Gleb Budman

We're launching the inaugural edition of Beyond Benchmarks, a deep dive into the metrics and trends observed across the early-stage enterprise cloud market. This is the first look at some of the business data around GenAI in SaaS. Some initial observations: 1) 60% of SaaS companies have already integrated GenAI into their offerings (60% of these as part of their current product and 40% as a new product), and an additional 20% are planning to do so this year. Almost half aren't monetizing these features. Those that are are primarily experimenting with both usage-based and flat fee pricing models. 2) Most companies are utilizing OpenAI as their primary LLM, but many are experimenting with multiple models - and we are noticing an early trend towards intelligently routing GenAI inference requests to different models based on cost, performance, and security. 3) Though we are in the initial innings of GenAI, we are seeing some positive signals - companies that implemented GenAI had 7% higher NDR than those that did not. Still early days, but we'll be doing this benchmarking report regularly to track and share how things progress in this new era. Link to report in comments.

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🌟Innovative VC Firm Overcomes Exits Drought with Secondary Sales🌟 ⛵Navigating a challenging landscape where exits are scarce, Santa Barbara Venture Partners (SBVP) has pioneered a novel approach to sustain its growth and attract investors for its second fund: secondary sales. Instead of waiting for traditional exits like IPOs or acquisitions, SBVP opted to sell shares of its portfolio companies, demonstrating its ability to generate returns for investors and stand out in a competitive market. 🎤According to Dan Engel, founder and managing partner of SBVP, these secondary transactions have been a game-changer, sparking investor interest and bolstering the firm's credibility. By leveraging its recent successes, including a lucrative stake in sports-betting company DraftKings Inc.' acquisition of digital lottery app Jackpocket, SBVP seized the opportunity to return profits to its limited partners (LPs) and pave the way for its second fund. 💡Engel highlighted the challenges faced by young VC firms in raising subsequent funds, particularly amid a downturn in exit activity and heightened investor scrutiny. With traditional exit routes becoming increasingly elusive, the pressure is on for firms to demonstrate tangible returns and establish a track record of success. ✨"For us, secondary sales have been a game-changer. They've helped us return profits to our LPs and attract investors for our second fund," said Dan Engel. 💰For SBVP, the decision to pursue secondary sales was driven by the need to provide liquidity to LPs and validate its investment thesis in the eyes of prospective investors. By strategically offloading portions of its holdings in high-performing portfolio companies like Bark Technologies and Rad AI, SBVP not only generated substantial returns but also bolstered investor confidence in its ability to deliver results. ⚠Despite the complexities and potential stigma associated with early share sales, Engel emphasized the importance of prioritizing investor returns and seizing opportunities to unlock value for stakeholders. With a focus on profitability and transparency, SBVP remains committed to its mission of delivering sustainable growth and maximizing returns for its LPs. 🔍 "Returning profits to our investors is our top priority. By strategically selling shares, we're proving our commitment to delivering results and driving value for our stakeholders," added Engel. As SBVP continues to explore secondary transactions and expand its investor base, the firm stands as a testament to innovation and resilience in the face of market challenges. 🚀 ✅ Looking to raise capital for your #fund and increase the international pool of your LP #investors?   🤝 Need warm #LP introductions?   📝 Selling #secondaries to increase liquidity?   🧐 Looking for co-investments?   ▶ G+QUANT's link for inquiries and fund decks: https://lnkd.in/gjC_EuTE #VCInnovation #SecondarySalesSuccess #InvestorReturns #ValueCreation 

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There are two interesting and relatively new/emerging revenue models in hardware space. (1) Software Enabled Hardware Hardware is sold at lower but slowly improving gross margins (eg 20-40%), and software recurring revenues layered on top. Software sells at higher margins, enabling blended margins to appear in 50%+ category. These are applied in situations where hardware is not expected to be replaced or greatly improved upon in deployment for a significant number of years to come. Consider your car, or military equipment, or even infrastructure equipment. As always, there are often multiple business/revenue models utilized by different players in the same industry. (2) Hardware As A Service Hardware and software are bundled and sold with annually recurring revenues. Often multi-year contracts are signed to be able to amortize hardware over time, and enable blended gross margins over the length of the contract to be high (approaching 60-75%). This is more common in situations where vendor takes responsibility to upgrade hardware as needed along the way to provide maximum and highest functionality to the customer. Hardware inventory costs are, over time, passed on to suppliers or third party financing parties in lieu of few gross margin points. Consider robots as a service in factories (ala Formic), or AI-enabled equipment (eg Evolv, Lumafield etc). Hardware innovation will require deeper investigation, experimentation, and understanding of business/revenue models to fit customer needs as well as to maximize value for the innovating company. Strong and experienced management teams work hard to minimize sales friction, inventory costs etc, but also maximize gross margins, customer stickiness, and ability to upsell during the life of a contract.

