boldstart in 2017, enterprise tech in 2018

2017 Recap

2017 was another year of growing, learning, investing and partnering with amazing founders. Once again, we are grateful to have the opportunity to work with so many amazing founders, advisors, co-investors, and other collaborators to bring the boldstart family together.

Before diving into yet another year and list of predictions for enterprise in 2018, we’d like to recap a few thoughts and moments from 2017.

  1. We were first check leads in 8 founding teams including Wallaroo Labs, MState (fka hyperfab), blockdaemon, and 5 in stealth.
  2. Thematically our new investments include 4 targeting the “Rise of the Developer,” 3 in “Intelligent Automation,” and 1 in “Decentralized Computing;” geographically 4 are in NYC, 3 in Bay Area, and 1 in LA (more on our themes)
  3. 6 portfolio companies raised Series A financings including ManifoldHypr, and 4 unannounced, 1 raised a Series B (unannounced), and Security Scorecard raised a $28mm Series C.
  4. 2 exits including yhat (sold to Alteryx — AYX NYSE) and init.ai, one an early investment in a data science platform and the other on NLP for developers.
  5. We co-founded MState (fka hyperfab, read Coindesk article) with Rob Bailey to help bring enterprise company building expertise and Fortune 500 connections to the blockchain community. Our partners include IBM and one unannounced Fortune 50.
  6. We built out our CXO advisory board and further cemented our Fortune 500 relationships to help our portfolio cos scale from “founder-market” fit to product market fit in an accelerated timeframe (meet our advisors). This resulted in tons of collaboration with large enterprises ranging from product feedback to pilots and customer relationships.

Enterprise Tech in 2018:

“The Law of Accelerating Returns” by Ray Kurzweil is truer than ever before: the rate of change in a wide variety of evolutionary systems (including but not limited to the growth of technologies) tends to increase exponentially.

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In other words, today is the slowest rate of technological change you will ever experience in your life and doing nothing is worse than doing something. Keep this in the back of your mind as you think about the biggest transformation in enterprise tech; the re-platforming of corporate America from legacy to cloud/hybrid cloud and monolithic software apps to microservices driven development. With this pace of change accelerating, everyone will have to move earlier in the food chain; corporates will need to work with earlier stage startups (we are experiencing that phenomenon in our portfolio) and VCs will have to go earlier to invest Continue reading "boldstart in 2017, enterprise tech in 2018"

All Platforms Need a Killer App – Cryptokitties is the one for blockchain

I’ve always loved investing in companies that can become platforms but not investing in platforms. What does that mean? Well, to be succinct, it’s quite hard to sell a platform. You need to show users/customers how your platform can solve problems. Every platform needs a killer app to demonstrate the power of the platform – show don’t tell. Going back to webmethods, it was how DHL used WIDL (precursor to XML) to embed tracking information in other websites. For twilio, it’s first big opportunity was becoming the SMS provider for Uber. For the blockchain, it’s bitcoin and for ethereum and smart contracts, it’s Cryptokitties. Yes, cryptokitties.

It’s taking over the ethereum blockchain and despite all of the ideas for enterprise smart contracts and tracking assets on the blockchain, cryptokitties is the first killer app (outside of the currencies) showing end users how they can create unique assets on the blockchain and crate, share, track, trade and sell digital goods.

According to the crytokittie site:

CryptoKitties is one of the world’s first games to be built on blockchain technology—the same breakthrough that makes things like Bitcoin and Ethereum possible. Bitcoin and ether are cryptocurrencies but CryptoKitties are cryptocollectibles. You can buy, sell, or trade your CryptoKitty like it was a traditional collectible, secure in the knowledge that blockchain will track ownership securely.

To get onboarded, we need to start with a Metamask.io plugin to connect our browser to the ethereum blockchain and the world of distributed apps. It’s pretty simple and once you get up and running, you need to add some Ethereum to your account via Coinbase or direct transfer. Once you have Ether in your account, you can buy a kittie and enter the world of blockchain without even knowing it.

So despite all of our discussion on putting car titles, real estate titles, and other unique assets on the blockchain, cryptokitties, a fun and addictive game, is the one application showing how powerful the blockchain can be for asset tracking and ownership. And it’s not so far a leap to think about what other enterprise digital assets can be similarly put on the blockchain.

The post All Platforms Need a Killer App – Cryptokitties is the one for blockchain appeared first on BeyondVC.

Blurring lines in enterprise SaaS; the race to own customer data

I’ve written before about the competitive nature of SaaS and the amount of entrants in every category. Lately after every conversation, I feel like the world is being divided into two camps and there is a massive battle going on in terms of who is going to own them and how. To oversimplify, I’ll call it pre-customer and post-customer domination. And there are companies looking to blur both of those categories as well. It’s pretty hard to create a new system of record these days as Salesforce, Marketo, Gainsight and the like are building tighter lock-in around their products. That’s not to say it can’t be done as those companies have larger fish to fry, mainly huge enterprise customers and $1mm + deals. Opportunities abound in the SME (small, medium enterprise), and we’ve seeded a number of founders going after that space.

