EC investor survey

Startup CEOs sound off on picking cloud providers • ZebethMedia

By zebethcontrolPosted on November 8, 2022Posted in buildbuddy, EC Cloud and Enterprise Infrastructure, EC Enterprise, EC investor survey, egnyte, Enterprise, monte carlo, StartupsNo Comments

Years ago, there was a price war between public clouds. Back in 2014, to pick one example, Amazon’s AWS cut its prices in response to Google’s recently launched competing service. Since those heady days, the cloud infrastructure market has matured and changed. Sure, AWS is still top dog, with Microsoft and Google working to both snag share from the leader (and one another). But the era of seemingly endless price cuts has been overtaken by a different market narrative: While building on public cloud services is inexpensive to start, it can become far less so over time. That Dropbox made the choice to build out its own infra remains an interesting, if isolated, data point. (ZebethMedia’s coverage from the event back in 2017 is worth your time.) We wanted to get a better vibe for what founders and CEOs are thinking about their public cloud choices, and the strengths and weaknesses thereof. So we got a hold of a few companies that we’re tracking, collecting input from BuildBuddy (early-stage, YC backed, delivering a managed service), Monte Carlo (mid-stage, high-growth, data-focused), and Egnyte (late-stage, profitable, a near-IPO company with a cloud storage and productivity focus) to get a broad view. We surveyed the three founders and included their full replies below. But first, a few observations on their answers. Don’t build alone The number of companies that have built on a public cloud and later went solo is slim. Despite Dropbox managing the transition, and later finding gross-margin leverage in the effort, most companies that build on public clouds stay there. And that appears set to remain the case. The two younger companies we surveyed mentioned the required scale to make such a transition economical. Egnyte’s CEO, the leader of a company that has a history of cloud storage — meaning that surely it has the required scale, right? — mentioned some more modest cases where it may use its own hardware instead of public cloud services. But if Egnyte is still content to use public cloud infra, well, we can presume that nearly every startup is going to stay put as well. Mostly (cloud) monogamous Both BuildyBuddy (GCP) and Monte Carlo (AWS) are single-cloud companies. Egnyte has some workloads on clouds that are not its main, but noted that it is somewhat concentrated. As before, we’re seeing similar answers from each company, size to the side. This is why AWS et al. work with startup accelerators; if you get a company aboard your public cloud when it’s young, you have (nearly) a customer for life.

3 investors explain how finance-focused proptech startups can survive the downturn • ZebethMedia

By zebethcontrolPosted on November 2, 2022Posted in EC Fintech, EC investor survey, EC Real Estate and Proptech, economic downturn, Fintech, proptech, real estate tech, StartupsNo Comments

