On SaaStr Episode 190 discussing the 0 to 1 enterprise stage and first customers

\I had the pleasure of speaking with Harry Stebbings for the second time on the SaaStr podcast released today. On this episode we took a different tact, focusing more on the zero — 1 enterprise stage and how to get your first referenceable customers vs. scaling post Series B. Please listen here if interested in how to grow and gain your first Fortune 500 customers — show notes below.

SaaStr 190: Why SaaS Founders Should Not Sell Their Products in The Early Days, How Founders Can Build Relationships with Enterprise CIOs and The Right Way To Think About Discounting and Pilots with Ed Sim, Founding Partner @ Boldstart Ventures


In Today’s Episode You Will Learn:
• How Ed made his way into the world of VC from one very meaningful high school lecture that changed his life and career path?
• What does Ed mean when he says “founders should not sell their product to enterprise in the early days”. Starting from the ground up, what can founders do to begin that relationship building process with enterprise buyers and CIOs? What can a startup do to establish that trust in the mind of large buyers? How much of a role does VC backing provide in comforting enterprise buyers?
• What would Ed advise founders contemplating the debate of going SMB up to enterprise or enterprise to SMB? What role should product play in this decision-making process? What are the leading indicators in testing the product that founders should observe for and guide their direction? Where does Ed most often see founders make mistakes here?
• How does Ed think about discounting? Would he agree with a previous guest that “discounting is now table stakes”? Rather than the financial element, what does Ed believe the founder should really be looking to get from the buyer in terms of commitment? How does Ed approach and asses pilots? To what extent should they be free or paid? What can be done to set the benchmarks for success and ensure closing?

  1. What does Ed know now that he wishes he had known in the beginning?
  2. Quality or quantity of logos?
  3. What would Ed most like to change in the world of SaaS?

The post On SaaStr Episode 190 discussing the 0 to 1 enterprise stage and first customers appeared first on BeyondVC.

Be Bold or Go Home – Fortune 500 Innovation

Click image for this evolving story

We at boldstart ventures have regular dialogue with Fortune 500 IT and business executives who are at the forefront of creating more agile organizations. Along those lines, I’ve been exploring new storytelling mediums and have put together a few different Series on Medium (best on mobile) sharing some of our thoughts on how CIOs should think like VCs and move earlier stage to partner with startups. Read here for the full story

The post Be Bold or Go Home – Fortune 500 Innovation appeared first on BeyondVC.

The Enterprise Strikes Back

Consumer companies are the ones that drive the headlines, that generate the most clicks on Techcrunch, and are top of mind for many in the tech industry. So I’d like to celebrate this brief point in time where the enterprise strikes back. While one of the darlings of the last 10 years, Facebook, is getting pummeled, the enterprise market is back in the spotlight.

Look at the Dropbox IPO which priced above its initial value and came out white hot at the end of one of the worst weeks in stock market performance. Couple that with Mulesoft being bought for 21x TTM revenue (see Tomasz Tunguz analysis) at $6.5 billion and Pivotal’s recent S-1 filing and you can see why the enterprise market has everyone’s attention again. However, I’ve been around the markets long enough to know that this too shall pass.

The real story in my mind is about what’s next. It’s true that Salesforce and Workday have created some of the biggest returns in recent enterprise memory. And with that, VC money poured into every category imaginable as every VC and entrepreneur scrambled to create a new system of record…until there were no more new systems of record to be created. My view is that we will see many more of these application layer companies go public in the next couple of years and that will be awesome for sure. There will also still be some amazing companies that raise their Series C, D and beyond funding rounds with scaling metrics. There will also be the few new SaaS app founders who have incredible domain expertise reinventing pieces of the old guard public SaaS companies.