The Race for the Customer – Owning the Central Repository for Customer Data

After every pitch, I seem to hear one thing – we will be the central place where all customer data resides to make intelligent decisions. Forget about web analytics, marketing automation, email platforms, customer support, customer success, and sales intelligence. The world is moving towards an all-in-one place and holistic view of the customer. This is the blending of tons of different SaaS segments and every company is adding more data to their approach. With APIs everywhere, this is making it easier for companies to start integrating data from multiple sources. Doing that is not the hard part; getting in the mind of the end user of these apps and ensuring seamless workflows will be much harder. At the end of the day, the more you know about your customer, the easier you can understand their mindset, and increase their happiness, and thus your revenue. Data-driven platforms like segment looker, and mixpanel have an interesting view as a central repository for customer data which feeds into apps. Mixpanel, it seems, is going one step further trying to capture more value from their customers by creeping into customer success. App players in various segments like zendesk want to move beyond customer support and into proactive marketing campaigns. Gainsight is pitching how to operationalize the customer lifecyle with cross-functional collaboration and proactive marketing. I can go on and on. This race also plays into another theme, automation and intelligence. Once the data is clean and in one place, it is easier to analyze and make predictions. We made an investment in March of 2013 in Preact, a SaaS platform for customer success which sold to Spotify. The company never completed its mission but big on Gooley’s mind was proactive intelligence. I now believe we have the tools Continue reading "Blurring lines in enterprise SaaS; the race to own customer data"

Why I love and fear AWS

The AWS launch of Amazon Connect (see techcrunch article) got me thinking about the current state of play in SaaS. Amazon Connect is a call center in a box, the same tech it uses in-house for their current platform. With that release, companies like Talkdesk and others have much to fear. While I see partnerships with companies like zendesk, salesforce and freshdesk to integrate voice with chat and email, I also firmly believe that it is just a matter of time before AWS continues to extend outward and deploy their own chat/email customer support system to go after their partners. Trust me, it will happen. I fully acknowledge and love AWS for the opportunity to fund so many amazing founders who are fully leveraging the power of the cloud platform and services. What I also greatly fear is that Amazon and AWS have proven that they are amazing at taking markets that become hyper competitive and just blowing them up overnight with the lowest cost and good enough offering. AWS has also proven that it will continue to move upstream in the stack from the pure infrastructure layer to the application layer. Here are a few examples:
  1. Amazon Quicksight (launched 10/15) –  fast, easy to use business analytics at 1/10 the cost of traditional BI Solutions
  2. Amazon Chime (launched 2/17) – frustration-free online meetings with exceptional audio and video quality – companies like gotomeeting (Citrix) made a smart move selling to LogMeIn
  3. Amazon Workdocs (1/15) – fully managed, secure enterprise storage and sharing service, users can comment on files, share, etc – box, dropbox watch out
There are many more examples in the infrastructure space like identity management, API gateways, etc. To be clear, this does not mean that AWS will win everything as those products above have not seemed to make a meaningful dent in competitors, but at the same time, we also can’t ignore the power of AWS. Advantage wise, I would say startups will clearly have the ability to go premium, offering a much better and more comprehensive product but prices will eventually come down. So as I think about where the world is going, I am constantly reminded of the mid-2000s and now when retailers were/are concerned about being “Amazoned.” As an investor in infrastructure software, I have always been fully aware of this same phenomenon. It’s just now that I can also clearly see that we need to think about which SaaS apps are the next in line to be disrupted. AWS won’t win and own every market, but they sure as hell can disrupt pricing and make life difficult for many competitors.

also published on Medium

The post Why I love and fear AWS appeared first on BeyondVC.

Thoughts from Mulesoft and AppDynamics IPO Filings

I finally had a chance to take a quick read of the respective S1 filings for AppDynamics and Mulesoft. While the growth for each company is quite amazing, two thoughts jumped out at me. As we move to a cloud-only world with instant-on capabilities and low friction in onboarding customers, why does professional services revenue keep increasing year over year for these enterprise cloud businesses. Secondly, as the world continues to move to the cloud, why does on-prem software exist any more? Looking at both S1 filings, it’s clear that AppDynamics and Mulesoft have caught on to what Salesforce already knows – if you want to be a massive business you also need to sell professional services. As these tech companies get larger and larger, their target customer also increases in size as these vendors look to move from 6 to 7 figure deals. In order to support continued ARR growth upstream, some of the best companies successfully use professional services as a weapon and make implementation, support and training part of the sale. See Jeff Leventhal’s post (boldstart venture partner and Workrails cofounder/CEO) on why services continue to matter for cloud vendors. Same goes for why on-prem. In both S1s, we can see Mulesoft and AppDynamics discussing the need for multiple delivery models as many larger customers have regulatory and compliance needs, esp. in banking, insurance, and health care. On-premise and hybrid cloud deployments are not going away despite the continued adoption of the cloud. There is a whole world of what being enterprise ready from a product perspective looks like, and how SaaS companies can use new technology like Docker to have the best of both worlds, SaaS and on-prem without multiple code bases. If interested, take a look at EnterpriseReady.io curated by Replicated (full disclosure: boldstart is an investor).

