Category: Venture Capital

Crypto InfraEnterprise SoftwareOpen SourceVenture Capital

boldstart 2021 recap & what’s ? in enterprise 2022

Posted on by Ed Sim

2021 Recap

Sending ? and ? from the boldstart team at the end of a challenging 2021. With COVID raging at the beginning and end of the year, it is all the more amazing what our portfolio companies have accomplished the last twelve months. We are truly ?? to our founders, limited partners, co-investors, and friends for another year of growth and learning.

boldstart kicked off 2021 by announcing the closing of $230M of funds, $155M fund V and $75M opportunities ii, to continue supporting developer first & SaaS founders from Day 1 to scale(?).

We added 3 team members:

Ellen Chisa, Founder-in-Residence and former co-founder of Dark

Ab Gupta, Operating Partner and former VP Strategy & Ops at Kustomer

Ernest Addison, Associate and formerly at Audax group.

And our portfolio continued to grow:

  1. ? Day one lead/co-lead in 14 founding teams: (most still in stealth) representing ??, ??, ??, ??, ??, ??, ??. Continued investments in developer first, SaaS, and crypto infrastructure companies.
  2. ? ? Day one to scale: Huge congrats on milestone valuations realized for dev first security company Snyk ($8.6B) and fellow security startups BigID ($1.25B) and Security Scorecard (almost ?), crypto infra startups Blockdaemon ($1.255B) and Fireblocks ($8B, investment via MStateLabs our enterprise blockchain lab), and YipitData (new ?).
  3. ? Day one to follow on funding: Over $1.7B in follow on funding for the portfolio including those above and Superhuman, Replicated, Dooly, Env0, SpectroCloud, Cape Privacy, Hypr, and 3 others which closed new rounds but will announce early 2022.
  4. ?? Day one to exit: Huge congrats to FortressIQ on its sale to Automation Anywhere. We are ?? to have partnered since day one as FortressIQ created the market for process discovery and automation and scaled to dozens of enterprise customers.
  5. ? ️From idea to product launch: New company launches out of stealth include developer first startups Jit Security (orchestration for dev first security), Slim (container optimization), Atomic Jar (integration testing shifted ⬅️), Cloudquery (OSS cloud asset inventory SQL), CodeSee (code visualization), Liveblocks (API for collaboration), and SaaS co UtilizeCore (service mgmt automation).
  6. ??‍? More amazing angels/advisors added to the boldstart family: We continued doubling down on our enterprise angel/advisor network bringing diversity and some of the best builders and doers in product, engineering, and sales to help our founders accelerate their path to product market fit with folks from Airtable, Notion, Twilio, UiPath,Tableau, Elastic, Coinbase, Hashicorp, and more…

What’s ? in Enterprise 2022

  1. The next big thing in 2022 is blockchain is the new “dev tool” as many long time enterprise founders rush to explore and build newcos in crypto infra and enterprise investors fund any company with “enterprise + crypto.” Despite the number of companies that don’t make it, there will be a handful of foundational companies started in 2022 that will create returns that far exceed the money lost.
  2. VC funding will hit another record year in 2022 but don’t be fooled as while the total will be higher than 2021, the numbers will be skewed towards the perceived highest quality and fastest growing companies. In 2022, there will continue to be separation from the haves and have nots and this further increases the importance for funding outstanding and dynamic management teams who are also recruiting machines.
  3. Rise of orphaned companies — Speed bumps will surface for overcapitalized companies who raised too much ? too early and who tried to stay on the trajectory of super fast growth to be one of the top companies but fell short — lots of pain will surface in 2022 from these companies that overspent and don’t have much to show for it.
  4. A number of open source projects will become a DAOs (decentralized autonomous organization) instead of pursuing the classic venture backed model.

If you’re interested in staying on top of current trends on a weekly basis, please subscribe to my substack, What’s ? in Enterprise IT/VC.

?? again for all of your support, and here’s to a healthy and prosperous 2022!

