Angular Ventures
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Enterprise & Deep Tech Weekly

Issue #123: For the week ended November 30, 2021

What money can’t buy
Gil Dibner

Last week, in Tel Aviv, I travelled to the past. I had several meetings with portfolio companies large and small, a pattern emerged that took me back in time to the way the Tel Aviv tech scene felt around 2010. Until then, most tech startups were located in Israel’s many “industrial zones” in places like Herzelia Pituach, Netanya, and Ramat Hachayal. These were purpose-zoned areas full of rather dull office buildings with (relatively speaking) plenty of parking and some convenient lunch options. What they lacked in character, they made up for in convenience.

Into the city. Around 2010, however, startups in Israel began a migration to Tel Aviv as founders began to discover the joys of living and building in the city itself. As the city’s cultural life began to boom, tech startups moved in. The area around Tel Aviv’s famous Rothchild Boulevard became a startup mecca. Teams of young founders found and occupied old-school city office buildings or repurposed apartments. Built in the 1930s, 1940s, and 1950s, these buildings were rarely much to look at — especially from the outside — but with love and attention, founders turned them into much-loved offices bursting with personality.

Into the glass boxes in the sky. Around 2016, however, this sort of do-it-yourself office started to go out of fashion. Workspaces like WeWork, Mindspace, Regus, and Spaces opened up in Tel Aviv, drawing the hottest startups towards their tightly-packed arrays of glass cubicles. As Israel’s tech boom continued, dedicated office towers began to spring up all over the city — especially around Sarona, the Start-up Nation’s new hub. Today, the city is full of towers that, in turn, are full of glass boxes into which startups large and small are cramming their employees.

Back to basics. Today, in 2021, our portfolio seems to be moving back in time to the 2010 era. Visiting our portfolio in Israel today feels a lot like a trip back in time to a previous, simpler era, when startups were truly startups. On a visit to one of our portfolio companies — one that had just raised a $20M round — I sent a picture of their offices to a colleague. “Maybe now they can get a better office,” my colleague wrote.

“No,” I replied. “You’re totally missing it. That run-down office is the recruiting strategy.

The office is part of the hiring strategy — but not in the way you might expect. What the smartest founders seem to be doing with their offices is similar to what they are doing in their hiring strategies overall: emphasizing the uniqueness of their specific company and focusing their hiring efforts on bringing in truly exceptional people that are drawn to the company’s mission. The smart-money strategy seems to be: (1) source talent through a tight personal network, (2) focus on truly extraordinary people, (3) do not offer to pay the top of the range, (4) offer generous equity, and (5) build a distinct office culture in a distinct physical office that people want to work in. The office itself — like the salary — becomes a filtering mechanism to prevent the wrong people from joining the company. By not paying top of the range, these founders are ensuring that they are not hiring people whose primary motivation is salary level. By having a quirky and run-down office bursting with character, these founders are also filtering out the wrong people: “If you are just here for the money, you are in the wrong place. And if you want to work in a fancy glass box in the sky, then our company is not for you.”

Accept that money is necessary, but not sufficient to lead you to success. This observation on office culture relates directly to the crazy era of profligate venture capital we are living through today. The smartest founders are recognizing that there will always be some competitor that has raised more money. (This week, for example, saw a $555M “Series A” round in Europe.) Similarly, there will always be a competitor who will outbid you for talent. If your hiring strategy is to pay up, you may win in the short run, but you will lose in the long run. By structuring employment offers the right way and by creating a distinct office culture, founders can shift the dimensions of their hiring challenges away from areas that are rapidly becoming commoditized and towards things that are unique to the specific company. The real way for talent isn’t about numbers — it’s about mission. The only employees worth hiring are the ones signing up for the mission — the ones who care more about equity than they do about salary.

EVENTS

Dec 2 / David Peterson on Joining Angular and How the Future of Enterprise will be “Customer-Built”
David Peterson, Partner, Angular Ventures

Dec 8 / Building your Marketing Engine: Where do you Start?
Leigh Moore, VP of Marketing, Snyk

FROM THE BLOG

The Long Road to Creating a Category:
Category creation strategy, with a little inspiration from Apple.

Three Methods of Venture Capital:
A guide to navigating a manic market as a venture capitalist (part 1).

Back to Basics — My VC Manifesto:
A guide to navigating a manic market as a venture capitalist (part 2).

How the “No Code” Design Paradigm is Revolutionizing Enterprise Software:
Companies like Figma, Airtable, Notion, and Zapier are doing much more than vanilla PLG.

