Apr
30
2021
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Cloud infrastructure market keeps rolling in Q1 with almost $40B in revenue

Conventional wisdom over the last year has suggested that the pandemic has driven companies to the cloud much faster than they ever would have gone without that forcing event, with some suggesting it has compressed years of transformation into months. This quarter’s cloud infrastructure revenue numbers appear to be proving that thesis correct.

With The Big Three — Amazon, Microsoft and Google — all reporting this week, the market generated almost $40 billion in revenue, according to Synergy Research data. That’s up $2 billion from last quarter and up 37% over the same period last year. Canalys’s numbers were slightly higher at $42 billion.

As you might expect if you follow this market, AWS led the way with $13.5 billion for the quarter, up 32% year over year. That’s a run rate of $54 billion. While that is an eye-popping number, what’s really remarkable is the yearly revenue growth, especially for a company the size and maturity of Amazon. The law of large numbers would suggest this isn’t sustainable, but the pie keeps growing and Amazon continues to take a substantial chunk.

Overall AWS held steady with 32% market share. While the revenue numbers keep going up, Amazon’s market share has remained firm for years at around this number. It’s the other companies down market that are gaining share over time, most notably Microsoft, which is now at around 20% share — good for about $7.8 billion this quarter.

Google continues to show signs of promise under Thomas Kurian, hitting $3.5 billion, good for 9% as it makes a steady march toward double digits. Even IBM had a positive quarter, led by Red Hat and cloud revenue, good for 5% or about $2 billion overall.

Synergy Research cloud infrastructure bubble map for Q1 2021. AWS is leader, followed by Microsoft and Google.

Image Credits: Synergy Research

John Dinsdale, chief analyst at Synergy, says that even though AWS and Microsoft have firm control of the market, that doesn’t mean there isn’t money to be made by the companies playing behind them.

“These two don’t have to spend too much time looking in their rearview mirrors and worrying about the competition. However, that is not to say that there aren’t some excellent opportunities for other players. Taking Amazon and Microsoft out of the picture, the remaining market is generating over $18 billion in quarterly revenues and growing at over 30% per year. Cloud providers that focus on specific regions, services or user groups can target several years of strong growth,” Dinsdale said in a statement.

Canalys, another firm that watches the same market as Synergy, had similar findings with slight variations, certainly close enough to confirm one another’s findings. They have AWS with 32%, Microsoft 19% and Google with 7%.

Canalys market share chart with Amazon with 32%, Microsoft 19% and Google 7%

Image Credits: Canalys

Canalys analyst Blake Murray says that there is still plenty of room for growth, and we will likely continue to see big numbers in this market for several years. “Though 2020 saw large-scale cloud infrastructure spending, most enterprise workloads have not yet transitioned to the cloud. Migration and cloud spend will continue as customer confidence rises during 2021. Large projects that were postponed last year will resurface, while new use cases will expand the addressable market,” he said.

The numbers we see are hardly a surprise anymore, and as companies push more workloads into the cloud, the numbers will continue to impress. The only question now is if Microsoft can continue to close the market share gap with Amazon.

 

Apr
22
2021
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Google’s Anthos multicloud platform gets improved logging, Windows container support and more

Google today announced a sizable update to its Anthos multicloud platform that lets you build, deploy and manage containerized applications anywhere, including on Amazon’s AWS and (in preview) on Microsoft Azure.

Version 1.7 includes new features like improved metrics and logging for Anthos on AWS, a new Connect gateway to interact with any cluster right from Google Cloud and a preview of Google’s managed control plane for Anthos Service Mesh. Other new features include Windows container support for environments that use VMware’s vSphere platform and new tools for developers to make it easier for them to deploy their applications to any Anthos cluster.

Today’s update comes almost exactly two years after Google CEO Sundar Pichai originally announced Anthos at its Cloud Next event in 2019 (before that, Google called this project the “Google Cloud Services Platform,” which launched three years ago). Hybrid and multicloud, it’s fair to say, takes a key role in the Google Cloud roadmap — and maybe more so for Google than for any of its competitors. Recently, Google brought on industry veteran Jeff Reed to become the VP of Product Management in charge of Anthos.

