End of Year Report
by : Andy Brown & Sand Hill East team.
Welcome to the 2021 Sand Hill East Update. We have had a busy year working closely with our portfolio companies, boards and clients.
We were very thankful (and lucky) to have been able to have both a summer and winter soiree with no reported COVID outbreaks. A lot of fun was had by many!
2021 was a growth year in multiples and core valuation for growth SaaS companies in the Fintech, Insuretech and other enterprise technology domains.
2021 Summary of Activities
Roseann, Nanette and I added Andrew Dubois as an Operating Partner early in the year and added a number of advisory partners namely Jill Denham, Andy Honess, Phil Brittan, Scott Condron, Dan Kramer, Drew Rayman, Gil Shaked, Steve Milunovich, John Bruno and JP Rosato.
Andy and Jill as Senior Advisory Partners lead for us regionally in the UK/Europe and Canada respectively. We have firmed up our regional approach and have started work, led by Andy, on helping UK / European companies with US aspirations. Smartcom, Util and SamsonVT are the initial clients having had previous success with Callsign, Cutover and others on more of a one-off basis. We also have a good pipeline of candidates…
We have a less formal process in Canada that has also yielded success in particular with Skyhive, and there is ongoing interaction between our portfolio companies and Jill and also significant origination opportunity in Canada.
With Drew Rayman on board we have also started a real go-to-market practice on the brand and marketing side, which will expand in 2022.
We also had a number of our partners and advisory partners take operating or board roles in the companies we work with…
Andrew Dubois as COO of Knoema
Ed Corneiro as VP, Finance at Skyhive
Roseann Palmieri as Board member Knoema.com, Util.co, Advisor at Data Robot, Advisor at Xpansiv
Andy Brown & Roseann Palmieri — Advisors at Cape Privacy
Mirna Velasquez moved to take a promotion at Knoema
… and some with companies we admire.
Scott Condron as CTO of Wilshire, Board member T-Rex
Phil Brittan running Google Apps Workspace
Sand Hill East thesis — Digital Decade (2020–2030)
We believe that all companies will be digital companies by 2030.
We believe that all modern companies need to have a major focus on customer centricity, service quality and security.
We believe that the extent of this change is > the last 10 years of the industrial revolution.
Each sub-vertical will SaaSify and companies that continue to sell closed vertical solutions will be displaced. Consequently process & data automation across SaaS platforms becomes the priority for IT-less companies.
Gnn governments needs to take heed of these changes and finally move away their own legacy thinking to Citizen’s Services-as-a-Service!
Our six key focus areas from last years report remain the same (Digital, Security, DevOps, Data, AI, ESG)
We have seen further adoption of Digital Supply Chains globally and remediation of some of the process risks exposed by COVID. Many organizations continue to equate moving to Cloud with Digital. This is not
Digital is when your Business supply chain has API’s through which you interface upstream to your suppliers and downstream to your distributors and distribution channels. Digital Asset has constructed a thesis called The Global Economic Network which can be best be described as the way multiple supply chains can integrate with each other transactionally and through the lingua franca of that particular vertical. There has been a lot of progress in this area 2021 in many Alternative and lesser known fixed income asset classes and across a whole range of different types of products outside of Financial Services (e.g. wine, whisky, cannabis, carbon credits). This will continue.
Some of our other earlier investments such as PadinMotion rebranded in 2021 as Equiva, and Pomco pivoted around COVID toward contact tracing. Great job to both.
Security has remained at the top of corporate agendas in 2021 with both ransomware and the recent log4j vulnerabilities / exploits creating news headlines and widespread fear. Digital Identity still hasn’t moved to the top of the government agenda but it is getting a lot more support and is being adopted much more broadly in consumer businesses.
Privacy remains very important and we have built on our investments from last year in privacy and security/privacy cross overs, and most recently started to work with Skyflow which has a secured solution as a service for PII, CII and beyond.
DevOps — 2021 was the year that Devops went mainstream in major organizations vs. startups. There appears to have been a maturing of thinking around adoption of DevOps tooling in major enterprise as well, although still more at the departmental level than company wide. There are a number of companies that we work with providing solutions into this space that have seen real uptake of their capabilities in 2021 such as Codota, DeepFactor & Moogsoft’s MOC.