Professional services drives subscription revenue

From a customer and revenue perspective, Mulesoft has continued to move upstream as their average selling price was $82k in 2014, $105k in 2015, and $143k in 2016. For AppDynamics, the best I could find was total number of customers at end of October 2016 of 1,975 with revenue of $158mm for average selling price of $80k. From both filings, we can see that professional services revenue became a bigger part of the revenue pie. And in both cases, it’s pretty clear that professional services exist to drive the recurring subscription growth. In other words, neither group is making tons of gross margin and in fact one is almost breakeven while AppDynamics is losing money. Here is a deeper dive into the importance of professional services revenue at Mulesoft and AppDynamics: from Mulesoft S1 Filing: Screen Shot 2017-03-20 at 8.40.38 PM.png
Increasingly, our platform has been deployed in large scale, complex technology environments, and we believe
Screen Shot 2017-03-20 at 8.41.11 PM.png
Continue reading "Thoughts from Mulesoft and AppDynamics IPO Filings"

Thoughts from Mulesoft and AppDynamics IPO Filings

I finally had a chance to take a quick read of the respective S1 filings for AppDynamics and Mulesoft. While the growth for each company is quite amazing, two thoughts jumped out at me.

As we move to a cloud-only world with instant-on capabilities and low friction in onboarding customers, why does professional services revenue keep increasing year over year for these enterprise cloud businesses. Secondly, as the world continues to move to the cloud, why does on-prem software exist any more?

Looking at both S1 filings, it’s clear that AppDynamics and Mulesoft have caught on to what Salesforce already knows – if you want to be a massive business you also need to sell professional services. As these tech companies get larger and larger, their target customer also increases in size as these vendors look to move from 6 to 7 figure deals. In order to support continued ARR growth upstream, some of the best companies successfully use professional services as a weapon and make implementation, support and training part of the sale. See Jeff Leventhal’s post (boldstart venture partner and Workrails cofounder/CEO) on why services continue to matter for cloud vendors.

Same goes for why on-prem. In both S1s, we can see Mulesoft and AppDynamics discussing the need for multiple delivery models as many larger customers have regulatory and compliance needs, esp. in banking, insurance, and health care. On-premise and hybrid cloud deployments are not going away despite the continued adoption of the cloud. There is a whole world of what being enterprise ready from a product perspective looks like, and how SaaS companies can use new technology like Docker to have the best of both worlds, SaaS and on-prem without multiple code bases. If interested, take a look at EnterpriseReady.io curated by Replicated (full disclosure: boldstart is an investor).

Professional services drives subscription revenue

From a customer and revenue perspective, Mulesoft has continued to move upstream as their average selling price was $82k in 2014, $105k in 2015, and $143k in 2016. For AppDynamics, the best I could find was total number of customers at end of October 2016 of 1,975 with revenue of $158mm for average selling price of $80k.

From both filings, we can see that professional services revenue became a bigger part of the revenue pie. And in both cases, it’s pretty clear that professional services exist to drive the recurring subscription growth. In other words, neither group is making tons of gross margin and in fact one is almost breakeven while AppDynamics is losing money.

Here is a deeper dive into the importance of professional services revenue at Mulesoft and AppDynamics:

from Mulesoft S1 Filing:

Screen Shot 2017-03-20 at 8.40.38 PM.png

Increasingly, our platform has been deployed in large scale, complex technology environments, and we believe

Screen Shot 2017-03-20 at 8.41.11 PM.png
Continue reading "Thoughts from Mulesoft and AppDynamics IPO Filings"

Thoughts from Mulesoft and AppDynamics IPO Filings

I finally had a chance to take a quick read of the respective S1 filings for AppDynamics and Mulesoft. While the growth for each company is quite amazing, two thoughts jumped out at me.

As we move to a cloud-only world with instant-on capabilities and low friction in onboarding customers, why does professional services revenue keep increasing year over year for these enterprise cloud businesses. Secondly, as the world continues to move to the cloud, why does on-prem software exist any more?

Looking at both S1 filings, it’s clear that AppDynamics and Mulesoft have caught on to what Salesforce already knows – if you want to be a massive business you also need to sell professional services. As these tech companies get larger and larger, their target customer also increases in size as these vendors look to move from 6 to 7 figure deals. In order to support continued ARR growth upstream, some of the best companies successfully use professional services as a weapon and make implementation, support and training part of the sale. See Jeff Leventhal’s post (boldstart venture partner and Workrails cofounder/CEO) on why services continue to matter for cloud vendors.

Same goes for why on-prem. In both S1s, we can see Mulesoft and AppDynamics discussing the need for multiple delivery models as many larger customers have regulatory and compliance needs, esp. in banking, insurance, and health care. On-premise and hybrid cloud deployments are not going away despite the continued adoption of the cloud. There is a whole world of what being enterprise ready from a product perspective looks like, and how SaaS companies can use new technology like Docker to have the best of both worlds, SaaS and on-prem without multiple code bases. If interested, take a look at EnterpriseReady.io curated by Replicated (full disclosure: boldstart is an investor).

Professional services drives subscription revenue

From a customer and revenue perspective, Mulesoft has continued to move upstream as their average selling price was $82k in 2014, $105k in 2015, and $143k in 2016. For AppDynamics, the best I could find was total number of customers at end of October 2016 of 1,975 with revenue of $158mm for average selling price of $80k.

From both filings, we can see that professional services revenue became a bigger part of the revenue pie. And in both cases, it’s pretty clear that professional services exist to drive the recurring subscription growth. In other words, neither group is making tons of gross margin and in fact one is almost breakeven while AppDynamics is losing money.

