John Gannon

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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Hot take on a lot of early-stage digital health companies out there: You're not a tech company. Most tech-enabled care companies I've seen over the past two years are only tech-enabled in the sense that they use telehealth as their delivery mechanism for care. There are exceptions to this, of course - companies who build computer vision and applied AI tools to better the doctor-patient experience, companies who build tooling around risk scoring and stratification to enable more personalized medicine, companies who build truly novel intakes to better route patients to the appropriate care, etc. These companies have real technology chops and, if they sell it right to the market, can get credit for this from investors. But if you're truly a telehealth provider, you need to realize now that the goal post has shifted dramatically from 2021 and you're going to be valued at maturity at something like 3x EBITDA. That's profit. Not revenue. Throw a revenue multiple out the window. That's not the world we live in if you're a virtual doctor's office. Think of how that impacts venture math. If you're raising a seed round at $15M post-money (or $12M pre-money), it means you'll have to generate something like $150-200M in annual EBITDA to be a fund returner for your seed investors. Maybe even more with dilution, since telehealth businesses are not traditionally capital efficient and will likely need to raise material additional capital to reach that scale. You need to be ridiculously profitable (probably on $800M-$1B in annual revenue since you're likely going to be a 40% gross margin business). Here's the good news: you can set yourself up well (and probably be a contrarian founder relative to your peers), by talking about EBITDA growth and how you can grow into a fund-returning outcome based on realistic mature market comps. This will stand out for the investors you're pitching, even at the early stage. This is how you can beat the malaise of the tech-enabled care market. Focus on the right metrics and the right type of growth. You don't have to have all the answers (no founder does), but you need to make sure the ship is headed in the right direction. A focus on profitability for "tech-enabled care" (*ahem* telehealth) businesses is a good first step.

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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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Understanding is not formed in isolation.  Especially with emerging technologies like AI. Last night, the Boston community of 60+ leading founders, builders, and investors came together at Underscore VC to discuss the future enterprise requirements for AI agents, open-source models, data security, and vertical workflow capture. Wow, what a discussion and a good reminder that building a company is an immensely human endeavor that happens in silos. We are all figuring it out, and it's a lot easier together, so please, if you want to join the next meetup or are an enterprise software founder at the earliest stage of your journey and want to chat, reach out with email to [email protected] or DM. #AI #Community #Agents #Infrastructure #Security Special thanks to a longtime friend of OSS Robert Brennan from All Hands AI, my partner Lily Lyman on the intro of what we are trying to do in #Boston, portfolio founders Erik Peterson, John Miller, Mike Greene, Dave Wingert, Jonathan Tushman, David O'Hara, and the future founders (you know who you are!) and builders there to talk about the opportunities and challenges you are facing in deploying applied AI in the enterprise. Appreciate you 🙏

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Nice overview of how we're using data to inform how we invest in early-stage founders. We'll be announcing more this summer but we're seeing some really interesting early data. https://lnkd.in/exU_Juf5