Data & AI — Starts to Crawl In 2021 companies with NLP, ML & AI platform capability have gained real market traction Kodexa, Knoema,Moogsoft, Netomi, Skyhive have all had a successful 2021 as a result and are now positioned to scale into these markets as they evolve. To us it still feels like we are in the 1st or 2nd chapters of Kevin Kelly’s amazing book, “The Inevitable”
Alongside this providers of data who have created “playlists” of data that are useful in specific verticals or to answer specific business questions that can be used to enhance/improve digital supply chains have also done well and Knoema has continued to grow into this space. The various cloud marketplaces (Snowflake, Amazon, Alicloud, Google, Microsoft) have also grown massively in the past 12 months, but it still feels like early Innings for these companies. Companies that can bridge between on-prem data, cloud and analytics like Atscale and SQream have also grown fast and taken on bigger and bigger data sets, and in Atscale’s case the semantic layer has become super important to their customers.
ESG — ESG and Stewardship have become major topics for governments, world leaders, investors and companies and we have seen a massive focus on this in particular from the Buy-Side this year. Andy has had many Buy-Side and Sell-Side discussions on this topic this year and again, it feels like early innings but some of the fundamentals of ESG ecosystem are now coming together as standards emerge for the data frameworks around ESG (in particular the UN Sustainability Goals).
Raises & Exits
We have had a tremendous amount of interest in our portfolio companies in 2021 resulting in a number of raises.
Angel & Seed — Kudos to Kodexa, LexAlign, Modelshop and more
Series A — Kudos to Knoema, POMCO, Cyberhaven
Series B — Kudos to Cutover, Skyhive led by Eldridge and Netomi led by Wndrco and Eldridge
Series C — Beacon.io scored a fantastic raise from Warburg Pincus and Blackstone.
Series D — Kudos to Digital Asset led by 7 Ridge and Eldridge
Lots more raises to come in 2022 starting in Q1!
LMRKTS sold in mid-year to Capitolis which was a transaction Paul Walker and I were very involved in. Many congrats to Lucio, Hilary and Sunny, original founders of LMRKTS, and to Gil and Tom for the acquisition.
2021 Advisory
Our traditional types of work around Enterprise Advisory have expanded in 2021. We now have 4 modes of engagement with clients :-
• Bring Expertise/Experience to bear to help young startup companies build products that (mainly Enterprise) customers will buy.
• Help young and later stage startup companies connect to the marketplace, get feedback on their products, evaluate the best uses of the products, and establish the right approach to take to get sales of the product established.
• Work with established companies who want to truly transform digitally and establish new approaches, business models,
Organization, Op Model and Roles and Responsibilities to meet the very different needs of customers and consumers.
• Helping companies from the UK come to the US and Canada and get established starting with distribution/channel arrangements, followed by a “land” of some kind.
In each of these models we get some form of ownership and / or cash incentive for our time and our work.
We spent a lot of time and energy with one particular global (non US) bank in 2021 and saw significant progress as a result. We have led with Innovation, quality of people and best in class Fintech and Tech4Fin solutions to age old financial services problems. With the right leadership it is possible to make tremendous progress quickly, and we are hoping this ends up as a case study in transformation. We have agreed terms with another broker / dealer in 2022 to perform a similar exercise and we are looking forward to engaging…
2022 will continue the break-out for many of our Fintech companies although valuations will align to multiples in public markets which will reduce if the 10 Year rates rise as predicted. In 2021, we continued to see senior professionals leave traditional finance roles for Fintech, Defi and Crypto with the major Crypto platform companies such as Coinbase, NYDIG, BlockFi continuing to recruit some of the best and brightest from the Street. There is an inevitability to the adoption of Blockchain and DLT in the FIAT side of Financial markets (Buy Side, Sell Side, Intermediaries, Custodians etc) at the same time as increasing capital has is shifting to the non-FIAT platforms. The use of DLT to drive automation in financial markets where there has been large inefficiencies, leaving capital tied up for long periods of time, has commenced in many areas of fixed income. There will be significant progress in this space in 2022.
T-Rex Group (www.trexgroup.com) continued to build out and grow during 2021 entering the Project Finance platform solution product space and signing their first major client. They also continued to grow elsewhere in the Alternatives domain and we look forward to 2022 being a successful year.