Here is a deeper dive into the importance of professional services revenue at Mulesoft and AppDynamics:

from Mulesoft S1 Filing:

Screen Shot 2017-03-20 at 8.40.38 PM.png

Increasingly, our platform has been deployed in large scale, complex technology environments, and we believe

Screen Shot 2017-03-20 at 8.41.11 PM.png
Continue reading "Thoughts from Mulesoft and AppDynamics IPO Filings"

Building AI on CXOTalk

I had a great time participating on CXOTalk by Michael Krigsman with boldstart portfolio co founders, Sean Chou from Catalytic and Keith Brisson from Init.ai When you get down to it, AI is going to be huge in the enterprise but you need to make sure to focus on solving real business problems. Watch to learn more on our discussion about “applied AI.”
Here are some nuggets of wisdom:

Companies are removing #data silos. This will enhance usage of applied #AI

@keithbrisson @edsim  on #CxOTalk

There’s lots of hard work to make #AI easy for the user

@sychou @wearecatalytic on #CxOTalk

Great #AI is invisible to user.

@sychou @keithbrisson @edsim #CXOTALK

AI is like water. Every company will have it eventually. i like to talk about “applied AI.” What problem does it solve? ~ @edsim #cxotalk

also published on Medium

The post Building AI on CXOTalk appeared first on BeyondVC.

Apps sell infrastructure

Pivotal just announced it did over $270mm of revenue in 2016 from Cloud Foundry helping large companies with digital transformation. That’s some nice growth from the $115mm the year earlier.

The initial Pivotal Cloud Foundry sales pitch was that it gave big companies a way to build new applications that run in a public cloud (rented space on Amazon (AMZN, +0.47%) Web Services, Google (GOOG, +0.34%) Cloud Platform or Microsoft (MSFT, +0.62%) Azure) or private cloud (flexible infrastructure that runs in a company’s own data center.

The need for faster, better software deployment resonated with older companies facing competition from smaller, newer rivals that already use cloud computing. You could argue, for example, that Hilton (HLT, +0.05%) and Hyatt (H, -0.47%) hotels should worry more about Airbnb (AIRBNB) than about each other.

This is yet another sign how large companies are embracing cloud technologies and microservices to be more agile. At the end of the day, it’s not about buying Cloud Foundry because of infrastructure savings, its the ability to quickly and scalably deploy new applications quicker to meet business needs. That’s the bet Pivotal made many years ago, and it’s paying off. Remember if you are selling infrastructure – stop, sell apps to the heads of business who have a huge sense of urgency to get things done. Most of them also have pretty sizable budgets as well. The byproduct of all of this is saving money but that is not what moves the needle.

Apps selling infrastructure was all around today – see the Fortune Term Sheet note (scroll to middle) on CA’s $600mm purchase of Veracode in the secure dev ops space:
Forrester analyst Amy DeMartine put it nicely when she said that “along with most large technology companies, CA Technologies is on the digital transformation bandwagon and touts that applications are at the center of this transformation,” as she wrote in a recent report covering the impact of the deal. “With the acquisition of Veracode, CA Technologies gives credence to the basic need of companies to secure their applications before release.”
And the Information put out a story (sorry paid subscription) on Google Cloud and how Diane Greene understands how to sell to large enterprises – guess what – apps drive infrastructure spending!
Google didn’t have much traction in the cloud market when Ms. Greene joined, and she has helped the company understand how to sell to corporate customers, said Patrick Moorhead, an industry analyst. “That said, Google Cloud Platform has a ways to go before they can be looked at in the same way as Azure and AWS,” said Mr. Moorhead. There are signs Ms. Greene is trying a Continue reading "Apps sell infrastructure"

Thoughts from RSA and the Climate for Security Startups

Just getting back from a few days at RSA. We kicked it off Sunday night with a boldstart founders and execs dinner where we talked about what’s next in cybersecurity with some of our portfolio companies like security scorecard, bigid, snyk, stealth co and many friends from the industry representing strategic partners and IT buyers. After a couple more days of straight security talk with lots of new vendors, VCs, strategics and CISOs, I wanted to share a few observations. Many of these are not earth shattering but important to cover nonetheless.

  1. There are way too many cyber security startups. A record $3b went into these companies in 2016 and $2.5b in 2015. Many startups are features or products and not businesses. Each category and mini category used to only have a few vendors and now you can expect up to 10. Lots will struggle and go out of business and industry consolidation is ahead.
  2. That being said, cyber security budgets keep increasing! Banks like JP Morgan spent $500mm on security and yet they are still not secure. While many large cos will still buy from best of breed startup vendors, the landscape is changing as Palo Alto Networks and Symantec keep incorporating new tech and provide an integrated seamless stack.
  3. Which leads me to my next point. One CISO of a large bank told me that his team met with over 300 vendors last year. Large companies can’t possibly integrate all of these disparate technologies and the more you have, the more false positives you have.
  4. Rise of Nation State attacks – more sophisticated and deadly – many are targeting the largest financial institutions.
  5. There is a huge skills gap as there isn’t enough amazing talent to meet the demand.
  6. If you look at security market into 3 phases, before, during and after an attack, most money used to go in before phase. Now more is going into the during and after phase.
  7. Hackers are also using machine learning and so it is a cat and mouse game.
  8. Despite all of this, the weakest link is still people and social engineering. Simple fixes like patching vulnerabilities and 2 factor authentication can go a long way in preventing some of this mess. Getting rid of passwords can also help – biometrics? Anti-phishing, employee training?
  9. Assume you are breached – find needle in haystack – better use of machine learning to automate work flows on incident response and back end vs playing cat and mouse game of guarding the gates.
  10. US more at risk of cyber attacks than other countries – critical infrastructure is not state owned and we are more interconnected than many other countries – we Continue reading "Thoughts from RSA and the Climate for Security Startups"

