Enterprise Software

Thoughts from Mulesoft and AppDynamics IPO Filings

Posted on by Ed Sim

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).

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Enterprise Software

Building AI on CXOTalk cutting through AI hype, "applied AI" to enterprise

Posted on by Ed Sim

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

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Enterprise SoftwareInfrastructure

Apps sell infrastructure

Posted on by Ed Sim

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.

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SecurityVenture Capital

Thoughts from RSA and the Climate for Security Startups The year ahead in security tech and VC

Posted on by Ed Sim

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.

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Enterprise SoftwareSaaS

Enterprise Collaboration Wars Lessons for SaaS startups

Posted on by Ed Sim

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…

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Enterprise SoftwareInfrastructureOpen Source

Developer love vs revenue Going from Seed to Series A

Posted on by Ed Sim

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.

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Enterprise SoftwareSaaS

Thoughts on SaaS in 2017

Posted on by Ed Sim

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?

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Enterprise SoftwareVenture Capital

boldstart in 2016, enterprise tech in 2017 year in review, outlook for enterprise tech in 2017

Posted on by Ed Sim

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

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Future of WorkSaaS

2017 will be big year for freelance economy Linkedin/Microsoft allowing users to hire freelancers in-app

Posted on by Ed Sim

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.

Venture Capital

our journey to an oversubscribed fund iii for first check enterprise boldstart closes $47mm fund iii for first check, enterprise founders

Posted on by Ed Sim

 

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

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