Picks — What I’m Spending Time on Now

I’ve been having a blast since we sold StackStorm to Brocade.

As promised in my last post (the 4Ps of Picking), in this post I’d like to share with you a little bit about what I’m seeing in the market.

Like many, I see a greater gulf than ever between the frontier of what is possible and the performance of the average enterprise. You can see this gulf when you measure metrics in terms of operational agility — such as deployment frequency or deployment lead time (time spent in the queue before production).

And you can see the gap in outcomes in studies such as the Puppet Labs sponsored State of DevOps survey here:

http://resources.idgenterprise.com/original/AST-0147237_2015-state-of-devops-report.pdf

One of my favorite (hello StackStorm and auto-remediation!) is that the MTTR for super high performers is 168x faster than average performers.

So with that as context, here are a few of the spaces into which I’m looking:

Storage:

Given my background having helped create the open storage and software defined storage space, storage is a natural for me albeit one that is under incredible pressure and stress these days in part thanks to too much venture investment chasing what is a large but mature market. I have a bunch of friends and colleagues in storage and am confident in my picking skills in this space.

Cloudian:

I’m really proud that Cloudian has invited me to join their advisory board.

Cloudian has a unique offering in the storage space — it is a massively scaleable 100% compliant on-premise S3 cloud that includes far better metadata than does S3 for use in management (thanks in part to an early bet on AWS and Cassandra). They are achieving great outcomes for their customers both by saving them money on object storage (speeds, feeds and dollars per GB!) and, more importantly, by improving the productivity of IT teams all the way up to and including the development teams.

They have spent literally years perfecting their object storage with customers like NTT hosting and tier one financials. And now the word of mouth is spreading.

Cloudian is a much later stage company than some of the others I advise. It’ll be in the news quite a bit in the weeks and months to come thanks to their well deserved accelerating momentum.

System Z:

This is the first of a few stealth mode start-ups I am advising. This one is looking at the coming impact of 3D memory. I cannot reveal much other than to say that putting many many TBs of non-volatile memory next to the CPU at nearly memory speeds is insane and wonderful. By the time this company emerges I’m not at all sure it’ll be seen as a storage company; storage as a space has been utterly transformed and yet storage companies are too often in my opinion stuck in the speeds, feeds and $/TB mindset of the early 2000s.

Machine learning and data science:

This is an incredible area to learn about. There is so much hype and yet also it goes without saying that some of this deep learning stuff is getting awfully useful. I am not an expert here, unlike storage, and yet I’ve made it an area of focus in my networking and learning. I’m starting to grok the various camps in machine learning in large part with the help of many of the companies I mention below. I’m also getting hands on with my limited Python chops. Fun stuff.

My sense is that those companies that best focus their AI or machine learning on specific pain points will flourish and that many of the opportunities for platform companies that provide for example “data science as a service” have faded away.

With that in mind I’m extremely excited to be supporting TextIQ. Apoorv, Omar, and the entire team at TextIQ are harnessing cutting edge machine learning to address some real pain points in the legal industry. They have tremendous traction and when you meet Omar and see the demo it is easy to see why — clarity of vision, tremendous energy, high CPU, and yet active listening and more. This a rocket ship on the launch pad; yes — slightly hyperbolic and yet I could not be more bullish on their prospects.

They are hiring — and picking their next handful of proof of concepts and production deployments as well. http://textiq.com

I’m also working with Andy and Xavier at Data Fellas. This team has a track record implementing data science pipelines for some of the larger users in Europe and are leveraging this experience to build related software. They are also prime drivers for the now widely used Spark notebook. You can see Andy’s activity on GitHub here: https://github.com/andypetrella

As the name DataFellas and the tag line “we make offers to data they cannot refuse” both suggest, these guys are fun and a little bit irreverent. More importantly, each time I chat with them I come away more impressed by their understanding of what it is like to deliver an distributed data science pipeline to enterprises. They have spent so much time helping actually drive outcomes for customers that they truly feel their pain.

DataFellas are close to getting their product out in alpha / beta form — and in the meantime are doing workshops with folks doing data science at cost in return for getting additional product feedback. Back in March O’Reilly picked them to do their on-line training “Building Distributed Pipelines for Data Science using Kafka, Spark, and Cassandra” — so their expertise speaks for itself. Get in touch with them now — Andy is speaking in NYC this week and is scheduling chats and at least one training now: http://www.data-fellas.guru

In both cases, as you dig in, you’ll find incredibly energetic teams that have survived rigorous PhD programs and are now doing the real work of building great companies. I’m hugely proud of the progress both teams have already made.

