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Ever since Alice (literally) fell down the rabbit hole in Lewis Carroll’s “Alice’s Adventures in Wonderland”, the meaning of the phrase has changed to a metaphor for extreme distraction on the Internet with no clear destination.

Not long ago, we too fell into a rabbit hole: the modern data stack. Data & Analytics is a core theme for us at Lightbird. After talking to many experts in the space and getting lost in said rabbit hole, we have defined one thesis we believe will spark innovation in different areas based on existing challenges in the space and summarized core aspects we consider when talking to Data & Analytics founders.

TL;DR: As more data gets generated, it becomes critical for unique business insight and value creation. With the data stack consolidating around a small set of cloud-based vendors and the cloud data warehouse becoming the system of record, new areas for innovation emerge. We are particularly excited about warehouse-native applications and reverse ETL, providing better, real-time insights on the whole customer lifecycle. Driven by increasing complexity and dependency, we also believe that data teams will focus more strongly on data operations. Therefore, data quality, monitoring, observability as well as management and governance are getting more important. Lastly, when assessing solutions in the Data & Analytics space, we particularly focus on the strength of the community and low barriers for adoption combined with a 10x better user experience.

Data, data everywhere

There is little doubt among technology leaders on the overall importance of data to derive insights, drive decision-making and ultimately increase business value. The drivers among others are the move to the cloud, the amount of data generated and the overall defensibility achieved through data. Cloud spending is increasing and expected to reach $374bn in 2022, an estimation conducted by Bain even before the COVID-19 pandemic. The same consultancy firm also expects SaaS and cloud solutions to receive the largest spending increases in 2022. What’s more, the average amount of SaaS applications used by organizations has risen to an average of 110 SaaS tools. Consequently, more data is generated, captured, copied and consumed worldwide — an estimated 181 zettabytes by 2025. Lastly, data is seen as a strategic asset and differentiator, fueling product innovation, customer insights and business value.

However, businesses aspiring to be truly data-driven still face many challenges. While speaking to data experts at startups as well as more established corporations, it became clear that the path to (data) success remains long for many.

🔮 Expectation vs. reality: Data is often seen as the magic bullet solving all problems. Yet, more than 70% of enterprises derive low value from their data and/or have low integration of data in their strategy, operations and culture. The main reason is the lack of resources and skills to do so (see next point).

🧠 Data mindset ≠ data skills: Despite the fact that many organizations want to be data-driven, they don’t know where to start or lack the resources and skills. Across all stages, this lack of data specialists is prevalent. According to a survey by Gallup for the Business-Higher Education Forum, 69% of US employers expect candidates with Data Science & Analytics skills to get preference for jobs in their organizations. However, only 23% of college and university leaders say their graduates will have those skills. With the increasing flywheel of more data produced → more data knowledge required, this gap will only become more urgent to be filled.

🏚️ Legacy systems: The pace of innovation in the data & analytics space has exploded in recent years (check out this market map by Firstmark to better understand what we mean). Especially in more mature companies, the main driver for data headaches are old and distributed systems. With data, it’s always easier to build new things in the data stack than to maintain old systems. A company starting today has a significant competitive advantage with its data stack over one starting 3–5 years ago.

🛡️ Data siloes: Data teams are often siloed from data consumers or business units and might even, to quote one of our data experts, get requests in a freaking ticketing system like Jira. Democratizing access to data, enabling data customers and business teams to understand, find and use data is thus critical to a) take away the burden from the data teams and b) unlock more value from the available data to become actually, truly data-driven.

The modern data stack

Despite these challenges mentioned above, huge innovation has happened in the data space. The major one is the adoption of cloud software and the cloud data warehouse as the critical infrastructure component for the emergence of the modern data stack. Why is this? The cloud data warehouse enables cheap and scalable storage, handling many different data types, timeframes and speeds. It answers the core question of where to store it all?, standardizing and centralizing data from different sources and consequently becoming a system of record.

In this context, a16z voices the platform hypothesis, proposing that the whole “backend” of the data stack — not just the data warehouse but the data ingestion, storage, processing and transformation — is consolidating around a relatively small set of cloud-based vendors. As shown in the simplified illustration below, previously isolated data from different data sources is fed into the cloud data warehouse (illustrated in red below). It then gets transformed and made available in BI tools like tableau, in data science notebooks like Deepnote and more.

Following this thesis around the cloud data warehouse becoming the system of record or single source of truth for data, we want to highlight two areas that we are particularly excited about. The first concerns warehouse-native applications built on top of the data warehouse and Reverse ETL (Extract, Transform, Load). The second, a bit wider area, deals with the challenges arising from opening up more data systems and linking them to the cloud: Data Quality and Governance.

Warehouse-native applications & Reverse ETL

As the “backend” of the data stack starts to consolidate and monolithic, closed data systems get opened up, there is a huge potential for warehouse-native applications to emerge and to put previously siloed data into context through Reverse ETL.

💡 A wide range of new applications are emerging with a “warehouse-native” architecture in place. These applications provide better, real-time insights on the whole customer lifecycle including product usage and user journeys.

As the adoption of SaaS solutions increases, more data gets created and made available in the cloud. This data from the likes of Hubspot or Stripe can not only be fed into a data warehouse, it can also get enriched by the data from the data warehouse and synced back to the respective tool through Reverse ETL. Providers like Census or Hightouch enable this as a service. Consequently, data customers and business teams derive new and better insights right in their main OS and can execute them in real-time — taking away workload from oftentimes already overworked data teams.

In addition to that, as the data warehouse becomes the system of record, it allows “frontend” developers to use it as a single point of integration (aka standardization) to build many applications on top.

We see verticalized solutions for different business functions emerging that leverage these new ways of creating, storing and using data: Fullview, Planhat or Vitally for Customer Success; Weflow for Sales and Endgame, June, Correlated, Pocus for product analytics and Product-Led Growth (check out our previous series on PLG if you’d like to dig deeper into the topic). There are also more generalist platforms like Breyta or PoggioLabs, and enablement tools like Y42, Whaly or Weld to sync user data across different SaaS tools.

A core challenge with Reverse ETL however, which is also discussed by Priyanka Somrah in her newsletter “The Data Source”, is to maintain low latency in order to avoid inconsistencies between data updated in the warehouse and data that is fed into third-party applications like Salesforce or Zendesk. There, business users need the most up-to-date versions of the data in order to execute the insights. Snowflake has already launched Change Data Capture (CDC) to address this challenge.

Data Quality & Governance

One drawback of connecting more diverse data sources and the explosion of new warehouse-native applications is that it creates huge dependencies and complexities. Petr Janda, former CTO of Pleo, has illustrated this problem in the following image:

Finding, understanding as well as securing data while ensuring high quality and trust is still a challenge for many. Yet, it is a critical fundament upon which data success and literacy are built. Therefore, inspired by Ethan Aaron, we expect data teams to expand their mandate from analytics into operations — similar to what we see with the rise of DevOps in engineering.

💡 There needs to be better integration, visualization, security, and control capabilities that reduce repetitive and laborious tasks required to deliver clean, compliant data repeatedly to the end user/application.

DataOps and the respective tools help users find, understand, access and secure data as well as create trust in its quality. It answers questions such as What data do we have available? Where does it live? How is it structured and used? Who has access to it? How can it be shared in a secure way?

Data Ops is particularly relevant as it deals with physical systems, data models, processes and human beings. DataOps is designed to build high-quality data and analytics solutions at an increasingly accelerated pace, and with higher reliability. It can be broken down into different sub-categories.

🔎 Data quality, monitoring & observability: Here, the goal is to help users trust the data they find. This is especially critical as mastering data and data quality management has been and still is one of the most important trends in Data, BI and Analytics according to a report on the Top Business Intelligence Trends 2022 by BARC.

Companies are constantly battling with insufficient data quality as a hurdle to making better use of the data.

Soda, a Belgium-based company, helps enterprises monitor the quality of their data and brings together different departments to collaborate and investigate data challenges together. Other players in the space are Monte Carlo, Datafold, and BigEye.

🏛️ Data management & governance

The survey from BARC also found that data governance is equally significant to ensuring high-quality data to work with. Data Management and Governance includes the access and collaboration aspect of working with data which defines how you handle permissions and exchanges of data, both internally and with other organizations. Companies addressing these challenges are Harbr, Oblivous and Decentriq.

Another challenge is to make data discoverable within the organization and to establish standardized metrics across all the teams to ensure alignment between the business and the data teams. Data Catalogues aim to solve exactly that and give insights on what data is actually available, where it can be found and how it is structured and being used. Tools like Castor, Atlan or Lyft’s open source program Amundsen provide such solutions.

Lastly, in order to be able to track data across repositories and pipelines for troubleshooting and/or compliance purposes, Data Lineage is critical. Manta, helps enterprises understand and visualize the flow of information through the organization and brings visibility into the where, how and what of their data assets. Another well-established player in this field is Collibra which has raised almost $600M in funding so far.

Assessment Criteria

When we assess opportunities in the areas mentioned above and by talking to data experts, it became clear that the bar to try and buy data tools is very high. Founders building in the Data & Analytics space should thus address the following questions of users and buyers when defining their value proposition:

🚧 Barriers to adoption: How applicable is the tool to the current tech stack and existing data sources? How well is it integrated with other tools? What are the switching and implementation costs?

📊 Data types: How fast (batch vs. real-time) and in which format (structured vs. unstructured, new vs. old) should the data be made available?

