What’s 🔥 in Enterprise IT/VC #408

Magic Quadrant for AI Code Assistants - one of fastest times for new category to Gartner MQ - By 2028, 90% of enterprise software engineers will use AI code assistants up from < 14% in 2024

I just love ❤️ seeing markets come out of nowhere, and you know a market’s for real in the enterprise when Gartner has a Magic Quadrant for it. If there was a metric for “New Category to Gartner MQ” this has to be one of the fastest as Github only announced “GitHub Copilot: your AI pair programmer” 2 1/2 years ago 🤯.

We all know the astounding numbers.

To no one’s surprise, the MQ is dominated by large vendors from Microsoft’s Github to Google to AWS. But it’s ROI like this that shows we are still just in the early innings for AI code assistants, especially when the AI is helping developers do the boring stuff and kill technical debt!

This data is so 🤯, let me say it again - Amazon Q took the average time to upgrade an app from 50 days to just a few hours, saving 4,500 developer years of work; in less than 6 months Amazon Q provided an estimated $260 MILLION in annualized efficiency gains!

Make no mistake - if you are building anything in the developer workflow and don’t have an AI story, then you will be dead in the next 24 months. Here’s Gartner’s predictions for the next 3-4 years:

By 2027, the number of platform engineering teams using AI to augment every phase of the software development life cycle (SDLC) will have increased from 5% to 40%.

By 2027, 80% of enterprises will have integrated AI-augmented testing tools into their software engineering toolchain, which is a significant increase from approximately 15% in early 2023.

By 2027, 25% of software defects escaping to production will result from a lack of human oversight of AI-generated code, which is a major increase from fewer than 1% in 2023.

By 2028, 90% of enterprise software engineers will use AI code assistants, up from less than 14% in early 2024

By 2028, the use of generative AI (GenAI) will reduce the cost of modernizing legacy applications by 30% from 2023 levels.

Given these forecasts, the 💰 has been and continues to flow into AI-powered coding to the tune of almost $1B since the start of 2023, that’s in 20 months! Here’s a headliner from the FT from this past week.

And while there is a Gartner MQ and over $1b deployed into AI Code Assistants, I still believe we are just scratching the surface. There is so much more we can do and improve - case in point - read Stammy’s comments below:

Stammy nails it - either too micro or macro when it comes to value creation for devs. Charity Majors from Honeycomb dives deeper this week with a great take LLMs and coding 🧵:

And I’m a huge believe in Number 1 which IMO leads to more abstraction from just the raw code.

That’s why I’m also a big believer in what Guy Podjarny (prev. founded Snyk) and now Tessl (full disclosure, boldstart co-led the Inception round) is advocating, “AI Native Software Development.”

I’m excited to introduce my new company, Tessl!

We’re reimagining software development for the AI era, and helping shape a new software development paradigm we call 𝐀𝐈 𝐍𝐚𝐭𝐢𝐯𝐞 𝐒𝐨𝐟𝐭𝐰𝐚𝐫𝐞 𝐃𝐞𝐯𝐞𝐥𝐨𝐩𝐦𝐞𝐧𝐭.

The AI tools we use for development today are novel and powerful, and we should all invest in embracing them - but they are only the beginning. They optimize dev workflows created before the LLM revolution, 𝐛𝐨𝐥𝐭𝐢𝐧𝐠 𝐨𝐧 𝐀𝐈 at various spots. To tap the true potential of AI-powered dev, we need to rethink these workflows from first principles, assuming 𝐀𝐈 𝐢𝐬 𝐛𝐮𝐢𝐥𝐭 𝐢𝐧. This is what we mean by AI Native development. 

I’ve linked to our launch blog post in the comments, as well as our new podcast. In both, we’ll explore AI Assisted dev tools and what AI Native Software Development is, and how the two will connect. Over time, you’ll see Tessl offering tools to help make this new software development paradigm a reality.

Guy dives deeper into what’s next with Jason Warner, founder of Poolside and previous CTO of Github in this clip here:

These thoughts also align to a number of my previous What’s 🔥 posts on thinking about the Second Order Effects from AI Native Code Assistants - what happens when this becomes a default in the industry - more code written by AI, more code to understand and to review, more code to secure, etc….

The future is certainly bright, and I strongly believe that there is a ton of opportunity for founders to think beyond this Gartner MQ - just don’t deploy another $1B into existing workflows and let’s look beyond that!

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

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Scaling Startups

#as your startup scales, how do you continue to innovate? Steve Jobs on happy accidents (Farnam Street - Shane Parrish)

“Process makes you more efficient. But innovation comes from people meeting up in the hallways or calling each other at 10:30 at night with a new idea, or because they realized something that shoots holes in how we’ve been thinking about a problem. It’s ad hoc meetings of six people called by someone who thinks he has figured out the coolest new thing ever and who wants to know what other people think of his idea.”

— Source: Insanely Simple: The Obsession That Drives Apple’s Success

#super fun and 🎙️ listen in - so enjoyed this wide-ranging conversation with friend Steve Brotman tracing back to early days in NYC Enterprise tech ecosystem in mid-90s 👴🏼 to why we started boldstart ventures, the evolution of what a first check means from seed to pre-seed to Inception Investing and what we look for in founders...