In the early days of the COVID-19 pandemic, interest rates for mortgages dropped to historic lows. Predictably, home buyers made hay, taking full advantage of the favorable financial environment to pick up new homes and refinancing mortgages on their existing homes. Startups operating in the financial side of the real estate tech market suddenly faced a surge in demand, and many departed on hiring sprees to keep up. But as those interest rates, housing prices and inflation began to climb back up, demand slowed dramatically. This meant that the once high-flying startups were suddenly dealing with the opposite problem — too many employees and not enough transactions to make money. Layoffs became widespread. Shutdowns were a thing again. As interest rates soared even higher, the once frothy market morphed into an environment where only the fittest could survive. We’re widening our lens, looking for more investors to participate in ZebethMedia surveys, where we poll top professionals about challenges in their industry. If you’re an investor and would like to participate in future surveys, fill out this form. To get a sense of how investors who have backed proptech startups with a financial focus are dealing with the market shift, we reached out to three active investors. The trio shared their thoughts on everything from what types of startups in the home buying and lending space have the best shot at survival to the advice they are giving startups in their portfolios. Pete Flint, general partner of NFX, noted that the chances of survival are higher for proptech startups that let consumers fractionally invest in properties and increase access for those seeking a rent-to-own approach. “The best thing founders can do during a downturn is move quickly and efficiently, and evolve their offering to match the new needs of the market. This will help them capture more market share, which will give them the highest chance of survival,” he said. Nima Wedlake, principal at Thomvest Ventures, agreed, noting that agility is a critical trait. “Startups that survive this period will adapt their product offerings to meet the needs of today’s homeowners and buyers,” he said. In such a climate, companies that help others navigate tough times seem to be in special demand. “Companies that sell software that enables cost-cutting or additional lead-generation opportunities are seeing accelerating adoption as incumbent mortgage companies realize they need an edge to drive demand,” Zach Aarons, co-founder and general partner of MetaProp, pointed out. “If a startup can prove its users see significant savings, then they shouldn’t have a hard time being successful in this market,” he said. We spoke with: Editor’s note: For a more complete picture, we’re examining the proptech sector from three different angles. This survey covers proptech startups with a financial focus, and we’ll soon publish a survey that looks at upcoming tech in the space, and another that examines the environmental impact of proptech and what startups are doing to minimize their footprint. Pete Flint, general partner, NFX Startups doing anything related to home buying or lending have struggled this year. Which types of startups operating in the home buying/lending space do you think have the highest chances of survival? Resilient proptech companies have to be able to navigate the cyclicality of the industry. It is embedded in the category, and with the long housing and tech boom, many founders have underestimated this. In my view, it is less about the “type” of startup that is more likely to survive now and more about what the startups do to respond to this moment. The best thing founders can do during a downturn is move quickly and efficiently, and evolve their offering to match the new needs of the market. This will help them capture more market share, which will give them the highest chance of survival. The verticals that we think will be more resilient during this economy are:

5 cloud investors illustrate the various paths ahead for startups • ZebethMedia

By zebethcontrolPosted on October 21, 2022Posted in cloud cost optimization, cloud infrastructure, EC Cloud and Enterprise Infrastructure, EC investor survey, Enterprise, enterprise startups, investor survey, StartupsNo Comments