Enterprise SoftwareInfrastructureOpen SourceSecurityVenture Capital

boldstart 2018 recap and what’s hot in enterprise 2019

Posted on by Ed Sim

2018 Recap

Welcome to our annual boldstart recap and enterprise predictions letter. We had another solid year filled with learning, growth, laughter, and new projects and partners. Thanks to all of the amazing founders, advisors, co-investors, corporate partners, and others that helped make 2018 an amazing year. We are truly grateful for your support.

boldstart 2018People often ask us why firstcheck.vc or what is first check and our response is that the seed landscape is so confusing, and what founders need is an investor with courage and conviction to lead their rounds and support them from day 1. This initial round could be $500k or it could be $3mm. We are purpose-built to not only invest pre-product but also to help accelerate your path to product-market fit with our decades of entrepreneurial and investing experience along with our active CXO advisory board.

To that point, we are most excited when our founders are able to go from slide deck to product-market fit and Series A and beyond. This year was a banner year as boldstart portfolio cos raised over $150mm of follow on capital from some of the top Series A and B investors (highlights below).

    1. First check leads in 5 founding teams, all in stealth. Some of these themes include privacy/ML, next gen CMS, intelligent automation, and developer productivity.
    1. First check to Series B — congrats to BigID on its $30mm Series B led by Scale Venture Partners, Kustomer on its $25mm Series B led by Redpoint, and Snyk on its $22mm Series B led by Accel and GV. Truly amazing that all of these companies went from slide deck to B in approximately 3 1/2 years.
    1. First check to Series A — congrats to Fortress IQ on its $12mm Series A led by Lightspeed and a stealth co on their $13.5mm Series A led by Bessemer Venture Partners. Once again, we led each of these rounds at slide deck stage and helped land the first handful of customers to accelerate path to product market fit and their Series A rounds.
    1. First check to seed — congrats to Blockdaemon on their seed round led by Comcast Ventures and Wallaroo Labs on its seed led by RRE Ventures. In each of these cases, we led much smaller rounds before they raised proper seed funding.
    1. Smallstep, Clay, Dark, and Windmill emerged out of stealth. All are developer first companies respectively in zero trust security, automation, and developer productivity.
  1. Rebel exit to Salesforce. Dev-first API for interactive emails — will be a great fit with the Salesforce marketing cloud.

7. New CXO advisors join — Tony Saldanha (P&G Next Gen Svces, Transformant), Farhan Shah(Allstate, CTO, Head of Platform Eng), Munu Gandhi (VP Infrastructure, AON), Virginia Lyons (CISO, Williams Sonoma) and GTM advisors — Natalie Diggins (Neustar, ex-VP Cloud Platform/DevOps), Francesca Krihely (MongoDB, Dir. ABM/Demand Gen), Richard Crowley (Slack, Ops Architect), Misha Brukman (JanusGraph, co-founder). This means more collaboration with the Fortune 500 and more go-to-market experience as our portfolio companies navigate their path to first customers. In 2019, we’ll be doubling down on this effort as we are hiring a GM for our CXO Advisory Board & Network (job description here).

AWS Reinvent Survivor Dinner with founders, Fortune 500 execs, and VCs

9. Ongoing press coverage of boldstart themes: every Fortune 500 is a tech company, developer first, and security including Fortune, Techcrunch, Wall Street Journal, Business Insider, SaaStr podcast, and more…

Fortune December 2019 Investor Roundtable

No matter what economic cycle we go through, Fortune 500 companies need to invest in software.”
Ed Sim, Boldstart Ventures

Enterprise Tech in 2019

Amara’s Law: “We tend to overestimate the effect of a technology in the short run and underestimate the effect in the long run.”

While the cloud wars, AI, automation, and digital transformation dominated the enterprise headlines in 2018, we have to remember that we are still early in the cycle. In our enterprise world, a large Fortune 500 can’t just flip a switch and close data centers and move to the cloud wholesale. There are other considerations like people, process, culture (see Dean Delvechhio’s, CIO Guardian Life,keynote at AWS), dreaded legacy technology and debt embedded in mainframes, COBOL, and other stuff they don’t want to mess with. Consider 2019 another year of blocking and tackling as the Fortune 500 continues their march to the cloud.