Thoughts from RSA and the Climate for Security Startups

Just getting back from a few days at RSA. We kicked it off Sunday night with a boldstart founders and execs dinner where we talked about what’s next in cybersecurity with some of our portfolio companies like security scorecard, bigid, snyk, stealth co and many friends from the industry representing strategic partners and IT buyers. After a couple more days of straight security talk with lots of new vendors, VCs, strategics and CISOs, I wanted to share a few observations. Many of these are not earth shattering but important to cover nonetheless.

  1. There are way too many cyber security startups. A record $3b went into these companies in 2016 and $2.5b in 2015. Many startups are features or products and not businesses. Each category and mini category used to only have a few vendors and now you can expect up to 10. Lots will struggle and go out of business and industry consolidation is ahead.
  2. That being said, cyber security budgets keep increasing! Banks like JP Morgan spent $500mm on security and yet they are still not secure. While many large cos will still buy from best of breed startup vendors, the landscape is changing as Palo Alto Networks and Symantec keep incorporating new tech and provide an integrated seamless stack.
  3. Which leads me to my next point. One CISO of a large bank told me that his team met with over 300 vendors last year. Large companies can’t possibly integrate all of these disparate technologies and the more you have, the more false positives you have.
  4. Rise of Nation State attacks – more sophisticated and deadly – many are targeting the largest financial institutions.
  5. There is a huge skills gap as there isn’t enough amazing talent to meet the demand.
  6. If you look at security market into 3 phases, before, during and after an attack, most money used to go in before phase. Now more is going into the during and after phase.
  7. Hackers are also using machine learning and so it is a cat and mouse game.
  8. Despite all of this, the weakest link is still people and social engineering. Simple fixes like patching vulnerabilities and 2 factor authentication can go a long way in preventing some of this mess. Getting rid of passwords can also help – biometrics? Anti-phishing, employee training?
  9. Assume you are breached – find needle in haystack – better use of machine learning to automate work flows on incident response and back end vs playing cat and mouse game of guarding the gates.
  10. US more at risk of cyber attacks than other countries – critical infrastructure is not state owned and we are more interconnected than many other countries – we Continue reading "Thoughts from RSA and the Climate for Security Startups"

Thoughts from RSA and the Climate for Security Startups

Just getting back from a few days at RSA. We kicked it off Sunday night with a boldstart founders and execs dinner where we talked about what’s next in cybersecurity with some of our portfolio companies like security scorecard, bigid, snyk, stealth co and many friends from the industry representing strategic partners and IT buyers. After a couple more days of straight security talk with lots of new vendors, VCs, strategics and CISOs, I wanted to share a few observations. Many of these are not earth shattering but important to cover nonetheless.

  1. There are way too many cyber security startups. A record $3b went into these companies in 2016 and $2.5b in 2015. Many startups are features or products and not businesses. Each category and mini category used to only have a few vendors and now you can expect up to 10. Lots will struggle and go out of business and industry consolidation is ahead.
  2. That being said, cyber security budgets keep increasing! Banks like JP Morgan spent $500mm on security and yet they are still not secure. While many large cos will still buy from best of breed startup vendors, the landscape is changing as Palo Alto Networks and Symantec keep incorporating new tech and provide an integrated seamless stack.
  3. Which leads me to my next point. One CISO of a large bank told me that his team met with over 300 vendors last year. Large companies can’t possibly integrate all of these disparate technologies and the more you have, the more false positives you have.
  4. Rise of Nation State attacks – more sophisticated and deadly – many are targeting the largest financial institutions.
  5. There is a huge skills gap as there isn’t enough amazing talent to meet the demand.
  6. If you look at security market into 3 phases, before, during and after an attack, most money used to go in before phase. Now more is going into the during and after phase.
  7. Hackers are also using machine learning and so it is a cat and mouse game.
  8. Despite all of this, the weakest link is still people and social engineering. Simple fixes like patching vulnerabilities and 2 factor authentication can go a long way in preventing some of this mess. Getting rid of passwords can also help – biometrics? Anti-phishing, employee training?
  9. Assume you are breached – find needle in haystack – better use of machine learning to automate work flows on incident response and back end vs playing cat and mouse game of guarding the gates.
  10. US more at risk of cyber attacks than other countries – critical infrastructure is not state owned and we are more interconnected than many other countries – we Continue reading "Thoughts from RSA and the Climate for Security Startups"