Cloud cost optimization startups have become ubiquitous, and they’ve found a friendly ear among enterprise clients looking to cut costs amid the downturn. But should younger startups similarly scrutinize their cloud spend? According to several cloud investors, startups should prioritize building over optimization — unless it’s going to save them a big chunk of money. Boldstart Ventures partner Shomik Ghosh summed it up succinctly: “In early product or go-to-market stages, optimizing cloud spend should be the last thing on a founder’s mind besides utilizing as much cloud resource credits as possible.” We’re widening our lens, looking for more investors to participate in ZebethMedia surveys, where we poll top professionals about challenges in their industry. If you’re an investor and would like to participate in future surveys, fill out this form. While founders shouldn’t lose sleep over cloud costs at the early stages, they should still carefully ponder other expansionary decisions, like cloud marketplaces, before foraying out. Himself an entrepreneur, angel investor Anshu Sharma noted that using cloud marketplaces as a distribution channel has pros and cons, and shouldn’t perhaps be done from Day 1 because “it can commoditize your offering.” Quiet Capital founding partner Astasia Myers concurred, saying startups should focus on finding product-market fit first. “We encourage startups to consider cloud marketplaces once they have found product–market fit, not before,” she said. “To successfully leverage cloud marketplaces, a solution’s product marketing, value proposition, and return on investment need to be clear while exhibiting a fast time to value, which happens post-PMF.” However, because of how fast things are moving, startups can explore marketplaces earlier than they could: “Historically we saw startups join cloud marketplaces at Series D+. Now we are starting to see companies consider it post Series B.” Founders should also remember that startups are destined to become bigger, and should therefore plan ahead. “It’s always important to select a technology stack that is available in all major cloud providers and that is as elastic as possible to support those migrations should they be needed (using Kubernetes is a great example of allowing for that),” Liran Grinberg, co-founder and managing partner at Team8 said. To find out what cloud-related advice investors are giving startups these days, we spoke with: Shomik Ghosh, partner, Boldstart Ventures Liran Grinberg, co-founder and managing partner, Team8 Tim Tully, partner, Menlo Ventures Astasia Myers, founding partner, Quiet Capital Anshu Sharma, angel investor and co-founder & CEO, Skyflow Shomik Ghosh, partner, Boldstart Ventures Founders are looking to cut costs amid the downturn. How important is it for startups to optimize their cloud spend in the early days? It depends on what is meant by “early days”. In early product or go-to-market (GTM) stages, optimizing cloud spend should be the last thing on a founder’s mind besides utilizing as much cloud resource credits as possible. Finding product-market fit, engaged users, and understanding the end-user workflow and how the product is essential to these users is the most important area founders need to focus on. As the company starts to have a few million in ARR, then it starts to make sense to manage cloud spend more closely to improve gross margins and therefore the bottom line (net cash burn or free cash flow). Major cloud providers often lure startups with free credit, but they also charge data egress fees later on. As cost optimization becomes a bigger consideration than ever, how consequential are early stage decisions on choosing a cloud provider? I think picking a cloud provider at the early stage based on cost is missing the forest for the trees. I know some founders who, in the early days, switch cloud providers to keep utilizing free credits. This may be possible when there are only a few people on the team, but as the team gets bigger, everyone needs to learn and relearn documentation, APIs, and UIs, which has a bigger hidden “cost” than any money being saved. Cost optimization is not just the size of the bill at the end of the month. It’s also the velocity of the team’s product development, downtime avoided, developer experience to allow teams to move faster, etc. All of these points should be top of mind when choosing a cloud provider at the early stages. What are the pros and cons of using a multi-cloud setup instead of building on top of a single public cloud? As a company scales, teams become a bit more focused on functional areas. In the early days, everyone does everything, but as the team scales, you have not just a backend infra team but inside of that, a database team, a security team, an ML team, a QA team, etc. Multi-cloud can help get the benefits of best-of-breed tooling from each cloud provider. In the early stages of a startup’s life, it is most important to go from 0 to 1. Astasia Myers, founding partner, Quiet Capital For example, Google BigQuery may be better for some use cases than Redshift or Azure Synapse, while AWS may have the best infra management tooling. The trade-off, of course, is having to make all those tools across platforms interoperable, and the major cloud providers are not exactly incentivized to do this. This is where startups come in, and by focusing on making one product the best, they can work across platforms and integrate easily (i.e. Snowflake can be used across any major cloud provider). When should a startup consider going on-prem, if at all? Would you advise AI/ML startups any differently? In terms of terminology, I think on-prem should also be called “modern on-prem,” which Replicated coined, as it addresses not just bare metal self-managed servers, but also virtual private clouds. The most common reason startups should consider modern on-prem is for dealing with sensitive data, which especially occurs in regulated industries (healthcare, financial services, or pharma). The scope of what is considered sensitive is growing over time with regulations though, so it’s something more startups need to be aware of. A lot of

6 Investors share where they draw the line when it comes to potential ethics issues

By zebethcontrolPosted on October 12, 2022Posted in business ethics, EC investor survey, ethics, investors, Startups, Venture, venture capitalNo Comments