Oh yeah, we are as 🔥 up as ever about the current platform shift powered by AI (just a tech infused in all enterprise software) and have 💰 to deploy!

Video here:

#leadership vs. management (full post her from Eric Partaker)

#not a hard and fast rule but directionally correct across the board

#💯 solid advice for those repeat founders

#some context on venture returns, correlations with DPI (early exits) vs. LT performance - early exits may mean your big winners are sold much too early but one does generate DPI or dollars back to investors

#on Jumbo Inception rounds - this is not going away folks

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Enterprise Tech

#this got a lot of folks chiming in - is the AI security market real? At $200M from Palo Alto this includes AI-powered along with net new Securing AI - read the comments, they are enlightening

#Frances Odum, cybersecurity research, just released his comprehensive report on the AI Security market which is Securing AI - cool to see Protect AI (full disclosure: boldstart co-led the inception round) in a few places on the map

#😲 Grafana, infrastructure monitoring software co, raises $270M at $6B valuation, double from last round 3 years ago - crossed the $250M ARR mark with over 5,000 customers (Silicon Angle)

Infrastructure monitoring startup Grafana Labs said today it has raised a bumper $270 million via two separate funding transactions, as it looks to solidify its status as a leader in the observability industry.

Today’s round is said to have involved all of the company’s prior backers, led by Lightspeed Venture Partners, with participation from GIC, Sequoia Capital, Coatue, Lead Edge Capital, J.P. Morgan and K5 Global. In addition, CapitalG joined the round as a new investor. The new cash infusion brings Grafana’s valuation to north of $6 billion, and comes just over two year after it raised $240 million in its Series D funding round.

Grafana is clearly dead set on spreading its tentacles into every aspect of IT monitoring, and its business has grown rapidly as a result. According to the company, it has managed to grow its paying customer base to more than 5,000 companies in the last year, including big enterprises such as Dell Technologies Inc., Microsoft Corp., Salesforce Inc. and Citigroup Inc. Meanwhile, its annual recurring revenue has risen to more than $250 million, the company said. 

#who’s generating revenue from AI?

#the problem with LLMs and copilots for enterprises - still needs to be solved!

#💪🏼 You know you are making it as a startup when job recs list your new product as a must-have!

Cool metric to track: Time from Product Launch to Global 2000 job requirement 🔥

This is the dream👇🏼 for any enterprise founder creating a new category or launching a new product.

LFG - agents are the future (full disclosure: boldstart led the inception round)

#And when it works over a few years, this is what happens 👇🏼

#those Megatron Jumbo Inception rounds can also be quite risky - 3 of 5 cofounders are now gone from a $220M Inception round for AI agentic workflow startup H out of France

The company formed earlier this year in Paris with the ambitious goal of developing autonomous agents — systems which can perform a range of tasks —that the startup said would outperform existing AI models. That pitch drew considerable investor interest, in large part due to the startup recruiting four seasoned scientists from Google DeepMind, Alphabet Inc.’s AI lab.

In May, Accel Partners LP lead an unusually large initial financing round for H, totaling $220 million. Other investors included Amazon.com Inc., Samsung and several billionaires such as former Google chief executive officer Eric Schmidt and LVMH CEO Bernard Arnault, via his fund.

Three months later, three of the H co-founders who joined from DeepMind have left: Karl Tuyls, Daan Wierstra and Julien Perolat. CEO Charles Kantor, a former Stanford University mathematics student, and chief technology officer Laurent Sifre, the fourth DeepMind veteran, remain.

#everyone doesn’t love GenAI - this video post on X from Procreate, art SaaS app, got over 8M views - blog post here

Creativity is made, not generated.

Generative AI is ripping the humanity out of things. Built on a foundation of theft, the technology is steering us toward a barren future. We think machine learning is a compelling technology with a lot of merit, but the path generative AI is on is wrong for us.

We're here for the humans. We're not chasing a technology that is a moral threat to our greatest jewel: human creativity. In this technological rush, this might make us an exception or seem at risk of being left behind. But we see this road less travelled as the more exciting and fruitful one for our community.

#GenAI ROI

#founders of startups trying to make some noise, please don’t do this 👇🏼 - seems like Action1 is trying to take a page from the Wiz playbook except the Wiz Google convos were so real…

Here’s Crowdstrike’s response 🤦🏼‍♂️

#open source license change from Cockroach Labs - most models are based on open source and then money made from hosted/cloud versions with dashboards, management console, team based collaboration etc but Cockroach with different approach - revenue thresholds (TechCrunch)

Cockroach Labs, the business and core developer behind the eponymous distributed SQL database known as CockroachDB, is changing its licensing once again — five years after it moved on from an open source model.

The company revealed today that it’s consolidating its self-hosted product under a single enterprise license, a move designed to encourage larger businesses to step up and pay for the features they really need. All customers with more than $10 million in annual revenue will now have to pay a fee based on the number of CPUs or CPU cores within the server system where the database is deployed — essentially, the bigger the database deployment, the bigger the cost.

At the same time, startups below this revenue threshold will be able to use the exact same enterprise version at no cost, in the hope that they may reach a size that will eventually require them to pay for these premium features. 

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Markets

#$8-10M a year of expenses to be a public company

#20 years ago this past week 🤯

#legend