💐 Control: How much of the data stack should be kept in-house vs. outsourced? Should it be on-premise, in the cloud, or offer a hybrid solution?

💙 Community: Where can one get help? How responsive and growing is the community? Is there clear documentation available?

💨 Varia: Other aspects that were mentioned included the reliability and stability of the tech, the calculation and loading performance, data security/GDPR, access and release management as well as version history.

At Lightbird, we emphasize the strength of the communities and low barriers to adoption as important assessment criteria as well as a 10x better user experience. Many of the data experts we spoke to mentioned that having an open-source approach with an engaged and growing community has a strong signaling effect and increases trust for them — not only in how the solution is being developed over time but also in how they can get support.

We will continue to go deeper into the Data Rabbit Hole as time goes by since there is still much more to unpack. Nonetheless, we hope that this article has given you a good first overview of the drivers, challenges as well as opportunities for builders in this space. Founders focusing on building strong, sustainable communities around their products while providing a 10x better user experience than the status quo still have many areas to disrupt — and we’re bullish to partner with them, so please reach out!

And to stay up to date about everything at Lightbird, make sure to sign up for our newsletter here.

This article would not have been possible without the support of the experts that helped us nurture our understanding of the space. Many thanks to Janine Lee, Matthew Brandt, Macarena Beigier, Martin Seifer, Sarah Schneeberger, Lingxuan Zhang, Livia Kaiser, Osmo Salomaa and many more🙏

Bonus: Data Bookshelf

There are a couple of very insightful articles describing the modern data stack which we used to get started when we first fell into the rabbit hole. They might be helpful for you as well 👉 check them out here.

Navigating the Data Rabbit Hole was originally published in Marcau Partners on Medium, where people are continuing the conversation by highlighting and responding to this story.

We are more than excited to announce our investment in the UK-based company trumpet alongside Triple Point, Haatch and Anamcara and a number of high-profile angels 🙌

Learn more about our thesis and experience for yourself why we believe Rory, Nick and Andrew are going to revolutionize the way B2B software is sold by clicking here!

Simplifying the SaaS buyer journey: Why we invested in trumpet was originally published in Marcau Partners on Medium, where people are continuing the conversation by highlighting and responding to this story.

Co-written by Marcau/ Lightbird’s Thuy-Linh, Keen Ventures’ Djoni, No Such Ventures’ Sophie, Headline’s Anna and Paua Ventures’ Charlotte

In autumn 2021, after working 3 years in strategy consulting, I (Thuy-Linh) was starting a new chapter of my professional journey as a VC investor at Marcau Partners /Lightbird, full of energy and expectations for an industry that was relatively new to me. And, boy, how new indeed! I was expecting changes from my previous work and work environment but quickly realized I had underestimated some fundamental differences.

Reaching out to peers that are going or went through similar career transitions, and sharing how much we enjoy our new roles, I also quickly found out that our reflections and challenges were very much the same. So, together with friends Djoni (Keen Ventures), Sophie (No Such Ventures), Anna (Headline) and Charlotte (Paua Ventures), we decided to share our own experiences as well as our tips & tricks to successfully embrace and best settle in your role as an ex-consultant/now-tech investor.

Consulting vs. Venture Capital: 2 working cultures

“Ah, so you are now in VC? Shouldn’t be too much of a change for you then?”

Duh, we got this question over and over again… So let’s go through some important differences in working culture between a consultant and an investor role that you should expect and that make both worlds very distinct.

1. Dobby is free!…but what now? — While in consulting you mostly had someone telling you what needed to be done by when (👋 to our ex managers, partners, clients), in VC you are often given the liberty to decide what you want to do, who you want to talk to, what opportunities to pursue and when you want to do all of this. Amazing, no? Truth is, it does take time to embrace this new freedom (and responsibility!). The challenge is also that you often don’t get a lot of guidance on where to start, how to reach out to people, how you should decide which opportunity to pursue. Down the line, it also requires you to be much more proactive, agile and flexible in your job.
2. Mirror, mirror, tell me I am a good investor — Being project-based, consulting is a perfect environment to get regular feedback on your performance. VC does not offer this institutionalized setup where your performance can be easily reviewed against well-defined criteria and clear deliverables. Some days as an investor, even if you made X outreaches, spoke to Y founders and read Z articles, you look back and wonder “what have I really been doing and delivering today?”. In VC, there generally will be little guidance on whether you are actually any “good at this job” (only time, and a good portion of luck too, will tell: even unicorn investments take years to unfold), how you can possibly get better at it and how to progress your career.
3. The Solo Fighter — While VC remains a team-based work, it can sometimes feel lonely, as, ultimately, it is really about you as an investor and how you create your place in the ecosystem that matters. No more hiding behind a big brand, a client, partner, manager (👋 again) to go out there and make decisions: you will be asked to decide for yourself what investor you want to be, decide which opportunity to purse, own this decision and process end-to-end, hustle to build your own personal brand, show conviction and form an opinion on (almost) everything. And so, it requires some adaptation for someone like us who was previously trained to always give three potential options with all pro’s and cons, but with zero skin in the game.
4. It’s a marathon, not a sprint — In consulting, work usually comes in short but intense waves, after which you are allowed some time to take a breath. In VC, if you are a procrastinator who needs set targets to get going, beware, as deadlines are much more fluid and work, in a way, never really stops: you could go on forever researching a space, looking for interesting opportunities, talking to people. Even when you just closed a deal, you are already arranging meetings with the next founders, attending the next networking events, … Bottom line, the VC game is really about endurance.

Feeling a bit lost in your new role? Here a few of our tips & tricks

• 🧑‍🤝‍🧑Build your tribe: Go out there and network. VC is a world full of motivated, friendly and approachable folks. Find people with whom you connect and like to spend time with, sharing the latest deals, gossip, best places to eat in Berlin/Paris/London/Bali (yes, looking at you lucky ones!) and most importantly helping each other to grow in your respective roles. So sign up to these meetups, don’t be afraid of reaching out cold via LinkedIn, and get your social game going! Hint: Don’t know where to start? It might help to connect with people with the same career background as you 😉
• 🎯Set yourself goals and celebrate small accomplishments: Use your analytical and methodological consulting skills to put more structure in your work. For instance, find things you would like to do or try out, design some “strategies” to get there and commit to them. This does not have to be in the form of OKRs, but rather small personal goals you would like to achieve for this year, month or even week: a glorified to-do list if you will, but it helps giving yourself some direction and also a sense of having “delivered” something (#impact).
• 🔭Allow yourself an exploratory phase: When transitioning from consulting to VC, you usually already have a couple of years of professional experience in your bag. And thus, you feel like you should hit the ground running when starting your new role (e.g., already know which industry you like, make your first deals in the first months). Don’t worry if this isn’t the case. On the contrary, take the time for a “walk” to understand how key processes work, to explore different topics and industries, to discover what it means for you to be an investor. You will sooner or later realize that there is not one single way of being successful at this job. Plus, no one is expecting you to find the next unicorn in your first months in the team, so be kind to yourself, and take your time.
• 💬Ask for feedback and look for mentors: We all know, feedback loops in VC are long. But do you really need to wait 5–7 years to know how you are doing as an investor? If your team doesn’t yet have a very structured feedback culture, take it on yourself to introduce one: it can take the form of formal performance review sessions with your team, of casual coffee catch ups with your partners, of mentorship and shadowing opportunities, etc. Feedback is so important to grow in your role, so be proactive about it. It is truly an opportunity for you to shape your role in a way that no one else has before. And, like many things in VC, if you don’t do anything about it, nothing is going to happen.

Congrats again on your new role in VC! We hope that you recognize yourself in the points in this article and found some useful tips to help you start on this exciting journey. Please don’t hesitate to reach out to us, we always love a chat!

Transitioning from Consulting to VC: Things we wished we’d have known was originally published in Marcau Partners on Medium, where people are continuing the conversation by highlighting and responding to this story.

At Lightbird we have long been convinced that payroll will be the next big thing, the next frontier, for open finance and fintech in general. And when we first met Max, we knew that we finally found someone who, like us, was obsessed with this topic.

The information contained in payroll data, e.g., one’s earnings, employment status, identity, retirement and savings contributions, tax withholding, etc. is critical to access essential financial services such as credit, mortgage applications and insurances as it provides a more holistic view of a consumer’s financial situation. Yet, payroll systems are one of the last business systems without a modern API infrastructure: for lenders, verifying payroll information still relies on phone calls and other manual processes vulnerable to fraudulent actions (costly and inefficient) — for instance, more than 1 in 10 adults in the UK still think it is “reasonable” to exaggerate income on a mortgage application; for users and loan applicants, accessing their payroll data requires to individually log into their payroll accounts, download and share relevant information electronically or to even sometimes physically bring the documents to the next local credit branch (inconvenient and unsafe). Ultimately, these archaic processes defer and deter objective lending, renting and insurance decisions and represent great barriers to universal financial access.

Mistho, as one of the first European players enabling access to employee payroll information via a standard API, contributes to, not one, but two revolutionary movements:

• First, it implements and drives the idea of open payroll in Europe, which allows consumers to regain full control over their HR and financial data and to share it directly with third parties. Just as open banking solutions improved consumer access to their personal account data, mistho wants to do the same with HR and payroll.
• Second, it simplifies access to financial services and redefines individual credit-worthiness by ensuring access to real-time, reliable and consumer-permissioned data independently of the payroll systems in which they are hosted.

