We are living in two worlds at the moment, those who are GPT-4 or AI sexy and those who aren’t. For those in the former camp, the amount of 💰 that continues to pour into any company with Gen AI in its tagline and at valuations from 2021 reminds me that some of us truly have amnesia. On the other hand, the best, non-sexy Gen AI leaders are continuing to retrench and refocus on first principles and core product and team building.

In my 27 years of investing in early stage enterprise tech, I can’t remember a time where the largest of companies moved so swiftly to go after a space. Don’t get me wrong, I like many of you do believe in the transformational power of LLM models and already see many of our existing portfolio companies leveraging this. I also am a dreamer and am looking for that next big win but I do want to tread with caution. Case in point - AWS Bedrock…

https://twitter.com/edsim/status/1646848756241817607?s=20

Amazon Bedrock will be huge for enterprises…

With Bedrock’s serverless experience, customers can easily find the right model for what they’re trying to get done, get started quickly, privately customize FMs with their own data, and easily integrate and deploy them into their applications using the AWS tools and capabilities they are familiar with (including integrations with Amazon SageMaker ML features like Experiments to test different models and Pipelines to manage their FMs at scale) without having to manage any infrastructure.

On the non-AI side of the world, I remain optimistic. The pendulum in startups and venture is always swinging from one extreme to the next. While painful, 🙏🏼 to be back in capital efficient build mode.

https://twitter.com/edsim/status/1646519216978415618?s=20

For day one startups, this is all about building the right way with the sole focus on shipping the right product and getting early proof points. This means hiring folks with “hands on keyboard” who can get shit done. It’s great to hear founders proudly pound their chest 🦍 when they get to PMF or $1M ARR as lean as possible instead of puffing their chest when it comes to how much money raised and at what price.

If you’re a company who has raised a few rounds, don’t be afraid to start with a whiteboard and and ask yourself the basics - what am I building, for who, and who do I need to build and sell this product. Too much 💰 means chasing too many ideas, having a couple of skunk work teams sitting in the corner or carrying too many sales reps with the hope that things will turn around. Besides the cost, more people means more meetings which means more time to get shit done. This reminds me of an old movie, Stripes, probably non-PC in today’s age, where John Candy shares his goals for basic training. Keep this image in your mind as you think about your company and how to move faster.

The benefits will be tremendous - more focus, speed, runway, and more value creation. If things don’t work out and all things being equal, I can assure you that having a lean, efficient org that ships product quickly will be more valuable in the eyes of an acquirer than a bloated team doing the same. Why? It’s because every single public enterprise software company and many late stage companies are doing the same thing, focusing on the Rule of 40 and trying to get to free cash flow positivity as quickly as possible. This means that acquisitions need to be accretive and quickly (in 1 quarter ideally).

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

Scaling Startups

1. 💯 I write about this a ton - patience required…to a point - and one of my many tweets on this

2. Raising capital in public - gutsy!

3. Another great post by The Product Led Geek on Snyk’s side products used to drive growth starting with its vulnerability database (full disclosure -Snyk is a portfolio co)

   The Product-Led Geek

   A look inside Snyk's biggest growth loop

   For those that don’t know, Snyk is the developer security company, most recently valued at nearly 8 billion dollars. Snyk was founded on the premise that the only feasible path to secure software applications is a developer-first path, which really means empowering developers to secure their apps as they’re coding, building and deploying them…

   Read more

   a day ago · 3 likes · Ben Williams

Enterprise Tech

1. Palo Alto Networks flexing its 💪🏼 (The Information)

   The company, which is the biggest stand-alone security software firm measured by market capitalization, is offering its cloud security software for free for up to two years to customers who ditch a competing service to sign up with it, according to interviews with customers and sales pitch documents viewed by The Information.

   It’s an unusually aggressive tactic to win customers, according to industry executives, who say it’s more common for software firms to offer discounts for customers who agree to buy multiple products.

2. Great read on bringing LLM models intro production by Chip Huyen

   New post: bringing LLM applications to production!

   1. Challenges of LLM engineering & the solutions that I’ve seen

   2. How to compose multiple tasks and incorporate tools (e.g. SQL executor, bash, web browsers, third-party APIs)

   3. Promising use cases

3. Perfect, I hope there are less dev tools and infra investors 😃

   https://twitter.com/lukesophinos/status/1645422641489285120?s=2

4. It will only get better for developer productivity…
   also check out AWS CodeWhisperer announced GA and it’s free to use! - going after Copilot

   https://twitter.com/GergelyOrosz/status/1645349618211864577?s=2

5. sounds like many of the YC cos

   https://twitter.com/lukesophinos/status/1645422641489285120?s=2

6. AutoGPT is the new cool thing and here’s why it won’t take over the world yet

7. RSA continues to get bigger, up from 335 in 2022 - Richard Stiennon , ex-Gartner Analyst, breaks it down by company, headcount, HC growth here...

   The Security Industry

   401 Cybersecurity Vendors Exhibiting at RSAC

   Many investors and researchers go through the painstaking task each year of filtering through the exhibitor list for the RSA Conference. At IT-Harvest that task falls to Salaar. He has painstakingly gone through the exhibitors several times. Out of the 537 booths in the Expo this year 401 belong to cybersecurity vendors. The rest belong to integrators, …

   Read more

   6 days ago · 3 likes · Richard Stiennon

8. Treat your customers with ❤️ - Quite a headline from The Information: Cybersecurity Firm Zscaler Loses Coveted Spot in Gartner Ranking Due to ‘Sales Arrogance’ - Gartner top rankings mean a ton when it comes to positioning and enterprise sales and this is a first that I’ve seen…

   In the latest ranking report for security firms like Zscaler, Gartner said it heard frustration from Zscaler’s customers over the company’s “pricing and perceived sales arrogance” from staffers, particularly when contracts came up for renewal. Small- and medium-size companies have frequently told Gartner that Zscaler “can be hard to do business with,” Gartner said in the report, which is due to be released publicly on Thursday.

9. Lists galore - the AI 50 (Forbes) and 44 of the most promising Gen AI startups according to VCs (Insider)

10. Dystopian future? “We've officially moved past 'AI models can write blog posts for me' and into "How much can AI models act like humans?" territory.”

    https://twitter.com/ItakGol/status/1645491031071236120?s=20

11. a16z 2023 State of Crypto Report - lots of great data on active developers, etc.

Markets

1. “Silicon Valley VCs tour Middle East in hunt for funding” from the FT

   “The Four Seasons in Riyadh is basically Palo Alto,” said a partner at one large Silicon Valley venture fund.

2. 👇🏼 Must read: Why the startup sector should keep its eye on the SEC

   The SEC’s current agenda — a public list of the regulations the agency is considering — contains proposals that will increase barriers to capital for companies and funds, constrain investor access and potentially push more companies from private to public. In short, the SEC’s actions could slow one of our greatest engines of innovation.

   Three key areas of proposed intervention by the SEC offer examples of why the venture community should be paying attention: