Enterprise tech thru Arali Lens - Nov' 22
ChatGPT, market realities, and scaling in this new world
Been behind schedule in publishing this newsletter, but all with good reason. This was supposed to be the last one of the year, so it assumed slightly larger proportions, given the surface area it needed to cover.
Just as I was about to wrap up, ChatGPTv3 made its entrance. I had to go ahead and experiment, check if it can do the job for this edition. Here is what it threw up.
In the first example, the paragraph is well-written; however, statements like record breaking number of IPO’s and the $1B are far from the truth. The second example seems more grounded in reality, however on closer inspection, the numbers are from Nov 21 and it refused to go on further even when coaxed.
On the whole, it is easy to get all excited about how this will transform the chat / content landscape. In reality, it has only reset the bar for most AI solutions in this space in terms of accuracy. Domain and context-specific modelling will assume far higher importance that it ever had.
Market scan & building perspectives
It has been a somber month of November across the tech landscape, with the biggies laying off excess manpower and cutting costs, in line with the new market regime. Meta’s layoff announcement very succinctly captured the chimera of tech acceleration induced by COVID and the new capital efficiency mantra of the public markets. Even Alphabet hasn’t been spared, with a much-publicized letter by Cristopher Hohn of TCI Fund Management outlining the steps that need to be taken to ensure better fiscal discipline. A purge of about 2/3rd’s workforce at Twitter post-Elon Musk’s takeover has been unprecedented.
While a lot is being talked about crazily extended product lines, significantly low workforce productivity, here are a couple of interesting tweets on the inherent scalability of software products and how small, motivated teams can deliver world-class products.
An interesting lesson for early-stage startups on the growth path would be founders need to think hard and long about continuing to be lean, workforce productivity, and do more with less. It is very important to keep the small startup culture alive. However, this is easier said than done.
A detailed note from Sequoia on learnings for Indian SaaS companies from SaaStr, also highlights how they should think about organization design, GTM, product and customer segments while scaling in the US. While most of these points are applicable for startups with established PMF and clearly defined GTM motion (maybe, post preA / A rounds & above); building out a few of these aspects need not wait until then.
Customer centricity, product differentiation driven by customer obsession, & product organization more aligned with the customer than engineering are table stakes and should be implemented from day 1.
Some good GTM tips from Ed-Sim in the What's 🔥 in Enterprise IT/VC #317 edition, some of which I cant emphasise enough in these times:
“Killer product and insane time to value” have become table-stakes in this period where there is a lot of scrutiny on spends.
Incredible ROI helps, as always.
Land through innovative pricing that helps step aside buyer approval processes as much as possible and then expand.
Reports galore
Battery Ventures recently released the State of the OpenCloud report 2022 - a must read for Cloud aficionados. Lots to unpack:
There is the expected narrative about corrections in the public markets, but also some interesting analysis on more pain ahead for private companies that just turned unicorn. This slide shows that out of the 70 companies with a NTM revenues of $1B, only 60 of them are valued over $5B and only 40 above $10B. For the private ones, both, the ones valued at around $3B and the ones valued above $5B, have to run at a scorching pace (10X revenue ramp, as mentioned in the report) with good economics just to be where they are. If that isn’t a big ask, don’t know what is.
However, not all is gloom. Cloud is accelerating, as we have been saying. Secondly, and more importantly for an enterprise-tech fund like ours, there is still significant opportunity for cloud penetration. (Disruption potential of 76% in 2022 going down to 64% in 2025. Disruption potential is measured by how much of non-cloud spend can be moved to the cloud)
This is an important aspect of our thesis for investing in solutions for tech-laggard industries; we have seen enough examples in our portfolio to double down on the same going forward.
The report also provides a mature perspective on operational best practices for early stage firms - there is no one-size fit all approach for sales motion.
For all the large enterprise focused founders trying to force-fit PLG into the sales motion just because the VCs love it, please desist. There is no running away from building your sales motion focused on your buyer and the ICP.
There is a new report on B2B marketplaces by Adevinta Ventures, the VC arm of leading online marketplace player Adevinta. Created in collaboration with Dealroom, the report highlights the relative resilience of VC funding into B2B marketplace companies and the large opportunity it represents over the next decade.
Some interesting facts that come to bear:
The combined enterprise value for B2B marketplaces has been rising by 3% and has seen only a 10% drop in VC funding, much lower than other sectors.
There is adequate scope for VC funding into B2B marketplaces; it only attracts 19% of overall investments into marketplaces (both B2B and B2C).
Multiple industry structures are getting transformed by B2B marketplaces. Trends include greater adoption of digital solutions, improved financing, and better management of complex value chains.
Noteworthy B2B action in India
After months of decline, Indian startups saw a 30% m-o-m jump in funding in October at $1.3Bn, some pulling in big rounds last month.
In yet another acquisition in the lending tech area, CreditVidya is to be acquired by CRED in a stock and cash deal. CreditVidya, which has been one of the forerunners in the lendingtech space, has raised a couple of rounds of funding, but reportedly struggled to scale up its lending book and tech portfolio significantly. Only goes to establish that timing is paramount in this market, so is customer centricity and building a product that clients love
CSR tech platform Goodera scooped up $10mn. A great example of a company building a very sticky solution to address a specific problem in a particular geography (yes, i mean, focussing on a very small TAM) and in product Act 2, starting to address a larger global opportunity in an adjacent area (with obviously, a much larger TAM).
In another example of an Indian fintech SaaS company raising capital to scale globally, Pune-based fintech SaaS startup Lentra raised $60 million in a Series B round.
Arali Perspectives
While seed investors assess most aspects of the startup pretty objectively, assessing founder's ambition is not as straightforward and requires some nuanced thinking. Rajiv writes an interesting piece on evaluating founder motivations.
From Arali’s Portfolio
Unbox Robotics won the Business World Supply Chain Resilience Award 2022 for the category of “Best Use of Robotics.” The company was also recognised in the 2022 Gartner® report as a Sample Vendor in “Emerging Tech Impact Radar: Smart Robots and Drones.”
Prolance was featured in Arch India magazine, wherein the team spoke about how Prolance is transforming the fragmented interior design industry in India.
CogniSaaS CEO and founder Rupesh Rao spoke on The Jasons Take On, a CS podcast, on managing complexity during onboarding & implementation.
Pathfndr launched its product on Product Hunt.
Signing off, folks!
If you are building something in the enterprise tech space from India or associated with enterprise tech in general, we would love to hear from you.
Also, this post is public, so feel free to share it!