Discover more from What's Hot in Enterprise IT/VC
What's 🔥 in Enterprise IT/VC #297
Know when to hold 'em, know when to fold 'em...finding a clear path as you extend runway
As a number of founders and investors are thinking through burn rate models and balancing growth with expenses, many reference the conventional wisdom of choosing to be default alive or default dead. Frankly I don’t know what any of that means, but the only thing I can say is that there is no conventional wisdom and every company is in a different place and has different reasons for making decisions. Whatever you choose to do as a founder, make sure that you are building a clear path to get to the next milestone and not just extending runway because you simply don’t want to give up. There has to be a there there, call it default fundable or default value creation on exit. I’ve seen times like this before so I’m reviving an old blog post from Feb 2011.
“I had a tough call with an entrepreneur this morning. His company raised a fair amount of seed financing but did not hit the milestones it needed to in order to raise a real round of venture capital. The product is nice but they took too long iterating and releasing a subsequent version while the market around it moved much quicker. In the process, the company ramped up too quickly before it knew exactly what the core value proposition was and to whom. Net net, the entrepreneur was left with a few choices: skinny the company down and try to get to breakeven, look to existing Angel investors for a bridge, shut the company down, or try to sell the business. I am not going to go through each one of the above decision trees in this post, but given the market dynamics today and the overflow of angel funding, I am sure that this is a conversation that many an angel and entrepreneur are having right now. Net net, way too many companies have received angel funding and many of these companies will not raise subsequent rounds of funding.
That is ok as that is how markets work. If you are in this position, all I can say is don’t give up but also be honest with yourself and team. Assess your strengths and weaknesses, dive into the market and opportunity, and be as lean as possible to give you as much time to get to where you want to go. If you decide to fight through it and pivot and have the support of your existing investor base then great. Many companies have been successful that way. If you decide it is time to move on and capture whatever value you can for the assets then great as well. Just make sure that you have this conversation with your investors earlier rather than later to ensure you have enough time to execute on the new path. In the end, this process is not unlike what The Gambler from Kenny Rogers song had to go through at the table.”
You got to know when to hold `em, know when to fold `em,
Know when to walk away and know when to run.
You never count your money when you`re sittin` at the table.
There`ll be time enough for countin` when the dealin`s done.
No matter what choice you make, waiting and 🙏🏼 is not one that will drive a successful outcome.
As always, 🙏🏼 for reading and please share with your friends and colleagues.
Thanks for reading What's Hot in Enterprise IT/VC! Subscribe for free to receive new posts and support my work.
What’s coming next in startup land
A good reminder for investors and founders - it can be lonely when trying to go big
What’s next for enterprise IT spending? Some data and thoughts from the Morgan Stanley CIO Survey published June 24 with respondents weighing in between mid-May to mid-June.
CIOs' expectations for 2022 IT budget growth came in at 4.0% in our 2Q22 CIO survey, down 20 bps from the 4.2% reported last quarter, and down 10 bps from the 4.1% growth cited by CIOs for their 2021 growth (down from 4.3% last quarter). While growth expectations are trending lower, they remain largely inline with the 10-year pre-Covid average of 4.1% growth in IT spending.
Bottom-line, while IT budgets appear to be seeing incremental pressure, this is not the sharp pullback in spending seen in 2008/2009 or 2020. Historical analogues would suggest we would likely see further downward revisions in coming quarters, but the overall IT spending growth should likely stay in positive territory.
Below are the highest priority categories which to no one’s surprise is Cloud Computing, Security Software, and DW/BI/Analytics.
According to CIOs, Security Software is the most resilient if we hit a recession.
Here’s another look at security software spend relative to all software spend.
Speaking of cyber security…
👇🏼 must read on PLG - evolution of north star metric from users to orgs and much more on Snyk’s (a portfolio co) growth. If you want a higher level breakdown on Snyk and its developer first growth story, check out some of my earlier posts…
9/12/20 Developer first security + 5 lessons learned as Snyk scaled to 1.5 million developers 🚀 in 5 years
3/12/21 What did Snyk look like in 2015 on its way to a $4.7 billion valuation + its relentless focus on the developer experience
What is and isn’t tech? 🧵
Another great post on building multiplayer experiences from portfolio co Liveblocks which allows you to build amazing real‑time collaborative products
via a set of APIs and tools that helps you create performant and reliable multiplayer experiences in minutes.
Kubernetes so hard to use…of course, there is always SpectroCloud (a port co)
People are weakest link when it comes to security - fascinating how Axie got hacked via a PDF job offer
The good news is that while seed investing is down sequentially QoQ, it’s up YoY - more on Crunchbase News