    1. Still in second inning for enterprise move to cloud: Regardless of what economic cycle we endure, the Fortune 500 march to a cloud-native architecture will continue. For the more advanced enterprises who have migrated to the cloud, this will be a year of net new technology and building applications. Along these lines, we are starting to hear serverless more and more from the Fortune 500 and see this trend reflected in the sales pipeline at iopipe which has gone from mostly startups to larger companies. While developers can now spin up applications faster than ever before, one of the downsides is the complexity of managing these distributed applications and technologies. Watch for startups solving this problem with a focus on observability, reliability, security and automation.
    1. Privacy engineering rules: We can’t go a week without a new data breach or privacy violation; Marriott, Google, Facebook and more. Large enterprises are also complaining about keeping up with so many different regulations like GDPR and the California Consumer Privacy Act (CCPA). Other states are also creating legislation around privacy of a consumer’s data and expect 2019 to be the year that the US creates a national standard. This will be a boon to startups as this encompasses finding PII, securing data, and incorporating privacy by design. This is hitting every market from security to data infrastructure to cloud. Designing software with a privacy-first mentality becomes a core theme in 2019. This will be similar to how AI became embedded in most applications in 2018. BigIDand Dropout Labs address some of these areas, and we are actively looking for new opportunities.
    1. Year of HQ2 and Distributed Teams: It was a banner year for non-Silicon Valley cities as NYC and Northern Virginia were selected as Amazon’s HQ2. Google also unveiled plans to double its NYC employee base to 14k. In startup board rooms all across the United States, founders and investors are asking how do we keep scaling our teams? We will see many more startups created with fully distributed teams from the beginning or layer in an HQ2 as it becomes even more expensive and difficult to scale in the prime geographies. Rather than be seen as a negative to funding and scaling a business, this will be seen as a huge positive!
    1. Balanced growth vs. growth at all costs: No conversation about 2019 will be complete without considering the uncertain economic, financial and geopolitical environment in which we are currently living. The 10 year bull market where every company’s revenue chart is up and to the right is over. Many startups were funded on growth alone and this is the year that efficient growth plays a huge part in determining who the next winners will be. Startups should also make sure they are well funded for 24 months and have contingency plans to put on the brakes in case another nuclear winter occurs. Look at 2001 and 2008’s Lehman collapse and Sequoia RIP Good Times deck for lessons learned.
    1. Seed funds back to basics in 2019: We highlighted the barbelling of VC in the year-end 2017 update and see this continuing in 2019. Either you’re a mega fund or an early stage fund, being caught in the middle is a place you don’t want to be. On the seed side, we are seeing more firms focus on smaller and more concentrated portfolios instead of a spray and pray mentality. Consider this a back to basics approach the way VC used to be in the Arthur Rock days. There is so much money out there at the seed stage and specializing, focusing, and concentrating paves a path to success. This is what boldstart is all about, leading that first check round, rolling up our sleeves, and leveraging our Fortune 500 CXO network to accelerate the path to product-market fit.
    1. Enterprises buy new technology, stop selling them: When speaking with IT Execs in 2018, I repeatedly heard the common refrain of “I wish startups would stop spamming me” and “my voicemail is filled with vendors.” When we asked how they find new technology, their answer was clear; research on the web, word of mouth, and their teams, i.e. what are devs using. The script for selling and catering to the enterprise is flipping to the point that these large organizations will find you instead of being sold to. This has huge implications for how startups build their products and go-to-market teams with a focus on ease of use, dev evangelism, content marketing, a tilt towards inside vs field sales, and much more. This “bottom-up” strategy, especially for developer first and product-led growth companies, will continue in 2019. Winning the hearts and minds of developers matters and building the GTM around conversion and upsells will be key.
    1. Low code, no code: There are 31 million developers on Github and more added in 2018 than the first six years combined. That stat is simply astonishing, and this theme is all about bringing on the next 31 million devs or what we call “citizen developers.” Much of the technology today has been built around abstraction making it easier and easier for devs to go from code to production. Many of today’s applications are actually a polyglot of APIs, third party packages, and services like Twilio, Auth0, and others allowing developers to rapidly assemble new scalable applications.This trend of allowing less experienced developers or even business analysts to build apps in a day will continue and unlock the next wave of “new devs. While they may not be building mission critical applications, this will certainly remove the bottleneck for many business departments to do it themselves without waiting for engineering. See a recent Business Insider article with more of my thoughts. Manifold and Dark are inline with this theme with a dev services marketplace and an IDE to build an application in a day.
    1. RPA moves to intelligent automation and more software, less services: Companies like UIPath and Automation Anywhere had banner years for growth in 2018 and will do so again in 2019. That being said, RPA while automated is still not intelligent so expect 2019 to see more ML and NLP layered into these processes. One other opportunity is that 1/2 to 2/3 of every automation project at the Fortune 500 is still spent on services and not software. 2019 will be the year we see further segmentation in the multi-billion dollar automation market and opportunities for startups to bring new solutions characterized by shorter deployment times, ease of use, and less maintenance. Enter portfolio companies Catalytic and Clay as examples with a respective focus on people friendly and dev-friendly automation. FortressIQ is also one to watch as it uses machine vision and NLP to mine business processes to help determine how work is being done and what to automate.
  1. Blockchain = supply chain: The crypto markets were white hot in early 2018 until they weren’t. Many of the smartest entrepreneurs were leaving their companies to start a new blockchain or crypto company. Many of those went back to doing other things. For those who have the fortitude, 2019 will be the best year to build an enterprise blockchain company with all of the hype removed. That being said, blockchain will not solve all of the world’s problems but we believe use cases in supply chain and data governance will be two big areas in the future. Mstate and blockdaemonwill be well positioned for this opportunity.