However as a first check investor in enterprise startups, the companies that truly get my attention are more of the infrastructure layer companies like Mulesoft and Pivotal. We are at the beginning stages of one of the biggest IT shifts in history as legacy workloads in the enterprise continue to move to a cloud-native architecture. Being in NYC working with many of the 52 Fortune 500 companies who are undergoing their own migrations and challenges makes us even more excited about what’s ahead. The problem is that as an investor in infrastructure, it’s quite scary to enter a world where AWS commoditizes every bit of infrastructure and elephants like Microsoft and Google are not far behind. Despite that, it’s also hard to ignore the following facts:

  1. Enormous spend and growth for public cloud and app infrastructure, middleware and developer software of $50b (Gartner, Pivotal S-1)
  2. Rise of multi-cloud
  3. Fortune 1000 digital transformation journeys still in early innings
  4. Most legacy workloads are still locked on-prem and not moved to any cloud
    Continue reading "The Enterprise Strikes Back"

The Enterprise Strikes Back

Consumer companies are the ones that drive the headlines, that generate the most clicks on Techcrunch, and are top of mind for many in the tech industry. So I’d like to celebrate this brief point in time where the enterprise strikes back. While one of the darlings of the last 10 years, Facebook, is getting pummeled, the enterprise market is back in the spotlight.

Look at the Dropbox IPO which priced above its initial value and came out white hot at the end of one of the worst weeks in stock market performance. Couple that with Mulesoft being bought for 21x TTM revenue (see Tomasz Tunguz analysis) at $6.5 billion and Pivotal’s recent S-1 filing and you can see why the enterprise market has everyone’s attention again. However, I’ve been around the markets long enough to know that this too shall pass.

The real story in my mind is about what’s next. It’s true that Salesforce and Workday have created some of the biggest returns in recent enterprise memory. And with that, VC money poured into every category imaginable as every VC and entrepreneur scrambled to create a new system of record…until there were no more new systems of record to be created. My view is that we will see many more of these application layer companies go public in the next couple of years and that will be awesome for sure. There will also still be some amazing companies that raise their Series C, D and beyond funding rounds with scaling metrics. There will also be the few new SaaS app founders who have incredible domain expertise reinventing pieces of the old guard public SaaS companies.

However as a first check investor in enterprise startups, the companies that truly get my attention are more of the infrastructure layer companies like Mulesoft and Pivotal. We are at the beginning stages of one of the biggest IT shifts in history as legacy workloads in the enterprise continue to move to a cloud-native architecture. Being in NYC working with many of the 52 Fortune 500 companies who are undergoing their own migrations and challenges makes us even more excited about what’s ahead. The problem is that as an investor in infrastructure, it’s quite scary to enter a world where AWS commoditizes every bit of infrastructure and elephants like Microsoft and Google are not far behind. Despite that, it’s also hard to ignore the following facts:

  1. Enormous spend and growth for public cloud and app infrastructure, middleware and developer software of $50b (Gartner, Pivotal S-1)
  2. Rise of multi-cloud
  3. Fortune 1000 digital transformation journeys still in early innings
  4. Most legacy workloads are still locked on-prem and not moved to any cloud
    Continue reading "The Enterprise Strikes Back"

Snyk, from first check to leader in dev-friendly open source security

We are thrilled to announce our investment in Snyk, which is a developer-first security solution that helps companies use open source code and stay secure. We couldn’t be more excited to be leading this new round of capital again with Canaan Partners and including Heavybit, FundFire, and Peter Mckay (Co-CEO of Veeam) (see Techcrunch for more coverage).

Our initial journey goes way back as we were investors in Guy Podjarny’s previous company, Blaze.io, which sold to Akamai in 2012. For the next few years we collaborated on several co-investments and what ultimately attracted us to Guy’s new company (along with co-founders Danny Grander and Assaf Hefetz), was their bold vision to create a new platform for securing open source components with a dev-first focus. At the time we seeded Snyk in late 2015, open source library usage was growing significantly and solutions were either security first which slowed down dev or dev first but not with enough security built in. With the movement towards continuous integration and deployment, it was clear a new solution was needed.