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The story of Eon starts years before our investment. We identified Ofir Ehrlich as a special operator, and he helped us across multiple deal processes; in the meantime becoming a great and loyal friend to Vine and to me personally. Fast forward to the end of 2023, Israel has just been caught blindsided by a devastating Hamas attack on October 7th, the country was in disarray, but that didn’t stop Ofir from bringing the gang back together to ideate on their next big idea. And, surprise, it wasn't in AI. On November 29th, as we sensed this would become one of the most competitive deal processes in Israel, we were fortunate to have the opportunity to introduce Shaun Maguire to Ofir over lunch in our office via Dean Meyer. Shaun was in Israel on a righteous mission to show Elon Musk the atrocities of October 7th and resilience of the Jewish nation. We as a firm know when we can go alone, and when we need / want to partner with the multi-stage firms, in this case Sequoia. Ofir would easily raise a large seed, and it would be an obvious seed investment for most firms out there, given the incredible founder-market fit of Ofir plus his stud co-founders, Ron Kimchi and Gonen Stein. Once the market caught wind of the fact that this prospective founder was quickly moving from “ideating” to potentially being pre-empted, the conversation in a week shifted from “get to know you” to Sequoia Capital / Vine Ventures, L.P. need to earn the right to partner with these founders, together. We quickly went into diligence mode, speaking with experts in the backup space, incumbents, and potential customers. Within a week, the insights that Ofir had described to us were validated, and it became clear that this was an n of 1 team to go and build a solution in this category, which could become among the largest in enterprise software. We are extraordinarily grateful that Ofir chose to work with us and that Sequoia remained loyal to Vine as we navigated the deal process together. Since then, Ofir, Gonen, and Ron have built one of the highest caliber teams we have ever seen, and have worked with some of the largest corporations in the world, allowing them to have a holistic view of their cloud assets and ensuring that they are available, even in the case of a ransomware attack or human error. Following this progress, in just 8 months the company has rapidly completed both their Series A (Tal Morgenstern, Lightspeed + Omri Casspi) and Series B financing led by the wonderful folks at Greenoaks. With that, we are grateful and excited to be a part of the Eon journey, and look forward to working closely with the team as they build the next great enterprise software company out of this small but mighty country. Am Yisrael Chai. Let's go Eon! Daniel Povitsky Demren Sinik Barak Kaufman Alex Moskowitz Racheli Adler John McIlree https://lnkd.in/e8fvVCji

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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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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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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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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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Open-source models can be a strong lever for increasing gross margins at AI companies, especially those that have hefty cost structures (e.g., enterprise sales orgs that require significant customer success or implementation resources, as well forward-deployed AI services models common in healthcare and life sciences). One of many reasons to maintain a modular and flexible stack with minimal dependencies when building an AI company. More on the importance of flexibility in the AI stack: https://lnkd.in/eA2XATRk h/t Delip Rao #ai #artificialintelligence #generativeai #healthcare

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One of my proudest moments as an investor occurred today as Alaffia Health announced its series A because it shows how the Aperture® Venture Capital vision of multi-level, multi-generational #impactinvesting is succeeding in the marketplace. Here’s the model in its most basic form : ✅As diverse fund managers with meaningful capital to allocate, we are changing the VC landscape every day just by doing our day jobs. ✅As Black/Brown investors with ~40 years experience collectively, Aperture GPs have access to talent /excellence that others do not, so our portfolio *organically* is more inclusive by race, gender and geography even while optimizing for financial outcomes (all about the alpha). ✅Our most successful portco’s are using financial #innovation to solve market problems that impact underrepresented demographics and underserved communities. Alaffia Health is a shining example of the impact portion of our overall fund thesis, and we couldn’t be prouder of TJ Ademiluyi and Adun Akanni, MPH, PMP - the dynamic brother-sister founder duo whose vision we have steadfastly supported on their journey. Congratulations to TJ and Adun from William Crowder and myself, as well as the whole Aperture team- Marjorie King Philip McKenzie Yves Louis-Jacques Tanvi Lal Michelle Dhansinghani Lisha Bell Katie Kelly Amy Chung Cindy Chong, CFA Brian Fernandes-Halloran Monroe France Jayden Pantel Darren Herman Evan Wladis Neal Triplett Thomas Scriven Peter Ammon Irina Bit-Babik Tim Milanich Rob Rahbari

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Anticipation is in the air as TechCrunch Early Stage 2024 prepares to take over Boston (Go Celts & Bruins!) tomorrow! This well-attended event will be a hotbed of innovation, where over a thousand attendees from early-stage startups will converge. But remember: success in our rapidly evolving tech landscape requires more than just innovative ideas - it's about achieving synergy between human ingenuity and technological advancements. As we dive into this immersive experience, let’s make sure to keep our human-centric approach at the forefront. After all, technology isn’t what drives change—it’s how people adopt it that truly matters. Excited to share insights & foster discussions around this philosophy at #TechCrunch2024! Explore more about what’s coming: https://lnkd.in/eptdAKXy #TechnologyAdoption #HumanCentricTech #Startups

