what the next 5 years will look like!

While valuations are 📈 for all enterprise software companies, the good news is that the fundamentals underlying this are also 📈 as IT spending...cybersecurity, BI/Data, and cloud spend is forecasted to continue to rise in 2022 and beyond.

Gartner @Gartner_inc

.@Gartner_IT’s annual survey of over 2,000 CIOs reveals that enterprises must embrace business #composability to thrive through disruption in 2022 & beyond. Learn more here, live from #GartnerSYM. gtnr.it/3n2ToBz @Gartner_SYM

In fact, according to a Gartner report released this past week, IT budgets in 2022 are expected to rise at a faster rate than they have in more than 10 years! (WSJ)

Here are the actual Gartner numbers on spend.

As you can see, it’s all about enterprise software and in particular spending on infrastructure. (ZDNet)

Enterprise software saw the biggest increase in spending for 2022 compared to 2021, while device spending fell precipitously after a big 2021. According to Gartner, the 11.5% growth predicted for 2022 is driven by "infrastructure software spending spending continuing to outpace application software spending," according to Gartner.

Here’s a look at the public markets as you can see 💰 shift into enterprise software the last 5 years and away from consumer FAAMG.

Gavin Baker @GavinSBaker

Hedge Funds broadly negative on FAAMG while net exposure is at 4 year highs for software. Data from MF at GS, who writes one of my favorite emails every weekend.

Let’s hope this spending binge continues so it can continue to support these valuations and sky high growth rates. As always, 🙏🏼 for reading and please share with your friends and colleagues!

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Scaling Startups

1. Must read from Michael Eisenberg (Aleph) - Michael and I go way back to 1999 when we were on a board together in Israel - solid advice for founders when choosing their partner. I fear that with the speed of dealmaking we are losing this…

   aleph @aleph

   “In an era of transactional investing, relationships are both scarce and proprietary. They are 'different,'” says @mikeeisenberg, as he stresses the importance of the investor-founder relationship for entrepreneurs raising capital in this environment.

   

   bit.lyInvest in Relationships, Not TransactionsAs I prepared for our annual LP meeting at Aleph, I wanted to reflect on our investment strategy in this era of weaponized capital, or capital as a commodity. A quote from an article my friend Sam…

2. Summary of Working Backwards (startup lessons from Amazon)

   John Danner @jwdanner

   Reading books is a luxury that few startup founders have time for. This is a summary of Working Backwards, the most important book to read for startup founders this year. Here is what you should take away from this book:

3. I highly recommend these annual get togethers for whole companies that are distributed and more frequent IRL for the teams. Yes this was discussed at the board level and many of our companies get way more value out of these bonding experiences than the actual $ cost. Full video here

   

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Enterprise Tech

1. 🔥 up for latest offering from Cape Privacy (a portfolio co) as it now helps companies run ML models on encrypted data without decrypting it in Snowflake!

   Cape Privacy @capeprivacy

   Cape Privacy lets you run predictive ML models on encrypted data in #Snowflake. #FinancialServices firms can now gain a more precise understanding of trends, customers, and performance without decryption. capeprivacy.com #AI #security #privacy #datacloud #predictions

   

2. Privacy market on 🔥 with TripleBlind raising $24M for privacy preserving data sharing and Skyflow raising $45M for data privacy API

3. Must read 🧵 on the supply chain backlog from the founder of Flexport

   Ryan Petersen @typesfast

   Yesterday I rented a boat and took the leader of one of Flexport's partners in Long Beach on a 3 hour of the port complex. Here's a thread about what I learned.

4. If you’re interested in what makes up the DAO stack (web 3), here it is

   Balaji Srinivasan @balajis

   Components of the DAO stack - identity - tasking - wiki, docs - public-facing content - treasury management - codebase, bug tracker - send/receive payments - encrypted chat via private keys - smart contracts for crowdfunding - meetings, scheduling, attendance What else?

5. 😲

   Jay Fry @jayfry3

   ~100 million downloads of @HashiCorp products last year & ~12k contributors to the open source projects, says @davidmcj in #HashiConf opening keynote.

   

6. OSS leading to web 3

   Chris Dixon @cdixon

   Composability is to software as compounding interest is to finance 🧵

7. In-depth look at how Google runs its Site Reliability Engineering (SRE) teams

   “It was only logical that this year’s DevOps Enterprise Summit would want to invite Google SRE leadership to break down how it works at Google. After all, with more than 2 billion lines of code, Google’s production environment is one of the most complex integrated systems… ever. Its interconnectivity and uptime sets the standard for DORA metrics, but also create challenges at a planet scale. It literally wrote the books on site reliability engineering.”

8. This is so good 👇🏼

   Nick Mehta @nrmehta

   What do #ChiefCustomerOfficers, unicorns, and The Eagles (band from the 70s) all have in common? Not much actually, except put together they make an epic parody video. NOTE: No Tiger Globals were harmed in the making of this video. bit.ly/2YX3bB7

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Markets

1. Braze just filed its S-1

   Jamin Ball @jaminball

   Congrats to @Braze on their S-1 filing! A modern customer engagement platform $BRZE - $186M LTM Revenue (+52%) - 55% last Q YoY growth - 65% gross margin - (24%) Op Margin - (10%) FCF Margin - 125% DBNRR - 17 months GM adj CAC Payback - $16B TAM

   

   cloudedjudgement.substack.comBraze: Benchmarking the S-1 DataToday Braze filed their initial S-1 statement. A S-1 is a document companies file with the SEC in preparation for listing their shares on an exchange like the NYSE or NASDAQ. The document contains a plethora of information on the company including a general overview, up to date financials, risk fact…

2. GLG the expert network many growth stage funds use for market research and customer calls just filed its S-1

   Marc Rubinstein @MarcRuby

   GLG, the world's largest expert network, filed for IPO yesterday. It has 1 million experts on its books and facilitates calls between them and its 2,700 clients. Its S-1 highlights the power of aggregation. 👇👇

3. Why Twilio could go much higher

   Christopher Seifel @2ChaseGreatness

   Great thread on $TWLO - was just doing more work on it today and agree with much of the analysis here. Solid work , KZ 👍

   

   KZCapital @KzCapital

   1/ I’ve seen a lot of good and bad $TWLO analysis so I thought I’d chime in here. $TWLO is a name I’ve covered since their IPO — the company has undergone massive innovation over the past 5 years and I believe they’ve rewritten their own narrative time and time again.