And so, we could not be more excited to accompany Max and Shervin on their mission towards more financial inclusion.

Here are a few other reasons why we decided to lead the €3M seed investment in mistho alongside Flash Ventures, GFC, FinVC and Nauta Capital:

🌊Open payroll or an ocean of opportunities: We talked about achieving more financial fairness for consumers, but by digitizing and facilitating the access to payroll data, mistho also provides immediate value to lenders, landlords, insurers and banks — think of processes such as identify, income and employment verifications, or also more generally of more precise KYC and risk profile definitions. Beyond this initial use case, we also believe that mistho’s solution and built integrations to payroll providers could be applicable in a variety of other exciting areas — think for instance of direct deposit account switching for neobanks.

💎First mover in Europe: Mistho is one of the pioneers providing a simple, easy-to-implement solution for income and employment verification in Europe. While players like Atomic (2019, $69M), Argyle (2018, $78M) and even Plaid (2013, $734M) are betting on open payroll in the US, we believe that the payroll market remains a massive opportunity still largely underserved by European startups.

🏆A “go and get-it” mindset: Shervin and Max are not at their first venture. And as they met to work on mistho, their respective roles just came naturally: Max = the Why (we told you, he is obsessed with the problem), Shervin = the How (you should once quiz him about History, the guy is a walking encyclopaedia!). Not only are they complimentary in their roles as founders, Max and Shervin also share a love for home-made oven-backed pizzas and more importantly an unbeatable work ethic, execution power and commitment. Proof is, in the past 9 months only, the mistho team was able to build a product able to cover more than 70% of UK employees.

We are incredibly proud to be backing mistho leading the way to new standards in dealing with payroll data in Europe and universal financial access, and look forward to continue working closely with the team as they expand in the UK and other European markets.

Find out more about mistho on their website, or read here and here for more information on the funding round.

Our journey towards more financial inclusion with mistho was originally published in Marcau Partners on Medium, where people are continuing the conversation by highlighting and responding to this story.

Following up on our previous piece, this second article draws closer on CFOs’ relationship to tech. Read on to find out more about the digital adoption in finance, key buying criteria and what we consider as key success factors for players in the CFO tech stack space.

📈 The incremental digital adoption of finance teams

The COVID pandemic has been the catalyst for the acceleration of digitization in many industries. Yet, when speaking with CFOs and finance teams working in startups, scale-ups and enterprises alike, no one seems to have experienced an accelerated digital adoption in their respective teams or department: “not much changed really… I would see digital adoption as rather incremental in finance” said Niklaus, Lead Business Controller at Swisscom. And indeed, digitization in finance has been rather progressive and slower compared to other industries, leading some observers to advise CFOs to better adopt digital in finance or ”get left back”.

So is there no way to accelerate the rate of digital adoption in finance? For our interviewees, much has to do with the overall company’s strategy. In startups or scale-ups, the pandemic did not have much of an impact “because we were anyway already digital-first!” as stated by Bernhard, CFO at Carvolution. In large enterprises, where it usually takes time for new technologies to make their way through the corporate bureaucracy, the willingness to digitize finance and necessary support for CFOs to lead the digital transformation has to come from the top. There are also other drivers than the pandemic, such as the advances in technologies like AI / ML, that could accelerate the rate of digital adoption in finance in the upcoming years. One of these drivers repeatedly mentioned in our interviews was simply the change in the finance workforce with the arrival of younger, more tech-affine talent.

✔️ CFOs’ buying criteria — The must-have’s of every tech tool

With respect to trying out new tools, the finance professionals we spoke to are generally open, but do not want to spend too much time optimizing their tech stack. Here’s a short list of key criteria they will look out for when considering a new tool:

• Integration with existing stack: Data that do not reconcile, totals that do not add up and numbers that seem to “just pop up” out of nowhere is a great source of frustration for financial professionals. When adopting a new tool, the number one priority is that it does not disrupt the existing work and data flows within the finance team and its systems. Hence a seamless integration with the current stack is essential to any buying decision.
• UX / UI: In finance departments, Excel is still the go-to tool, despite all its limitations, just because it is too convenient, flexible and everybody knows how to use it — “If you’re going to build something to replace Excel, it better be 100X better than Excel because 10X ain’t gonna cut it” tweets Siqi Chen who is building Runway (USA, 2021, $4.5M)* to rethink the role of financial data in any organization. While finance teams would be open to try better tools, they don’t have the time to learn new user skills. For Boris, CFO at SMG “we just really cannot lose time with new technology”: intuitive, no-code interfaces that are fun to work with are key.
• Speed of implementation & customer service: linked to the above, adoption must be as easy as 1,2,3. This includes a seamless and rapid implementation and high-quality customer service when required.
• Return on Investment / Price: this is especially true for SMBs with limited budget to spend on different tools. The costs of a new tool must be justified by the value it brings (e.g., through faster, more reliable processes).
• References / user community: The CFO is a large and active community, often underrated by startups in their go-to-market strategies. Yet, many interviewees cited their community as the go-to source for new tools (hint: cold LinkedIn outreaches from providers are not well received!). References from peers and the user community are an important factor in the final buying decision.

*(Country, Founding year, Funds raised)

Medha Agarwal and Urvashi Barooah wrote a compelling article on buyer personas in the finance tech stack if you want to dig deeper in this topic.

🚀 Success factors for players in the CFO tech stack space

We summarized the key findings and highlights of our conversations with CFOs on their relationship to tech. Based on those conversations and additional research, we want to conclude this article with what we at Lightbird believe could be key differentiative and success factors for players willing to create true value for finance teams and potentially win in a crowded market.

Often cited characteristics of future winning finance tools will ensure to fill the common gaps of existing ones, e.g.:

• ensure seamless integration with other systems and apps, potentially allowing for real-time features
• come in a user-friendly, intuitive interface allowing and offering best-in-class customer support when required
• facilitate collaboration across teams beyond the finance department (e.g., cloud-based solutions for data collection and reconciliation)

All the above are critical, however in our opinion not necessarily differentiative in a highly competitive environment. We consider that true value-creating tools would also be able to:

• allow for true customization — as complex areas such as forecasting, scenario and risk modelling where tech can better support CFOs are fundamentally specific to each business, features that allow flexibility and customization over standardization are preferred.
• make complex things seem simple — tools should come with a neat and intuitive user-interface, yet are based on very nitty-gritty details (that can be viewed if necessary) and able to reliably process, integrate and reconcile complex data.
• ensure more data governance & transparency: data is the core of every finance activity and so ensuring that it is processed securely, reliably, transparently and in compliance with any obligations is key. Ultimately, it comes down to helping finance professionals better trust the technology and data they work with — so “I can sleep better at night” concludes Fabian from The Creative Club.

As a final note, we would like to thank all CFOs and finance professionals who accepted to spend some time with us to share insights and reflexions about their work, challenges and tech habits. We hope we were able to give you a glimpse into those great, honest conversations through these articles.

Thank you for reading and as always, we welcome any comments and questions on the topic. Are you a founder building something or just generally interested in this space? We’d love to have a chat with you, feel free to get in touch with us via Email. Also, sign up to our newsletter to stay updated on everything happening at Lightbird 🙂

Finance 2.0: A Conversation with CFOs on their Relationship to Tech (II/II) was originally published in Marcau Partners on Medium, where people are continuing the conversation by highlighting and responding to this story.

Digitization in finance isn’t something new. Over the past decade, startups and legacy providers have conquered this market, leading to a myriad of scattered tools fighting for a place in the CFO and finance professionals’ tech stack. The market is crowded and competitive — yet new startups keep on coming for this space and similarly, investors’ money and attention haven’t faded away. So at Lightbird in the past couple of weeks, we decided to sit down and conduct several interviews with CFOs and finance professionals to better understand why the CFO tech stack remains an attractive space for innovation and where we see the biggest future opportunities.

TL;DR: The evolution of the CFO role has had a significant impact on the key challenges finance teams face every day. Consequently, opportunities to create value for finance professionals lie in technology that a) further automates basic finance tasks to reduce errors and increase efficiency, b) better connects the (data) dots, and/or c) enables better collaboration with business partners.

🤠 Beyond finance: The multiple hats of a CFO

Finance departments have long been seen as a back-office black box for the rest of the organization, dealing with number-crunching and reporting activities no one else understands or likes to do. While finance professionals still take care of the core transactional, record keeping and reporting activities of a company (see the bottom of the pyramid as illustrated below), their role and particularly the role of the CFO has drastically evolved over the past decade to become more strategic than ever. Today, CFOs and their teams are considered gatekeepers of essential data and insights, key to strategic decisions and the future of a company. Hence, they are asked to focus their time on more valuable activities such as financial planning, forecasting and risk management (see the top of the pyramid).

For finance professionals today, daily activities span across many core aspects of the company: from traditional and transactional finance activities, to strategic finance including even resource management / HR tasks in some smaller companies. Risk management and data governance are other important activities that oftentimes fall under the responsibility of CFOs. As Fabian, CFO at The Creative Club, told us: “Previously, the CFO was, in essence, the “Chief Accounting Officer”. But nowadays, bookkeeping is just one nuance of the job— my role is more focused on strategy and growth projects in close collaboration with my CEO”.

This evolution in the CFO’s remit impacts the kind of challenges finance teams face today and subsequently defines their needs and relationship with tech.