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What do you do when a radical new technology puts your main product right in the crosshairs of disruption? Listen to David Okuniev — co-founder of Typeform | Ask awesomely — discuss the challenges of innovation within existing structures. David shared a game-changing insight: Radical innovation is really, really difficult to do inside your own product. He emphasized the need to break free from the constraints of familiarity and embrace change from outside the box. Henrik Werdelin and I have both seen our fair share of this in our respective careers. What struck us most was how David leveraged structure to overcome the innovator’s dilemma. By creating a culture of experimentation and providing space for bold ideas, he propelled Typeform beyond incremental improvements. What other hacks have you seen or employed to help your organization overcome the innovator’s dilemma? Share your stories below! 👇 And if you want to dive deeper into our conversation, click the link in the comments to catch the full podcast episode!

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Very excited to share Galileo 🔭's $45M series B led by Scale Venture Partners, with participation from Premji Invest as well as partners Databricks Ventures, Citi Ventures, Amex Ventures, ServiceNow Ventures, SentinelOne, and existing investors Battery Ventures, Walden Catalyst Ventures and Factory. Clem Delangue 🤗 from Hugging Face and Ankit Sobti from Postman participated as well. Atindriyo Sanyal, Yash Sheth and I started Galileo in May 2021 with a singular focus: 𝘁𝗼 𝘀𝗼𝗹𝘃𝗲 𝗔𝗜'𝘀 𝗾𝘂𝗮𝗹𝗶𝘁𝘆 𝗺𝗲𝗮𝘀𝘂𝗿𝗲𝗺𝗲𝗻𝘁 𝗽𝗿𝗼𝗯𝗹𝗲𝗺 𝗳𝗼𝗿 𝗯𝘂𝗶𝗹𝗱𝗲𝗿𝘀 𝘄𝗼𝗿𝗸𝗶𝗻𝗴 𝘄𝗶𝘁𝗵 𝗹𝗮𝗻𝗴𝘂𝗮𝗴𝗲 𝗺𝗼𝗱𝗲𝗹𝘀. Over the past two years, it has been incredible to see Language Models not only become more popular, but become a powerful OS that developers are building with! Yet, with human vibe checks (still❗) being the first line of evaluation defense, AI's measurement problem is more critical to solve than ever before. Since our Series A two years ago, we have been hard at work across 3 fronts: 1️⃣ 𝗕𝘂𝗶𝗹𝗱𝗶𝗻𝗴 𝗙𝗼𝘂𝗻𝗱𝗮𝘁𝗶𝗼𝗻𝗮𝗹 𝗔𝗜 𝗘𝘃𝗮𝗹𝘂𝗮𝘁𝗶𝗼𝗻 𝗥𝗲𝘀𝗲𝗮𝗿𝗰𝗵 You cannot evaluate what you cannot measure. To give our users best in class evaluations, we have invested millions of $$ into LLM evaluation research. Galileo’s Luna Evaluation Models have emerged as the core need for AI developers. 2️⃣ 𝗕𝘂𝗶𝗹𝗱𝗶𝗻𝗴 𝗮 𝗽𝗹𝗮𝘁𝗳𝗼𝗿𝗺 𝘁𝗵𝗮𝘁 𝘀𝗰𝗮𝗹𝗲𝘀 𝗮𝗰𝗿𝗼𝘀𝘀 𝘁𝗵𝗲 𝗲𝗻𝘁𝗶𝗿𝗲 𝗔𝗜 𝗦𝗼𝗳𝘁𝘄𝗮𝗿𝗲 𝗗𝗲𝘃𝗲𝗹𝗼𝗽𝗺𝗲𝗻𝘁 𝗟𝗶𝗳𝗲𝗰𝘆𝗰𝗹𝗲 With Galileo AI developers can go from fine-tuning LLMs with high quality data, to evaluating complex AI systems, to monitoring them in production at scale, to providing a proactive AI firewall against user harm. It was essential to take an end to end approach to truly provide user value. 3️⃣ 𝗕𝘂𝗶𝗹𝗱𝗶𝗻𝗴 𝗮 𝘀𝗼𝘂𝗻𝗱 𝗯𝘂𝘀𝗶𝗻𝗲𝘀𝘀 𝗳𝗼𝗿 𝘁𝗵𝗲 𝗹𝗼𝗻𝗴 𝘁𝗲𝗿𝗺 Over the past 12 months, revenue has grown 843%, dozens of customers have come onboard, including Twilio, Chegg, ServiceTitan, as well as 6 of the Fortune 50 (in a fraction of the avg deal cycle). Unlike other 'GenAI-native' startups, we don’t have sky-high compute costs and crazy valuations – we’re building a business for the long term, with 80%+ gross margins. ⚡⚡ We have some exciting product launches to announce during Galileo Productionize on Oct 29. Would love to see you there: https://lnkd.in/eVH49zde NONE of this would be possible without the fearless team of Galileans 💜! Everyday I am totally blown away by their smarts, camaraderie, grit, ideas and humor. We’re growing (highly selectively) across engineering, AI research, sales, marketing, ops and customer success. Interested in joining this kick-ass team? DM me! Thanks Richard Nieva and Forbes for covering the announcement: https://lnkd.in/eUmG6yST More details in our blog: https://lnkd.in/eZGKrDgg