Enterprise Collaboration Wars

It’s going to be fun to watch the enterprise collaboration wars and how each company is approaching the market! In my mind it is a microcosm of many battles being played out with startups versus incumbents. Do large enterprises go for “best of breed” providers or the “one throat to choke” model? How does the bottom-up model work versus the traditional top-down enterprise sales model? As for collaboration, here is a view of some of the players:
  1. Slack – bottom up, adding enterprise features, but not on-prem yet, many early adopter enterprises but can they bridge gap to more traditional
  2. Microsoft – Teams, product not as fleshed out but starting with bases of thousands of enterprise clients due to enterprise company licenses, does that mean adoption?
  3. Box/Dropbox – coming at it from a technically commodity base layer of file sharing and storage, trying to add stickiness on top with Paper by Dropbox and Notes from Box
  4. Google – has Gsuite for Google Cloud – do they add a collaboration layer or do they just buy someone else?
  5. Salesforce – has Quip, do they keep adding layers on top?

and many others… Dom NiCastro from CMSWire has a great article on this: Don’t Expect Slack to Dominate Enterprise Collaboration — Yet My personal opinion on the matter as quoted in Dom’s article:
Ed Sim, venture capital investor and founding partner at New York City-based boldstart ventures, questions the Microsoft adoption numbers. If a “huge company” with a $20 million Microsoft contract includes departments that don’t use Teams, does that count? “Slack does have an opportunity here but it has to move quickly and launch those features companies want,” Sim said. “And at some point they may have to look at hosting on-premises if they’re ever going to get there. You have a host of companies that need their own control over data where it’s located.”
Speaking of SaaS and on-prem, I would recommend taking a look at Enterprise Ready and what it means for SaaS vendors to build for enterprises vs. just sell – shameless plug – portfolio co replicated can make this happen and let you still manage one code base! Lot of lessons to be learned for startups:
  1. Consumerization of the enterprise is real and Slack is finally getting there
  2. Dropbox and box approached the enterprise with the same model bottom-up model and now are fully enterprise focused with lots of direct sales reps
  3. Watching if an incumbent like Microsoft can leverage its massive installed base to win or not. Only time will tell…
  4. Funding – all started with small seed rounds (slack $1.5mm even though different biz, dropbox $1.2mm, box $1.5mm A Continue reading "Enterprise Collaboration Wars"

Developer love vs revenue

Great blog post by CockroachDB on open source business models and their plans to make money:
If you’re serious about building a company around open source software, you must walk a narrow path: introduce paid features too soon, and risk curtailing adoption. Introduce paid features too late, and risk encouraging economic free riders. Stray too far in either direction, and your efforts will ultimately continue only as unpaid open source contributions.
I would say same goes for any developer-focused company whether OSS or some other hybrid free/premium model. It is truly an art form when it comes to striking that steady balance between developer and community love versus generating revenue and potentially alienating those who supported you. This is also an important question as it relates to fundraising for dev-focused startups. Introduce your pricing page too soon and that is the metric that Series A investors will track religiously. Bet the farm on developer love and metrics only and you may never get enough traction to get to that next round. From what I have seen in our portfolio, goal #1 is always to build an amazing community, focus on developer love and track the metrics and tweak. Without the developers, you have no customers.

Optimizing for Price at Seed Stage is a Mistake

Next step is where the art comes in – do I just put a “contact me” form for anyone wanting team or enterprise features or do I throw up a pricing page like below: My perspective would be you are better off putting a “contact me” page early on to learn as much as possible about who your potential buyers are, your users, budgets, and willingness to pay. Going after revenue too early can be distracting and also take away from building an amazing product. One of our portfolio companies, replicated, has done a great job with this: Taking your time and learning as much as you can about your community and users also gives you ultimate flexibility into what you charge for and what business model to pursue.

Give Investors a Reason to Believe

There is no 100% sure way to go from Seed to Series A but assuming you have an amazing product, the timing of when you implement pricing is critical to getting to that next level. From my experience, the investors at the Series A stage who truly understand infrastructure software will agree with this approach of optimizing the developer metrics and usage and showing what an inbound funnel may look like versus focusing on the pure revenue.

That being said, it is becoming more and more difficult to solely get the developer metrics (downloads, registrations, projects/services created, any other adoption number) needed to raise a Continue reading "Developer love vs revenue"

Thoughts on SaaS in 2017

When we started boldstart in 2010, a core thesis of ours was to invest in next-gen SaaS which we called SaaS 2.0 at the time and best highlighted in our end of 2015 review:

SaaS 2.0, reinventing for the mobile first workforce will continue to remain robust. We also see older school SaaS companies being rebuilt with more flexible back-end technologies like microservices and reimagined with a more responsive and beautiful UI.

While we continue to be excited about opportunities in SaaS startups, it is clear that the game has changed substantially since 2010. Despite the amazing productivity gains from open source, AWS, microservices and other new technologies, we have seen the time to launch extending and the cost of getting a minimally viable product (MVP) out the door increasing. So why is this the case?

  1. Most SaaS categories have multiple players and to build a transformative SaaS app means the bar to what a “minimally viable product” is much higher than it was 5 years ago. In other words, a MVP of 5–6 core features may now need 8–10 core. This takes more time, money, and resources. Founders need to make tough decisions on what their definition of feature parity is and what that one unique product angle will be to rise above the noise (more to come in a follow up post).
  2. The competition for talent has and continues to be fierce so as tech costs go down, human capital costs continue to increase.
  3. Cost of getting message to market has increased due to the noise from the many competitors in a particular space.

So what can a founder and investor do in this changing world?