⚡ The key challenges and pain points of finance teams

While the activities and needs of finance professionals working for startups, SMBs or large companies can widely diverge, they still share key challenges and pain points, as revealed by our interviews:

• Tech black box and inefficient data reconciliation: Among the things that can make finance professionals stay up at night are data that do not reconcile, totals that do not add up and numbers that seem to “just pop up” out of nowhere. As Niklaus, Lead Business Controller at Swisscom, puts it: “It is crucial that the flow of data is continuous — otherwise it’s just “garbage in / garbage out!”. For many CFOs, the current tools in use remain “a black box they cannot trust”: how is the data processed by these tools? How is it consolidated? Why do I get this result and why doesn’t it make sense? And when mistakes arise in processes that should be well-oiled and error-free (e.g. reporting, invoicing, record keeping), finance teams have to spend too much time understanding where errors come from and find workarounds to manually fix them.

• Data, data, data everywhere: Data is at the core of what finance teams do. Every day, finance teams have to deal with a massive amount of data to be collected, cleaned, consolidated and eventually interpreted from a variety of internal as well as external sources. Yet, as mentioned above, a lot of time is still wasted on the data collection, cleaning and reconciliation part, rather than on the more challenging and essential analysis and interpretation. For many CFOs, a key challenge for their organization remains how to truly make sense of all the data they collect and to derive insightful conclusions.
• The complexity of being future-proof: budgeting and forecasting have always been part of the central tasks for a CFO. While planning future scenarios typically happens punctually at pre-defined periods of the year, the recent pandemic highlighted the importance of rolling forecasts and short-term planning. CFOs are therefore increasingly asked to keep a constant eye on how the business is evolving, using real-time data, and to provide business partners with more precise forecasts and relevant risk management measures. With that and the overall shift towards more strategic responsibilities, CFOs face the challenge of taking on tasks with a new level of complexity.
• Communication or the power of being understood: the inherent complexity of what finance teams do is often misunderstood. Like some of our interviewees mentioned, many stakeholders still have the wrong belief that finance is “simply” about number crunching and neat reporting. And so, for finance professionals, another often cited pain point is the ability to communicate and showcase the complexity of their work in a simple and easily digestible format to their stakeholders.

⭐ Where tech can support and bring the most value

Based on the challenges and pain points CFOs are facing, we identified three opportunity areas where tech can provide the most value to finance teams:

• Making basic finance tasks more automated, error-free and efficient: the majority of existing tools in the market today focus on automating basic activities in finance (e.g., transacting, record keeping, reporting, spend management) — yet there is still more to do! In this space, the future opportunity lies in offering tools that make basic finance tasks even more automated and efficient, as well as more transparent and error-free, so that finance professionals can truly trust the systems they work with and focus on more complex activities. LiveFlow (UK, 2021, $4M)* is an interesting example in this space as they aim to speed up financial reporting by automatically updating excel spreadsheets.
• Connecting the dots: when asked about their wish-list of tools, many of our interviewees mentioned something in the likes of “a tool that could bring more clarity in the interconnectivity of data” or a “super app that would collect, consolidate and make the connections between the available data” especially in complex activity areas such as FP&A, Treasury Management and Risk Management. In essence, CFOs wish for tools powered by AI / ML to i) more efficiently connect and consolidate data otherwise scattered or isolated across different sources, ii) to suggest predictions / scenarios of potential outcomes based on the interconnections found in the available data, and iii) to help make better sense from the data in real time to derive more insightful decisions. Startups such as Pigment (FR, 2019, $99M)* and Modern Treasury (USA, 2018, $133M)* are designed to help CFOs better connect the dots between different sources.
• Enabling cross-teams collaboration: Another opportunity consists in helping CFOs in communicating their insights to business partners. Tech tools can support finance teams in better visualizing and sharing easily digestible financial insights. In that sense, self-service dashboards or financial cockpits that are also adapted to non-financial audiences come in particularly handy. Solutions like Abacum (USA, 2020, $32M)* and Pectus Finance (GER, 2021, n.a.)* put collaboration with business partners at the core of their product.

*(Country, Founding year, Funds raised)

In the second part of this article, we dig deeper into CFOs’ relationship to tech, their willingness to adopt new tools, buying criteria and conclude with what we consider as success factors for potential winners in this space.

Are you a founder building something or just generally interested in this space? We’d love to have a chat with you, feel free to get in touch with us via Email. Also, sign up to our newsletter to stay updated on everything happening at Lightbird 🙂

Finance 2.0: A Conversation with CFOs on their Relationship to Tech (I/II) was originally published in Marcau Partners on Medium, where people are continuing the conversation by highlighting and responding to this story.

Welcome to the second part of the PLG Playbook — Europe Edition. If you haven’t read the first part, make sure to check it out before reading on. The first two steps of the PLG Playbook we discussed were: (1) Focusing on the end user to define the core value proposition and (2) getting in front of them through waitlists and referrals, leveraging utility and virality, SEO and community.

The remaining three steps to be discussed in the PLG Playbook are the following: early value creation for users, data-driven conversion & retention optimization, and — last but not least — sales-led expansion to get the full picture. Let’s jump right in!

💡 Create value before charging anything

One of the core aspects of the PLG Playbook is to let the users try the product before they buy it. It is the product that onboards and trains the users.

Users should take the least number of steps to understand a product’s value and to get to their “aha moment“ before paying anything.

Freemium or free trials are a good way to provide value before charging users. Zendesk (DK, 2007, NYSE:ZEN) is an example of a product applying the free trial pricing strategy. Users choose their plan depending on their respective feature requirements and try out the full Zendesk product during a certain time period. It’s like a test drive for a new car: you try to provide as much value as possible in a short period of time. A free trial strategy is usually more suitable for high price and high complexity products.

Pitch (GER, 2018, $137.7M), a collaborative presentation software, offers a freemium pricing strategy, i.e. providing access to parts of the product for free without a time limit. Their pricing page is easy to understand, applies the three pricing tiers approach and has a clear call to action. Furthermore, the whole onboarding process is super smooth, allowing users to sign up with Google and Apple SSO. During onboarding, you can invite team members to the workspace and a pop-up explains the product in four simple steps with clear advice on where to start (user activation).

Both companies charge on a per user per month basis, billed annually. However, there are many other potential value metrics —such as per message, per API call, per seat — based on which to define your pricing. Initially, you can get the value metric through qualitative user interviews by asking users to rank the value drivers of your product. Later on, you should optimize the value metric through product usage data and move towards a more quantitative approach.

Zendesk and Pitch also have different tiers for different user segments, such as individuals, teams, enterprises. Thereby, different feature requirements can be better addressed.

Julian Lehr from Stripe wrote a great overview on how to experiment with your pricing strategy if you want to dig deeper into the topic.

💎 Generating leads for your B2B SaaS product is closely linked to how you price it and how convenient it is for users to onboard. Lucy Chen has written a great post on how to make onboarding more effective if you need some inspiration. Successful companies aim for low friction, self-serve onboarding in combination with a freemium or free trial pricing model — you can only monetize something that provides actual value.

🔎 Optimize for conversion & retention with data

The main challenge in PLG is to convert enthusiastic users into paying customers. To succeed in doing so, you first need to understand how your product is being used, where users struggle and churn, and which features best solve their problems. A solid data-driven understanding of product activation and usage — both qualitative and quantitative, ideally shared across the whole organization — will help you increase your paying user base.

Qualitative data points can be derived from user feedback through support, success and sales teams. Ideally, the product is set up in a way that customers opt-in to talk to you, resulting in a continuous pipeline of users to get insights from. We also see more and more tools providing quantitative insights for PLG-driven companies, leveraging and productizing best practices from hundreds of top tech companies. They shed light on real-time product usage, user journeys before payment and other sales-relevant aspects of your product and make it available across all sub-teams. Players from the US include Endgame (USA, 2020, $47.5M), Appcues (USA, 2013, $13.7M) and Calixa (USA, 2020, $16.3M). In Europe, June.so (remote, 2020, $2.4M) allows anyone to self-serve actionable metrics and to identify opportunities in seconds. According to Enzo Avigo, Co-founder and CEO of June, the benefits of leveraging product data with June are threefold: 1) better access to data results in a deeper understanding of what users do; 2) better initiatives since data helps to draw and test hypotheses at scale; 3) more initiatives as data provided through June is fast to query. Sensible.app (DK, 2021, n.a.) also aims to build a system of intelligence that helps traditional, sales-led companies better understand the whole user journey through (product) data.

When looking for relevant metrics to track, activation, active user growth (MAUs, WAUs, DAUs) as well as funnel conversions are key aspects to focus on. User activation measures certain actions that are predictive for future retention and are correlated to business performance, such as scheduling five meetings or inviting 3 colleagues to collaborate. Based on your most relevant metrics, defining Product Qualified Leads (PQL) as the highest potential leads should be the next step. PQLs are users that fit your target segment and “that have used the product and reached pre-defined triggers that signify a strong likelihood to become paying customers”.

OpenView has recently published a Product Benchmarks Report based on a survey with 258 startups with a variety of growth rates, ARR, and product types. You can find the most important metrics in the table below.

💎 A critical part of the PLG Playbook consists of understanding how your users interact and engage with the product and how the funnel looks like. Just as important is building a data-driven culture across all relevant teams. Data, user research and feedback — both quantitative and qualitative — are critical to develop new features, prioritize improvements within the product, increase conversion rates and ensure retention.