Somewhat in the space as well — although not yet deploying machine learning — is CareerWave. At the highest level CareerWave is sort of like uber for career and business coaching. However it is more than that — we are all told these days to “own our own career.” Ok, but how? Not everyone can afford thousands of dollars a month for a coach and yet study after study suggest that coaching helps lead to happier and more successful people. And maybe more importantly for companies, unhappy people under perform and eventually leave. What if we can apply software and machine learning to the problem? That’s the gold standard of coaching, and it’s CareerWave’s approach — they are signing up betas now and also coaches.www.careerwave.me

There is yet another company in stealth mode that is looking to leverage machine learning for support related tasks. Stay tuned.

DevOps Automation:

  • System X
  • System Y

Yes, sorry, these are two stealth stage start-ups. Each of them intends to help enterprises better measure and automate their operations — and so at a high level they may seem like the Nth monitoring or orchestration or continuous delivery solution. And yet, each are different in part by explicitly focusing on enterprise adoption as opposed to primarily on community usage. The DNA of these companies, much like StackStorm, merges deep DevOps experience with company building and enterprise operations experience as well.

The founders of both of these systems are already gathering around them an incredible team and some great early adopters as well. I’m bullish on both. And I will share more as their founding teams are ready for me to do so.

Other:

I’m now spending about half of my time meeting new companies, attending meet-ups and so forth. The other half is split between helping existing companies and doing some hacking and preparing for various Spartan races.

A couple of other machine learning related companies I’ve just gotten to know are again characterized by brilliant technical teams that are drilling into specific pain points. I think the entire team at Alchemist Acceleratordeserve a lot of credit for helping these teams iterate towards product / market fit quickly — while also shared a lot of otherwise very hard earned knowledge about company building. While I’ve just gotten to know these companies, I think they are both interesting:

  • DataCulture — here Karthik and team have drilled into a specific pain point in ecommerce that they are addressing with AI powered software and services. They are about 5 days away from revealing their MVP here:http://supply.ai
  • Relato.io — Russell is a well known agile data scientist — after all he wrote the O’Reily book of that name — with a track record building out such capabilities at LinkedIn and elsewhere. He’s now applying and extending his capabilities in order to drive waste out of the sales and business development processes. http://www.relato.io/index.html

If you are interested in someone like me helping you out — or at least hearing you out — please do get in touch. My network of friends and of people that seem to trust me has expanded quite a bit over the years. I’m looking for founders and later stage companies that could use my particular insights, relationships, and drive.

Speaking of drive, one thing I’ve learned since selling StackStorm is that I’m definitely not done yet. I’m having a blast and feel every bit as competitive as I ever have.

Community hackathon:

Last and likely least I’m also shooting for some upcoming hackathons to test and stretch my Python skills. Here I’m most interested in apps that help support community engagement and that shine a light on our governments. The deeper I dig into my local government the more I see the need for transparency and innovation.

I’m also proudly volunteering time as a member of the Vestry at St Matthew’s Episcopal in San Mateo. It is a warm and welcoming community with inspirational leadership.

My ask for you is — what am I missing? What do you think about my areas of focus? If you were me, what would you do differently?

Please keep in touch.

3 Reasons to Scrap Your Startup

Contrary to common belief it’s not poor market timing, aggressive competition or a lack of ability to raise capital that kills the bulk of startups. Rather, according to CEOs of failed startups, it’s a lack of market for their products. That’s right—all too often startups burn through their funding, iterating on their big idea, without validating that it solves a problem at a price customers are willing to actually pay. In the enterprise, this is even more critical as early adoption needs to be closely matched with the proper pricing structures.

But even if you’ve hit on a true need in your market, there are still a number of other pitfalls that can be hard for first-time entrepreneurs to avoid. Three of the most common reasons I see enterprise products and start-ups fail include:

  1. Low customer adoption/use. If it takes too much time to onboard, doesn’t resonate with CIOs or your target buyer (which could be the head of marketing, sales, finance, HR) or is too cumbersome for employees to use, it won’t gain traction.
  2. Product is not working as intended. Customers may have initial patience for a few minor bugs, but ongoing problems requiring significant rework can sink your company. This is especially true in the enterprise market, as your product outage could cost your customers thousands or even millions of dollars.
  3. Doesn’t address a top problem of your target customer. No matter how amazing your product is or how well it solves your customers’ problems, most companies only have enough budget to address their top two or three pain points. Creating robust buyer customer personas ensures you’ve done more than just scratch the surface of their true organizational needs, allowing you to prioritize your product roadmap accordingly.