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ISP Strategic Leadership, Engineering, and Operations As an organization scales, there is often a need to separate strategic technology leadership under the CTO from internal execution under engineering and operations management. This allows the CTO to focus on outward-facing duties while enabling streamlined operational efficiency. However, it's crucial to recognize the differing motivations and needs of these distinct technical roles. On one hand, engineers thrive on tackling interesting, challenging projects that push their abilities and knowledge. They value working alongside capable peers, genuine recognition of technical accomplishments, and contributing to products/services that reach the market. In contrast, operations teams should strive for repeatable processes, continual improvement, and driving efficiency at scale. Their priorities revolve around standardizing workflows, minimizing disruptions, and incrementally optimizing existing systems and procedures to maintain consistent service delivery as the company grows. An effective organizational structure acknowledges this dichotomy, fostering an environment that fuels engineering innovation while providing operations with the stability and process-orientation they require. Striking this balance enables the company to stay agile and innovative through its engineering efforts, while simultaneously scaling operational execution in a reliable and repeatable manner. Competitive compensation remains an important motivator across both domains. By properly aligning structural elements, motivational factors, and leadership priorities, a rapidly growing ISP can position itself to attract and retain top talent across engineering and operations, driving sustainable growth and success in the dynamic technology landscape.

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Open access. Lots of talk about it, but what is it, how to do it? There is no getting around the need for ISPs to deploy some infrastructure; otherwise, they are just resellers of someone else’s service. But by sharing middle mile Infrastructure they can focus their Capex on last mile investments rather than duplicating what can be shared. The question then is, how to share it? In theory, Kenya's National Broadband Network is Open Access, but from what I've heard it's not a good solution. Leasing fibers on middle mile fiber would allow each provider to light it as fast as they would like. All of the civil works and fiber would be shared; the electronics is small portion of the total. In our transportation system, we share the roads, built by the public sector, and let multiple providers, that is private cars, taxis, buses, and trucks, all share the same infrastructure. That's a rough analogy, but maybe useful.

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Orb (#uncorrelated) raised $25M to continue building their pricing and billing platform that lets companies automate a range of different billing modes e.g., usage-based, subscriptions, or a mix, marry analytics and billing, collect and meter product usage data, invoice customers, generate revenue reports, draw on product usage insights to find revenue opportunities, model out alternative pricing plans (thus enabling experimentation), orchestrate changes in real time, schedule future price changes for certain customer cohorts or contract renewals, directly embed draft invoices into product billing portals, surface past-due invoices, and recover failed payments automatically. "Orb gives companies a single source of truth that can connect every unit of product usage to revenue. We’ve found a particularly strong fit in AI, cloud infrastructure, fintech, and dev tools, and have seen most of our growth come from those verticals.” Orb’s revenue grew 5x in the past year, and the customer base tripled to include brands such as Vercel, Replit, Pinecone, and Perplexity. https://lnkd.in/gYh4y2tg

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The secret—if it ever was one—is out on private equity fondness for vertical software. While PE-backed acquisitions were down 50%+ from a peak in 2021, vertical buyouts have continued to grow, and the fervor seems to be gaining steam. In today’s essay, we will pose an answer to one question: is PE a viable path to exit for a venture-backed startup?

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AI memory is fundamental for conversational AI and AI agents. It is critical for building personalized experiences and improving reasoning. Check out Letta’s course to understand how to use AI memory to enhance the customization and quality of your AI app.

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I'm always happy and proud to hear our early investors at REFASHIOND Ventures: The Industrial Transformation Fund talk about the work they are doing. Each of them is having real impact in building supply chains for tomorrow. In this podcast Zac talks about the underlying infrastructure for what what I describe as Information and Data Supply Chains. This is worth listening to if you want to get into some of the issues that will determine the future of Physical Supply Chains. #TWSCF #TNYSCM | The past ran on supply chains. The present runs on supply chains. The future will run on supply chains. The world is a supply chain.®

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Are we building too much supply side infrastructure for AI? Will revenue ever catch up? I discussed these questions and more with Laura Chau, partner at Canaan, in episode 452 of The Full Ratchet. Tune in today to catch our full discussion. Link to the full episode is in the comment section below.