💸 Expand with sales-led distribution

The last part of the PLG Playbook takes place when you layer top-down sales on top of the bottom-up approach. After some time, many self-serve SaaS startups hit a growth ceiling. This is shown in smaller pockets of adoption, continual churn, and churn of larger customers to more enterprise-class solutions.

Sarah Guo, GP at Greylock, discusses this in her article Designing for Buying.

To fully capture the value of Product-Led Sales, salespeople double as solutions architects and/or customer success. They nurture existing users to become paid customers, to upgrade, or to expand within the organization. Consistently providing the best service is highly knowledge-intensive. Workbounce (UK, 2021, n.a.), a Collaborative Enablement platform, is building a system of intelligence that sits between sales reps, documentation, and FAQs from across the stack. This lets salespeople find the content and answers they need fast, through a Slack integration and Chrome extension.

However, the push for moving up-market is quite a delicate timing question. David Peterson, Partner at Angular Ventures, even argues that fast-growing software companies aren’t afraid to go after the enterprise market from day one. A recent survey by Pocus and FirstRound has shown that 48% of respondents made their first sales hire between $500K and $1M in ARR and that hire typically reported directly to the CEO/Founder.

97% of respondents either have sales AND PLG or plan to add a sales team to their PLG motion.

This post by Lenny Rachitsky takes a closer look at how the distribution approach of B2B SaaS companies changed over time. To take the example of Zendesk again, it started by selling to founders and early hires at smaller companies and then layered a sales-led distribution approach on top later on. In this article on Future by Sarah Wang and David George, it is mentioned that Zendesk switched to enterprise sales when a lead wanted to purchase more than 15 seats. The conversation was likely shifting towards more security and legal topics, resulting in a more complex sales process. Further learnings on transitioning to enterprise sales in a product-led growth organization can also be found in this recent post by Bessemer Venture Partners.

💎 A purely product-led sales motion eventually hits a growth ceiling. Layering a sales-led distribution approach on top of the bottom-up approach allows expanding from users to teams to the whole organization, catering to more demanding accounts and increasing the ACV (for bigger customers).

Conclusion

What fascinates us about the PLG Playbook is that it is all about the user and how to solve his or her pain point. As Caryn Marooney and Madhu Muthukumar have said in their talk on Trends and tactics from the frontlines of product-led growth: there is one thing that everyone in your company has in common 👉 serving the user! And while PLG has many advantages, such as higher efficiency of sales, organic customer growth, and more proactive product journeys, you still have to do the work of the other GTM building blocks.

Ultimately, product-led growth touches every part of your company. It’s a culture, not a product.

We hope to have given you an actionable playbook to get back to when thinking about growing product-led while highlighting exciting European companies along the way! If you are a founder working on PLG as your growth strategy and want to geek out over it, feel free to get in touch with us via Email & Twitter. And sign up for our newsletter to stay up to date about all things Lightbird.

The Product-Led Growth Playbook: Europe Edition (Pt. 2) was originally published in Marcau Partners on Medium, where people are continuing the conversation by highlighting and responding to this story.

Like most good stories, it started with a group of friends and a few beers: the idea of Saporo was born when Olivier, Eric and Guillaume shared a few bottles of Saporo on a Summer evening in 2021. Fast forward a few months, the Lausanne-based cyber security startup joins the Lightbird squad, lands its first client and is working in full swing on a solution helping organizations better anticipate and prevent cyber attacks.

As more and more organizations migrate their infrastructure to the cloud, remote work becomes prevalent and IoT fosters an increasingly connected world, the exposure to cyber attacks has gone up drastically: According to Checkpoint’s Cyber Security Report, cyber attacks against corporate networks increased by 50% in 2021 compared to the previous year. On average, an organization becomes a victim of ransomware every 11 seconds worldwide.

Cyber attacks not only pose a risk to an organization’s finances and reputation but can also threaten business continuity as a whole. The risks incurred by cyber attacks are so high and expensive that insurance providers have raised premiums and in some cases are even no longer provide coverage for cyber attacks. AXA France, for example, canceled reimbursements for ransomware payments under its cyber insurance policies for its customers in May 2021 because the number of claims was exploding.

The so-called Achilles heel of a company’s IT security — be it in the SMB or Enterprise segment — is the directory. A directory service is used to manage users and their access rights: when you enter a password of your work laptop, the directory is checked to see if you have the rights to use this laptop and the various corporate services attached to it. This directory and the respective identities are commonly targeted in cyber attacks: attackers identify the weakest point of entry and try to move up from the user’s identity towards more valuable assets, e.g. from the intern up to the CFO’s credentials and data. While the directory is the cornerstone of most organizations’ network, it is not designed for security.

This is exactly where Saporo comes into play: Saporo proactively and continuously conducts machine learning-driven analyses across assets, users, and computers to proactively identify and prioritize the necessary fixes before attackers exploit them. This enables security managers to anticipate cyber crimes rather than react to attacks that have already occurred. Consequently, financial, reputational, and business risks can be limited and reduced.

We are proud backers of Saporo and have co-led the recently announced pre-seed round of $2.7M together with our friends from Session.vc. Here are three points why we are convinced that Olivier, Guillaume, Eric and their team are onto something big!

1️⃣ A strong founding team of cyber security experts and serial entrepreneurs

The first time we spoke with Olivier was at the beginning of August 2021, when Saporo was only four months old. Olivier and his co-founders Guillaume and Eric quickly showed a deep understanding of the cyber security space in combination with strong execution power. Their background and professional experience in both Switzerland and the U.S. leads to a good cultural mix. They also experienced firsthand what it means to build a unicorn as part of the Nexthink team, a Swiss-based analytics platform to measure and manage information security programs. In addition to several years of experience at Nexthink, the founding team has built further extensive cyber security as well as company-building know-how at companies such as Dathena, Vectra AI and Alaya.

2️⃣ A growing market with big momentum

Organizations are starting to take security risks more seriously: According to Gartner, worldwide spending on information security and risk management technology is expected to reach 211B in 2025. High growth is predicted for this market in the next couple of years because security spending still varies widely between different industries/companies today. While cloud-based companies already spend 9.5% of their total IT budget on security, more traditional companies are still far away from this figure. However, as these more traditional organizations become more digitized, e.g. by deploying IoT devices and moving to the cloud, they are increasingly urged to protect themselves against cyber attacks. The opportunity for cyber security players to address the needs of these new customers is huge.

A good example of this market opportunity resides in the healthcare sector, where healthcare providers are increasingly moving their data to the cloud. This shift poses great challenges related to data privacy and data security, especially concerning sensitive patient data. For attackers, however, this data is very attractive and IT security managers consequently invest a lot of resources to deal with these issues. Interestingly enough, IT security teams spend 60–70% of their time on post-incidents, i.e. checking logs and trying to figure out what went wrong when it is already too late.

Wouldn’t it make more sense to prevent cyber attacks in the first place? This is exactly where solutions like Saporo dealing with privilege access management in combination with threat intelligence come into play. And more and more IT security officers realize the strategic importance of prevention over reaction. This move from post-incident to pre-incident analysis is the last point we would like to make on why we believe Saporo has great potential.

3️⃣ Moving from post-incident to pre-incident analysis

Saporo’s solution helps CISOs and their teams with pre-incident analyses by

• proactively conducting stress tests to identify and fix weaknesses in the directory before attackers exploit them. Saporo not only looks at whether the assets are compliant but also whether the assets have higher-privileged access to further assets. Simple stress testing tools or scanners do not perform such extensive analysis.
• ruthlessly prioritizing actions with the least amount of effort for the biggest impact. By prioritizing problems based on real attack scenarios, IT security teams can consequently allocate resources to the most critical issues at hand.
• eliminating the need for deep attacker knowledge and providing quantifiable risk measures and efforts instead. This is done in a simple and practical way, letting IT administrators configure the solution directly in their tech stack.

Currently, Saporo focuses on the Microsoft Active Directory (on-premise) and Azure AD (cloud). Looking at the market size of Microsoft, this makes sense: Microsoft remains the dominant provider with its Azure AD (Active Directory) despite increasing competition from other players like Google and Amazon. Among the Fortune 500 companies, Microsoft has a market share for identity management of 95%. This is mainly driven by the continuous presence of Microsoft Office in the (enterprise) business space. There is however some movement in the Directory-as-a-Service space, with JumpCloud (USA, 2012, $350.7M) recently announcing their $159M Series F at a $2.56B valuation, and Okta (USA, 2009, NASDAQ:OKTA) going public on the NASDAQ in 2017. Consequently, Saporo is also working on the coverage of other data sources like Amazon Web Services, Google Cloud Platform and Okta to be released in the coming months.

The team is using the fresh funding of this financing round to expand its team, especially in sales and product development. We are excited to have joined Saporo early on their adventure and cannot wait to work together on the journey ahead.

If you would like to stay up to date with all news Lightbird, sign up for our newsletter and follow us on Twitter and Linkedin.

Anticipating cyber attacks: Why we invested in Saporo was originally published in Marcau Partners on Medium, where people are continuing the conversation by highlighting and responding to this story.

Buying insurance in the 21st century is not easy: the user experience is poor, the process is the opposite of smooth, and the benefits are uncertain and distant. It remains a product category consumers only have little trust in, consider complicated, inflexible, expensive, difficult and annoying to buy. On the insurers’ side, they have to spend huge amounts for distribution and customer acquisition, amounting to almost 50% of the total costs.