Thanks again for all of your support, and here’s to a healthy and prosperous 2019!!!

Sincerely,

Ed, Eliot, Jeff and Max

also posted on Medium

Enterprise SoftwareOpen SourceSecurityVenture Capital

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

Posted on by Ed Sim

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 excited back then, much of which has come to fruition in the 2 years since:

  1. Solving a huge pain point in an emerging but potentially massive market — we were witnessing the move to continuous integration and deployment spreading to the enterprise combined with the growth of open source and third party components; the thinking was that if you could make it dev-friendly then it could be a massive business
  2. Dev first business model with budget from security — we love bottom up, organic models but always question where the bigger budgets are coming from, and what we saw in Snyk was an opportunity to go bottom up with developers and then access the security budget for bigger dollars.
  3. Founder-market fit — GuyPod previously was Chief Architect at Sanctum/Watchfire Security, developers of one of the first web-app firewalls, ultimately sold to IBM. Danny Grander had significant security engineering experience starting in the IDF where he met Guy and into Skybox Security and as CTO of Gita Technologies. Assaf had a Sr Research role at Skycure which Symantec bought last year. This team had the technical and product skills and understanding to go after this opportunity.
  4. Repeat founders — we are always thrilled when founders we backed previously give us thefirst shot to invest in their new company. In this case, we had backed Guy before when he co-founded Blaze.io which was sold to Akamai. He eventually became CTO of the Web Experience Unit at Akamai.
  5. We like to work with founders well before they leave their current roleand start a new company. In Guy’s case we had regular dialogue over a couple year timeframe to both brainstorm and also vet the idea with our Fortune 500 relationships. We also introduced Guy to fellow founders like Tom Preston-Werner from Github (see blog post on Snyk) to help refine the story.
  6. Time to value — incredibly easy to get up and running, authenticate via github, bitbucket and Snyk starts scanning, monitoring, and suggesting fixes
  7. We love being able to help accelerate time from “founder-market fit” to “product-market fit” to which we accomplished by helping Snyk secure some of their early on-prem Fortune 500 customers.
  8. We are purpose built to double and triple-down in our portfolio as they hit milestones and scale their GTM team.

Once again, we couldn’t be more excited about leading this new round of funding and look forward to continued success for the team.

Also on Medium

 

Enterprise SoftwareVenture Capital

boldstart in 2017, enterprise tech in 2018

Posted on by Ed Sim

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 Manifold, Hypr, 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 in those founders before they take off.

