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What's 🔥 in Enterprise IT/VC #326
On planning...Be Macro Aware, Micro Obsessed
This goes for both founders and investors and this duality can play itself out in so many ways from a psychological perspective. I’m still seeing too many beaten down founders and investors paying way too much attention to the macro headlines. Yeah, the markets were rip roaring for the last couple of years but hell, forget all of that. If you still believe in your mission and what you are building, then buckle up…startups and investing ain’t easy. Enjoy this journey. Appreciate what you have - the product you’ve built, the customers who love your product, and your team that is 🔥 up for the mission. Jettison the non-believers and focus on what you can control. 2023 will be the year that separates the good from the great. You got this!
As always, 🙏🏼 for reading and please share with your friends and colleagues.
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Also goes both ways, investors need to bring it as well!
How you raise at a $12B valuation in May 22 when market was crashing - Deel just shared its numbers - insane growth + EBITDA positive.
LFG AtomicJar - one of largest OSS communities for testing now ☁️ ready and with $25M Series A led by friends at Insight Partners…here’s the TechCrunch story as well💪🏼 Huge congrats on $25M Series A led by ! Shift ⬅️ integration testing for developers building off of huge community which hit 100M downloads. Try ☁️ version now in beta. 🔥 up to continue backing from day one!We are happy to announce our $25M Series A led by @insightpartners and to launch the public beta for https://t.co/aY6OG3PqpT. It’s never been easier to try the @testcontainers experience of testing with real dependencies and to ship with confidence 🚀🥳 https://t.co/W3to7KECO6 https://t.co/8Qx3G5LYcDAtomicJar @AtomicJarInc
And here’s a quote from Netflix, testcontainers.org OSS user, and now early user of the cloud version
"We believed in the Testcontainers Cloud vision from day one and we are excited to be working with AtomicJar on adding it to our platform. Our goal is to make the Netflix Testing experience consistent and reduce Docker operational burden. Testcontainers has played a big role at Netflix, and Testcontainers Cloud takes it to the next level," said Roberto Pérez Alcolea, Senior Software Engineer, Productivity Engineering, Netflix.
"From our metrics, up to 90 percent of build time is spent in tests, so any kind of consistency or speed improvement can make a massive difference. A few of our engineers already use Testcontainers Cloud on a daily basis and we believe it fits into Netflix's continuous efforts to make developer feedback loop faster by allowing developers to run their tests locally and more frequently regardless of their development environment."
Now GitHub is working to build new tools into Copilot, Salva said, which could give developers more control over the suggestions the service provides and expand its use cases.
If successful, adding security tools to Copilot could make it a formidable competitor to cybersecurity startups offering similar tools. Snyk, a leading startup in the space, has raised more than $1 billion at a $7.4 billion valuation for its AI-powered software meant to serve a similar purpose.
Speaking of Snyk (a portfolio co) - huge congrats with its investment from ServiceNow which will help bring developer first security into the mainstream💯 movement started with a single developer to multiple products to platform - even more awesome is evolution of from customer to partner to investor. DevSecOps in mainstream and speaks to importance of platform approach esp. in these economic times https://t.co/q4FJ7DIK2oThe integration between @ServiceNow and @snyksec is evidence of what some call a platform approach to IT and #cybersecurity , as #CIOs and security leaders seek a single source for their IT and security data @bellelin_ #CISO https://t.co/XpawZ1FxTnSteve Rosenbush @Steve_Rosenbush
Deploying applications on the edge - what Chick-fil-A learned in 4 years - FWIW, we are still super early in the lifecycle of application deployment on edge and more to come, especially as 5G rolls out in a big way (also see SpectroCloud bare metal edge K8s - a port co)
What have we learned?
It took a lot of great engineering and smart tradeoffs to develop an MVP business critical Edge Compute platform with a small team.
Operating 2,500+ Kubernetes clusters (with a small team) is hard work, but an API-First, just-enough-automation approach worked great for us.
Coming from a cloud-first world, some of the biggest challenges at the edge are the constraints (compute capacity, limited network bandwidth, remote access). We would suggest investing a lot of time in learning your constraints (and potential ones) and considering whether to remove them (which takes longer and takes more money) or manage them. For example, we worked around some network management constraints by rolling a series of custom services that worked great, but had a long-term management cost.
LFI Conf is taking place next month in Denver. So many orgs are focused on doing more with less right now, and this conference is all about that within the critical cross section of building more resilient orgs, learning from incidents, understanding gaps, and implementing consistent, predictable workflows for folks to be more efficient and effective through learnings. The conference is a mix of folks across tech and research with 2/3 of attendees being staff or Senior SWE and about 10% are VP or C Suite titles. Attendees and speakers come from some of the most respected tech companies, startups, and Fortune 500: Google, Netflix, Honeycomb, Indeed, Fastly, Bloomberg, Etsy, Kaiser, Texas Mutual, Stripe, Salesforce, LinkedIn, NBC Universal, MLB, Datadog, Epic Games, Slack, Zendesk, Snowflake, Equinix, and others.
Take a look! (What’s 🔥 discount code: LFIWHATSHOT15)
Nice framework but don’t overthink it also - Bessemer Venture Partners thoughts/data on usage-based pricing - linear, volumetric, or bundling
Great post last week from a16z on who will the winners be in Generative AI and agree with the answer -
There don’t appear, today, to be any systemic moats in generative AI. As a first-order approximation, applications lack strong product differentiation because they use similar models; models face unclear long-term differentiation because they are trained on similar datasets with similar architectures; cloud providers lack deep technical differentiation because they run the same GPUs; and even the hardware companies manufacture their chips at the same fabs.
