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Don’t Let WeWork Bring a Dark Cloud — Enterprise is Still Hot


October 2019: 

What we’re talking about

IPOs and speculations on the delta between private vs. public valuation have been driving the headlines. With all eyes on WeWork’s failed IPO prospects, we are encouraging companies to be thoughtful and stay focused on margins, capital expenditure, and frankly, building an enduring company. Case in point: We’s largest competitor is thriving.

Enterprise is still hot (see funding news below!), and we aren’t seeing a slowdown in enterprise SaaS/cloud investments. And because the tech market is still so strong, we’ve been seeing companies like We and Sweetgreen try to blur the lines by marketing themselves as “technology companies” as a way to attract investors and raise valuations. But, as Fred Wilson eloquently points out, businesses with high valuations and low margins run the serious risk of falling into a financing crisis. We are bullish on companies that do not have to reach massive scale to achieve high-gross margins. This lays the foundation for capital efficiency, which has been out of vogue as of late, but we believe builds the most enduring businesses.

We’ve been lucky to see the compounding value of capital efficiency up close by partnering with Zoom and Veeva. Fundamentally healthy unit economics, coupled with innovative go-to-market strategies (the Emergence team can help!), can build iconic companies.

With 2020 quickly approaching, we are also very interested in how companies are preparing for turbulence in the economy. We’ve been hearing about companies tightening their belts on spending, but being extremely strategic on implementing the right set of tools and technologies, such as equipping the Deskless Workforce or finding ways AI and automation will improve productivity in order to help the bottom line. We’d love to hear from our community on how you’re strategizing for spending in the next cycle, what new industries you’re focused on building software for and how you’re thinking about automation and augmentation for the workforce.

Portfolio News

Enterprise Spotlight

Enterprise is back, and it no longer conjures up feelings of lag or incumbents. September brought IPO highs with Cloudflare and Datadog, as cloud software continues to reach new heights. Datadog was the fourth cloud software company to reach a $10B valuation in 2019 and this year also hit a record with two cloud-based companies inducted into the 11-digit club. SF-based companies remain in the headlines for taking home the majority of the state's VC funding, sweeping up 45% of all seed through pre-IPO funding, up from 40% in 2018.  

The collaboration space continues to heat up. Dropbox dropped Spaces in what they branded as the “new Dropbox” to provide teams the ability to use comment streams, AI for relevant file sharing and key integrations with Slack, Trello and G Suite. Flexport got on deck with the launch of Flexport Platform now allowing customers, their factories and reps increased collaboration and communication.

LegalTech funding hit a record high of $1.2B in the first three quarters of 2019, up from $1B for all of 2018. In September, Legalist raised $100M and we announced our investment in dynamic contract provider Ironclad. Earlier this year, Luminance raised $10MClause secured $5.5M and Evisort took home $4.5M to extract key information from long contracts in seconds. 

The start of Q4 also saw continued late-stage funding momentum across data analytics, AI and ML. Samsara's closed $300M to help industrial companies collect and analyze data, DataRobo’s $206M supports AI in the enterprise and Trifacta's $100M Series E puts cleaner data into the hands of data scientists.

GTM Spotlight: 
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Team Spotlight: What we're reading

Joe Floyd, General Partner
Reboot: Leadership and the Art of Growing Up by Jerry Colonna 
I absolutely loved it! Jerry weaves painful stories from his personal life together with insights gleaned from his professional career. The intermingling of his personal vulnerability makes his points so incredibly powerful. His willingness to share his journey for self-discovery enabled me to reflect on my own life and share my discoveries. Reboot is one of the few books that helped me uncover truths about myself. 

My Top Takeaways:

  • How have I been complicit in creating the conditions I say I don't want? The notion that you should focus inward first before blaming others.
  • No one has it figured out. Not movie stars, billion-dollar CEOs or presidents. Everyone wants to be told they are on the path. It is a pathless path and you are exactly where you need to be.
  • Three questions that can really help you resolve conflict and cut through emotions: 1. What am I saying that needs to be said? 2. What am I saying that's not being heard? 3. What's being said that I'm not hearing?