boldstart 2018 recap and what’s hot in enterprise 2019
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.
People 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).
- 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.
- 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.
- 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.
- 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.
- Smallstep, Clay, Dark, and Windmill emerged out of stealth. All are developer first companies respectively in zero trust security, automation, and developer productivity.
- 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).
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…
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.
- 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.
- 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. BigID and Dropout Labs address some of these areas, and we are actively looking for new opportunities.
- 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!
- 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.
- 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.
- 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.
- 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.
- 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.
- 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 blockdaemon will be well positioned for this opportunity.
Thanks again for all of your support, and here’s to a healthy and prosperous 2019!!!
Ed, Eliot, Jeff and Max