Resilience, always: A dose of contrarian optimism
In this edition of my newly revamped B2BaCEO newsletter, I bring you a message of contrarian optimism. I talk to the CEO of HubSpot. I introduce you to my partner Sid. I share an interview with the co-inventor of the iPod and iPhone. And I insist you watch the best video I’ve ever seen about entrepreneurship.
05.20.2022
BY ashu garg
I. Here’s What I’m Thinking
As readers of this newsletter are grimly aware, market volatility has increased in recent weeks.
It’s not difficult to understand why given everything from supply-chain shocks, the return of inflation, and an attendant rise in interest rates to the Russo-Ukrainian conflict, tensions with China, and the continued effects of the pandemic. As of the end of last week, the NASDAQ was down 28% YTD, the S&P was down 13% YTD, and the Dow was down 12% YTD. Even more distressing to those of us in the enterprise business, the Bessemer Emerging Cloud Index, which tracks the performance of emerging public companies providing cloud software, was down 45% YTD.
Just doomscrolling VC Twitter over the past couple of weeks, you’d think the world was coming to an end. But the situation is not as bad as it seems. Even with the recent downturn, we have the cushion of two full years of robust growth. The NASDAQ would need to lose an additional 40% to return to the bottom of March 2020 and lose 16% to return to the pre-COVID levels of February 2020.
More substantively, the underlying revenues of these businesses are healthy. Software companies are still growing, and there continues to be strong demand for software solutions. Despite being down 56% year to date, Datadog just reported its Q1 FY 22 performance with best-of-breed metrics: 130%+ net revenue retention, with 30% YoY growth in customers. Zoom, another company whose growth was fueled by Covid-19, has fallen 10% below its price in March 2020, but the business has grown from $7M in profit in 2018 to $1B of profit in 2021. And although its stock has dropped 77%, Shopify’s revenue rose 22% YoY.
Microsoft CEO Satya Nadella said it best at the beginning of the pandemic: “We have seen two years’ worth of digital transformation in two months.” And it will take a lot more than a couple of months of hard knocks to wipe out two unprecedented years of progress and an incredible 13-year bull-market run.
There is light at the end of the tunnel. Macroeconomic issues, like supply shocks, typically resolve themselves in 12 months. Whereas the era of interconnectivity and globalization, despite what the most fatalistic Cassandras say, is not coming to an end. Equity volatility may be elevated over the next 12 months, but Foundation Capital is continuing, in resilience, to invest in exceptional founders, with a unique technical insight, working on a pre-revenue company or earlier. Just last week, alone, we made two investments.
There have been, and will continue to be, unforeseen challenges, to be sure. More geopolitical conflict, more market volatility — hopefully not much more pandemic! But one thing I’ve learned, during my years in Silicon Valley, is that these are just events — moments in time. Innovation, however, is relentless.
II. How to Sell Software
For the latest episode of the podcast, my guest was Yamini Rangan, the CEO of HubSpot. The tagline of the B2BaCEO podcast is “from engineer to CEO,” and that’s exactly the path that Yamini took.
She started out as an engineer, moved to sales, and then, eventually, to running go-to-market operations as an executive. Less than a year ago, Yamini became the CEO of HubSpot, under unexpected and trying circumstances, which she details in the conversation. We spent most of our conversation discussing how to make the transition from engineering to sales and how to build a customer-focused organization.
III. Meet My Partner: Sid Trivedi
Where are you from originally? I was born in India but have also lived in Singapore, Indonesia, and the United States. Both my parents worked at large multinational companies, so we were moving around quite a lot as they got posted to new roles.
What did you want to be when you grew up? As a kid, I was fascinated by space. I was, and still remain, a big Star Trek fan. In elementary school, I really did think that I had a shot at becoming an astronaut — especially because Aki Hoshide, one of Asia’s most well-known astronauts, was an alumnus of my school. As I grew older, I realized the physical endurance it took to be an astronaut didn’t make it a realistic path for me. But with the recent progress in commercial space travel, maybe one day, in the not too distant future, I’ll make it to the final frontier!
What do you invest in? I have invested across the enterprise stack, from applications to infrastructure, but primarily focus on investing in early-stage cybersecurity and IT companies. In other words, I’m focused on technologies that cater to the CTO, CIO, CISO or one of their subordinates. More recently, I’ve also started digging into what the intersection of crypto/Web3 and the IT and cybersecurity market might be and how the sectors I focus on might be impacted in this brave new world.
What’s the coolest technology experience you’ve ever had? There have been so many! But two stand out. First, when my dad joined Nokia in 1995, he got his first mobile phone, the Nokia 2210. The idea of being able to call anyone, anywhere, at any time was so different from anything we had experienced before. Every new phone my dad brought home for the next 15 years added new features we had never seen in a phone: a color screen, games, email, a calendar, a camera — the shift from desktop to mobile happened right in our home!
The second experience was sitting in my aunt’s Tesla Model 3, in July 2019, and driving from the Bay Area to LA using Tesla Autopilot. The way the car adjusted to other car speeds, changed lanes at the push of a button, and automatically turned as the road turned was magical. It made me see how technology would change the way we move and, almost immediately, I made up my mind to buy a Tesla as my next car.
One word to describe the kind of founders you look for. Relentless. For the best founders, they’ve found their calling when the first thing they think about every morning when they wake up and the last thing they think about every night before they sleep is their company and product. They never stop thinking about how to make their vision a reality.
For the best founders, they’ve found their calling when the first thing they think about every morning when they wake up and the last thing they think about every night before they sleep is their company and product. They never stop thinking about how to make their vision a reality.
Sid trivedi, partner at foundation capital
IV. FC Portco Spotlight: Levo
The shift to the cloud has led to a dramatic proliferation of APIs. According to new estimates, the total number of public and private APIs in use is approaching a whopping 200 million. APIs are crucial to the global digital economy, making them a looming security threat. According to Gartner, this year API abuses will be the most frequent attack vector for data breaches in enterprise web applications.
Levo is a purpose-built, developer-first API security solution that fully automates API security testing in CI/CD pipelines. Levo auto-generates security tests that are run by developers in CI/CD, in a self-serve manner similar to unit and integration tests. Try Levo on your application for free up to 50 endpoints. Sign up here.
V. One of the Greatest Product Designers in History
Tony Fadell is the co-inventor of the iPod, iPhone, and Nest Learning Thermostat. After a 25-year career designing some of the most ubiquitous and inventive products of the last few decades, Fadell added “author” to his resume with his just-published book, Build: An Unorthodox Guide to Making Things Worth Making. My partner Steve Vassallo interviews Fadell about his lessons learned for building game-changing products and companies. They cover everything from the hardest product Fadell’s ever built to the piece of software he wished that he’d invented.
VI. ‘A Pressure Test for the Soul’
Startups are hard. That’s what people who’ve never done it might not understand. There is pleasure but also pain. There are highs and lows. There are great rewards; there are also real sacrifices. In this short documentary, 25 of Foundation Capital’s founders get real and share their personal stories. It is the best encapsulation of entrepreneurship that I’ve ever seen. So if you need a reminder of why we, in Startup Valley, do what we do, then meet our founders.
Published on 05.20.2022
Written by Ashu Garg