  1. NYC has deep enterprise tech: the NYC you imagine that is full of ad tech and media is not the NYC that we see. Some of our latest investments in NYC include founders building companies in serverless, open source data streaming, decentralized biometric security, splunk for customer data, and developer productivity for dynamic code testing. There will be more deep enterprise tech startups founded, funded, launched, and scaled out of NYC in 2018. The talent base is improving, the customers are here, and the west coast VCs are paying attention. A sidebar is that NYC is and will continue to be one of the best places to launch any crypto-related company with Consensys as a base, the large number of fin tech entrepreneurs in NYC, and also with IBM in close proximity, one of the leaders in the enterprise blockchain. That is why we are also so excited about Mstate.
  2. Continued barbelling of VC will continue in 2018:. Either we see lots of smaller or seed funds at one end of the barbell or mega funds on the other end. It’s increasingly becoming tough to be caught in the middle to maintain ownership in your winners, and we will see more established VCs like Sequoia raise mega funds to counter the Softbank Vision effect. As for us, we are continuing to double down on our old school VC model, first check in, leading or co-leading, and rolling up our sleeves.
  3. CIOs are the new VCs: this is the year that Chief Information Officers start acting more like VCs. Corporate America is pressured to decrease costs and improve customer interactions and every Fortune 500 is a technology company. Expect this trend to continue and what this means is that CIOs will take a portfolio approach, make some bets, and double down on their winners. There will be lots of room for startups to wedge their way into large corporates and they will have every opportunity to turn pilots into production. This speed of adoption of new tech will accelerate at the largest enterprises, and they will be reliant on early stage startups to do so.
  4. Rise of the developer in the Fortune 1000: According to Gartner 75% of app development supporting digital business will be built, not bought. There are more devs, more corporates who need more dev tools and services, and we are seeing continued adoption in the largest companies. Tied to this will be a need for a hybrid, cloud/on-prem deployment and we are excited about portfolio companies like replicated that play to this future.
  5. GDPR is the next Y2K: GDPR kicks off in May 2018, and we are convinced it is going to be a massive problem and will sneak up on many enterprises.GDPR is all encompassing and focuses on protecting a customer’s PII (personally identifiable information) and hits every segment of the data pipeline from how developers access data as they create new apps to finding and monitoring all of a company’s PII to eventually allowing end users the right to be forgotten. This will be a huge boon in data and security spend in 2018 directly tied to this.
  6. Enterprise blockchain will prove itself: Cryptocurrencies are hot but the tech powering this, blockchain gets less attention. 2018 will be the year that many Fortune 500s that are piloting this tech will bring applications into production. There’s been lots of buzz for the need for a shared, distributed ledger but 2018 is the year we see production level use cases in the wild.
  7. Rise of Chief Data Officers: As the value of an organization’s data continues to rise, we will see many more Fortune 500s create the Chief Data Officer position. This is a trend that kicked off over the last 2 years and will only accelerate in 2018. This role is crucial as companies look to consolidate to a data lake (cloud or hybrid cloud) to prep for a future driven by AI and machine learning. Investment opportunities will abound as data ops becomes the new dev ops and the need for pipelining software to go from raw data to prepped data increases. This Chief Data Officer will also be responsible to manage the impact of GDPR (see above).
  8. AI is not a market, AI is embedded in every application: AI is not a market, it’s an enabling technology just like Java, wireless, and blockchain are. We said this in our predictions last year for 2017 (AI is table stakes) and this will accelerate in 2018. Some call this “ambient AI” and I just call it software. The real enterprise use cases that will continue to scale is the automation of the back office and the move away from robotic process automation (RPA) to Intelligent Automation (cognitive layer) and the continued move from AI in the back office and moving to the front office in every industry.
  9. Move to cloud accelerates, serverless hits early majority: We are still at the tip of the iceberg as enterprises move from legacy to cloud or hyrbrid/cloud. AWS has dominant market share but multi-cloud becomes a must-have for most Fortune 1000 organizations. This includes choosing best of breed by cloud vendor (Google for tensorflow, AWS for s3 and serverless, etc) and also distributing workloads over multiple clouds. With this, serverless and event-driven workloads will continue to proliferate as companies move beyond AWS Lambda and start using Google Cloud Functions and other solutions.
  10. Dev Sec Ops is the hot topic in security: With the velocity of software development and the reuse of software components, building in security at developer level becomes a must have. Securing open source dependencies like our portfolio co Snyk, managing service to service authentication and policy, encrypting traffic and more become hot areas in 2018.
  11. Quantum dabbling: We will hear about more and more enterprises explore the use of quantum. In 2017, new languages were created from companies like Microsoft and IBM to take classical algorithms and help repurpose for quantum, and this will accelerate in 2018 as the Fortune 500s start building out skunkworks teams to explore use cases. We are still a few years away from having a quantum computer perform calculations faster than a classical machine but once that happens, there will be tremendous opportunity for startup activity.

Previously posted on Medium

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.

    Read More

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

Read More

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

Read More

Enterprise SoftwareEntrepreneurshipVenture Capital

The 4 Kinds of Series A Rounds in Enterprise roadmap for understanding how to go from seed to Series A

Posted on by Ed Sim

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.

Read More

EntrepreneurshipVenture Capital

One VC’s take on NYC and Enterprise Tech enterprise tech in NYC on the rise!

Posted on by Ed Sim

When Willie Sutton, the prolific bank robber, was asked why he robbed banks, he answered, “because that’s where the money is.” When asked by investors in early 2010, why we were starting a seed fund focused on enterprise and leveraging NYC, I answered with Willie’s quip but also said, “because that’s where the customer-driven talent is.” One of the key criteria for successful enterprise investing besides team, product, and huge markets is ensuring that you invest in a “must-have” and not a “nice-to-have” solution. When companies are born out of real pain, more often than not this criteria is wholly satisfied!

I bring a unique perspective to this conversation having been a VC based out of NYC for the last 19 years (wow — am I dating myself!). While I have had my fair share of failures, I have also been a first round investor in many enterprise successes both in and outside of NYC, including leading or seeding the first round in LivePerson ( NYC, current market cap of $650mm), Greenplum (sold to EMC, now Pivotal), GoToMeeting (sold to Citrix, now Citrix Online doing over $600mm+ revenue), Divide (NYC, sold to Google), blaze.io (sold to Akamai), GoInstant (sold to Salesforce.com) and a few others.

Necessity is the mother of invention

As I think about common characteristics of great enterprise startups that I have had the pleasure to work with in NYC, I think about entrepreneurs building companies based on great pain, a deep understanding of the customer problem because they are customers themselves, and from that, using their computer science backgrounds to engineer a better and more scalable solution. Many of these great founders are simply hidden in larger companies, developing software for non-tech firms and functioning where tech is more of a support role versus front and center in terms of driving revenue growth. This is much different from entrepreneurs leaving established software vendors wanting to create a bigger, better, and cheaper mousetrap with a “great technology in search of a problem to solve.” While starting with a customer pain is great, the big question for many of these startups is whether or not this pain is a one-off or a market problem that is massive enough to attack.

Success Breeds Success

Divide

1 NIGdT5UjTHoG1GEtLB5GQw

When we first met Andrew Toy and Alex Trewby in mid-2010 they were VPs Wireless at Morgan Stanley and experiencing a huge pain point — employees were bringing in their iphones and android devices for personal use while still using their blackberrys for corporate purposes. Like any great entrepreneur, they asked the question, how do I solve this problem with software and allow companies to have the peace of mind and security policies needed for them while also allowing employees to use their existing devices. The challenge was to create a separate sandbox that could be easily used and understood. Rather than forking off android, Andrew and Alex built an App, something consumers could easily understand and yet make it easy for huge enterprises to deploy. The big bet in 2010 was that we would move to a BYOD world and that Android would become a dominant mobile platform (at that time, it was a big bet!) Hence Divide was born and 4 years later sold to Google and now branded as Android for Work with a stated goal of being on a billion devices. Pretty cool for two ex-technology execs at a financial services firm!

