What's 🔥 in Enterprise IT/VC #227

Developer first GTM FTW - Okta + Auth0

Mar 6

While tech stocks took a beating this past week with high flyers like Zoom and Snowflake down double digits, I want to remind all of us that we are still just in the early innings for enterprise startups. This slide from Neeraj Agrawal’s (Battery Ventures) State of the Cloud 2021 best sums it up as software is still only 6% of the S&P 500. Call me an optimist, but I’m a believer in the long term despite my short term pessimism around valuations.

Speaking of valuations, this is where the venture market is in terms of paying now for future potential. Let’s 🙏🏼 that these companies can deliver on these expectations or 2-3 years from now we will have a generation of orphaned enterprise startups who can’t raise funding because their prices were too high to start.

Matt Garratt @mdgarratt

Everything B and later we no longer talk about ARR multiples, but rather potential TAM. We just assume companies will 50x - 100x revenues and execute flawlessly for 4 years. It just has to be a big enough TAM to justify the valuation.

Related to that, many of the companies realizing these premium valuations are those with a developer first or product led growth motion. Long ago I said that if you’re a company with a top down enterprise go-to-market motion, then you should be deadly worried about any one coming from the bottom up with a more efficient GTM. Okta made a bet the company move this week to bring much needed expertise in the developer first motion by announcing an acquisition of Auth0 for $6.5 billion or about 20% of its market cap.

Ed Sim @edsim

Every consumer investor is now a SaaS investor Every SaaS investor now an infrastructure and developer investor The rule of VC many years ago in mid-late 90s was u can’t make 💰💰💰 with devs Rule of next 20 yrs, you can only make 💰💰💰 dev first - win ❤️🧠 to win enterprise

This is another huge win for developer first companies and just the beginning as more and more developer first startups will go public or get acquired at huge multi billion $ valuations over the next couple of years.

Sudheendra Chilappagari @webaficionado

From @okta's earnings call: Auth0 will not only help Okta expand the market (customer identity > workforce identity), but also inverse their GTM motion. Okta was selling to IT and Security teams via top-down sales, but Auth0 won developers in a bottoms-up approach, like Twilio.

I took a few slides from the Okta deck (slides here) to highlight more on the developer first motion.

While these Auth0 numbers are incredibly attractive, this is still lower than best in class dev first companies like Datadog which still has NRR over 130% and had greater than 100% growth when relatively the same size. Notice the fine print as well - the >$200M ARR represents estimates for FY ending 1/31/22 so my sources say the ARR was closer to $150mm. Using $150mm ARR as a baseline you get a 43.3x trailing ARR and a 32.5 forward ARR multiple.

Going back to my earlier point on the importance of PLG and a developer first motion, this slide shows the various GTM motions at Okta and how Auth0 fills that much needed developer and self service hole.

This also ties in nicely with Neeraj’s State of the Cloud report where he outlines the need to transition from the one-size fits all SaaS metrics based on averages to a more nuanced understanding based on cohort or like-minded customer bases.

Bottom line, the SaaS markets keep growing, companies keep getting bigger than ever, and winning the ❤️ and 🧠 of developers is becoming more and more important.

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

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Scaling Startups

Seems like everyone these days wants to disrupt the traditional top down enterprise GTM with a developer first offering. However, here’s a reminder for what’s important if you embark on this mission - seeing too many founders that are trying to skip steps…
Ed Sim @edsim
True developer first founder milestones in order: product, 🌠 , users, engagement, win 1 user at a time, add another 0 Wannabe dev 1st founder milestone: enterprise customer #1, #2, #3 - no mention of users or community Always tempting for latter, but LT value built on former
March 5th 2021
3 Retweets14 Likes
And along those lines, this tweet nails it👇🏼💯 in terms of the importance of building out an engaged community over time as I’ve seen valuation accrue to those who can do this right versus those who don’t.
David Spinks @DavidSpinks
The minimum viable community (MVC) is the new minimum viable product (MVP).
March 5th 2021
37 Retweets159 Likes
Finally, Claire Carrol shares how she built the dbt community and the number one reason for success - be on a mission!
Over the last few years, the dbt community has been incredibly successful — since I started, we’ve grown from 1000 members to over 10 000. In December, we hosted a conference that had 5 000 registrants, and received incredibly positive feedback. Late last year, when our eventual Series-B investors reached out to a dozen community members and asked for their NPS, we received an average score of 10.2/10 — no, this is not a typo, apparently someone gave us as 12/10. (If this was you: you should know better as a data person! You’re really messing up my numbers here!). Most of these community members cited the community as a reason for their high score.
Claire also nails the importance of putting users first, esp. when it comes to developer experience
A lot of this mindset also applies to other interactions with your users, crossing over into the world of “developer experience” (i.e. how easy it is for a developer to be successful with your product) — by putting your user first, you’ll still create a lot of virtuous cycles.
No matter what your mission is, I encourage you to ask not what your community can do for you, but what you can do for your community.
Founder health - sleep - this 🧵 from Will Ahmed, founder of Whoop, is pure gold as it lays out that it’s not just sleep you need, but the right sleep, deep and REM. I love my Whoop as it’s helped me sleep better and is awesome for working out and tracking my recovery.
Will Ahmed @willahmed
You want to sleep better but you don’t have more time to spend in bed. OK, no problem I’ve spent 10 years researching sleep as an athlete then an entrepreneur and of course as a founder of @whoop Here’s what I know 👇🏼
March 2nd 2021
101 Retweets604 Likes
🎧 Natalie Ledbetter, our head of people and platform at boldstart, drops some serious knowledge on the Business of Cloud Native podcast on how startups can approach team and culture building, including how to prioritize your hires, common mistakes founders make when building a team, and why you should always avoid brilliant jerks, even if they are very brilliant.
🎧 I had the chance to join Randy Seidl and David Nour on their Tech Sales Insight 🎧 podcast to talk about mission driven founders and how to think about your first few sales hires. I also encourage you to check out other great listens as Kevin Haverty, CRO of ServiceNow, and Peter Mckay, CEO of Snyk share their wisdom.