Besides the distribution challenge, today’s traditional insurance policies for property (e.g. goods, cars, pets, etc.) and related property damage to third parties are designed for an economy focused on ownership. However, there is a significant behavioral shift from owning to sharing across a multitude of categories. The global sharing economy is set to reach $335bn by 2025, with one key driver also being an increased shift towards sustainability. According to a study by Capgemini, 79% of consumers are willing to adjust their purchasing behavior based on the global agenda for sustainable development.

Omocom, a Swedish embedded insurance provider and member of the Lightbird portfolio, combines and solves these two problems by providing API-based, short-term, micro-insurance policies that can be integrated into products on platforms. The platforms can thereby increase trust and lower barriers of adoption for their customers while simultaneously driving more sustainable consumption choices.

Read on to find out why we think Omocom is uniquely positioned to conquer the embedded insurance space and why we are excited to join forces with Ola, Tobias and the whole Omocom team.

📊 Market

Funding in European insurtech startups has seen unprecedented growth in 2021: A staggering EUR2.7bn were invested in the 2021, topping 2020 by far. Global VC investment in insurtech has grown 4.1x from 2016 to 2020 (as a comparison: Fintech only grew at 1.4x). According to a report by Dealroom and Mundi Ventures, European insurtech startups have a combined enterprise value of EUR 23bn as of the beginning of June 2021. The $50M+ unicorn club comprises players like Wefox (GER), Alan (FR), Zego (UK), Friday (GER), Luko (GER) and many more

Within the insurtech space, embedded insurance is part of the overall trend towards a more fragmentized insurance stack. Single insurance functionalities are abstracted through technology and integrated into the workflows across the insurance ecosystem. The value proposition of embedded insurance is to unify the buying experiences (e.g. car + insurance) and to make the insurance default ON. The market is growing rapidly: Embedded insurance in the property and casualty market alone is expected to reach 24% of market share by 2030, a 12x increase from the 2% it has today.

⚙️ Product & Technology

Omocom provides customers with insurance right when they rent items on P2P sharing platforms like GoMore, or make a purchase on B2C marketplaces like Tiptapp and refurbished electronics platforms like Refurbly.

Its API is easily embeddable and flexible, enabling seamless user experience, data collection and scalability. Furthermore, the risk engine makes individual risk calculations for each transaction in real-time.

By integrating Omocom’s insurance solutions, the P2P platforms and B2C marketplaces can increase trust, loyalty and retention as well as get access to a higher margin revenue stream. The customers on the other hand get the insurance products when they need them (and only for as long as they need them) and consequently profit from a more streamlined customer experience.

When testing out the product, we were not only impressed by the simple front-end but also by the clearly structured tech stack. The technological infrastructure is well-thought-through and built for scale right from the start.

🤝 Team

Already in our first meeting it became clear that the CEO and Co-Founder of Omocom, Ola Lowden, is not only an entrepreneur who wants to build a successful business. He also has the ambition to contribute to a more sustainable future. It was crucial to him that we as investors understand what Omocom is really about, i.e. a mission-driven company that is beyond purely offering insurance. Omocom envisions to become the provider for circular insurance that catalyses a change in the way we consume, encouraging the re-use of products as a means for a healthier and more sustainable planet.

On his mission, Ola is accompanied by his Co-Founder and CTO Tobias Mård. He and his team are the driving force behind Omocom’s stable and strong technology infrastructure. The company culture is to a large extent driven by Tobias’ motto “With trust comes growth”. Continuous communication and collaboration within the company are other key values at Omocom. As a remote-first company, Ola and Tobias knew how important it is to build and sustain such values from the beginning. The company has set up a modern tech stack to support cross-border collaboration, and employees remain flexible in when and where they work.

🚀 It’s time to grow

By participating in this pre-Series A round alongside the lead investor Mundi Ventures and the co-investors Inventure, Mustard Seed Maze and Luminar Ventures, we are excited to make our first investment in the insurtech space and are looking forward to working closely with the whole Omocom team.

Rethinking insurance for the sharing economy: Why we invested in Omocom was originally published in Marcau Partners on Medium, where people are continuing the conversation by highlighting and responding to this story.

If you are a founder in the B2B SaaS space, chances are high that you have heard of Product-Led Growth (PLG) as one of the most promising ways to grow. Notion, Canva, Airtable, Figma, Atlassian, Twilio, Zoom, and Slack are at the forefront of this new paradigm in software selling that places the product at the core of the go-to-market and growth motion. And they are unlocking huge value! Over the last couple of years, the number and market capitalization of public PLG companies has increased significantly. In 2021 so far, companies like GitLab (Oct, $11bn market value), Freshworks (Sept, $10bn market value), and Monday.com (Jun, $6.8bn market value) went public.

Why is PLG relevant? Traditional (enterprise) software sales and adoption are characterized by long sales cycles and procurement processes as well as complex products with a non-intuitive user experience. Salespeople educate buyers (e.g. C-level, VPs) on the product before a POC is run across parts of the organization. Then, during the implementation phase, the product is spread top-down through the company. Today, many software products just kind of show up in organizations, usually driven by end users trying to find a solution to a very specific problem they experience in their daily work (bottom-up). These end users generally hate demos, talking to sales, running implementation projects and training to use the software — they want to get a job done as quickly and easily as possible. This is where PLG comes to play. Compared to traditional software sales, a product-led growth motion uses the product to drive customer acquisition/distribution, conversion, retention and expansion. Users can try and use the product through self-serve (low friction), pay only as much as they use it (value-based pricing) and get more value out if by sharing it with others (virality). As a consequence, user growth is decoupled from sales headcount. However, it does not mean that sales teams are redundant — in fact, their role is critical for expansion and gets a more consultative layer on top (more on this in part 2 of this series).

Who is PLG for? As a B2B SaaS founder, looking at your users and their problem, you might decide for or against product-led growth to grow your company. Pete Kazanjy, the author of Founding Sales, suggests answering the following questions to come to this decision:

1. Is the value proposition simple enough for your target user group to understand through self-serve (i.e. get to the “aha” moment by themselves)?
2. Is the product new and differentiated?
3. Can the product co-exist with an incumbent in an organization’s tech stack (e.g. note-taking vs. accounting software)?
4. If none of the above apply: will you focus on smaller, fast-moving organizations not currently targeted by incumbents?

PLG fundamentally defines the company strategy as a whole, requiring the whole organization to be aligned. It impacts how you build the product, how you generate acquisition and expansion, how you price it, and how you engage with your customers.

Common blog posts and articles on PLG usually describe the growth flywheels of Loom, Slack and the likes which are mostly based in the US. However, we see more and more companies in Europe applying the PLG Playbook. We thus wanted to take the opportunity to have a closer look at it and the (selected) European founders applying the tactics to build and grow their companies. While some companies like Snyk have raised a significant amount of funding, others like Flowrite and Butter are still young.

The PLG Playbook

At Lightbird, we divide the PLG Playbook into the five different steps illustrated below.

This two-part series starts off with the first two steps of the PLG Playbook, which are how to focus on your end users and their pain point as well as how to acquire them in a cost-efficient and scalable way. The second part then discusses onboarding and pricing strategies, gives insights on the PLG tech stack for conversion and retention as well as on how to layer sales on top of the bottom-up approach. Let’s get started!

🎯 Focus on the end user and his/her problem

The first and most crucial part is figuring out who your end users are and what problems they experience with current solutions. Try to find out what they do in their jobs, how influential they are, what they are struggling with on the ground and how they are spending their budget. The more precise you are, the better! In addition: Try to understand how frequently users experience the problem you are trying to solve and what workarounds they have come up with. Ideally, they are actively looking for a solution and are willing to pay for it.

Maze (Location: FR, Founding Year: 2018, Funding as of 11/21: $17.5M), a software for user testing, is focusing on one specific use case, i.e. user testing, and a specific user group, i.e. product teams. A Product Manager immediately understands the problem maze wants to solve for him or her.

💎 Figuring out your end users and narrowing down the use case allows you to a) define the core value proposition of your product; b) nail your product’s positioning and messaging strategy; and c) consequently efficiently allocate marketing spend by focusing on high potential users who immediately understand your value.

📣 Get in front of your end user

Once you know your user segment(s), find out how and where they spend their time to get in front of them in a quick and cost-efficient way. Creating awareness for customer acquisition can happen through friends and family, word of mouth, waitlists, communities, and much more. We want to highlight four core awareness strategies in this article: waitlist & referrals, leveraging utility & virality, SEO and community.

Waitlist & Referrals

One potential strategy to apply before you actually launch your product is the waitlist. Flowrite (FIN, 2020, $660k), a writing tool powered by AI, is growing its waitlist with incentivized referrals. The product gets endorsed by early users helping to increase trust among their peers. There is even a public Google sheet that shows the referral leaders and a ranking. Gamification at its best! According to Samuli Pehkonen, Head of Marketing at Flowrite, this strategy paid out: The waitlist referral program brought in 30% of the total waitlist signups for Flowrite and was essential for customer development. Combining the waitlist with the private beta program enabled Flowrite to iteratively build the best possible product for the ideal users together with them.

Utility & virality

Ideally, the product has strong virality components to it. If the product can only be used with others or gains its value through collaboration, adoption rates can be increased significantly.