Security Scorecard

1 yyZnxDy2wAUnj5Yin0KuOA

We first met Alex Yampolskiy and Sam Kassoumeh in-mid 2013. They were both formerly Chief Security Officers at Gilt Groupe and were experiencing major pain in their day to day jobs. They were in charge of auditing the security of every vendor that touched the Gilt platform and all of it was done manually through intensive Q&A and when in doubt, via an expensive security audit from a consulting firm. As Alex and Sam spent many cycles on this method, they asked themselves if they could continuously scan the security of their partners in a non-intrusive way. It was already clear that software was moving to the cloud but less certain was the belief that a company is only as secure as its least secure partner and continuous monitoring would be imperative. From this, security scorecard was born. SecurityScorecard provides precise global threat intelligence and risk awareness continuously and non-intrusively so businesses and their partners can collaboratively predict and remediate data security issues. Fast forward 15 months from the initial seed round, and they have landed several large customers and closed a $12.5mm Series A with Sequoia Capital, founding investors in some phenomenal, multi-billion dollar security companies — netscreen, palo alto networks, and fireeye.

I could go on and on about many other great enterprise companies in NYC, but you get the point — find a massive pain that you are experiencing and living with first hand and create a software solution around this. It is this unique understanding of the customer that we will see time and time again as new enterprise-related startups in NYC are launched. It is also this deep domain expertise and understanding of the customer that will allow many enterprise startups in NYC to flourish, especially as we live in a cloud-based world where switching costs are not as high as they once were.

Bottom Line

The idea of NYC enterprise startups succeeding should no longer be a laughing matter. We have great entrepreneurs, companies, talent, and investors ready to capitalize on Willie Sutton’s vision — NYC is where the money is (see Jonathan Lehr’s great overview on NYC Enterprise Tech). We at boldstart ventures feel quite fortunate to be invested in a number of enterprise related startups in NYC like security scorecard, divide, truly wireless, handshake, yhat, and bowery.io and are excited about the future of enterprise tech in NYC. We have seen more success stories in the last 3 to 4 years versus the 10 years before that, and we expect this rapid innovation to continue. While many of these companies are engineers coming from large Fortune 1000 type companies here in NYC, we are also increasingly seeing founders leaving the more established tech companies like Google, OnDeck Capital, and Gilt to pursue their dreams.

As I write this I am wondering who the next entrepreneur will be that is hidden in the bowels of a more established company, feeling massive pain everyday, and ready to launch the next unicorn like MongoDb. Is that you?

(reprinted from my post at Medium)

EntrepreneurshipVenture Capital

boldstart ventures in 2014 – our ethos how we work with enterprise founders from first check onwards

Posted on by Ed Sim

As we look into 2014, we thought it was important to reflect on our activities in 2013 and refocus and refine our thinking and messaging as a firm. We are thematic in our approach and primarily known as seed investors with a focus on enterprise and companies that can scale quickly. To date our messaging has been clear, but we also could not ignore the fact that companies like Plain Vanilla Games took off quickly and became known as the fastest growing mobile game in history. The challenge for us is how to explain this in a focused, simple manner.

Here is our attempt and then I will break down how it all ties together:

boldstart’s messaging
We have over 20 years of experience backing bold founders with big visions. Our founding team has led first rounds in market leading enterprises such as LivePerson (LPSN), GoToMeeting (sold to Citrix), Greenplum (sold to EMC), and 24/7 Media (TFSM). BOLDstart helps founders at the seed stage accelerate their growth from idea/ alpha phase to product market fit and successful Series A round. With a focus on seed investing in the mobile, agile, and smart enterprise and business models that harness the power of network effects, our entrepreneurs have successfully been able to raise over $200 million of financing following our initial seed investment. Founded in 2010, we have backed 27 awesome teams including Indiegogo, divide.com (sold to google), goinstant (sold to salesforce), blaze.io (sold to Akamai), thinknear (sold to telenav), Plain Vanilla Games (quizup), rapportive (sold to LinkedIn), and klipfolio.

ok, so let’s break down the key elements of our message:

“We have over 20 years of experience backing bold founders with big visions.”
That is pretty self explanatory. However, to add to this, we love entrepreneurs who have big visions but of course, start with an incredibly focused product. This means we invest in product-driven engineering teams where all of the development is done in house and where rapid iteration is a key to success.