Enterprise Tech

Speaking of sales…huge congrats to Dooly on its seed (led by us at boldstart) and Series A (led by Addition) funding announcement.
What I’m most excited about is Dooly’s true product led growth motion focused on the individual rep and how from there it not only spreads virally amongst the team but also cross functionally across departments.
What Slack did to email, Dooly is doing to the way people capture and distribute notes across the business, making them more collaborative, more distributed and more connected to the people and systems that need to be in the know to get their jobs done. Dooly is creating a connected workspace that short circuits the many manual workflows and processes that keep people away from focusing on their high-value work. Dooly’s goal is to help people become the best version of themselves at work by automating those workflows. Check out the 🧵
Ed Sim @edsim
1/ Super excited to announce @Boldstartvc investment in @DoolyHQ - 🙏🏼 to partner with @KrisHartvigsen @jvaill as they're on a mission to help customer facing teams do less grunt work, collaborate faster, + close more deals with their connected workspace medium.com/boldstart-vent…The Fastest and Most Joyful Note-Taking Experience for Go-To-Market Teams: Welcome Dooly.aiAt boldstart, we love to partner on day one with founders reinventing the enterprise software stack. Our north ⭐️ is always focused on investing in product obsessed founders reimagining existing…medium.com
March 3rd 2021
4 Retweets43 Likes
Tomasz Tunguz shares “How Much is 20% More Net Dollar Retention Worth to Your SaaS Startup?”
A great primer on what infrastructure as code (IaC) is and how enterprises can scale IaC (🎩 GarethRushgrove). AWS CloudFormation, Terraform and Azure Resource Manager covered in this post - also why I’m excited about Env0 (a portfolio co)
One of the defining attributes of the cloud is that the resources it provides can be defined in code. The advantages of this approach are so obvious, but infrastructure code has long struggled with two key aspects of traditional software engineering: modularity and reuse.
Your reusable infrastructure code should enforce enterprise requirements and standards while also allowing for teams to change or extend it allowed ways. Parameterize as much as possible so that the behavior can be configured by users rather than requiring new code. It can be a tricky balance to strike—especially in a large enterprise with diverse needs—but extensible infrastructure code modules reduce the need for teams to create and maintain their own fork.
E-commerce for largest retailers as % of overall revenue accelerating meaning more $$$ spend in the future for enterprise infra and developers - Target grew 2x YoY and Best Buy almost did the same…Both were way ahead investing heavily in their infrastructure years before COVID and it’s paying off.
Like other retailers that have fared well in the pandemic, Target became more of an e-commerce-dependent company because of it. For the full fiscal year, 18% of sales came from digital channels, up from 8.8% last year. Last week Best Buy Co. said its online sales rose almost 90% to $6.7 billion in the most recent quarter and made up 43% of total U.S. sales, nearly double the share in the same period last year.
Yuval Noah Harari (author of Sapiens) provides a historical lens on the lessons learned from a year of COVID and things to think about for the future. And with my enterprise lens, it means more investment in infrastructure, DevOps, security and developer first startups.
As humanity automates, digitalises and shifts activities online, it exposes us to new dangers. One of the most remarkable things about the Covid year is that the internet didn’t break. If we suddenly increase the amount of traffic passing on a physical bridge, we can expect traffic jams, and perhaps even the collapse of the bridge. In 2020, schools, offices and churches shifted online almost overnight, but the internet held up. We hardly stop to think about this, but we should. After 2020 we know that life can go on even when an entire country is in physical lockdown. Now try to imagine what happens if our digital infrastructure crashes.

Information technology has made us more resilient in the face of organic viruses, but it has also made us far more vulnerable to malware and cyber warfare. People often ask: “What’s the next Covid?” An attack on our digital infrastructure is a leading candidate. It took several months for coronavirus to spread through the world and infect millions of people. Our digital infrastructure might collapse in a single day.
Satya Nadella shares the future from his Ignite Keynote. Venturebeat has a great overview on the big themes:
- Ubiquitous and decentralized computing
- Sovereign data and ambient intelligence
- Empowered creators and communities everywhere
- Economic opportunity for the global workforce
- Trust by design
Microsoft Mesh coming soon - huge enterprise and collaboration use cases - will it work this time? Pretty 😎 video!