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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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Nic Poulos and I wrote an essay for Euclid Ventures, "An Era for Vertical Software." The TL;DR is that vertical SaaS is a distinct, enduring discipline that we believe is poised to dominate the software landscape over the next decade.   "2024 will represent a turning point, perhaps even a new era for venture capital. While the fog feels like it’s lifting, the path forward isn’t yet clear. One includes a soft landing for the US economy and the continuing recovery of software multiples, with ZIRP-era behaviors continuing around hot themes. Another sees a recessionary period in which VC capital inflows remain stagnant and startup funding the year dips below $100B. Either way, a more measured VC market in 2024 is a certainty. For many investors, that will come with a rude awakening as their strategy becomes more difficult to execute or their thesis of choice is negatively impacted by tightening markets.    We see this reversion of the venture ecosystem to its mean as a strong tailwind for Euclid and vertical software. As a category, Vertical SaaS is uniquely well suited to thrive in volatile market conditions and produce fund-returning outcomes. The sections below aim to answer the question: why is vertical software different? Our answer discusses the factors driving the natural market resilience we see in vertical software as a category–resilience that will help them thrive in 2024 and beyond."

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Our inaugural VC Fund Performance report has certainly got people talking (https://lnkd.in/ggv2TvuN)!  Highlights include:  Slow capital deployment: Funds in the 2022 vintage have deployed about 43% of their committed capital at the 24 month mark, the lowest share of any analyzed vintage. Prior vintages ranged from 47%-60% after 24 months. Declining graduation rates: 30.6% of companies that raised a seed round in Q1 2018 made it to Series A within two years. Only 15.4% of Q1 2022 seed startups did so in the same timeframe. Distribution back to LPs remains elusive: Less than 10% of 2021 funds have had any DPI after 3 years. Carta Fund Admin customers should have received expanded analysis in their inbox. Everyone else, out the report here: https://lnkd.in/g2N6tPU6   #startups #venturecapital #emergingmanager #fundperformance

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I can't believe 2024 has almost come to an end! In two weeks, the infrastructure software world will descend on Las Vegas for Amazon Web Services (AWS)'s annual conference, AWS re:Invent! If you're a #founder, customer, operator, or investor and will be at the conference, I'd love to catch up. I'll be there from Monday, December 2nd to Thursday, December 5th. I'm still actively looking to invest in the next great #startup enabling CIOs, CTOs and CISOs! Please reach out directly or comment below. #AWSreInvent

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