There are, of course, the standard moats: scale moats (“I have or can raise more money than you!”), supply-chain moats (“I have the GPUs, you don’t!”), ecosystem moats (“Everyone uses my software already!”), algorithmic moats (“We’re more clever than you!”), distribution moats (“I already have a sales team and more customers than you!”) and data pipeline moats (“I’ve crawled more of the internet than you!”). But none of these moats tend to be durable over the long term. And it’s too early to tell if strong, direct network effects are taking hold in any layer of the stack.
Based on the available data, it’s just not clear if there will be a long-term, winner-take-all dynamic in generative AI.
IMO 👇🏼 - from my What’s 🔥 #322 Dec. 31, 2022 predictions post
OpenAI giveth and taketh away: It’s probably one of the best things to happen to the startup ecosystem since the cloud became real but don’t rush into starting an OpenAI or ChatGPT company as any one can use the same foundational model. Founders and investors have to still focus on the problem that is being solved and remember that AI may help users be way more productive, but its not a business.
I don’t see a full market here, but more the fact that this will be embedded into every single application. Notion AI has already done so, and Satya from Microsoft says it will embed OpenAI in all apps. The tech is amazing, but to start a standalone business with the same models everyone else can use and compete with existing SaaS cos with massive distribution is not for the faint of heart.
From Dec 2016 (boldstart in 2016, enterprise tech in 2017)
What’s ahead in 2023 in Crypto
🔥 up for EthosWallet investment 👇🏼 - it's time for a reimagined crypto wallet w/the developer tooling + infra to easily build + scale. Start building on the Sui Network using Ethos Developer tools here
Microsoft Azure ☁️ still strong….although mentioned some slowdown in coming quarters for growth - some clips from earnings transcript
Amy Hood, CFO
Azure and other cloud services revenue grew 31% and 38% in constant currency. As noted earlier, growth continued to moderate, particularly in December, and we exited the quarter with Azure constant-currency growth in the mid-30s. In our per-user business, the Enterprise Mobility and Security installed base grew 16% to over 241 million seats with impact from the slowdown in growth of new business noted earlier. In our on-premises server business, revenue decreased 2% and increased 2% in constant currency, with continued hybrid demand offset by weakness in transactional licensing.
From Satya on OpenAI
You could prompt a -- I mean, one of the reasons why we are the leaders in robotic process automation and workflow automation today is because of some of the AI capabilities that we have in there. GitHub Copilot is, in fact, you would say, the most at-scale LLM-based product out there in the marketplace today. And so, we fully expect us to sort of incorporate AI in every layer of the stack, whether it's in productivity, whether it's in our consumer services. And so, we're excited about it.
But I think that we're also excited about OpenAI innovation, right? So, they commercialize their products. We're excited about the ChatGPT being built on Azure and having the traction it has. So, we look to both, there's an investment part to it and there's a commercial partnership. But fundamentally, it's going to be something that's going to drive, I think, innovation and competitive differentiation in every one of the Microsoft solutions by leading in AI.
On the macro side
So, that's sort of fundamentally how we view it. And then the other aspect I'd also say is simultaneously investing in this new AI trend because I don't think any application start that happens next is going to look like the application starts of 2019 or 2020. They're all going to have considerations around how is my AI inference performance, cost model is going to look like. And that's where we are well positioned again.
So, that's how I view it. The market, you all are better readers of, quite frankly, what's happening out there. We can tell you what we see. What we see is optimization and some cautious approach to new workloads and that will cycle through, but we do fundamentally believe on a long-term basis, as a percentage of GDP, tech spend is going to go up.
CrowdStrike downgraded by Deutsche Bank research citing headwinds - seeing this across the board in startup land as well - need to have a kick ass product with instant time to value to get a foot in door
New logo acquisition becomes tougher in a worsening macro environment, and we argue it is increasingly difficult to pick off legacy vendors’ customers that haven’t already defected. The logic here is that incumbent vendors innovate to a point of being perceived as “good enough” and thereby stem customer churn.
Amongst security practitioners, there is ever growing frustration with vendor sprawl and security posture complexity, making Microsoft’s integrated value proposition, enabled by its E5 bundling motion, increasingly difficult to ignore. Our checks validate Microsoft’s perceived efficacy more so than in the past, and well timed into a likely recession
Platform expansion, multi-module adoption & net retention. Number of modules per customer has been a meaningful growth vector for both companies given respective innovation, M&A, and new product introduction. We see risk of incremental modules being deemed nice-to-have vs. need-to-have, with customers sticking with incumbent point solutions or addressing needs via a non-endpoint centric approach. From a gross churn perspective, we see risk of decelerating if not inverting headcount and device growth given both companies largely price per endpoint. Admittedly, a risk to this view is these platforms themselves benefitting from consolidation, lower TCO
Speaking of Microsoft - it is at a $20B ARR Run rate (from Yahoo Finance)
Microsoft’s (MSFT) earnings report may have signaled a continued slowdown in cloud growth and a steep drop in PC sales, but it also provided more insight into its growing security arm. According to the tech giant, its security offerings are now a $20 billion per year business.
That’s double the $10 billion per year seen in 2021, and up from the $15 billion it brought in in 2022. Microsoft previously committed to spend $20 billion through 2026 through 2026 to expand its security offerings.
“Even in this economically challenging time, organizations…everyone sees security as the top priority,” Vasu Jakkal, Microsoft CVP of security, compliance, identity, and management told Yahoo Finance.
Microsoft, meanwhile, has seen its customer numbers explode from 400,000 organizations in 2021 to 860,000 in 2023.