Reed told me that he believes that there are a lot of factors right now that are putting Anthos in a good position. “The wind is at our back. We bet on Kubernetes, bet on containers — those were good decisions,” he said. Increasingly, customers are also now scaling out their use of Kubernetes and have to figure out how to best scale out their clusters and deploy them in different environments — and to do so, they need a consistent platform across these environments. He also noted that when it comes to bringing on new Anthos customers, it’s really those factors that determine whether a company will look into Anthos or not.

He acknowledged that there are other players in this market, but he argues that Google Cloud’s take on this is also quite different. “I think we’re pretty unique in the sense that we’re from the cloud, cloud-native is our core approach,” he said. “A lot of what we talk about in [Anthos] 1.7 is about how we leverage the power of the cloud and use what we call “an anchor in the cloud” to make your life much easier. We’re more like a cloud vendor there, but because we support on-prem, we see some of those other folks.” Those other folks being IBM/Red Hat’s OpenShift and VMware’s Tanzu, for example. 

The addition of support for Windows containers in vSphere environments also points to the fact that a lot of Anthos customers are classical enterprises that are trying to modernize their infrastructure, yet still rely on a lot of legacy applications that they are now trying to bring to the cloud.

Looking ahead, one thing we’ll likely see is more integrations with a wider range of Google Cloud products into Anthos. And indeed, as Reed noted, inside of Google Cloud, more teams are now building their products on top of Anthos themselves. In turn, that then makes it easier to bring those services to an Anthos-managed environment anywhere. One of the first of these internal services that run on top of Anthos is Apigee. “Your Apigee deployment essentially has Anthos underneath the covers. So Apigee gets all the benefits of a container environment, scalability and all those pieces — and we’ve made it really simple for that whole environment to run kind of as a stack,” he said.

I guess we can expect to hear more about this in the near future — or at Google Cloud Next 2021.

Apr
12
2021
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Microsoft goes all in on healthcare with $19.7B Nuance acquisition

When Microsoft announced it was acquiring Nuance Communications this morning for $19.7 billion, you could be excused for doing a Monday morning double take at the hefty price tag.

That’s surely a lot of money for a company on a $1.4 billion run rate, but Microsoft, which has already partnered with the speech-to-text market leader on several products over the last couple of years, saw a company firmly embedded in healthcare and it decided to go all in.

And $20 billion is certainly all in, even for a company the size of Microsoft. But 2020 forced us to change the way we do business from restaurants to retailers to doctors. In fact, the pandemic in particular changed the way we interact with our medical providers. We learned very quickly that you don’t have to drive to an office, wait in waiting room, then in an exam room, all to see the doctor for a few minutes.

Instead, we can get on the line, have a quick chat and be on our way. It won’t work for every condition of course — there will always be times the physician needs to see you — but for many meetings such as reviewing test results or for talk therapy, telehealth could suffice.

Microsoft CEO Satya Nadella says that Nuance is at the center of this shift, especially with its use of cloud and artificial intelligence, and that’s why the company was willing to pay the amount it did to get it.

“AI is technology’s most important priority, and healthcare is its most urgent application. Together, with our partner ecosystem, we will put advanced AI solutions into the hands of professionals everywhere to drive better decision-making and create more meaningful connections, as we accelerate growth of Microsoft Cloud in Healthcare and Nuance,” Nadella said in a post announcing the deal.

Holger Mueller, an analyst at Constellation Research, says says that may be so, but he believes that Microsoft missed the boat with Cortana and this is about helping the company catch up on a crucial technology. “Nuance will be not only give Microsoft technology help in regards to neural network based speech recognition, but also a massive improvement from vertical capabilities, call center functionality and the MSFT IP position in speech,” he said.

Microsoft sees this deal doubling what was already a considerable total addressable market to nearly $500 billion. While TAMs always tend to run high, that is still a substantial number.

It also fits with Gartner data, which found that by 2022, 75% of healthcare organizations will have a formal cloud strategy in place. The AI component only adds to that number and Nuance brings 10,000 existing customers to Microsoft including some of the biggest healthcare organizations in the world.

Brent Leary, founder and principal analyst at CRM Essentials, says the deal could provide Microsoft with a ton of health data to help feed the underlying machine learning models and make them more accurate over time.

“There is going be a ton of health data being captured by the interactions coming through telemedicine interactions, and this could create a whole new level of health intelligence,” Leary told me.