  1. Go niche — pick a vertical, say old archaic tech and SaaS-ify it — my friends at appfolio have done a great job of this rearchitecting property management software, secure documents, and legal case management and they are growing nicely.
  2. Go big — you can’t be afraid to go after incumbents in the large markets because as they grow they can lose focus and underinvest in their technology and platforms. Salesforce is 15 years old and Workday is already 11 years old. We’ve taken this approach by investing in experienced founders with unique takes on old school large markets in certain categories like email, CRM, BI, or BPM and going after the big players from the bottom up. Many of these companies start with a simple wedge
  3. New category killers — make bets on the next potential category killers and SORs (systems of records) like collaborative data science, enterprise PII, or SaaS for professional services.

With respect to #2 above, we have always been believers in the idea that technology moves in waves and cycles. The larger an Continue reading "Thoughts on SaaS in 2017"

boldstart in 2016, enterprise tech in 2017

2016 was a banner year for boldstart, and we could not have achieved any of this without the amazing support of our boldstart family and the founders who have given us the opportunity to invest in and partner with them.

Before diving into the standard year-end predictions on the enterprise, I thought I would share some data on our firm and our founding teams from 2016:

  1. we welcomed 9 new enterprise founding teams to the portfolio including Workrails (started by venture partner Jeff Leventhal), BigID, Hypr, Init.ai, and 5 stealth companies
  2. Thematically our new investments include 5 infrastructure/dev platforms, 3 security, and 2 SaaS; 4 are using some form of AI or machine learning; geographically 4 are in NYC, 3 Bay Area, 1 Canada, 1 Chicago
  3. 8 of our portfolio companies raised follow on Series A rounds with > $70mm raised and an average size of almost $9mm — announced rounds include Kustomer, Robin, Emissary, Replicated and Front — geographically 2 in NYC, 3 Bay Area, 1 Canada, 1 LA, 1 Chicago
  4. 4 of our portfolio companies raised Series B financings with close to $70mm raised and an average financing size greater than $17mm — announced rounds include security scorecard, handshake, and wevr — geographically 2 in NYC, 1 LA, 1 Canada
  5. fund iii had an oversubscribed closing of $47mm
Enterprise tech in 2017:
  1. We are pumped about the NYC enterprise tech ecosystem! When you have local Fortune 1000 IT execs who are looking to buy innovative technology combined with NYC enterprise startups and west coast VCs and founders building a presence here, you get an amazing recipe for a killer 2017.
  2. Fortune 1000 companies continue their slow but steady march to the cloud unlocking significant $$$. Yes, AWS and Azure will garner a bulk of this, but still requires significant new investment to easily monitor, manage and secure this sprawling infrastructure. Concurrent with this move will be microservices/container tech moving from dev environments to production and more $$$ spend being unlocked to support this transition. Abstraction layers and avoiding vendor lock-in are huge.
  3. Enterprise companies get more comfortable purchasing from startups. Many are already using open source (numbers range from 70–90% in certain tech stacks) and more and more Fortune 1000s are creating new positions like Chief Innovation Officer, Chief Digital Officer, etc., and we expect this trend to continue. Combining the bottom up, user-driven model with forward thinking IT execs has resulted in shortened enterprise sales cycles across our portfolio and some phenomenal reference customers.
  4. AI is table stakes for any enterprise app, not a separate market but weaved into every app from SaaS to infrastructure like CRM, BI, BPM, monitoring and Continue reading "boldstart in 2016, enterprise tech in 2017"

2017 will be big year for freelance economy

When Microsoft announced the purchase of LinkedIn an overlooked element of the story was how they planned to give users the ability to find experts while inside of all office apps. Imagine being in powerpoint and having a sidebar to find expert designers who are connected to you for hire or sitting inside of Microsoft word and looking for some editing help from a contact of yours. This is going to be big and disruptive.

One of the key trends we have observed in our portfolio is that larger enterprises are looking to augment their teams using on-demand/freelance labor. We are seeing this across the board in companies like Wonder (on-demand research), Workrails (on-demand software consulting), Emissary (on-demand sales intelligence) and Crew (best freelance mobile designers and developers). We must all be wary of linkedin but I do believe there will be opportunities for incredibly focused startups to thrive in this space as LinkedIn and Microsoft make this more mainstream in the business world.

The post 2017 will be big year for freelance economy appeared first on BeyondVC.

our journey to an oversubscribed fund iii for first check enterprise

 

This is a story about starting an enterprise seed fund called Boldstart in 2010 and our journey in enterprise since 1996. Despite our firm being a little over 6 years old, our individual stories go further back. We each independently fell in love with enterprise software 20+ years ago as seed investors (cos like gotomeeting/Citrix, greenplum/EMC, livperson/IPO LPSN) and founders (workmarket, onforce/Adecco, spinback/buddymedia/salesf0rce) and are now benefiting from the ecosystems, knowledge and network that we’ve collectively developed.

What seemed like a big bet in early 2010 was only us pursuing our passion. Our goal was to be the best first check partner for enterprise founders, bringing the value add of a VC firm while moving with the speed and conviction of an angel investor. We set out to build boldstart at the height of mobile app mania and viral growth and were faced with questions about our focus on enterprise and NYC. At the time there were only a handful of micro-VCs in existence, and despite going against the tide, we felt that the opportunity to build the first and best enterprise seed fund was a dream worth pursuing.

