What's 🔥 in Enterprise IT/VC #332

Monday can't come soon enough

Apologies for the delay on the newsletter as I, like many of you, have been scrambling to help founders figure out payroll. I’m still in shock 🤯 at the speed of this failure but also not surprised. The beauty of the echo chamber is that products like ChatGPT can be instant hits overnight, but at the same time, the mob can turn quickly and, in this case, create a bank run at the speed of which has never been seen before. I’m not here to opine on SVB management or if VCs caused this, but what I can say is that there are thousands of tech employees who are and will be severely impacted if deposits are not 100% honored. Let’s 🙏🏼 that the Fed does the right thing and steps up and guarantees deposits after all assets have been sold. If not, SVB, IMO, will lead to a massive ripple effect, a rapid flight to safety and quality, and potentially put other smaller, regional banks like First Republic, Signature…into similar paths of destruction. Best case scenario is a larger bank like a JPM Chase or Morgan Stanley takes over the SVB deposits and honors them fully on Monday morning similar to what happened to Washington Mutual during the mortgage crisis.

For now, we don’t know the full effects on the startup ecosystem. Besides the obvious like meeting payroll, there are many venture investors whose bank accounts are on SVB and are in no position to make short term loans. Some Limited Partners who invest in VC funds also have assets locked up in SVB and can’t wire to VCs who are making capital calls. SVB was so important to the industry that 50% of all tech startups banked there along 44% of the companies that went public.

This liquidity crunch will get much worse if we don’t get clarity on Monday. Hopefully there is either a sale or the uninsured receives the first of a few advanced dividends to alleviate the burden. As a founder/investor, once the ST payroll situation is solved, wait until Monday before signing any emergency additional bridge loans to cover future payrolls. Start those discussions now but wait until we all know more. I’ve seen pretty aggressive terms from some investors offering $0.50-60 on the dollar for future recovery of cash, and now is not the time to do so if you’re payroll this week is covered. BTW, here’s a great, simple document if you need to put together a short term more friendly loan.

Sumukh Sridhara @sumukhsridhara

We just built a product @AngelList to help startups impacted by SVB that need emergency capital: - Standardized Loan Agreement Docs (temporary loan from investors) with online signing & funding. - Built in banking access (if your company needs it) DM me if you need access

As always, 🙏🏼 for reading and please share with your friends and colleagues. We will get through this but let’s be patient and kind to one another. Looking on the bright side, once we get through this, there will be a generation of founders and investors who once knew only 📈 but now will be seasoned veterans bringing healthy skepticism around building startups the right way with an obsession around the importance of cash.

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Scaling Startups

1. Staying lean and mean…

   Erik Bernhardsson @bernhardsson

   Obv every startup is different but my current playbook is working fairly well so far (in terms of user growth): * Only hire engineers * Spend almost 100% time on the product * Sometimes tweet about exciting stuff we're working on

2. Complexity increases with team size

   Dave Kline @dklineii

   11 counterintuitive lessons for building a winning business: 1. Each additional hire increases complexity faster than productivity.

   

3. for VCs building new firms

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Enterprise Tech

1. Great post from Chase Roberts Vertex Ventures on the new edge with contributions from: Guillermo Rauch, Co-founder & CEO of Vercel, Kurt Mackey, Co-founder & CEO of Fly.io, Nicholas Van Wiggeren, VP of Engineering at PlanetScale

   Chase Roberts @chsrbrts

   Thoughts on edge computing, serverless, rebel cloud alliances, and Shiba Inus.

   

   chsrbrts.medium.comEdge Infrastructure & The Rebel CloudThe term “edge” in software infrastructure has become bloated. Does edge computing describe IoT? Or is it Lambda Functions? What about…

2. Why generative AI will be layered into every application where it makes sense…

   Ethan Mollick @emollick

   👀Two early papers find the effects of generative AI on knowledge work are completely unprecedented in modern history Separate studies of both writers and programmers find 50% increases in productivity with AI, and higher performance and satisfaction. And this is just the start.

   

   

   

   also in 🧵 link to GitHub article on developer productivity which has always been hard to measure but here is some of its thinking:

   We’re here to support developers while they build software—that includes working more efficiently and finding more satisfaction in their work. In our research, we saw that GitHub Copilot supports faster completion times, conserves developers’ mental energy, helps them focus on more satisfying work, and ultimately find more fun in the coding they do.

   We’re also hearing that these benefits are becoming material to engineering leaders in companies that ran early trials with GitHub Copilot. When they consider how to keep their engineers healthy and productive, they are thinking through the same lens of holistic developer wellbeing and promoting the use of tools that bring delight.

3. From a couple of weeks ago but super relevant

   Omar Pera @ompemi

   The 2023 modern AI tech stack for simple web apps. Hosting: @vercel Frontend: @nextjs Backend: @vercel with flask Database: @supabase AI models: @OpenAI @replicatehq @huggingface LLMs mix: @LangChainAI @dust4ai Vector db: @pinecone It used to be an index.php 😅

4. The SaaS app chatbot race is on: more from Microsoft (Bloomberg) - as Satya stated in his earnings call in October 2022, AI copilot coming for Microsoft Dynamics and Office

   “ERP, CRM, marketing, customer service, supply chain—all these distinct categories are all made up, right? I mean, they’re all garbage sort of categories thought up by vendors,” said Nadella, whose first executive role at Microsoft was running an early internet-based version of business applications called bCentral. “What if we said, there was just one Biz App workflow?”

   as Dharmesh from HubSpot built his own SmartCRM product…

   Ed Sim @edsim

   got to ❤️ when founders of $20B co @HubSpot is still hacking away nights + weekends to build what's next

   

   dharmesh @dharmesh

   I've been furiously coding away every night on a new project. Thrilled I can finally share it with you. ChatSpot is something I built for myself. Check out the launch video: https://t.co/yTYVMeS0U0 It's the all-in-one ChatGPT-powered tool to help you grow better. It's in… https://t.co/JjJbwTGxTZ

   Not to be outdone, here’s Salesforce

   I still want a GenAI bot to analyze all my messaging, email, etc and then automatically create and update my CRM - none of these retrofits will do that as it will upset the existing paradigm

5. Circle stablecoin now depegged with $3.3B exposure

   Circle @circle

   1/ Following the confirmation at the end of today that the wires initiated on Thursday to remove balances were not yet processed, $3.3 billion of the ~$40 billion of USDC reserves remain at SVB.

6. 💯 as computing continually shifts between centralized to distributed computing, reminder that some problems still have not been solved

   Martin Kleppmann @martin@nondeterministic.computer @martinkl

   For discussion I refer you to Waldo et al.’s classic “A Note on Distributed Computing”, which is still as true today as it was 30 years ago scholar.harvard.edu/files/waldo/fi…

   

7. Values not features/speeds & feeds

   Ed Sim @edsim

   ❤️ the💡moment when technical founders go from tech/features based pitch to value based story - may seem basic but often hard for founders enamored w/speeds + feeds to flip thinking, more user/customer convos will lead u to promised land + faster time to close, keep iterating

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Markets

1. 🧵 on MongoDB and more specifically insights into 2023 and IT spend

   Jamin Ball @jaminball

   Some takeaways from the Mongo earnings call. TLDR - things are still getting worse, not better. Guiding to a sequential decline in Atlas revenue in Q1, and guiding to 16% growth for the full year (assuming no improvements to consumption headwinds) More below $MDB