Launching a startup isn't easy. At each stage of scaling - from founding to product-market fit, from product-market fit to hyper growth, and from hyper growth to maturity - entrepreneurs face unique challenges. Greylock Partners hosted an event, called Greyscale, focused on these challenges at each stage. In the opening keynote, Jerry Chen of Greylock Partners discusses the state of enterprise software after the first quarter of 2016. He summarizes the private and public markets, M&A activity, and explains how this climate affects the startup environment.
2. Valuations took a hit in Q1 but are coming back.
BessemerCloudIndex
Source: Bessemer
2016
3. We are seeing a“new normal”in valuations.
Source: Morgan Stanley, Capital IQ, Thomson
Avg. Aggregate Value /
Next 12 Month Revenue
15.5x
2013-2014
7.4x
2/12/2016
6. U.S. Early Stage VC: Q4 2015 - Q1 2016
Decrease
in # Deals
Increase
in Round
Sizes
Source: Pitchbook
7. U.S. Late Stage VC: Q1 2016
Decrease
in # Deals y/y
Smaller
Deal Sizes y/y
Source: Pitchbook
8. Expect M&A to return to historic levels.
Source: Morgan Stanley, Capital IQ, Dealogic
9. Market Summary
Public Markets
Valuations are down. We’re stabilizing at a new normal.
VC
Deal volume is decreasing, but still an appetite for great companies.
M&A
Expect strategic M&A to pick up over the next four quarters.
10. Startup Climate for 2016
Focus on cash
positions
Build for the
long haul
Pick a wave bigger
than you
You.
13. How do you get out between
OSS and a Cloud Place?
14. Infrastructure
Amazon is the biggest threat to
infrastructure companies.
Azure and Google will make progress in
2016 with enterprise buyers.
Incumbent and private cloud vendors will
act irrationally.
You need a large footprint and direct
connection to developers (DDI).
16. Security
Thousands of companies all sound the same.
(And many are the same.)
Customers don’t want to buy snake oil. Your job
is to help them be smart buyers.
Security is an evergreen market. There will
always be bad guys, so build a business model
that“works for you.”
19. The basic building blocks of apps are changing.
Bots and
conversational UIs
IoT extends reach
of apps everywhere
Big Data/AI
will power apps
20. Cloud-enabled car
recognizes when
you’re in an accident.
Sends data to your
insurance company
and sends quote to
your phone.
Calls Uber to
pick you up.
Not your father’s Oldsmobile.
23. Data and IoT
Vision, speech, and text are real and ready
for apps today.
Find the data. Accumulate more data and
proprietary data. More data trumps better
math.