2019 Recap

Welcome to our annual boldstart recap and thoughts for next year. 2019 was a special year for us, and we want to 🙏🏼 all of the amazing founders, partners, investors, and collaborators as we would not be here without your support.

We started boldstart at the beginning of the decade, and it’s been an incredible journey growing from an initial fund of $1mm in 2010 and closing out this past year with $157 million of capital, $112mm for seed and $45mm in an opportunity fund to support existing portfolio companies deeper into their lifecycle.

As many of you know, boldstart is purpose built to do one thing — to partner with enterprise founders from day one to scale. There is no greater feeling than when founders we back with nothing more than a few slides and vision hit their milestones; first customer, first executive hire, Series A financing, and more. We wake up every morning fired up knowing that we are an active participant in their journey from idea to product market fit and beyond. 2019 was a banner year as our portfolio companies raised over $635mm in follow on funding, up over 4x from the previous year. While raising capital is not the end goal, it’s an important indicator of the progress some of these companies have made. More of our highlights below:

1. First check lead/co-lead in 6 founding teams, all in stealth, 5 of which are partially/fully distributed. Themes include devops, dev productivity, data sharing, resilience engineering, and product collaboration.
2. First check to follow on funding: Congrats to Kustomer on its $35mm Series C led by Battery, $40mm Series D led by Tiger Global and $60mm Series E led by Coatue; BigID on its $50mm Series C led by Bessemer and including Salesforce, Snyk on its $70mm round led by Accel, Security Scorecard on its $50mm Series D led by Riverwood, Superhuman on its $33mm Series B led by Andreesen Horowitz, Catalytic on its $30mm Series B led by Intel Capital, Robin on its $20mm Series B led by Tola Capital, Hypr on its $18mm Series B led by Comcast and .406, and a few unannounced rounds led by Sequoia Capital.
3. IOpipe exit to New Relic: serverless monitoring and observability, will accelerate product rollout to existing New Relic customers
4. Welcome to three new members: Charlotte Chapanoff, EA/GM, Natalie Ledbetter, Head of People and Platform, and Shomik Ghosh, Principal. We’ll have more on the team in a future update.
5. CXO/GTM Advisors: Manjit Singh (CIO of Toyota NA) and Bernadette Rotolo (SVP Global Systems at Warner Music) joined our CXO advisory board. They’ve already been instrumental in helping us understand their tech pain points and roadmaps and provide solid advice to the portfolio. On the customer relationship side, introductions we made over the last 18 months converted into 14 closed sales in 2019. It is always awesome when these large enterprises make early bets and partner with the portfolio. On the GTM side, our advisors have been actively coaching founders on scaling functions like sales, marketing and product, and we’re thrilled that 3 of our advisors have moved on to join portfolio companies as senior executives. Trust built from advisory roles is often an amazing foundation to transition into full-time working relationships.

What’s 🔥 in Enterprise Tech in 2020

Cloud, cloud, cloud — that has been the steady drumbeat for the last 10 years. And while true (as I wrote last year) that we are still just in the second inning, we also have to remember this quote from Jean-Baptiste Alphonse Karr:

The more things change, the more they stay the same.

Technology always moves in cycles. We started with mainframes, then client-server, back to mainframes (cloud), and now back to client-server with hybrid cloud. Yes, the inevitable march to the cloud from the Fortune 500 will continue but cloud-native/hybrid will also be a force as privacy and data ownership become more and more important.

One other recurring theme we will continue to see in 2020 is for startups to reduce friction/make it easy for end users and developers to engage with a product or service. Time to value and land and expand have formed the basis of the GTM model for some of the most promising tech IPOs in 2019, and we will see more startups emulate Datadog and Zoom’s GTM.

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1. Hyrbrid cloud and modern on-prem become real: As Fortune 500 developers get up to speed culturally with agile and cloud native software, we must remember that not everything will move to the cloud right away. On the hybrid side, AWS Outposts allows companies to have their own rack of servers on-prem but fully managed by AWS. The Azure stack portfolio allows customers to consistently build and run hybrid applications across data centers, edge locations, and cloud. While intriguing to be able to use the same software to run your apps on AWS and on-prem, the big question on AWS is “who owns the data.”

Along these lines, modern on-prem will become more prevalent in 2020. Companies like Gravitational and Replicated (a portfolio co) have been pushing the idea of shipping your SaaS application to your data versus the other way around. What’s clear is that modern on-prem is not like yesterday’s version which meant software vendors had a snowflake installed at every customer. The new version is write once to the cloud, and let your customers accept delivery when ready and consume services securely and compliantly.

2. SaaS 3.0, design first…and collaborative: The consumerization of enterprise has finally come with a focus on beautiful, intuitive, easy to use software, i.e. design first. Companies like Superhuman (a portfolio co), AirTable, Figma, Front and Cycle (both portfolio cos) have led this resurgence and excitement for the SaaS application stack. With the nature of distributed work and teams, design first and usability also means that collaboration has to be built into the workflow from day one; natively with real-time updates, sharing, commenting and more. This collaboration first thinking is a must have for most applications in 2020 and beyond.

SaaS 1.0 = reinventing legacy applications (Salesforce vs. SAP)

SaaS 2.0 = intelligence first — data first thinking with machine/deep learning for faster decisions

SaaS 3.0 = focus on design-first principles along with native collaboration built-in on day one

3. Acceleration of Fully/Partially Distributed teams with an international flair: The cost of living in the Bay Area and NYC is prohibitive for many. Given that it is harder to scale engineering teams in SF and NYC and that the tools to collaborate and work are getting better and better (see 2 above), we are seeing more and more companies founded with a remote HQ or fully distributed team on day one. Once upon a time, VCs cringed at the idea of distributed teams, and now it’s seen as a huge positive. In addition, Tier 1 financing risk is all but eliminated as VCs from the west coast are increasingly comfortable not only leading Series A rounds in Europe but also seed as well. FWIW, 6 of our first 9 investments in Fund IV fit in this category with France/SF, London/NYC/SF, Canada/Fully distributed, Canada/SF, Israel/Bay, and SF/India.