Whereby (NOR, 2017, $12M) is our favorite example here. Their video meeting tool makes it easy to join any video meeting without the nitty-gritty challenges one faces as a first-time user. Hosts just copy-paste their personal room link and share it with their attendees (activation). Attendees put in their name, enable microphone and camera and join the room (hook). No need to download an app, no need to set up an account, no extra windows popping up. By sending out the Whereby links, potential new users get instant value without signing up for it. These new users then send out their Whereby room invitation (trigger) and the growth loop starts spinning.

SEO

As with the other areas of the PLG Playbook, Product Led SEO also puts the end user in the center of the SEO strategy. This implies asking your end users how you can best close content gaps to help them solve their problem right at the moment when they are looking for a solution. Try to find out how your end users are using the site, what they are searching when they end up on it (via Google Search Console), talk to your customer success team on frequently asked questions (FAQ), and rely on your users to generate content for you (forums). Ultimately, a Product Led SEO strategy is aiming for a programmatic and scalable approach.

Snyk (UK, 2015, $1.3B), the cloud-native application security platform for developers, applies a strong SEO strategy. Francesca Kirhely, Developer Experience & Growth at Snyk illustrated in an interview with OpenView Partners how Snyk focuses heavily on helping developers find the relevant technical resources to their questions by leveraging suitable content. In addition to that, Quora is a way to apply programmatic SEO at Snyk: people are constantly discussing questions on the platform, thus creating content useful for SEO.

Community

The last aspect to help you with creating awareness and driving activation for your product is community. While a community is challenging to build, engage and scale, it is also very difficult to copy.

Butter (DK, 2020, $3.2M), a software making virtual workshops “as smooth as in real life”, strongly focuses on leveraging the community of its existing and potential users. According to Anamaria Dorgo, Head of Community at Butter, it helps them to a) get feedback from a curated, relevant user group; b) create product ambassadors helping them grow; and c) establish Butter as thought leader in the facilitation space. The community has now grown to close to 500 members. They get access to a knowledge base of the tool itself, “How-to-Butter” videos and best practice sharing, community-led events, expert AMA sessions, a discussion space, and much more. Being so close to its community members allows Butter to share future goals, progress as well as things that stand in the way and ultimately build the best possible product for remote facilitation.

💎 Leveraging these PLG tactics to create awareness has a ton of benefits. It allows you to build a close relationship with your end users to develop and sell the product. It helps to lower CAC through organic growth and virality as well as strong messaging. And taking advantage of communities can lead to improved LTV and retention rates if the members are fully aligned with the mission of the product.

Ritika Mehta has written a great article on why the next wave of startups will be community-led. And Sarah Nöckel from Northzone has shared her learnings of launching, managing and scaling a community with Femstreet if you want to dig deeper into the topic.

This first part of the PLG Playbook was all about focusing on the end users and how you can best solve their (specific) problem. The product is the center of your value proposition and your acquisition strategy, built for the end user. In the second part of this series, we will dive deeper into onboarding, converting and expanding your user base.

If you are a founder working on PLG as your growth strategy and want to geek out over it, feel free to get in touch with us via Email & Twitter. And don’t forget to sign up to our newsletter to stay up to date about everything happening at Lightbird. Stay tuned for part two!

The Product-Led Growth Playbook: Europe Edition (Pt. 1) was originally published in Marcau Partners on Medium, where people are continuing the conversation by highlighting and responding to this story.

Erectile dysfunction (ED) and Intimate Men’s Health is still stigmatized — let’s change this!

This week, the German-American digital health startup Regimen announced its USD 2.25 million seed round with Ringier Digital Ventures, advised by Marcau Partners, as lead investor. We want to share some background on this investment and explain why we believe it’s time to change the stigma around ED and Intimate Men’s Health.

💰 A stigmatized and underserved but large market

Intimate health and wellbeing have not been topics to discuss during dinner conversations. Nonetheless, we see more and more funding going into the space, with Femtech leading the way by attracting EUR 189M of VC funding, according to a report by Speedinvest (Nov 2020). The same report also shed light on the lack of funding in the Sexual Health & Men’s Health space, i.e. EUR 7M in the same period of time.

To us, this was surprising to see, since at least 30% of all men across all age groups suffer from ED (Allen & Walter, 2019). The number is likely to be even higher, as men often do not speak about such issues. The market is also growing on both ends of the age spectrum: older people want to stay sexually active for longer while younger people experience increased sexual pressure. The andrology market is currently estimated at EUR 150+bn (Regimen, 2020).

Scientific research shows that ED can have many causes, such as unbalanced nutrition, lack of fitness, or poor mental health. ED is therefore closely associated with cardiovascular diseases or mental health issues. Symptom treatment like ED pills alone is oftentimes not enough to fully heal ED. In fact, symptom medication alone can lead to far greater and more severe consequences for the underlying issues. That’s why a more holistic approach is required to cure ED. Yet, the main focus of investors in the Intimate Men’s Health sector has been on telehealth or DTC companies such as Hims or Roman, selling subscriptions for prescription, over-the-counter drugs and personal care online. We believe that Regimen is well-positioned to provide benefits with a more holistic approach, accessible to all.

⚡ Easy-to-use product with strong initial traction

The product of Regimen is an easy-to-use app-based therapy available for iOS and Android. Following a simple onboarding and health risk assessment, Regimen offers a bandwidth of scientifically validated tools to fight the causes of your ED in a subscription. The covered areas are physical exercises, patient education on nutrition, mindfulness, lifestyle adjustments, and risk factor management based on a cognitive-behavioral therapy approach. Progress is tracked based on the established IIEF (International Index of Erectile Function) score, and the therapy is adjusted accordingly. The data and feedback from customers show medically significant improvement and delightful user satisfaction. Furthermore, users remain very active even beyond the therapy cycle.

The product was developed with international experts and is therefore unfortunately currently only available in English, but there is good news: A German version is currently in development!

👦🏽 Credibility through personal experience and backed by science

When we met the Regimen founding team, we were impressed by their unique setup. Max had founded two companies before and suffered from ED in his mid-20s. Wilko is Max’s long-time technical counterpart. Wolf has a deep understanding of ED as a doctor and urologist, as well as a well-respected researcher in the field of ED. The team has all the necessary ingredients to tackle this market: credibility through experience and backed by science, a technical skillset, and signs of strong execution. They also held each other’s back when Max started to speak about his own experience with ED after successful therapy. In doing so, Max has become an advocate for the destigmatization of ED and a true role model for many out there.

It is a great pleasure to lead this round and to invest along with skilled operational business angels like the founders of Foodspring or the Co-CEO of the Global Fashion Group. We are convinced that it is time to break the stigma and to make holistic therapy for ED accessible. Regimen has the optimal setup to achieve this goal and we are proud to be part of the ride.

P.S. The team is hiring. Reach out to Max for open roles.

Erectile dysfunction (ED) and Intimate Men’s Health is still stigmatized — let’s change this! was originally published in Marcau Partners on Medium, where people are continuing the conversation by highlighting and responding to this story.

From a macro perspective, Switzerland has great prerequisites for a flourishing startup and tech ecosystem: It has been the most innovative country many years in a row according to the Global Innovation Index (GII) 2020 of the World Intellectual Property Organization, scores third in the World Happiness Report of 2020 and was just named Europe’s Innovation Leader 2021 by the European and Regional Innovation Scoreboard. Switzerland has the second-highest gross domestic product (GDP) per capita in the world and a very high standard of living. The average life expectancy at birth is almost 83 years. Looking at R&D spending in Switzerland, it amounts to over 3 percent of GDP or around CHF 22 billion. The Global Entrepreneurship Monitor 2019/2020 concludes, that the entrepreneurial framework conditions in Switzerland are high as the country achieves great results in commercial infrastructure, tertiary education, finance, knowledge and technology transfer as well as government programs.

The big question to ask then is if these favorable prerequisites actually translate into big entrepreneurial successes? And how does the tech startup founding and funding situation look like in Switzerland then? In 2020, CHF 2.1bn ($2.3bn) was invested in Swiss startups over 304 financing rounds. According to the Swiss Venture Capital Report, the largest funding rounds in 2020 were Sophia Genetics & VectivBio (both CHF 110M) and Monte Rosa Therapeutics (CHF 89M). Unsurprisingly, Biotech, ICT and Fintech are the sectors receiving the most funding. The main hub for the Swiss tech scene is Zurich, with 113 financing rounds happening in 2020. The canton of Vaud (Lausanne and Geneva mainly) follows suit with 55 financing rounds. Lastly, there are currently 4 VC-backed companies valued at over $1 billion in Switzerland (Roivant Sciences, Dfinity, Nexthink, MindMaze). Two other unicorns, namely Wefox and GetYourGuide are not completely straightforward: while both were founded in Switzerland, they have since moved main offices and operations to Berlin, Germany.

Sounds good? Yes, it does! There are some great individual success stories, competent angel investors and VCs as well as good initiatives to support founders on their way to build big companies. However, when taking a comparable country like Israel in terms of size (9.0M inhabitants in Israel vs. 8.5M in Switzerland in 2019), R&D expenditure as a percentage of GDP (4.95% vs 3.8% in Switzerland) and the lack of natural resources until recently, the state of the Swiss startup and tech ecosystem is rather sobering: there are currently more than 30 tech companies in Israel that are valued over $1 billion, and Israeli tech firms have raised a record $9.93 billion in 2020, up 27% year on year, in 578 transactions.

We are aware that a startup ecosystem has many interdependencies: startup founders and their peer groups, funding from angels and VCs, commercial and technical talent, and an entrepreneurial mindset. These parts all depend on each other in order for the ecosystem to work and for the startup & tech flywheel to turn, as illustrated on the left. The purpose of this article is to discuss different aspects of the Swiss startup and tech ecosystem and to draw on some examples from the “Israeli Startup Nation” to learn from.