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Insightful breakdown from my great Partner Omri Amirav-Drory on the simple factors that really separate the top 1% of investors from the rest, and how more operators should become investors! https://lnkd.in/gEiZdT2h

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At the beginning of this month, the infra team at Orb gathered for our Q2 infra offsite at HanaHaus in Palo Alto. Orb's customer growth in Q1 far exceeded even our optimistic projections — and is often the case in any org, this put a tremendous amount of load on Orb's infrastructure stack. Here's what is top of mind for our team as we look to the next few months: 1. We take uptime & reliability extremely seriously and have a strong track record of this — we proactively invest in our stack to avoid scrambling when issues happen. Over the last six months, we've invested in read/write workload isolation, more robust rate limiting, and making it much easier to spin up tenant-specific clusters of our core services and datastores. This has been a huge win already for our largest customers and in Q2, we're driving towards complete tenant workload isolation all the way from the API layer down. 2. Infrastructure often gets saddled with a really tough oncall rotation. At Orb, we share this workload across engineering with a larger rotation, but infrastructure owns the horizontal platform to make product engineers successful. In Q1, the infra team invested energy in aggressively making oncall better, and in the last month the number of overnight pages has dramatically decreased. Example investments include automated alerting and triage for long transactions and expensive queries. 3. When we first started building out Orb, we were careful to be pragmatic in where we spent energy with respect to scaling efforts. One of the choices we made was to use RDS Postgres as a job queue — although this has worked very well up to thousands of asynchronous jobs each minute, we've hit the EOL signs you'd expect (https://lnkd.in/gyQVEhKQ). We're spending time on moving to a different job queueing solution this quarter. 4. In Q1, we rearchitected parts of our ingestion and compute services to more aggressively pre-compute data, to avoid variable load through the API. We're finding that this is also going to help us ship much faster alerting features in Q2, enabling Orb customers to more efficiently power flows like spend management on Orb (without needing to pay for dedicated provisioning). If you're interested in joining this small but mighty infra crew, we'd love for you to apply (DM me, or look for link in the comments)

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We just concluded Embiggen X’s strategy for 2025. For almost two years, we’ve experienced conversations and priorities shift for large companies - more focus on innovating the core the business and less on non-core innovation initiatives. We’ve seen large global companies in the west close down their innovation labs, corporate venturing units, and let go of non-core innovation teams — or at the very least, decreased spending in venturing activities. This is also true for large corporates in Southeast Asia. Simultaneously, we’ve been getting into conversations with CEO’s asking more questions on AI & Digital Business Transformation. No, I’m not talking about building apps. We’re getting questions around: - How do we rewire the “guts” of our operations for us to be able to “scale profitably”? - How do we fix our “spaghetti & siloed” operations? - How do we make sure that we don’t just “buy more” off-the-shelf tech platforms that don’t talk to each other and complicating our already inefficient ops? - How do we increase our NPS score by transforming our customer experience? - Can you help us build a holistic digital business transformation strategy and help us execute too? - How and where can we use AI to become grow better? This is why Q4 of last year in the midst of business challenges, we decided to shift focus from Corporate Venture Building and spin off an AI & Digital Business Transformation company, Embiggen X (https://lnkd.in/geVM4BCF), from the Embiggen Group. Within less than a year, we’ve expanded our operations in Southeast Asia to Europe and 2024 as our highest revenue & profit generating year. We’ve served companies from Insurance, Supply Chain, Telco, Conglomerates, Construction, and Consumer Services to date. We help from Strategy to Execution. I’m beyond grateful to the operating team that made this new chapter of our journey possible. Embiggen X Managing Partner & COO, Xavier (X) Marzan; Partner & Head of Europe, Nicolas Souvlakis (calling in from Switzerland); Junior Partner & CAO Bien Herrera; Partner & CTO Robert Newgen; Chief Growth Advisor Gary de Ocampo, GICD; Advisory Board Member and Incoming Board Director Cliff Eala; Head of Artificial Intelligence Miguel Testa (calling in from Canada); as well as more partners, clients, and supporters. Big goals & challenges up ahead. Excited for whats to come. Onwards & upwards. 🚀