Today, we are super excited to announce our final close of $47mm for fund iii. This was oversubscribed from our initial target of $30mm and mirrors not only our growth but also the power of NYC as a hub for enterprise technology. As part of this final close, we are thrilled to have value added LPs like Knollwood Investment Advisory (anchor investor) and Top Tier Capital (institutional lead) join our mission. We are also grateful to our awesome investors who believed in us since day 1, especially Stillwater and KNC Holdings (Jeff Citron family office), our initial anchors. Most importantly, we wanted to thank our amazing group of founders that we have had the privilege to partner with over the years.

This is awesome not just for us but also for enterprise startups in NYC. To have institutional investors the quality of Knollwood and Top Tier Capital seeking an allocation to seed and NYC enterprise shows the tremendous progress we have all made. We still need to generate that first $1b exit, but I have no doubt that is coming, and we will certainly do our part to help make that happen. Our vision of bridging the west and east coasts is also becoming a reality, and it is no longer our secret that there is real enterprise tech in NYC. West coast founders now fully understand why having a NYC investor on their cap table pays huge dividends and west coast VCs are regularly leading Series A and B rounds in NYC.

Having more capital will only further our Continue reading "our journey to an oversubscribed fund iii for first check enterprise"

The 4 Kinds of Series A Rounds in Enterprise

A wise VC once told me when dinner is served, you eat. When it comes to fundraising, I’ve learned that if someone is trying to invest now, you should strike while the iron is hot. Given that the headwinds are getting stronger, we at boldstart have been advising all of our portfolio companies to raise as much as they can as soon as they can and to make sure that every dollar spent has a real ROI.

Related to this, the question I am often asked is “what metrics do I need to hit” to get that next round. While super important, I always like to understand where the business is in its lifecycle before answering. Having spent the last week in several meetings with startups going from seed to A, I thought I would break down the various types of A rounds and the major ??? to success:

The 4 kinds of A rounds:

  1. No A round. Sucks. — self explanatory
  2. Vision A round, super hard — raise on the promise and pre-launch, on the vision, huge market with the killer team that can build and scale. sometimes easier to raise on the promise and the expectations of amazing success than after the launch
  3. Metrics A round, easier — killer metrics, repeatable growth and predictable sales model, used to be $80–$100k MRR/$1mm ARR, the bar is raising…
  4. Hybrid A, toughest — this is where you are between 2 and 3 and the hardest to get done.

So let me break down the thought process on each one and how to put your best foot forward.

  1. No A round — cut burn, survive at all costs, we call that cockroach mode if the nuclear winter is coming, and you need to do whatever it takes to survive — never fun to do
  2. Vision A round — sometimes it is easier to raise on the promise of what you are going to launch, then launching and having investors wait for the metrics. These rounds, in many cases, are done through inbound leads and warm intros from your existing seed investors and from your network. The narrative is usually the same as well, we are not raising now, but if you are interested and want to get something done now rather than in 3 months, we are open to the conversation. Since this is inbound, you skip many of the initial steps and get right into your business. There may only be a few investors that fit these criteria, but ? is selling them on the big vision and how you and your team have the confidence and experience to get it done. Note, this is not a high probability round but one that can happen and only reserved for the most Continue reading "The 4 Kinds of Series A Rounds in Enterprise"

First enterprise customers – revenue or user engagement?

Since we are seed investors in enterprise technology, I am often asked this question. The answer on the surface seems quite obvious — generate as much revenue as you can to prove that customers find value and are willing to pay. My answer is the less obvious one — focus first on user engagement and the revenue and bookings will follow. Wait, isn’t user engagement more of a consumer metric? It is, but it is equally as important to focus on this metric in the enterprise. No matter what business you are in, you need to ensure that your ultimate customer (the end user) is happy and absolutely loves using your product. I have seen countless situations where a startup extracts initial dollars top-down from an enterprise but ultimately cannot get traction because the end users don’t love the product. Without love of product there is no user engagement, and without user engagement, there is no long-term customer. This is especially important in the age of SaaS as switching costs are quite low for substitute solutions. This is also the reason why next to VP of Sales, I would argue a VP of Customer Happiness/Success is a crucial hire. One is for generating new revenue and the other is for expanding existing customers and reducing churn. It is also why a number of companies have been created to help understand and monitor user engagement in the enterprise to proactively determine issues before they happen (totango, gainsight, and preact — full disclosure, my fund is an investor) What is user engagement in the enterprise? When understanding initial customer traction, we like to understand how a product/solution can/will become a daily habit for the user. It is pretty clear that the more an end user interacts with the product the more important it becomes and ultimately the more value it provides. Another important metric to optimize for would be expansion of users within an existing account. In other words, how do you sell into one user and create viral loops (sharing dashboards, etc) and expand the active user base for the product. Once again, this sounds like a consumer metric but quite an important one —the more people that use it the more it becomes part of the ingrained workflow creating more value. The challenge sometimes is that many enterprise tech companies are designed to work in the background, invisibly to automate tasks or aggregate data to reduce noise. If your tech is seamlessly analyzing data in the background, you need to find ways to show the user how awesome your product is by either sending alerts or creating some other eye candy to remind the user that your product is working and important. I have seen a Continue reading "First enterprise customers – revenue or user engagement?"