We had our annual investor meeting this past week in Miami 🌴, and let me share some thoughts from our own presentation and overheard in conversations with institutional LPs and founders.

1. Many LPs have been doing the annual meeting tour during the last month and the focus in pretty much every VC presentation was how much cash runway portfolio companies had. While no one can predict the future, investors discussed pain to last from 12 - 36 months - yes, up to 36. In our presentation we showed how we’ve worked closely with our founders during the last several quarters to make sure their business plans aligned with reality which resulted in the vast majority of portfolio cos having > 24 months runway.

2. Mark downs across VC portfolios are all over the place. Some have taken 25-30% arbitrary writedowns across the board while others were more targeted. Expect more writedowns in VC performance to come after Q4. The long term LPs understand that it’s not what performance is today but ultimately what the real cash on cash returns will be in the future. For those VCs who have limited track records, LPs are heavily discounting investment performance based on writeup during the bull market.

3. For some companies who have been quite efficient, it’s also a time to grab market share as other pull back. This can be an incredible time to perhaps focus more on smaller lands and logo acquisition with expansion later versus large deals which are under increasing scrutiny.

4. Unanimously, investment pacing is down across the board as folks are still waiting for the bottom to hit. Case in point is EV/NTM multiples for the Top 5 Median Cloud cos went from 15x to 11x in just a week. Growth is dead for the most part unless you’re raising structured rounds with debt. It will pick back up late next year, and there will be a clear bifurcation between the best in class companies and the rest.

5. Many multistage VC firms have been investing heavily in seed which is much more insulated from the month to month economic headwinds.

6. We hear this all of the time but today is the absolute best time to start a company and be a day one investor. You have to be truly nuts and on a mission to start a company in this environment.

   However if launched successfully, you will have less competition on day one and access to talent will be better than ever. On the investment side, many founders starting companies today know not to scale prematurely until product market fit and the cash will last much longer. Along those lines, we just closed 3 new lead investments in just the last 3 weeks after a slow summer. The median cash raise was $3m for all 3. In prior cycles it would have been $5M or more and the cash would have still lasted 24 months meaning that all the inefficiency in the system is being flushed out.

Stay the course - there will be pain but it will get better!

As always, 🙏🏼 for reading and please share with your friends and colleagues!

Scaling Startups

1. Reminder for investors - DPI (Distributions to Paid in Capital) or how much money you return to investors - is all that matters!

   

   Ibrahim Ajami @IbrahimAjami

   Every VC firm should have this framed in their offices. Very powerful chart. Thanks to @altcap and team.

   

   5:06 AM ∙ Oct 30, 2022

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2. Stripe, the bellwether of tech and #1 in the Cloud 100, laid off 14% of its staff - “too optimistic about the internet economy’s near term growth”

   

   Gergely Orosz @GergelyOrosz

   A rare to see reflection on “where did leadership make the mistake?” An addition: Adyen employs ~2,200 people, so a third of Stripe. Similar gross bookings processed. Clearly, we’re seeing the “hire first, get to profitability later” strategy backfire in the current economy.

   

   1:58 PM ∙ Nov 3, 2022

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Enterprise Tech

1. Quarterly update on State of Cloud from Battery - some great data in here as always - if you’re interested in a deeper dive on how a bottoms up motion can both be product led or marketing led and how your target customers also should have different sales motions, you can read it here

   And if you wonder why folks are still bullish on the road ahead despite the market volatility, here you go:

   

   Battery Ventures @BatteryVentures

   That said, we’re still in the early innings of cloud adoption — there is significant disruption potential for the cloud across every segment of the enterprise IT marketplace. We predict that cloud spend will represent ~25% of $919B in global tech infrastructure spending in 2022.

   

   3:56 PM ∙ Nov 1, 2022

2. Contrary Capital out with some great research on the DevOps opportunity ahead

   

   Contrary Research @Contrary_Res

   DevOps has emerged as the best way to develop and deploy software 90% of execs say DevOps is a priority, yet only 12% have mature practices. Here's our deep dive report exploring this gap, the industry and key trends:

   

   5:32 PM ∙ Nov 1, 2022

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3. This is why I ❤️ open source - there is nothing better than when one of your power users is @NetflixEng and is on stage talking about your new cloud product @AtomicJarInc to make integration testing orders of magnitude better.

   

   Sergei Egorov @bsideup

   OMG OMG OMG 🙌

   

   5:32 PM ∙ Nov 2, 2022

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4. Edge 1st framework to automate infra provisioning + serverless + AI coding assistance… from CEO Vercel 🧵

   

   Guillermo Rauch @rauchg

   We're entering a golden era of software development, with trends that mark a step function increase in automation 🧵

   8:27 PM ∙ Oct 29, 2022

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5. This is pretty cool (🎩 @IanAndrewsDC)

   

   Shubhro Saha @shubroski

   This weekend I built =GPT3(), a way to run GPT-3 prompts in Google Sheets. It's incredible how tasks that are hard or impossible to do w/ regular formulas become trivial. For example: sanitize data, write thank you cards, summarize product reviews, categorize feedback...

   

   5:37 PM ∙ Oct 31, 2022

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   By the way, if that is interesting, I’d check out what Clay.run (a portfolio co) which is like AirTable meets Clearbit meets…it’s a spreadsheet that fills itself and super targeted use case of building targeted lead lists in minutes

   

6. Great post on Technically Substack on APIs - from where it started and what Postman does - also traces initial single player mode to evolution to teams and multiplayer as devs could then save and share APIs (🎩 @ShomikGhosh21)

7. Stay tuned for video a week from now…good listening especially for folks getting ready for the next 12 months of pain

   

   Tom Mendoza @TomMendozaTalks

   Imagine being in a company that went from start up to $1B in revenue in 6 years ($250M-$1B in two), faced .com bubble crisis (Stock went from $152-$6), rebounded to join Fortune 500 and was voted #1 place to work. Dan Warmenhoven and I did and will discuss lessons learned.

   4:32 PM ∙ Oct 31, 2022

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8. Ready for confidential computing? Time to leverage secure enclaves as a service on AWS Nitro with the easiest way to get started from Cape Privacy (a portfolio co)

   

   Gavin Uhma @gavinuhma

   Excited to share Nitrogen today! dev.to/gavinuhma/intr… Makes it super easy to spin up an AWS Nitro Enclave, deploy a docker image, and configure all the networking. Deploy nginx, redis, or anything else with a few commands.

   6:27 PM ∙ Oct 28, 2022

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Markets

Anoushka Vaswani @anoushkavaswani

There are only 22 public software companies with a 10B+ market cap right now but 213 software private unicorns 🤔

9:08 PM ∙ Nov 3, 2022

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