👥💸 Founders and funding

A startup ecosystem needs big liquidity events in the form of M&A transactions or IPOs (i.e. exits) to drive positive feedback loops by way of know-how, network and money. In case of a successful exit, the startup’s founders and early employees are rewarded both financially and emotionally and can either build their next ventures or start investing themselves as Business Angels or VCs. Angels who have founded and grown a startup themselves have a deep understanding and empathy towards what founders really need in order to build and create something.

When looking at exits in Switzerland, the Swiss Startup Radar shows that the growth of exits is smaller than expected considering the funding and founding boom which exists since 2005. In 2019, there were a little more than 30 exits in Switzerland, mainly in the ICT sector. Overall, about 300 startups have been sold in the past 15 years with an average of 20 per year. Data from 2018 showed, that the biggest exits (i.e. being more than $100M) were mainly in the Pharma and Biotech industry. Only 12% of exits above $100M were in the software industry. What is striking is the lack of a second exit alternative in the form of an IPO, as there were only a little more than 20 IPOs over the past 15 years by Swiss startups.

Comparing this to Israel, startups grow much more aggressively in Israel and are realizing liquidity events faster (8.7 years compared to 10.9 years in Switzerland). Despite the fact that M&A activity was lower compared to 2019, Israel still counted 93 deals with $7.8 billion. As IPOs became an attractive exit alternative, Israeli companies made 121 funding deals on the Tel Aviv Stock Exchange and global capital markets, raising a total of $6.55 billion.

Yet, there are some good Swiss examples to illustrate this positive feedback loop despite the (still) lack of big liquidity events: some early employees of the meeting organizer platform Doodle went out to found new companies while others like its founder Myke Näf became active business angels and/or investors with their own funds (see Übermorgen Ventures). The same goes for two of the three Wingman partners, with Pascal Mathis having co-founded GetYourGuide and Lukas Weder being the Co-Founder of Eat.ch. Jeremias Meier, Co-Founder of Bexio is now also Operating Partner at session.vc. Even before a potential exit, scale-ups play a significant role in advocating an ecosystem: Beekeeper, the secure employee app which has raised $86M to date according to Crunchbase, has also launched its Frontline Future Innovation competition, an accelerator program for companies operating in the areas of Upskilling & Training, Employee Lifecycle Management and more.

Looking at the startup’s investors, they are also rewarded with both cash and experience, potentially raising their next funds on these successes and becoming stronger supporters within the ecosystem. Overall, the Swiss seed and early-stage funding ecosystem has recently been enriched with two “dorm room funds”: S2S Ventures and the Wingman Campus Fund. They both want to bring the career path of VC and entrepreneurship closer to students at various Swiss universities. The seed and early stage funding ecosystem is further supported by professional investors like Tomahawk, SeedX, Wingman Ventures, Equity Pitcher, btov, Redalpine, Ringier Digital Ventures* and Lightbird* among others.

Another way to describe these positive feedback loops is with so-called “startup mafias”, a term stemming from the PayPal mafia back in the 2000s, when early PayPal employees ended up building, running and investing in companies like SpaceX, Tesla, Lyft, Youtube, Pinterest and more. In Switzerland, the first generation of startups has resulted in a broad range of “startup mafias” (credits to Swisspreneur) with early employees and investors from DeinDeal, unic, Namics or foodpanda (and jobs.ch, Scout24 as well as local.ch to add a few more) building their own ventures and/or backing their fellow colleagues. These companies serve as role models for future founders.

One last point to make is that there is a vast range of different consulting and coaching opportunities, awards and support initiatives, incubators and accelerators, information platforms and associations to be found in the Swiss startup and tech ecosystem. While it is great to see a broad network of support for founders, this can also lead to a lack of founder focus.

🧠Talent

The second important lever for the ecosystem flywheel to turn is access to a strong pool of talent — both commercial and technical. With its world-class universities, Switzerland has the best prerequisites for obtaining sustainable access to highly qualified young professionals. Regarding commercial skills and know-how, the HSG with its renowned programs provides an essential pillar. Concerning the technical talent pipeline, ETH and EPFL are among the global top 50 universities in computer science with an increasing number of spin-offs in the last years. Among the more than 800 ETH and EPFL spin-offs to date, more renowned examples are Planted, 9T Labs, Oxara, Archlet, Futurae, Archilyse, Lunaphore Technologies, Faceshift (acquired by Apple in 2015) and Nexthink (Switzerland’s latest unicorn as of February 2021).

Yet, choosing entrepreneurship as a career path is still not that popular: the Global Entrepreneurship Monitor 2019/2020 found that only 40.2% of Swiss inhabitants view entrepreneurship as an interesting pathway for one’s professional future compared to 85.8% in the Netherlands or 69.2% in Canada. Students at specialized higher education schools and Swiss universities also have an entrepreneurial spirit which is below the international average (CH: 20.1% vs. Int: 34.7% five years after the end of studies). What’s more, talent in Switzerland is expensive: a software engineer in the Zurich region earns on average $115k. Switzerland also has a lot to catch up regarding gender equality in the tech and startup ecosystem: only 24% of software developers are female, ranking second-last according to an overview on European countries with more than 8k software developers in the State of European Tech Report 2020. In the same way, funding into mixed or purely female founding teams has also been very low, attracting only 17% of total funding between 2016–2020. The Female Founder Map initiated by Impact Hub Zurich and ZHAW wants to address this issue by bringing more transparency to the ecosystem. Lastly, we believe that role models like Melanie Gabriel (Co-founder & CMO at Yokoy), Yoko Spirig (Co-founder & CEO at Ledgy), Léa Miggiano (Co-founder & CMO at Carvolution) or Arijana Walcott & Sophie Lamparter (founders and investors at Dartlabs) play a crucial role in attracting a broader set of talent into the ecosystem.

In Israel, students are exposed to advanced computing studies from an early age and traditional jobs have lower salaries compared to software and tech, making it an attractive industry to work in. There are over 300 R&D centers located in Israel, and a lot of high-tech development comes from the Israeli military intelligence units (IDF). The military thus serves as an important startup incubator and accelerator. While both countries provide quite a high amount of grants to early stage companies, there exists a difference in government innovation funding: In Israel, government innovation funding can go directly to a private entity or a startup, whereas in Switzerland these government grants are given to researchers at higher education institutions to complete projects by collaborating with private companies.

🦸🏼‍♀️Social norms

The last aspect to consider when discussing the Swiss startup & tech ecosystem flywheel are the social norms that exist when thinking about starting and building a company. With approximately 8.5M inhabitants (2019), Switzerland lacks a large home market. This would imply that founders think big from the start, wanting to build products for the bigger markets in Europe to achieve the necessary scale for venture returns. As Alex Danco puts it:

Startups are a bet that the future will be radically different from the present, and they are valuable on the way up because they are, effectively, a call option on that future coming true. Their founders set out to discover that future; their value is indefinite, not definite. One day they might become giant, cash-gushing businesses; but not anywhere near your current horizon. Your only goal right now is grow, explore, and earn the right to keep growing and exploring.

This mindset is critical to put VC money to work. However, the Global Competitiveness Report of the WEF has criticized the lack of entrepreneurial risk-taking in Switzerland — in the category in which Israel is by far the leading country. This is also shown in the total insurance premium per capita, which is at $6’835 in 2019 for Switzerland, only topped by four other countries. The opportunity costs of working at a startup are also high in Switzerland: the gross monthly wage median in 2018 was $7'116, making it very attractive to work at a well-paid corporate position with a great work-life balance and even more corporate benefits instead of a low paid early-stage startup with a mediocre MVP. This also leads to probably the biggest differentiator of the Swiss to the Israeli startup and tech ecosystem: Israel’s mix of questioning culture, and appetite for risk among others makes for a fertile place for fast-moving companies to appear.

⛰️Concluding thoughts

To sum up, an ecosystem relies on many different parts to interact with each other in order to mature, i.e. startup founders and their peer groups, funding, talent, and social norms. It’s still early days for the Swiss startup and tech ecosystem but there are good signs that it’s moving in the right direction: The first generation of entrepreneurs has paved the ground for a strong second generation of startup mafias to emerge such as Beekeeper (Yokoy, Angle Audio), Teralytics (decentriq), Climeworks (neustark), and Dacuda (Locatee, PXL Vision) attracting funding from international VCs. The funding landscape is also slowly becoming more operational with Business Angels like Bettina Hein (Founder & CEO of juli), Nicolas Bürer, Jeremias Meier (Co-Founder of Bexio) or Laurent Decrue (Founder of MOVU) being active in the space. However, we still believe that there need to be more and bigger liquidity events, an increasingly operational and diverse investor community, and a cultural shift towards a stronger risk appetite and entrepreneurship as an aspiring career path for the Swiss startup & tech ecosystem flywheel to take up speed. Let the ride begin 🐱‍🏍!

*) Marcau Partners is an investment advisory boutique offering “Venture Capital as a Service” to entrepreneurial investors. Clients include Ringier Digital Ventures and Lightbird Ventures among others. For more information visit marcau.vc and follow us on Linkedin.

Thoughts on the Swiss startup & tech ecosystem flywheel was originally published in Marcau Partners on Medium, where people are continuing the conversation by highlighting and responding to this story.