That of course could drive a lot of privacy concerns where health data is involved, and it will be up to Microsoft, which just experienced a major breach on its Exchange email server products last month, to assure the public that their sensitive health data is being protected.

Leary says that ensuring data privacy is going to be absolutely key to the success of the deal. “The potential this move has is pretty powerful, but it will only be realized if the data and insights that could come from it are protected and secure — not only protected from hackers but also from unethical use. Either could derail what could be a game changing move,” he said.

Microsoft also seemed to recognize that when it wrote, “Nuance and Microsoft will deepen their existing commitments to the extended partner ecosystem, as well as the highest standards of data privacy, security and compliance.”

Kate Leggett, an analyst at Forrester Research thinks healthcare could be just the first step and once Nuance is in the fold, it could go much deeper than that.

“However, the benefit of this acquisition does not stop [with healthcare]. Nuance also offers market-leading customer engagement technologies, with deep expertise and focus in verticals such as financial services. As MSFT evolves their industry editions into other verticals, this acquisition will pay off for other industries. MSFT may also choose to fill in the gaps within their Dynamics solution with Nuance’s customer engagement technologies,” Leggett said.

We are clearly on the edge of a sea change when it comes to how we interact with our medical providers in the future. COVID pushed medicine deeper into the digital realm in 2020 out of simple necessity. It wasn’t safe to go into the office unless absolutely necessary.

The Nuance acquisition, which is expected to close some time later this year, could help Microsoft shift deeper into the market. It could even bring Teams into it as a meeting tool, but it’s all going to depend on the trust level people have with this approach, and it will be up to the company to make sure that both healthcare providers and the people they serve have that.

Apr
12
2021
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Microsoft is acquiring Nuance Communications for $19.7B

Microsoft agreed today to acquire Nuance Communications, a leader in speech to text software, for $19.7 billion. Bloomberg broke the story over the weekend that the two companies were in talks.

In a post announcing the deal, the company said this was about increasing its presence in the healthcare vertical, a place where Nuance has done well in recent years. In fact, the company announced the Microsoft Cloud for Healthcare last year, and this deal is about accelerating its presence there. Nuance’s products in this area include Dragon Ambient eXperience, Dragon Medical One and PowerScribe One for radiology reporting.

“Today’s acquisition announcement represents the latest step in Microsoft’s industry-specific cloud strategy,” the company wrote. The acquisition also builds on several integrations and partnerships the two companies have made in the last couple of years.

The company boasts 10,000 healthcare customers, according to information on the website. Those include AthenaHealth, Johns Hopkins, Mass General Brigham and Cleveland Clinic to name but a few, and it was that customer base that attracted Microsoft to pay the price it did to bring Nuance into the fold.

Nuance CEO Mark Benjamin will remain with the company and report to Scott Guthrie, Microsoft’s EVP in charge of the cloud and AI group.

Nuance has a complex history. It went public in 2000 and began buying speech recognition products, including Dragon Dictate from Lernout Hauspie, in 2001. It merged with a company called ScanSoft in 2005. That company began life as Visioneer, a scanning company, in 1992.

Today, the company has a number of products including Dragon Dictate, a consumer and business text to speech product that dates back to the early 1990s. It’s also involved in speech recognition, chat bots and natural language processing particularly in healthcare and other verticals.

The company has 6,000 employees spread across 27 countries. In its most recent earnings report from November 2020, which was for Q42020, the company reported $352.9 million in revenue compared to $387.6 million in the same period a year prior. That’s not the direction a company wants to go, but it is still a run rate of over $1.4 billion.

At the time of that earnings call, the company also announced it was selling its medical transcription and electronic health record (EHR) Go-Live services to Assured Healthcare Partners and Aeries Technology Group. Company CEO Benjamin said this was about helping the company concentrate on its core speech services.

“With this sale, we will reach an important milestone in our journey towards a more focused strategy of advancing our Conversational AI, natural language understanding and ambient clinical intelligence solutions,” Benjamin said in a statement at the time.

It’s worth noting that Microsoft already has a number speech recognition and chat bot products of its own, including desktop speech to text services in Windows and on Azure, but it took a chance to buy a market leader and go deeper into the healthcare vertical.

The transaction has already been approved by both company boards and Microsoft reports it expects the deal to close by the end of this year, subject to standard regulatory oversight and approval by Nuance shareholders.

This would mark the second largest purchase by Microsoft ever, only surpassed by the $26.2 billion the company paid for LinkedIn in 2016.

Apr
08
2021
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Immersion cooling to offset data centers’ massive power demands gains a big booster in Microsoft

LiquidStack does it. So does Submer. They’re both dropping servers carrying sensitive data into goop in an effort to save the planet. Now they’re joined by one of the biggest tech companies in the world in their efforts to improve the energy efficiency of data centers, because Microsoft is getting into the liquid-immersion cooling market.

Microsoft is using a liquid it developed in-house that’s engineered to boil at 122 degrees Fahrenheit (lower than the boiling point of water) to act as a heat sink, reducing the temperature inside the servers so they can operate at full power without any risks from overheating.

The vapor from the boiling fluid is converted back into a liquid through contact with a cooled condenser in the lid of the tank that stores the servers.

“We are the first cloud provider that is running two-phase immersion cooling in a production environment,” said Husam Alissa, a principal hardware engineer on Microsoft’s team for datacenter advanced development in Redmond, Washington, in a statement on the company’s internal blog. 

While that claim may be true, liquid cooling is a well-known approach to dealing with moving heat around to keep systems working. Cars use liquid cooling to keep their motors humming as they head out on the highway.

As technology companies confront the physical limits of Moore’s Law, the demand for faster, higher performance processors mean designing new architectures that can handle more power, the company wrote in a blog post. Power flowing through central processing units has increased from 150 watts to more than 300 watts per chip and the GPUs responsible for much of Bitcoin mining, artificial intelligence applications and high end graphics each consume more than 700 watts per chip.

It’s worth noting that Microsoft isn’t the first tech company to apply liquid cooling to data centers and the distinction that the company uses of being the first “cloud provider” is doing a lot of work. That’s because bitcoin mining operations have been using the tech for years. Indeed, LiquidStack was spun out from a bitcoin miner to commercialize its liquid immersion cooling tech and bring it to the masses.

“Air cooling is not enough”

More power flowing through the processors means hotter chips, which means the need for better cooling or the chips will malfunction.

“Air cooling is not enough,” said Christian Belady, vice president of Microsoft’s datacenter advanced development group in Redmond, in an interview for the company’s internal blog. “That’s what’s driving us to immersion cooling, where we can directly boil off the surfaces of the chip.”

For Belady, the use of liquid cooling technology brings the density and compression of Moore’s Law up to the datacenter level

The results, from an energy consumption perspective, are impressive. The company found that using two-phase immersion cooling reduced power consumption for a server by anywhere from 5 percent to 15 percent (every little bit helps).

Microsoft investigated liquid immersion as a cooling solution for high performance computing applications such as AI. Among other things, the investigation revealed that two-phase immersion cooling reduced power consumption for any given server by 5% to 15%. 

Meanwhile, companies like Submer claim they reduce energy consumption by 50%, water use by 99%, and take up 85% less space.

For cloud computing companies, the ability to keep these servers up and running even during spikes in demand, when they’d consume even more power, adds flexibility and ensures uptime even when servers are overtaxed, according to Microsoft.

“[We] know that with Teams when you get to 1 o’clock or 2 o’clock, there is a huge spike because people are joining meetings at the same time,” Marcus Fontoura, a vice president on Microsoft’s Azure team, said on the company’s internal blog. “Immersion cooling gives us more flexibility to deal with these burst-y workloads.”

At this point, data centers are a critical component of the internet infrastructure that much of the world relies on for… well… pretty much every tech-enabled service. That reliance however has come at a significant environmental cost.

“Data centers power human advancement. Their role as a core infrastructure has become more apparent than ever and emerging technologies such as AI and IoT will continue to drive computing needs. However, the environmental footprint of the industry is growing at an alarming rate,” Alexander Danielsson, an investment manager at Norrsken VC noted last year when discussing that firm’s investment in Submer.

Solutions under the sea

If submerging servers in experimental liquids offers one potential solution to the problem — then sinking them in the ocean is another way that companies are trying to cool data centers without expending too much power.

Microsoft has already been operating an undersea data center for the past two years. The company actually trotted out the tech as part of a push from the tech company to aid in the search for a COVID-19 vaccine last year.

These pre-packed, shipping container-sized data centers can be spun up on demand and run deep under the ocean’s surface for sustainable, high-efficiency and powerful compute operations, the company said.

The liquid cooling project shares most similarity with Microsoft’s Project Natick, which is exploring the potential of underwater datacenters that are quick to deploy and can operate for years on the seabed sealed inside submarine-like tubes without any onsite maintenance by people. 

In those data centers nitrogen air replaces an engineered fluid and the servers are cooled with fans and a heat exchanger that pumps seawater through a sealed tube.

Startups are also staking claims to cool data centers out on the ocean (the seaweed is always greener in somebody else’s lake).

Nautilus Data Technologies, for instance, has raised over $100 million (according to Crunchbase) to develop data centers dotting the surface of Davey Jones’ Locker. The company is currently developing a data center project co-located with a sustainable energy project in a tributary near Stockton, Calif.

With the double-immersion cooling tech Microsoft is hoping to bring the benefits of ocean-cooling tech onto the shore. “We brought the sea to the servers rather than put the datacenter under the sea,” Microsoft’s Alissa said in a company statement.

Ioannis Manousakis, a principal software engineer with Azure (left), and Husam Alissa, a principal hardware engineer on Microsoft’s team for datacenter advanced development (right), walk past a container at a Microsoft datacenter where computer servers in a two-phase immersion cooling tank are processing workloads. Photo by Gene Twedt for Microsoft.

Apr
06
2021
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Aporia raises $5M for its AI observability platform

Machine learning (ML) models are only as good as the data you feed them. That’s true during training, but also once a model is put in production. In the real world, the data itself can change as new events occur and even small changes to how databases and APIs report and store data could have implications on how the models react. Since ML models will simply give you wrong predictions and not throw an error, it’s imperative that businesses monitor their data pipelines for these systems.

That’s where tools like Aporia come in. The Tel Aviv-based company today announced that it has raised a $5 million seed round for its monitoring platform for ML models. The investors are Vertex Ventures and TLV Partners.

Image Credits: Aporia

Aporia co-founder and CEO Liran Hason, after five years with the Israel Defense Forces, previously worked on the data science team at Adallom, a security company that was acquired by Microsoft in 2015. After the sale, he joined venture firm Vertex Ventures before starting Aporia in late 2019. But it was during his time at Adallom where he first encountered the problems that Aporio is now trying to solve.

“I was responsible for the production architecture of the machine learning models,” he said of his time at the company. “So that’s actually where, for the first time, I got to experience the challenges of getting models to production and all the surprises that you get there.”

The idea behind Aporia, Hason explained, is to make it easier for enterprises to implement machine learning models and leverage the power of AI in a responsible manner.

“AI is a super powerful technology,” he said. “But unlike traditional software, it highly relies on the data. Another unique characteristic of AI, which is very interesting, is that when it fails, it fails silently. You get no exceptions, no errors. That becomes really, really tricky, especially when getting to production, because in training, the data scientists have full control of the data.”

But as Hason noted, a production system may depend on data from a third-party vendor and that vendor may one day change the data schema without telling anybody about it. At that point, a model — say for predicting whether a bank’s customer may default on a loan — can’t be trusted anymore, but it may take weeks or months before anybody notices.

Aporia constantly tracks the statistical behavior of the incoming data and when that drifts too far away from the training set, it will alert its users.

One thing that makes Aporia unique is that it gives its users an almost IFTTT or Zapier-like graphical tool for setting up the logic of these monitors. It comes pre-configured with more than 50 combinations of monitors and provides full visibility in how they work behind the scenes. That, in turn, allows businesses to fine-tune the behavior of these monitors for their own specific business case and model.

Initially, the team thought it could build generic monitoring solutions. But the team realized that this wouldn’t only be a very complex undertaking, but that the data scientists who build the models also know exactly how those models should work and what they need from a monitoring solution.

“Monitoring production workloads is a well-established software engineering practice, and it’s past time for machine learning to be monitored at the same level,” said Rona Segev, founding partner at  TLV Partners. “Aporia‘s team has strong production-engineering experience, which makes their solution stand out as simple, secure and robust.”

 

Mar
17
2021
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OctoML raises $28M Series B for its machine learning acceleration platform

OctoML, a Seattle-based startup that offers a machine learning acceleration platform built on top of the open-source Apache TVM compiler framework project, today announced that it has raised a $28 million Series B funding round led by Addition. Previous investors Madrona Venture Group and Amplify Partners also participated in this round, which brings the company’s total funding to $47 million. The company last raised in April 2020, when it announced its $15 million Series A round led by Amplify

The promise of OctoML, which was founded by the team that also created TVM, is that developers can bring their models to its platform and the service will automatically optimize that model’s performance for any given cloud or edge device.

As Brazil-born OctoML co-founder and CEO Luis Ceze told me, since raising its Series A round, the company started onboarding some early adopters to its “Octomizer” SaaS platform.

Image Credits: OctoML

“It’s still in early access, but we are we have close to 1,000 early access sign-ups on the waitlist,” Ceze said. “That was a pretty strong signal for us to end up taking this [funding]. The Series B was pre-emptive. We were planning on starting to raise money right about now. We had barely started spending our Series A money — we still had a lot of that left. But since we saw this growth and we had more paying customers than we anticipated, there were a lot of signals like, ‘hey, now we can accelerate the go-to-market machinery, build a customer success team and continue expanding the engineering team to build new features.’ ”

Ceze tells me that the team also saw strong growth signals in the overall community around the TVM project (with about 1,000 people attending its virtual conference last year). As for its customer base (and companies on its waitlist), Ceze says it represents a wide range of verticals that range from defense contractors to financial services and life science companies, automotive firms and startups in a variety of fields.

Recently, OctoML also launched support for the Apple M1 chip — and saw very good performance from that.

The company has also formed partnerships with industry heavyweights like Microsoft (which is also a customer), Qualcomm and AMD to build out the open-source components and optimize its service for an even wider range of models (and larger ones, too).

On the engineering side, Ceze tells me that the team is looking at not just optimizing and tuning models but also the training process. Training ML models can quickly become costly and any service that can speed up that process leads to direct savings for its users — which in turn makes OctoML an easier sell. The plan here, Ceze tells me, is to offer an end-to-end solution where people can optimize their ML training and the resulting models and then push their models out to their preferred platform. Right now, its users still have to take the artifact that the Octomizer creates and deploy that themselves, but deployment support is on OctoML’s roadmap.

“When we first met Luis and the OctoML team, we knew they were poised to transform the way ML teams deploy their machine learning models,” said Lee Fixel, founder of Addition. “They have the vision, the talent and the technology to drive ML transformation across every major enterprise. They launched Octomizer six months ago and it’s already becoming the go-to solution developers and data scientists use to maximize ML model performance. We look forward to supporting the company’s continued growth.”


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Mar
09
2021
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YL Ventures sells its stake in cybersecurity unicorn Axonius for $270M

YL Ventures, the Israel-focused cybersecurity seed fund, today announced that it has sold its stake in cybersecurity asset management startup Axonius, which only a week ago announced a $100 million Series D funding round that now values it at around $1.2 billion.

ICONIQ Growth, Alkeon Capital Management, DTCP and Harmony Partners acquired YL Venture’s stake for $270 million. This marks YL’s first return from its third $75 million fund, which it raised in 2017, and the largest return in the firm’s history.

With this sale, the company’s third fund still has six portfolio companies remaining. It closed its fourth fund with $120 million in committed capital in the middle of 2019.

Unlike YL, which focuses on early-stage companies — though it also tends to participate in some later-stage rounds — the investors that are buying its stake specialize in later-stage companies that are often on an IPO path. ICONIQ Growth has invested in the likes of Adyen, CrowdStrike, Datadog and Zoom, for example, and has also regularly partnered with YL Ventures on its later-stage investments.

“The transition from early-stage to late-stage investors just makes sense as we drive toward IPO, and it allows each investor to focus on what they do best,” said Dean Sysman, co-founder and CEO of Axonius. “We appreciate the guidance and support the YL Ventures team has provided during the early stages of our company and we congratulate them on this successful journey.”

To put this sale into perspective for the Silicon Valley and Tel Aviv-based YL Ventures, it’s worth noting that it currently manages about $300 million. Its current portfolio includes the likes of Orca Security, Hunters and Cycode. This sale is a huge win for the firm.