“helps founders at the seed stage accelerate their growth from idea/ alpha phase to product market fit and successful Series A round”
While this sounds simple, there is a ton of work that goes into helping our portfolio companies get to a successful Series A. This includes thinking through what milestones the startups will need to hit to make them attractive for an A round and ensuring there is real plan with enough cash (typically 18 mos) and runway to get there. Since most of our companies have a product that is in alpha stage (super early, buggy), we like to help our entrepreneurs get more market data and customer feedback through our relationships to help them further refine their product.

We also help our teams find key engineers, and sales and marketing folks who can help build and refine the gotomarket strategy for the entrepreneur. Finally, we try to prewire the Series A investment by getting our portfolio companies to meet with the right partners at the right firms early on before they even need money. Getting feedback from smart Series A funds helps the entrepreneur further hone their message.

“focus on the mobile, agile, and smart enterprise”
The big trend in technology today is the growth of mobile. The other force we always hear about is the consumerization of technology meaning that much of the innovation in design, applications, and user interface is driven by consumers first (think Facebook, twitter) and then brought into the enterprise or business after the fact. Yammer would be a great example of a Facebook like feed being brought into the enterprise and then being sold to Microsoft for $1.2 billion. Here at BOLDstart, we believe we are still at the very beginnings of this consumerization trend in the enterprise and hence our focus on the “mobile and agile enterprise.” Many of our portfolio companies in BOLDstart II reflect this theme such as Truly Wireless and handshake .

The other big theme is one of big data. As you know, we believe big data is passé and the real trend is smart data or what you do with the big data that matters. Storing and scaling tons of data cheaply and efficiently is already done. Smart enterprises are analyzing all of this data to make better decisions, increase revenue, and improve operating performance. Making sense of that data with algorithms and other software is the next wave and is reflected in investments like Coherent Path, klipfolio, security scorecard, and preact .

“companies that harness the power of network effects”
we are really investing in companies that can scale rapidly with zero to limited to market costs. Another way we think about this is that we fund products or companies that derive most of its growth by users recruiting other users. In industry terms, this means we looks for companies that have a high viral coefficient. Since we can’t predict the future, our investments in these types of companies are driven by small data sets that we can extrapolate to determine the potential opportunity and usage. For example, when we funded Plain Vanilla Games (Quizup), the team had launched a small test app in Europe called Eurovision Quizup where they were able to sign up 10,000 users in a week and one month later still had 30% of the users come back up to twice a day for 30 minutes a day. Given that other analogs like Words With Friends (scrabble) and Draw Something (dictionary) were quite successful and that no one had done Trivial Pursuit in the right manner, we decided to back the company in the seed round. As they say, the rest is history. We have taken this same approach with other networked investments like memoir.

finally, this theme is also applicable for b2b…
There is also a b2b theme as companies like ooomf and emissary.io are leveraging network effects, viral marketing, and growth hacking to ramp up their user base in the enterprise side. In addition, many enterprise software companies are exposing their functionality/service via APIs so other developers can easily build upon their platforms. APIs are the new business development models for these companies and once again represent many of the elements of consumer platforms. Companies like yhat, zillabyte, and goinstant fit this model.

In the end, we believe that we are better investors in the agile and mobile enterprise because of our front row seat investing in innovative, networked consumer companies. Companies like Plain Vanilla Games and Memoir help inform our thinking on what may/may not work from an enterprise perspective. The long term trend in the enterprise that we have been investing in for years is bottom up marketing. Instead of selling at the C-level, companies are better off getting one user in a department to use a product and then building in viral hooks and loops to help bring other employees on board. This is yet another example of the consumerization of tech. One of our most recent investments which is in stealth mode (will be announced shortly) is a great example of this – 3 users began to use the enterprise product and within 2 weeks, 42 of 45 employees were using the service and were interacting with it at least twice a week over a period of a couple of months. Now there is a backlog of over 200 companies waiting to use the system (we will give more detail in the next newsletter).

We hope this gives you a better idea of how we are thinking about opportunities and building our portfolio in 2014 and more importantly how to approach and what types of companies and teams in which we like to invest.