The venture capital industry doesn’t have the best track record when you’re talking about ethics. Like most professions involving power and wealth, venture capital also sometimes attracts people for whom doing the right thing isn’t a concern. And limited regulatory oversight and a lack of transparency mean that investors can often get off scot free for not factoring ethics into their investment philosophy. We’ve all seen startups happily taking money from investors who back companies that have a negative impact on the climate, or broadcast misogynistic rhetoric. Sometimes, we also get venture firms raising capital from foreign governments that don’t have the best track records surrounding issues like human rights. But not every investor is a bad person, of course, and it seems as though the industry is taking steps to clean up its act — albeit slowly. Startups and investors are increasingly paying attention to what kind of people they want to work with and where they want their money to come from. Investors also looking for startups that won’t just make them money, but have the potential to leave society and the planet in a better place. To find out just how ethical venture capital is at the moment and how far it can still go, ZebethMedia surveyed six investors about how they approach ethics in their day-to-day. And we’re happy to report that all of them said the industry doesn’t do enough to police itself on issues surrounding ethics. They also wanted more to be done to make the industry fairer and better. We’re widening our lens, looking for more investors to participate in ZebethMedia surveys, where we poll top professionals about challenges in their industry. If you’re an investor and would like to participate in future surveys, fill out this form. Several investors said that having more transparency in the industry would help alleviate some of the ethical problems that continue to flourish, like bad actors being given seemingly endless chances and firms covering up questionable practices. “Venture capital’s opacity presents significant barriers to effect self-policing,” Geri Kirilova, a partner at Laconia Capital, said. “Greater transparency in decision-making processes and capital flows, whether it’s voluntary or mandated by regulation, would help.” Logan Allin, founder and managing partner at Fin Capital, agreed. He said that it would be nice to see some consequences and accountability from industry organizations like National Venture Capital Association (NVCA) or government entities like the SEC to help stop such issues from being repeated often. But without regulation, many firms are taking matters into their own hands. While they can’t be responsible for fixing the industry on their own, they are personally keeping ethics top of mind as they invest and raise capital. To get a feel for how some players approach different ethical issues, we surveyed: Geri Kirilova, managing partner, Lacovia Vital Laptenok, founder & GP, Flyer One Ventures Logan Allin, managing partner, Fin Capital Check Warner, co-founder and partner, Ada Ventures Laura González-Estéfani, founder and CEO, TheVentureCity Soraya Darabi, co-founder and general partner, TMV Geri Kirilova, managing partner, Lacovia How much does a company’s potential to create positive social or societal impact influence your investment decisions? What if the impact of a startup could be negative? Negative externalities, particularly detrimental social and environmental effects, are often deal-breakers for us. We are particularly averse to companies that exacerbate human exploitation, social and economic inequality (ironic coming from a VC, I know), and environmental harm. Capital is never enough to make a business or relationship successful. Laura González-Estéfani, founder and CEO, TheVentureCity How much should VC incorporate ESG metrics in their investment decisions? The application of ESG frameworks to VC is hazy. VCs typically have a fiduciary duty to maximize returns for their LPs. If they believe ESG, however it is defined and applied to their investment process, positively impacts returns, they should incorporate it. If ESG matters to a LPs’ mission, it seems logical that the VC’s investments, at minimum, should not be counterproductive to these efforts. But this question is better suited to the LPs themselves. Do the ethics or reputation of another VC firm have an impact on your willingness to follow on their investment or co-invest? Yes, they are a factor in our decision-making process, particularly regarding our risk analysis of the business. How do you think about ethics when raising and accepting LP money? Beyond following standard KYC/AML procedures, we have a high bar for alignment of ethics and values with our LPs. Our LPs are also included in our anti-harassment, non-discrimination, and diversity policy. Does the venture capital industry do enough to self-police? What could be done to remove or deplatform bad actors? Venture capital’s opacity presents significant barriers to effect self-policing. Greater transparency in decision-making processes and capital flows, whether it’s voluntary or mandated by regulation, would help. How often do founder-related red flags scuttle an investment in a startup that otherwise appears to be an attractive investment? If we are not confident in a founder’s trustworthiness and judgment, we will not invest. Do you believe that founders can learn from past mistakes? Would you invest in a company led by someone with a troubled past? We do believe founders are capable of learning from their mistakes. Beyond the financials, what about a company compels you to invest? Given our pre-seed and seed investment focus, the financials are never the most exciting element for us. We are drawn to mission-critical solutions, with some form of market demand validation, led by founders who have a deep understanding of the customers they’re serving and the ability to effectively build a big company. How do you prefer to receive pitches? What’s the most important thing a founder should know before they get on a call with you? We review all inbound submissions. The easiest way to submit is through this form. Founders can learn more about our investment process and strategy here. Vital Laptenok, founder and general partner, Flyer One Ventures How much does a company’s potential to