Its most headline-grabbing exit so far was Twistlock, which was acquired by Palo Alto Networks for $410 million in 2019, but it has also seen exits of its portfolio companies to Microsoft, Proofpoint, CA Technologies and Walmart, among others. The fund participated in Axonius’ $4 million seed round in 2017 up to its $58 million Series C round a year ago.

It seems like YL Ventures is taking a very pragmatic approach here. It doesn’t specialize in late-stage firms — and until recently, Israeli startups always tended to sell long before they got to a late-stage round anyway. And it can generate a nice — and guaranteed — return for its own investors, too.

“This exit netted $270 million in cash directly to our third fund, which had $75 million total in capital commitments, and this fund still has six outstanding portfolio companies remaining,” Yoav Leitersdorf, YL Ventures’ founder and managing partner, told me. “Returning multiple times that fund now with a single exit, with the rest of the portfolio companies still there for the upside is the most responsible — yet highly profitable path — we could have taken for our fund at this time. And all this while diverting our energies and means more towards our seed-stage companies (where our help is more impactful), and at the same time supporting Axonius by enabling it to bring aboard such excellent late-stage investors as ICONIQ and Alkeon — a true win-win-win situation for everyone involved!”

He also noted that this sale achieved a top-decile return for the firm’s limited partners and allows it to focus its resources and attention toward the younger companies in its portfolio.

Mar
02
2021
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Parabol raises $8M after reaching 100,000 users of its agile meeting software

This morning Parabol, a startup that provides retrospective meeting software to agile development teams, announced that it has closed an $8 million Series A. Microsoft’s venture capital arm, M12, led the deal. The investment also saw participation from Techstars, CRV, and Haystack.

TechCrunch caught up with Parabol CEO Jordan Husney to talk about the round, and his company. We were curious how large the market that Parabol serves is, and if the company was overly-nicheing its service. While the startup is still young, the answer appears to be no – adding to our general sentiment that the software market is even larger than we perhaps thought.

Let’s explore how Parabol came to be, and how it came to pick its target market. Or more precisely, how its target market chose it.

Building horizontally, focusing vertically

After a stint in the consulting world, Husney was more than aware of the communications issues that distributed teams can endure. With multiple offices the norm among big companies, he told TechCrunch in an interview, communications between remote workers came down to an email thread, or a meeting. A self-described “recovering engineer,” Husney wondered if there was space in the business market for “structured communications,” or the type of asynchronous meetings that are popular in the code-writing world.

Borrowing from the ethos of agile development, a method of writing software that prioritizes collaboration and evolution over process and documentation, Husney built Parabol to bring agile work and communications methods to non-developer business teams. If agile principles were good at helping foster developer results through status meetings, why wouldn’t the same process translate to other work settings?

But the market had other ideas. Instead of hitting it big in the business world, owing to the friction resulting from needing what Husney described as a “behavior change” — something often lethal to rapid adoption of a new service, or product — agile teams themselves started using Parabol’s tech.

The startup followed the demand. And there’s quite a lot of it, as it turns out. Husney estimated that there are around 20 million agile developers in the world, the business from which has helped propel companies like Atlassian to enormous heights. It’s a big enough pool for the startup to swim in for a long time.

Returning to our earlier note about the depth of the software market, Parabol is a good reference point. It appears capable of building a real company on the back of supporting a subset of the software creation world’s peculiar meeting style; the market for software is simply gigantic.

Growth

After deciding to support agile software teams, growth came quickly to Parabol. In 2018 and 2019, the company saw growth of 20% to 40% each month, its CEO said. Calling his company a “rocket,” Husney gave partial credit to Parabol’s freemium go-to-market model, a common approach when selling to developers who eschew the traditional sales process.

By selling to the already-converted, Parabol found product-market fit. Husney himself had underestimated the demand from agile software developers for tools to support they work, because he thought that they’d already figured out their own needs, he told TechCrunch.

What Parabol has built is not a simple tool, however. Powering retrospective meetings and incident post-mortems, its software collects notes from workers on things that should be done, things that should no longer done, and things that should be kept up. The service then aggregates them automatically by topic, followed by users voting to decide on changes and takeaway actions. The result is an asynchronous way for developer teams to stay in sync.