EUROPE & ISRAEL FUNDING NEWS

Israel/Transcription. Verbit raised $250M for its AI-powered transcription and real-time captioning service.
Portugal/Digital Health. Sword Health raised $163M for its virtual therapy for musculoskeletal conditions, giving licensed PTs with medical-grade tech to make care more convenient, accessible and affordable.
Bulgaria/Fintech. Payhawk raised $112M for its financial platform that combines expense management, payments and invoice management in one solution.
Hungary/SW Development. Bitrise raised $60M for its full-featured mobile CI/CD in the cloud allowing developers to make mobile applications faster.
Ireland/E-commerce. Fonoa raised $25M for its APIs that helps digital companies determine and calculate taxes they should collect on their internet sales.
Germany/Logistics. Everstox raised $22.5M for its e-commerce logistics services, automating fulfilment and offering flexible warehousing options.
France/IT Infrastructure. Conduktor raised $20M for its all-in-one interface that simplifies working with one of the most notoriously difficult to work with data streaming platform Apache Kafka.

WORTH READING

ENTERPRISE/TECH NEWS

Quantum Processor Qubit Breakthrough. IBM claims it has created the world’s largest superconducting quantum computer, surpassing the size of state-of-the-art machines from Google and from researchers at a Chinese university. Previous devices have demonstrated up to 60 superconducting qubits, or quantum bits, working together to solve problems, but IBM’s new Eagle processor more than doubles that by stringing together 127.

Identifying Synthetic Drugs with AI. Researchers at the University of British Columbia have developed an artificial intelligence tool for analyzing synthetic drugs. Up until now, psychoactive “designer drugs” have been difficult to identify with standard drug tests. This new AI tool not only easily detects synthetic substances, but also can predict new chemical structures. This advancement in AI, called DarkNPS, could help to develop more accurate drug screening tests with faster results. While current tests can take weeks, or even months, this tool could deliver results in just a few hours.

ML App Store. Hugging Face, known as the largest open-source ML NLP community, has launched its ML app store called Spaces. Which features applications made by the community. Spaces support two frameworks that can quickly build Python apps: Streamlit and Gradio which give users the ability to quickly implement UI components making the applications easier to use, share and debug. The Gradio CEO Abubakar Abid shared his favorite apps from Spaces this week.

HOW TO STARTUP
The Sales Assist. Alexa Grabell, co-founder and CEO of Pocus, defines this emerging Product-Led Sales role. The sales-assist team offers a human touchpoint for users who are potentially good sales opportunities and need help solving their problem, getting value out of the product, or making a purchase decision.

The PM Questions. Zachary Perret, the CEO of financial plumbing company Plaid, lays out his recent 3 favorite questions when interviewing PMs. The third question is great. “If you replaced yourself with any other PM at the company, how would the outcome of the project have been different?”

VC Funding to Customer Funding. David Frankel, from the Founder Collective, shared a great insight — revenue from paying customers is by far the best source of capital for a startup. “The goal of founders should be to turn VC funding into customer funding as rapidly as possible.”

HOW TO VENTURE
Decacorns. Who are the most active investors in decacorn startups? “Since the first decacorn was born in 2007 — when Facebook, now Meta, was valued at $15 billion in a funding round as a private company — there have been 84 of these companies in total.” Spoiler alert, the top spot goes to Sequoia. What is interesting is that, if you recalculate the list to only include investors before they become a decacorn, it reveals the great early-stage folks: Y Combinator, Khosla Ventures, Founders Fund.

Breaking Through the (DevTool) Noise. Amanda Robson of Cowboy Ventures wrote about an investment framework for evaluating early-stage developer tool startups in today’s environment. “The project may point to an unaddressed pain point but that doesn’t always mean there’s a venture-scale opportunity where hundreds of millions of ARR can be generated. In order to assess the market potential for developer tool startups, we created a framework that we’d like to share with founders. We call it the “pay/stay framework” and break it down below. Will Developers Pay? + Will Developers Stay?”

Science Entrepreneurship and the Venture Studio Model. The billionaire chairman of vaccine maker Moderna, Noubar Afeyan, wants to reinvent scientific entrepreneurship. Flagship is a venture capital firm with a total of $17 billion in assets that operates more like an incubator. Through it Afeyan is churning out scientific ideas in biotech, the life sciences and agriculture with the goal of creating and nurturing a half dozen or more companies each year. Noubar Afeyan launched 70 companies by pushing researchers to ask what if their craziest ideas were true.

PORTFOLIO NEWS

Fixefy is one of the 14 up-and-coming Israeli startups to watch, according to VCs.

Aspecto’s CTO, Michael Haberman, will be leading a live session on December 8th covering the fundamentals of OpenTelemetry (and beyond). Register here to attend the webinar.

Planable has released their ultimate Agency Pricing Calculator for social media agencies.

Vault Platform’s Trust Gap report highlighted that 74% of office workers in the UK have either witnessed or been the victim of malfeasance during their careers. Their study further highlighted “alarming” issues of systematic misconduct, with more than a third of workers repeatedly experiencing or witnessing some form of misbehavior at least once a month.

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Angular Ventures Weekly

Angular Ventures Weekly

Early stage. Enterprise Tech. Europe & Israel.