In a little over two years, Snyk has gone from “founder market fit” to “product market fit” and this new round will allow the company to build out is product offering and expand its Fortune 500 customer base.

With over 120,000 developers using the platform, 100,000 projects protected, 350,000 downloads per month, and notable partnerships with Heroku, JFrog and Microsoft Sonar, Snyk has proven it can get developers to fully adopt a security solution, and the importance of having the strongest database of known vulnerabilities in open source

Funding rounds are always a great opportunity to look back and see how the company’s initial thesis has held up and what has improved or changed. See below for Snyk’s initial vision from late 2015, much of which remains the same today; developer velocity increasing, security isn’t dev-friendly, how do you bridge the gap, esp. in open source world where much of it is third party code.

There have clearly been some tweaks to the model since then, but what is most exciting for us is watching Snyk go from idea and vision in a non-existent market to one where the question of how developers are securing open source components is becoming mainstream. And given some high profile security breaches like Equifax in Sept. 2017 where it was due to unpatched open source vulnerabilities, you can see why the interest in solutions like Snyk’s are gaining rapid adoption.

While the need for dev-friendly open source security may seem obvious today, especially with the stats above, how did we frame our initial investment? Here‘s what got us Continue reading "Snyk, from first check to leader in dev-friendly open source security"

Snyk, from first check to leader in dev-friendly open source security

We are thrilled to announce our investment in Snyk, which is a developer-first security solution that helps companies use open source code and stay secure. We couldn’t be more excited to be leading this new round of capital again with Canaan Partners and including Heavybit, FundFire, and Peter Mckay (Co-CEO of Veeam) (see Techcrunch for more coverage).

Our initial journey goes way back as we were investors in Guy Podjarny’s previous company, Blaze.io, which sold to Akamai in 2012. For the next few years we collaborated on several co-investments and what ultimately attracted us to Guy’s new company (along with co-founders Danny Grander and Assaf Hefetz), was their bold vision to create a new platform for securing open source components with a dev-first focus. At the time we seeded Snyk in late 2015, open source library usage was growing significantly and solutions were either security first which slowed down dev or dev first but not with enough security built in. With the movement towards continuous integration and deployment, it was clear a new solution was needed.

In a little over two years, Snyk has gone from “founder market fit” to “product market fit” and this new round will allow the company to build out is product offering and expand its Fortune 500 customer base.

With over 120,000 developers using the platform, 100,000 projects protected, 350,000 downloads per month, and notable partnerships with Heroku, JFrog and Microsoft Sonar, Snyk has proven it can get developers to fully adopt a security solution, and the importance of having the strongest database of known vulnerabilities in open source

Funding rounds are always a great opportunity to look back and see how the company’s initial thesis has held up and what has improved or changed. See below for Snyk’s initial vision from late 2015, much of which remains the same today; developer velocity increasing, security isn’t dev-friendly, how do you bridge the gap, esp. in open source world where much of it is third party code.

There have clearly been some tweaks to the model since then, but what is most exciting for us is watching Snyk go from idea and vision in a non-existent market to one where the question of how developers are securing open source components is becoming mainstream. And given some high profile security breaches like Equifax in Sept. 2017 where it was due to unpatched open source vulnerabilities, you can see why the interest in solutions like Snyk’s are gaining rapid adoption.

While the need for dev-friendly open source security may seem obvious today, especially with the stats above, how did we frame our initial investment? Here‘s what got us Continue reading "Snyk, from first check to leader in dev-friendly open source security"

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.

1_T2mgRWcGugiSXs_kRsRQVg

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"

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.

1_T2mgRWcGugiSXs_kRsRQVg

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 create, share, track, trade and sell digital goods. To date, estimates have transaction volume of over $10mm and individual kitties selling for over $100k. Yes, those numbers sound insane but my point is that decentralized apps like this open the world to the power of the ethereum blockchain.

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.

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
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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"