The Road Map for Ensuring Startup Success

Communication is key. At Norwest Venture Partners, we’ve found that it’s important for enterprise companies to start by creating a customer advisory board and involving them in the development of each new product or product iteration. Test and obtain feedback from them in real time, as they use the product and test out your demos, and do a weekly gut check to evaluate how sentiment is trending. Start small and work out the kinks before scaling up to your overall customer base.

By involving your customers in your product iteration, they become more invested in your success. In turn, that means they’re more likely to give you the level of rich feedback you need to take your product to its next level and win over your market.

Some founders worry that they can only keep their clients happy by delivering every product iteration they request, but that’s not the case. If you involve your customers in your product development process, they will see the issues you encounter along the way, and won’t be surprised if it doesn’t ultimately work out. Focus on how you can get them excited about helping to define the roadmap–which may include scrapping some products that won’t keep your product on the path to success and longevity. Your customers aren’t just buying that initial product you have on offer. They’re buying your long-term vision too.  

If you’re concerned that scrapping a feature too soon is going to sink your company, consider the alternative. What if you hold out hope for six, nine or even twelve months and the end result is still the same? By failing to take decisive action, you’ve now wasted resources, money and customer time on feedback for your doomed product. This misstep can put you at a disadvantage to your competitors and even cause you to lose some great people who wonder why you let them sink so much of their time and creative energy into a project that had little hope of seeing the light of day.  

Identifying the Right Market to Disrupt

To be successful, a startup must build products that solve real problems the right way.

“You have to look for new enabling technologies, or major trends, like fundamental trends, that create a wide gap between how things are done and how they can be done,” said Aaron Levie, CEO and co-founder of Box, in his Building for the Enterprise lecture. “Looking back in time to our business, the gap was basically storage was getting cheaper, internet was getting faster, browsers where getting better yet we are still sharing files with this very complicated, very cumbersome means. Anytime, between the delta of what is possible, and how things work today is at its widest. That is an opportunity to build new technology to go solve a problem.”

But even great ideas can fail. So how can you recognize when you’re actually on to a billion-dollar valuation-creating product? In my experience, immersing yourself in your customer’s world is the best way to gain the awareness to spot the real opportunities for market disruption.  For instance, it’s unlikely that Marc Benioff would have had the inspiration, confidence and vision to have moved CRMs into the cloud with the founding of Salesforce without his years of success at Oracle. As Benioff counsels in his book Behind the Cloud,  “Don’t be afraid to ignore rules of your industry that have become obsolete or that defy common sense.”

Although some outsiders have a knack for coming in without prior industry experience and hitting the ball out of the park, most successful startups are founded by someone who is obsessed with creating a better customer experience, who understands the industry’s pain points and daily challenges inside and out. If you can tap into the issues that are driving your customer crazy and causing them to lose sleep while efficiently solving them, the market is ripe for your taking.


- Written by Sean Jacobsohn, Cloud VC | Partner at Norwest Venture Partners

Learn forward: 4Ps for Picking Better Than a VC

This post is, like many a blog, written largely as a bread crumb — a way to track my thinking. In the weeks since closing the sale of StackStorm to Brocade I’ve set off on a great adventure — getting to know many more entrepreneurs and investors while attempting to sharpen my understanding of relevant domains and technologies.

My goal is simple — I want to learn to pick opportunities better. And while doing so I want to help entrepreneurs and learn a lot.

This blog covers the discipline I’m attempting to follow in evaluating opportunities. My next blog will cover some of the opportunities I’m uncovering.

Picking:

Josh Kopleman from First Round (@joshk) has a great series of tweets recently on the importance of picking for entrepreneurs as well as investors. One of my favorite tweets:

Yes, +100. So how does an entrepreneur pick?

(Please, please correct and expand my thinking here.)

  1. The $1bn bar. Michael Porter in effect.

The trick is to find opportunities that you *know* can create a space or at least become a winner in a space that is large enough that you’ll be worth $1bn with growing revenues in less than 10 years.

OK, once again, how? How do you make that determination? In my case, I write-up 5 forces frameworks. And I have a lot of question marks in the key areas that I seek to fill in through conversations and education. I’m hopeful that these write-ups will themselves become breadcrumbs that will help me and the entrepreneurs I’m supporting.

I tend to drill in on ecosystem and community dynamics because I’ve been somewhat successful in understanding and leveraging these areas. I am extremely confident in my ability to see how hard or easy it will be to get a community and a channel going.

And here is one spot where a VC — who has lots of advantages versus me in picking including an infinite network — does not have something I do have: years of experience in actually doing the work. It is easy for me to go from a) potential space to b) community dynamics to c) relevant partners and d) a team than someone who is looking at many, many opportunities.

The judo I typically try is to define a space and to start to market that in my discussions with potential teammates, investors and users. Also something that has been helpful for me in the past is to think about a tag-line for the space — think of the space itself as a product worthy of positioning.

Once you find such a space — one that you can both help create and that you are confident is worth billions — then claiming leadership of it is pretty straightforward. Think software defined storage and Nexenta or event driven automation (still young) and StackStorm. We were able to seize leadership of those spaces (for better and worse) because I had helped to create them.

2. Personas

While arguably you could subsume a focus on personas as one part of the 5 forces framework, I choose to break these out.

A focus on who are the users, where do they hang out, what do they believe, how are they changing is all important. This does not necessarily mean that you need to be one of them. However you do need to know the secret handshakes. Only by getting inside their head can you become the natural choice for them.

Yep, I’m talking design from the get go. If an entrepreneur pitches me an idea and yet does not engage with me on who exactly is the user and how is that profile changing over time, well, at the very least they need a lot of help.

I’m working with one company that has recognized that developers have become all important to their adoption. And yet they have not yet unpacked what that really means for the self adoption journey from hearing about them through initial usage and support and so forth.

3. People

At this stage of my career it almost goes without saying however the people need to be people I want to spend years with -> I’m going to help them achieve their dreams, will I care about them, respect them, go the extra mile for them and with them?

Also, not quite the same point, but the more I do this the more I understand the importance of taking the time to shake and grow the network to find the penultimate list of experts as teammates and as initial users. If I were thinking about a start-up focused on public government I’d be looking to get on the President’s calendar. And if you cannot get to that level then something is wrong either with the idea, your pitch and positioning, or — your passion.

4. Passion

At some point something should click. For me I imagine betting absolutely 100% of everything on the idea, including the next 5 years of my life. Will I bet my daughter’s college fund on this idea, team, and opportunity? If so then I know I’m onto something worthy of all out effort. If not, then I owe it to myself to not dive in and to help the entrepreneurs see what at least for me is missing. As an aside — note to self — if I don’t chase at least a small percentage of the entrepreneurs away by being too direct and candid, then I’m being too nice and wasting everyone’s time.

For those following closely you might have noticed that this boils down to 4Ps: Porter (i.e. the space and 5 forces), Personas, People (focusing on the team and early user)and Passion.

In the next post I’ll highlight a few of the spaces I’m learning about and companies I’m helping or at least trying to help.

As a bit of foreshadowing, I’m trying to improve my extraordinarily rusty coding skills — doing some python hackery — and am fascinated by opportunities being created by machine intelligence, serverless computing (and other aspects of the AWS effect), non volatile memory, and more. I also think DevOps has a long, long way to go before becoming mainstream, which is both a shame and a huge opportunity. And I’m wrestling in a few cases with whether a company should focus on picks and shovels or whether they should be mining the gold themselves.


- Written by Evan Powell, Founding CEO of Stackstorm and Nexenta, and Advisor / Angel investor in a few Alchemist companies including TextIQ and Data Fellas.

Is it Time to Invest in IoT?

I published my first book, The End of Software, in 2004. At the time, I was president of Oracle On Demand, which served as a starting point for Oracle’s billion-dollar cloud business. In the book I discussed the fundamental economic reasons software should be delivered as a service.

As an example of new startups in the field, I discussed four companies, VMwareSalesforce,NetSuite and OpenHarbor. None of them were public companies when the book was published. Salesforce was still under $86 million in revenue. While I didn’t get all four correct, three of the four have gone on to be major companies driving the second generation of enterprise software.

It’s 12 years later. Some have said that enterprise software is a mature business; CEM, ERP, HR and purchasing software are now all being delivered as a cloud service. So is it the end?

I don’t think so. While second-generation software has helped reduce the cost and improve the efficiency of some enterprises, it has done little to transform our physical world. Power, water, agriculture, transportation, construction and healthcare have barely been touched. But that’s about to change.

Industrial machines or enterprise things are increasingly being instrumented and connected. John Chambers, former Cisco CEO, says 500 billion things will be connected to the Internet by the year 2025. While you may question that, we already know 100,000 wind turbines are connected with the capacity to send 400 sensors’ worth of data every five seconds. So we’re going to end up with a lot of smart, connected things.

Unfortunately, all our connection, collection, analysis, learning, middleware and application technology has been built to support applications for the Internet of People. Things are NOT people. Things exist where people aren’t. Things have much more to say and things talk much more frequently. A Joy Global coal-mining machine has vibration sensors that sample 10,000 times per second. We need a new generation of enterprise application, middleware, analytic, collection and connection cloud service products to build precision machines for mining, transportation, healthcare, construction, power, water and agriculture.

Some have begun to make the investments. GE Software was founded in 2011 with a $1 billion investment. CEO Jeff Immelt has declared that GE needed to evolve into a software-and-analytics company, lest its industrial machines become mere commodities. Immelt has set an ambitious target of $15 billion in software revenue by 2020. GE plans to achieve this through its new Predix software platform under the leadership of CEO of GE Digital, Bill Ruh.

PTC has taken an M&A path and invested more than $400 million in a series of companies: ThingWorx for $112 million, a $105 million acquisition of ColdLight andAxeda for $170 million. On the venture side you may not have noticed, but Uptake, a Chicago-based IoT startup, beat Slack and Uber to become Forbes 2015’s Hottest Startup. They raised $45 million at a $1 billion post-funding valuation.

I’ll let you be the judge of whether it’s time to invest in IoT. But if you’re an early-stage or even late-stage investor, it would be wise to be a student of this area as it promises to create as big a disruption as the second generation of enterprise software. And if you’re a startup with a vision to build products for things, not people, get started. Maybe in 12 years we’ll talk about you like we now talk about VMware, NetSuite and Salesforce.

- Tim Chou is the former president of Oracle On Demand, a computer science lecturer at Stanford and chair of the IoT Track of the Alchemist Accelerator. His book, Precision: Principles, Practices and Solution for the Internet of Things, will be released in May.

5 Metrics to Run Your Business

Whether you are running a company, driving a car or flying a jet you need a dashboard to tell you how you are doing. One of the most common mistakes is to fill up your dashboard with dozens of metrics covering every aspect of your business. The problem with this “kitchen sink” approach is that it is actually harder to understand how your business is doing. With a dozen different metrics, most days half of them will be up and half will be down – so how are you doing?

Focus on the fewest number of metrics that will allow you to understand how your business is doing. For example, I typically suggest companies use the following five metrics as their dashboard:

  1. Customer Acquisition. How many new customers are you adding every day (or week or month)? This is an important measure of how healthy your marketing efforts are working since this is the top of your conversion funnel. Depending on your business this may be new registrations, first time purchasers or application installs.
  2. Customer Engagement. How active are your customers? Just because you acquired them does not mean your customers are active and using your service. Do they use the product every week? day? hour? If your customers aren’t using your service then it’s only a matter of time before they churn out and are no longer a customer so this is your most important metric.
  3. Customer Retention. How long does someone stay a customer? This is critical to understanding your business model because this allows you to model customer churn. If it costs you $5 to acquire a user but they only stick around long enough to make you $2, then your business is upside down. The higher your customer retention, the easier it will be to grow your business.
  4. Revenue. How much money do you make every month? Focusing on daily or weekly revenue can be very noisy so for running your business focus on monthly revenue. In some cases, it might be more useful to measure revenue per customer in order to calculate a customer lifetime value.
  5. Cost. There are two kinds of cost  you might want to measure, depending on your type of business. Burn rate is how much money you spend every month on everything including salaries, rent and services. Customer acquisition cost (CAC) is how much you are spending to acquire every new user. If CAC dominates your costs then you should measure that, otherwise use the overall burn rate.

You will find that you cannot improve what you do not measure, but you will focus on improving whatever you do measure. If you can maximize acquisition, engagement, retention, revenue and cost you will have a very healthy business on your hands.

These five example metrics might not work for your company, but I bet there are five that do. Think about it and choose them carefully, they will be your guide through rough seas.


- Sean Byrnes is an entrepreneur living in the Bay Area where he is the CEO of a new company called Outlier. Previously, he started a company called Flurry which was acquired by Yahoo! in 2014. In his free time he advises some early stage technology companies and invest in many others.