Eversafe (www.eversafe.com) which focuses on identifying and alerting elder abuse through automated means has continued to make significant progress and has signed a number of important client relationships with large companies such as major broker-dealers and other senior oriented organizations.
Modelshop (www.modelshop.com) pivoted in 2021 to be a low/no code platform and has built on the new use-cases to achieve significant scale revenue traction. It is still early days but there is a lot to be optimistic about for 2022.
Fintech Studios (www.fintechstudios.com) had a reasonable year with a very strong finish. They have continued to grow the core compliance/ reg solution into new customers and have developed a number of other interesting go to market use-cases with the SI’s. The market is starting to come toward Fintech Studios and they have a solid execution plan for 2022
Beacon.io Beacon (www.beacon.io) had a very strong 2021 and closed a large Series C funding round from Warburg Pincus and Blackstone, and have continued to penetrate large institutions with very strong risk capabilities in many asset classes. In 2022 it is important to build on the repeatable sales success of the past year and productize even further into the new opportunities. We are looking forward to continuing to work together in 2022.
Diamond Standard Diamond Standard (www.diamondstandard.co) has developed the world’s only regulator approved diamond commodity. Diamond Standard has developed the technology so that investors are finally able to trade this $1.2 trillion natural resource as a liquid commodity. The Diamond coin hit $6000 in December of 2021 yielding a significant value outcome over gold, the broader market and other investment asset classes. It is early in the trading of diamond commodities and the best is yet to come.
Knoema (www.knoema.com) Knoema continued to successfully grow by increasing ARR by 70% and expanding capabilities in sales, product, customer support, marketing and data. We look forward to working with Knoema as they continue to scale ambitious offerings such as new industry vertical focused insights solutions and data distribution leveraging a data credits and metered distribution model.
MaxMyInterest Max had a great year and has built upon the promise of previous years to maximize return on cash. With the 10year tipping since the New Year and inflation all around, the spreads will widen and Max’s customers will make more money. The account opening process on Max is world class (seconds) and they are poised for significant growth in 2022 as more interest bearing startups and big bank platforms enter the market.
Capital Markets Gatway CMG had another year of building to meet market need and 2022 looks to be very promising for the platform, company, its strategic investors and its use in equity underwriting. I’m super excited for 2022 with CMG!
Ninth-Wave had a successful 2021 developing additional capabilities with an anchor client that is close to ready to take to the broader market. The market itself has continued to evolve and “Open Banking” opportunities have become more important in many jurisdictions outside the United States, which is an opportunity in 2022.
Boards
Zscaler (www.zscaler.com) has continued to innovate with velocity in 2021 bringing to market ZIA and ZPA for cloud/applications which is a major new category of opportunity to secure (and scale) workloads in the cloud, on prem or hybrid. ZS achieved the coveted highest Fedramp “IL5” certification this year making the platform usable in the highest security environments that exist in the world.
Moogsoft (www.moogsoft.com) had a very interesting 2021. We pivoted our core product into a PLG DevOps solution at a time when major organizations (often at department level) are making decisions to move away from traditional waterfall development and “Enterprise technology” tooling to a CI/CD Agile/Devops approach. This traction has been particularly visible in newer companies; alongside that we have continued to grow in the Global 2000 with our “Traditional” product and still beaten out the competition in many RFPs this year.
Guidewire (www.guidewire.com) Guidewire cloud has continued its development through 2021 with two major releases driving customer capability with the Cortina and Dodge releases. The platform has grown and won hearts and minds with bigger and bigger insurance companies.
Pure Storage (www.purestorage.com) Pure has had a very successful year and advanced the industry’s view of what a storage company can be in a subscription marketplace world. Pure’s solutions such as Pure- as-a-Service, Portworx and more are getting traction across DevOps teams and as DevOps itself has emerged in 2021 much stronger in the enterprise this play will get stronger.
CloudFrame (www.cloudframe.com) Major congrats to Venkat Pillay and the team for a super successful 2021. Despite competition from major cloud companies and traditional mainframe companies, Cloudframe’s risk centric approach to re-hosting applications has continued to gain traction with major banks, financial intermediaries, insurance companies and more.
Skyhive (www.skyhive.io). Skyhive, the experts in human labor analysis for governments and corporations, had a tremendous year culminating in closing their Series B and a number of large enterprise G200 clients. Skyhive has unique capabilities to bring to bear on competitive analysis of people’s skills and training across similar companies, states, countries, armies etc, in their mission to continuously re-skill the world, and create skills passports for all.