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Rolling into another day of the Primary Summit. Hit me up if we should connect onsite. Kudos to the Primary Ventures team so far, as yesterday’s Pre-Seed Summit was on point. Mar Hershenson, Benjamin Sun, Chris Douvos, Zach Weinberg, and Graham Pingree all dropping helpful nuggets for fund managers. Some paraphrased highlights: - Chris Douvos (AHOY Capital) - Most fund decks are terrible. Start with your people (not your strategy) and know you have about 6 slides of his attention. - Zach Weinberg (Curie.Bio ) - beleives SF’s AI talent is a significant advantage over NY, wouldn’t build AI in NY. Also questions if VC exits can keep up with VC expansion (generally hilarious and smart Twitter follow) - Mar Hershenson (Pear VC) - VC is so much more competitive now. It’s not enough to be an ex-founder with a great network and domain expertise. Have a better “why you are different” or do something else! - Benjamin Sun (Primary Venture Partners)- still sees arbitrage in going long NY venture (vs. SF). Do the work to keep various influential networking nodes aware of what you’re doing and how you think.

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Astera Labs is tapping into a $27.4 billion AI and cloud market opportunity: -Current Price: $46.33 (as of market close) - Market projected to grow from $17.2B to $27.4B by 2027 - Taiwan leads with $72.2M in revenue, followed by the U.S. at $30.7M - 2023 revenue hit $115.8M, a 45% increase from 2022 Here is a Deep dive into Astera Labs’s history, growth story and business model - https://lnkd.in/d8UX_f_S

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I like this idea of "technical taste". It gets into where software engineering is as much creative art as it is science. Four great takeaways (IMHO) for software devs in this era in particular: 1. Aspiring engineers should cultivate a sense of curiosity, experiment with different tools and technologies, and embrace a mindset of continuous learning. 2. AI has the potential to streamline processes and enhance productivity for engineers, but it may also lead to disruptions in traditional software development workflows. 3. Developing technical taste and judgment is essential for making informed decisions about which technologies and approaches to pursue. 4. Collaboration and open-mindedness are key to leveraging the full potential of AI and staying ahead of technological advancements. I also really liked these two quotes from Sam Schillace: 1. "The right time to do something is when you have that feeling in the pit of your stomach that's like, 'oh, this is a great idea and it's going to suck to build because nothing's ready yet.'" 2. "Technical taste is like, 'how well have you consolidated that set of experiences and heuristics into judgment that you can apply accurately when you see new things?'" 3. "It may be the case that very small teams can do very large projects, or like we were talking about before, it may be the case we're just going to get really ambitious about what we try to do with the same size of teams, which is kind of where I would put my money." Great job on continuing to put out great episodes, Brett Berson and team First Round Capital! #ai #engineering #softwaredevelopment

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I’m thrilled to be announcing that Notion Capital is leading the $15m Series A investment in Cogna today. In the industry, we like to think that software has been eating the world. But when you look at the data a better description would be more of a nibble. Depending on what source you look at the software industry represents between 5-8% of global GDP. Contrast that with the services industry that represents between 60-70% of GDP and worth around $25 trillion on a global basis. Most services have been out of reach for the software industry. They have either been too complex or too specialized for off the shelf software to access in any economically viable way. But that’s beginnning to change with GenAI leading to the emergence of ‘service as a software.’ Cogna is at the forefront of this opportunity - building precision software at scale and delivering huge productivity gains for traditional industries. We know Ben Peters & Lars Mennen well having backed their previous company Five AI that was acquired by Bosch in 2022. And we’re very excited to be backing them again together with Hoxton Ventures & Chalfen Ventures Read my full blog post on why we invested here. Radu Bozga Ben Peters Lars Mennen Bryan Gartner Mike Chalfen Hussein Kanji Kirsten Connell https://lnkd.in/eh8mhcJb

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In the AI-first world, the biggest moat enterprises have is their data -- but most enterprise data is a mess. Enterprises have a few options: hire a team to do rote data cleaning tasks, or leverage advancements in AI to automate data labeling. Proud to be partnering with the Refuel team as they develop purpose-built AI for unsexy data tasks!

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As we dive into 2024, the Series A fundraising landscape is becoming increasingly daunting. Investment standards are soaring, and fewer startups are making the cut. Series A investors are finding many seed stage companies too premature. The median valuation jump from seed to Series A skyrocketed from $19.5 million in Q1 2022 to $28.7 million in Q1 2024. Investors now demand stronger revenue performance, targeting $2 million to $3 million in ARR, up from $1 million to $2 million. Alarmingly, only 12% of Q1 2022 seed startups secured Series A funding within two years, down from 31.8% in Q1 2020. #venture #earlystage #seedtoseriesa #seed #seriesa #inspireglobalventures https://lnkd.in/gW4bkcNy

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