4. Developer productivity: developer productivity will continue to be a huge theme as the cloud native stack is way too complicated and as software eats the world, every company is a software company. Lori Beer, CIO of JPMorgan Chase, sums it up nicely when she talks about one of her competitive advantages is to focus on the “engineering experience” with a tremendous focus on automation so developers can focus on solving the tough problems and not the plumbing.

To further this point, below is the CNCF cloud native landscape — 🤯 confusing, isn’t it? With the great promise of micro-everything and containerization comes overhead and complexity to keep all of these different services communicating with each other with speed, security, reliability, and scalability. 2020 will be the year we see more and more services chip away and attempt to abstract and automate all of the underlying infrastructure so developers can just focus on coding. This includes companies in kubernetes automation like Garden.io and Tilt.dev (a portfolio co) and others in the cloud abstraction layer like Render and Dark (a portfolio co).

5. Full stack VCs continue to invest/lead seed rounds but will slow down by end of 2020: Starting early-2019, we started seeing a resurgence of Tier 1 West Coast VCs leading seed rounds. Seed 2.0 as we call it is different this time as many of these firms are more focused on ownership versus previously. In v1.0, many of these Series A VCs would spray $250k checks in dozens of companies but realized this was not helpful because it was diluting their brand and also potentially causing conflicts in potential later stage investments. v2.0 has many of these firms targeting double digit ownership and check sizes of $1 — $4 million with an eye towards leading the A round.

We’ve seen may of these rounds happen and believe that by end of year next year, many of these larger firms will realize that it’s way too hard to manage all of these portfolio companies properly and they will pull back again. In addition, the Series A muscle, especially amongst the best firms, is quite strong and can cause harm if triggered before product market fit, specifically around premature scaling. While these firms can be awesome to have as a potential built in A-round, it’s important for founders to weigh the pros and cons. Seed firms will either have to move earlier in the stack closer to formation stage and/or continue to differentiate through extreme focus and company building support.

6. Security starts with developers: As the world gets more distributed and complex, it’s imperative for security to first start with developers. It’s pretty clear that scanning and securing after cloud configurations are made and applications are deployed is not enough, and it must be built into the pipeline. This means making it easy for developers to scan all of their code, open source and containers like Snyk (a portfolio co), to easily incorporate zero trust frameworks and certificates into microservices and the edge like Smallstep (a portfolio co), and to create secure, scalable, peer to peer connections like Nebula. Expect more of this developer-first mantra to hit the security world in 2020 and for existing incumbents like Palo Alto Networks and others to make acquisitions to reach this new developer channel.

7. Developer first moves from inside the enterprise to outside: Just type in developer.jpmorgan.com, developer.gs.com, developer.walmart.com, or developer.NameYourFortune500.com and you’ll get the idea. We are moving to a new phase in the API-first world as Fortune 500s take the Stripe/Twilio playbook and start exposing their services to the outside allowing customers to build tightly integrated applications and creating new revenue streams for provider and client. The pot at the end of the 🌈 for these large organizations is to become a critical element inside of a customer’s workflow and deeply embedded into their customer‘s business processes making it hard to rip and replace. This interconnectedness of applications and systems means that once again Fortune 500s will continue to invest big $$$ into security, resilience engineering, and developer productivity.

8. Rise of FinOps: As cloud and SaaS continue to dominate, the sheer costs of cloud hosting are becoming a bigger and bigger line item under cost of goods sold. While version 1.0 was all about analyzing cloud spend reactively, the next generation will need to be proactive and help companies set policies upfront and understand, control, and manage these costs dynamically. FinOps helps companies address this problem as it’s incredibly complicated for someone in finance to know why costs spiked because a new product release was made or because data science used more GPUs to train their model. Coordinating all of these processes and allowing companies to set policies while providing self service will be the basis of many new companies in 2020. With infrastructure as code rising, we believe that the opportunity to proactively manage and codify this is already happening and that’s why excited about companies like Env0 (a portfolio co).

9. Data: The mantra over the last few years for many enterprises is data is the new oil and in order to win, one needs to store as much data as possible to train their ML/Deep Learning models (😃 i just can’t use the word AI). With many billions spent on data lakes and data infrastructure, we believe that helping companies easily collaborate, share, and even monetize this data will become increasingly more important. This year Amazon launched the AWS Data exchange to allow companies to easily find and subscribe to third party data in the cloud while Snowflake is making it easy to customers to share data externally. That’s why we are also so excited about Harbr Data (a portfolio co) which allows for easy external sharing and collaboration on data and models.

10. Privacy: I left this for last but with CCPA kicking in on January 1, we will continue to see more and more dollars invested in privacy engineering and managing PII data. Phase 1 for many of these enterprises is to discover and map the data flows (see BigID, a portfolio co) before building in rules to protect and safeguard this data. During 2019 we saw many products from scanning APIs for PII to allowing consumers to control their own data. Expect to see more of this in 2020 with an eye towards companies finding new ways to operate on encrypted data without decrypting. Duality Technologies and Dropout Labs/Privacy.ai (a portfolio co) are two such companies leading the charge.

We are super excited for what 2020 has to bring, and 🍻 to an even better year and decade for enterprise technology! If you’re thinking of starting a company in any of the areas above, please make sure to DM us as we’d love to chat!