Digital Asset Digital Asset (www.digitalasset.com) through the use of the DAML smart contract programming language has advanced across multiple verticals including financial services, financial infrastructure, sports betting, healthcare and many other use-cases. Importantly the ledgers that DAML supports and the technical capability of those ledgers has continued to improve pretty dramatically allowing for more and more intensive workloads to be TAM. The ability to rapidly create 2 sided markets with DAML is unique and the beauty of being able to deploy on almost any ledger or database has proved very compelling.
Tech Focused Advisory
Our Technology focused investments have continued to perform well, particularly those that are part of the Hybrid Cloud and Security market places.
Callsign (www.callsign.com) had a very busy 2021 closing major clients in investment banking and beyond. Behavioral Identity remains part of the bedrock of a secure internet and is also fundamental to solving authenticity and data lineage.
Inpensa (www.inpensa.com) are working on some new capabilities which will be rolled out in Q1 of 2022. More on that in our new quarterly report end Q1.
The-Wing (www.the-wing.com) had a more positive 2021. As the world emerges from COVID in 2022, The-Wing’s model for Hybrid work will be an interesting part of the ecosystem.
Netomi (www.netomi.com) had a very exciting year, executing sales very effectively and growing every quarter, culminating in closing their Series B a few months ago. They come into the new year with a lot of momentum, and a lot to look forward to.
Lionize www.lionize.com rebranded from Digital Prezence has built out their platform and is starting to land big clients in both the agency and enterprise space. As a reminder Lionize does match-making for influencers that helps brands find the perfect ambassadors for their brand. The platform also automates many of the heavy lifting of influencer campaign management which is key for agencies.
Cape Privacy www.capeprivacy.com Cape Privacy enables businesses to run predictive machine learning models on encrypted data. Cape’s platform uses secure multiparty computation (MPC) to operationalize data securely, avoiding a single point of failure and enabling computations on data that was previously inaccessible.
2021 New clients
Six additional firms have joined the Sand Hill East advisory portfolio in 2021. All are a work in progress from our perspective, some further along than others, but in all cases 2022 will be a very important year.
Util is a new client in 2021. They have built an ESG platform which does ground up research on all publicly listed equities on the basis of what they do “observably”. We have worked most of the year with the Util team and made a lot of progress on the platform, the go to market and messaging.
Nammu21 is a new client in 2021. Nammu provides the mechanism to extract data from complex financial product documents such as Project Finance, Private Credit and more. It provides a visualizer / browser to allow the core data from the documents to be understood easily and a Platform-as-a-Service platform to allow programmatic access to the data.PointFocal (www.pointfocal.com) has built a portfolio analytics innovation stack using the best alternative data to capture alpha and manage risk. It is early days but we are making good progress.
Smartcom (www.smartcom.net) is the pioneer of Intelligent Customer Management. It helps organizations protect their customers and clients from voice spam, and can increase answer rates from legitimate callers from on average 16% to 86% pick up rate.
Rythan (www.rythan.com) had a banner year extending its sales enablement platform to additional financial services customers and expanding into automated compliance reporting. 2022 looks to be a very promising year for Rythan as they continue on their mission to replace PDFs with interactive, tailored, presentations and reports. 2022 will be super exciting for Rythan.
SamsonVT (www.SamsonVT.com) was a late addition to the portfolio in 2021 and is a great opportunity. helps businesses to empower engineers on the ground, by replacing technical manuals with easy-to-follow 3D models on a digital platform, that is always up-to-date. This ensures maintenance can be carried out as efficiently as possible, saving businesses from costly delays. It transforms a supply chain’s order fulfilment processes with its ability to find, order and replace parts more accurately and more efficiently. The solution is simple to update across numerous languages and enables better on the job training and up-skilling. In short, SamsonVT creates the paperless engineer.
That’s a wrap!
We are all very excited for 2022; we have learned a lot in 2020–2021 which we are working to incorporate into our companies go to market and operating practices particularly in the Recruitment, Sales/Marketing/Direct processes. We are working on adding people/capability to help scale this approach in the New Year and will hope to have announcements as such in throughout 2022
Wishing all of you a very successful 2022!
Andy, Nanette, Roseann, Andrew, Mirna and all our advisory partners!