Enterprise Collaboration Wars Lessons for SaaS startups

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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Developer love vs revenue Going from Seed to Series A

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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Thoughts on SaaS in 2017

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

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

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.

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