The startup closed a Seed round in November of 2019, just in time to have cash on hand for the COVID-19 pandemic. The rapid switch to remote work quickly drove Parabol’s user growth from 600 per week in January of 2020, to 5,000 per week in March of the same year. The company has some public usage data available here, in case you want to check the spike yourself.

After raising its $4 million Seed, Husney decided to raise more capital after being told by others that it was a great time to do so. And after winding up with a few firms to choose between, wound up taking Microsoft’s money.

There’s a story there. Per Husney, Microsoft’s M12 was not on the top of its venture capital list; there is a somewhat good reason for that, as taking strategic capital over pure-venture capital is a choice and not the best one for every startup. But after Husney and company got to know the Microsoft partners, and each side underwent diligence, the fit became clear. According to the CEO, M12’s investing team called various Microsoft groups — Azure, GitHub, etc — to ask them about their views on Parabol. They raved. So Microsoft had strong internal signals concerning the deal, and Parabol learned that its potential investor was a heavy user of its product.

The deal worked out.

Why $8 million and not more? The startup’s growth plan isn’t super capital intensive according to Husney, and its market is pulling it instead of the other way around. The team is dilution-conscious as well, he explained. The founding team put the company together in 2015, and didn’t raise its seed round until 2019. It was ramen days back then, he explained; you’ll cling to your ownership, I suppose, when you have bought it that dearly.

Parabol runs lean on purpose. Husney said that his team was not following the Reid Hoffman blitzscaling ethos, instead focusing on hiring for individual leverage. In the CEO’s view, you don’t need to scale quickly to build collaboration products.

The $8 million raise could give Parabol infinite runway, the CEO said, but his company instead raised it for about a 24 month spend. At the end of that he expects the company to have around 30 workers, up from its current 10.

Parabol wants to quadruple its revenues this year, and triple them in 2022. And it wants to scale to 500,000 users from its current 100,000 this year, reaching one million by the end of next year. Let’s see how it performs against those goals.

Mar
02
2021
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Microsoft brings tighter integration to Dynamics 365 and Teams

As the pandemic drags on and we learn about the requirements of working from home with distributed teams, users could be craving more integration across their tools to help reduce the clicks required to complete a set of tasks. Today at the Ignite Conference, Microsoft announced tighter integration between its business suite Dynamics 365 and its collaboration tool Teams to help with that issue.

Alysa Taylor, corporate VP for business applications and global industry at Microsoft, pointed out that one of the advantages of this native integration approach is that it helps reduce context switching across different applications. “We are committed to really bringing together the collaboration platform and the business process layer to enable salespeople, service representatives, operations managers [and other similar roles] to really have a unified platform in which they both collaborate and have their everyday business functions,” Taylor explained.

This could manifest itself in a number of different ways across marketing, sales and service. For instance, a marketer can create a webinar, which they set up and track in Dynamics 365 Marketing tools and run in Teams as a streaming event with the Teams streaming setup integrated directly into the Dynamics 365 console.

In a sales example Taylor says, “We’re enabling sellers to be able to track the career movements of their contacts using the LinkedIn Sales Navigator, as well as connect very specific sales records within Microsoft Teams without ever having to leave Dynamics 365 Sales. So you can be in the Sales application and you have the ability to deeply understand a contact and any contact changes that occur in Teams, and that’s automatically updated in Sales.”

If your company is not an all-Microsoft shop and wants to use different tools as part of these workflows, Taylor says that you can use Microsoft cross-cloud connectors to connect to another service, and this is true regardless of the tasks involved (so long as the connector to the desired application is available).

Salesforce, a primary rival of Microsoft in the business software space, spent over $27 billion to buy Slack at the end of last year to bring this kind of integration to its platform. Taylor sees the acquisition as a reaction to the integration Microsoft already has and continues to build.

“I think that Salesforce had to acquire Slack to be able to have that collaboration [we have], so we are years ahead of what they’re going to be able to provide because they will not have these native integrations. So I actually see the Salesforce acquisition as a response to what we’re doing with Dynamics 365 and Teams,” Taylor told me.

It’s worth pointing out that Salesforce is far ahead of Microsoft when it comes market share in the CRM space with over 19% versus under 3% for Microsoft, according to Gartner numbers from 2019. While it’s possible these numbers have shifted some since then, probably not significantly.


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