Enterprise tech thru Arali Lens - Sep 22
Fairy tale billion dollar exits, Manufacturing on the cloud amongst other things
I would be doing injustice if i didn’t talk about the big event in the enterprise-tech world last month - Adobe’s acquisition of Figma for $20B. It’s being deemed an epiphanic moment for product-led growth (PLG), a David vs. Goliath battle in which Goliath seems to have prevailed. There’s been a lot of discussion around whether the valuation is justified. Read why Adobe is paying seemingly a high price, what Figma did brilliantly in a fight against an established player, and more. However, there is lot more to unpack.
Firstly, it makes for a classic VC success story — college drop-out, intern-turned CEO taking on big tech by building an immensely sticky product that scaled rapidly, eventually ending in a very large outcome. However, my interest as a VC has be to reverse-engineer the journey and the decisions that got Figma here. And, it’s been quite an interesting journey. So, strap up!
The video below recreates the seed pitch. It is radically different from what you would expect in a traditional pitch—no market numbers, no segment focus, no GTM! Complete focus on just what a cool product should do and how it can disrupt the market. Lesson for us investors i guess to put biases aside
Secondly, here is a discussion between Dylan and his seed investor & board member Danny Rimer. While the entire video is a must-watch for founders, there are very pertinent points about building a senior team (8:45 to 9:35), codifying culture (9.35 to 12.10), learning how to become a manager (12.40 to 14.28), investor-founder dynamics where the investor is pushing for commercialisation (16:34 to 17:38), proactively listening to customers (19:00 to 21:49), commercialisation (22:11 to 23:10), and building for scale while ensuring that values are not compromised (24:15 to 25:50).
Last but not the least, a timeline of Figma’s revenue scaling (ARR numbers):
Key takeaways: 2 -3 years to private beta; 5 years to get the first revenues; and then, explosive growth 5X, 5.7X, 3.2X, 2.5X and an estimated 2X in 5 years post commercialisation. Exhilarating stuff in hindsight, but reflects highly on early investors who kept their faith and patience!
The growth of Figma also highlights the growing preeminence of design, which has attracted a lot of investments. However, the road from design to manufacture in many industries is still quite bumpy. I believe there are large opportunities to unlock the same in multiple industries, which is the thesis behind our investment in Prolance, a SaaS plus DFM & cloud manufacturing solution in the home interiors space.
The growth of PLG companies like Figma has resulted in a large number of PLG enabler startups. It remains to be seen whether the incumbents (the SaaS enabler generation, for lack of a better word) will be nimble and build for the future (even if it means cannibalising their current revenues in the short term).
Other interesting things in SaaS and B2B
The state of the Cloud 2022 - Centaur report by BVP was released in the backdrop of Saastr last month. While it covers the standard stuff including the current depressed valuations, phenomenal growth rates, interesting trends like indirect monetisation, addition of marketplaces to SaaS, what really stood out was the very low cloud adoption across a sample of traditional industries. Vertical SaaS, with or without marketplaces, to me represents a great opportunity to build fast-scaling businesses
Meanwhile, cloud manufacturing startup Zetwerk announced its results for FY22 and it’s been growing at a staggering pace. For someone who personally saw the growth in tech services over the last two decades, I cannot help but wonder if the same story is being replicated in the manufacturing space. And if indeed it it is, just like the tech-services industry, there is space in the market for at least 4 to 5 large players, maybe starting off with a differentiated industry focus. Any contract/cloud manufacturing startup out there, give us a shout out!
Noteworthy Indian B2B action in September
HCL Tech acquired a majority stake in GUVI, an edtech platform focused on imparting tech-skills in vernacular languages. While it might not be a large outcome, kudos to the team for staying true to their mission of skilling talent from Tier-2, Tier-3 locations and resisting the temptation to go mainstream. Having interacted with the team in their formative days, and with some of the students they have helped skill-up, I’m sure they will be thrilled to scale their impact to the next level.
ZippMat, a B2B Commerce platform for construction supply chain serving MSMEs raised funds this month. Ximkart, a cross-border raw materials commerce platform focussed on minerals, chemicals, and metals also raised a seed round. Both these are examples of building businesses with tech-driven business models in traditionally tech-laggard industries. It will be interesting to see if these businesses stay focussed on discovery and commerce or leverage tech to ensure other value adds for its participants.
B2B supply chain finance startup CashFlo raised Series A funds to scale its supply chain financing solution. The opportunity to partner with manufacturers/OEMs as well as B2B commerce platforms makes this a very interesting proposition. The key to scaling this business will be to increase application acceptance rates by creating access to capital with different risk appetites.
Retail distribution startup Soptle also raised an angel round. While the value proposition for smaller brands is very interesting and apparent, my view is that these operations-intensive businesses need to stay geographically focused (at least in their early years), highly capital efficient, unlock synergies in logistics and working capital, and explore opportunities to create branded products. We will be watching the business closely.
From Arali’s Portfolio
Kudos to Unbox Robotics for winning the 'Innovative Start-up of the Year' title at the 2022 Entrepreneur Awards conducted by Entrepreneur India.
CogniSaaS participated in the SaaStr Annual 2022 at San Mateo, SF Bay, from September 13-15.
FinBox qualified as a finalist in KPMG India’s Global Tech Innovator Competition (2022). Our best wishes to the team for the grand finale!
WIZ founders Ramkumar Govindarajan and RamkumarRamchandran were recently featured in the 'StartUp Story' column in The Times Of India. You can read the interview here.
Banu, CEO and founder of HBox was interviewed by Nathan Latka, founder of Founderpath and Getlatka.com. Listen to him talk about where they are as a business and 0-1 scaling journey.
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.
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