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 🚀 Welcome to SCALE’s Insight Round-Up!

Welcome to our round-up of insights from world-class investors such as Sequoia, a16z, ICONIQ, and many more, all in one place.  

In this edition we cover:

• 🤼 Team Building

• 🤖 Everything in AI

• 📈 Market Trends

🤼 Team Building

Going Remote? Location Still Matters

Sequoia’s Atlas guide provides a detailed breakdown of the European talent ecosystem. This article dives into the complexities of remote work and distributed teams in Europe:

1. Hybrid and Remote Work Is Growing: While we hear about in-person work combing into vogue over 59% of tech companies now operate with distributed teams, with nearly two-thirds planning to expand remote work in the coming years

2. Specialized Talent Is Location-Based: Despite remote setups, location matters—around 74% of companies are hiring remotely to access skills they can’t find locally

3. Salary Convergence Across Europe: Compensation is leveling out across countries, reducing cost savings as a primary motivator for remote hiring

4. Engineer Preferences Favor Remote: Around 80% of recruiters say employee preference for remote or hybrid work is a major reason for distributed teams.

5. Hubs for Specialist Skills: Companies are establishing remote hubs in cities like Dublin for AI and Vilnius for front-end skills, optimizing access to talent while reducing overheads like real estate costs.

👉️ Click here to read the full article: Sequoia article

How to Move from Founder-Led to AE-Led Sales

BCV outlines key principles for when & how startups should transition from founder-led sales to Account Executive (AE)-led sales:

1. Hire your first AE when you achieve the “MVP/ICP handshake” (i.e., when your MVP solves a problem for your ideal customer profile (ICP))

2. Define key sales processes before hiring your first AE (e.g., target personas, meeting cadence, ,sales materials, CRM software, call recording software)

3. Look for agility and passion in your first AEs (i.e., founders should prioritise intellectual agility & passion for the product over sales experience - you want someone who can sell but also work with product & engineering to improve your offering) 

4. Hire at least two AEs at the start (No BDRs are needed at this stage) (i.e., hiring 2 AEs allows you to compare performance and understand if the sales motion is actually working) 

👉️ Click here to read the full article: BCV article

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🤖 Everything in AI

The Future of AI is Vertical

Bessemer explores Vertical AI and its potential to transform industries:

1. It represents a larger market opportunity than legacy vertical SaaS, targeting high-cost repetitive language-based tasks in sectors like legal, healthcare, and finance

2. There are 2 drivers for massive value creation: a) Expanding total addressable markets (TAMs) b) Unlocking new functions and verticals previously resistant to software adoption

3. Vertical AI is changing startup dynamics, with early data showing: a) Quick achievement of high average contract values b) Rapid growth rates (~400% year-over-year) c) Healthy gross margins (~65%) 

4. Bessemer’s predictions for Vertical AI: a) At least five companies reaching $100M+ ARR within 2-3 years b) First Vertical AI IPO expected within 3 years c) Market capitalization potentially 10x the size of legacy Vertical SaaS

5. Defensibility: While some AI applications may be easily replicated, many Vertical AI solutions are building robust moats through data, product depth, and economic value.

👉️ Click here to read the full article: Bessemer article

Unlocking the Future: AI Insights

Iconiq delves into why adoption of AI in enterprises is relatively low despite high demand and finds that it’s mostly due to lack of technical expertise, output performance, scalability, and in some cases cost. Buyers are looking for tools in terms of ROI, and that is not only measured in cost and time, but also impact on culture and employee performance. Increasingly, with the AI toolkit market developing, they found that the budget being set aside for AI solutions is:

1. Cannibalising other spending efforts

2. Being spent on external tools rather than internally built solutions

👉️ Click here to read the full article: Iconiq article

AI for the Enterprise

Kleiner Perkins doubles down on its investment in Glean earlier this year, co-leading their Series D. At the time, the need for a solution to help employees navigate knowledge fragmentation in a distributed environment was already acute. With breakthroughs in NLP and deep learning, Glean’s powerful search technology is now retrieving the most relevant information for LLMs to use. All information gleaned within a company is secure, private, permissions-aware, and fully referenceable back to source documentation. CIOs are turning to Glean as the obvious solution, with customers that include Databricks, Canva, BILL, and Grammarly.

👉️ Click here to read the full article: Kleiner Perkins article

📈 Market Trends

CFO Survey Q2 2024

Softbank has released its CFO survey for the quarter with several interesting results to call out: 

1. CFOs are more optimistic about the state of the economy vs 12 months ago i.e., 100% increase in optimism vs 2023

2. However, over 50% of CFOs believe stability and cash conservation should be the focus over the next 12 months. In turn, 80% of respondents are focused on balancing growth & profitability or are even putting profitability above growth

3. Only 6% of CFOs believe that the IPO window will open in H2 2024 with 35% only seeing IPO season kicking off in 2026

4. CFOs are split on whether it is easier to raise funds vs 1 year ago i.e., 37% think it’s easier, 31% think it’s harder, and 32% think it’s the same

The full survey provides a view into how CFOs are thinking across market conditions, impact of AI, priorities in the next 12 months, etc.

👉️ Click here to read the full article: Softbank CFO Survey

No Weak Links: Collaboration Will Strengthen the Supply Chain

The supply chain technology industry has been through massive highs and lows in the last half decade. Looking at manufacturing & distribution, shipping & logistics, and retail, Menlo VC analyses what’s next in the space:

1. Manufacturing & distribution: whilst manufacturing has boomed, supply chain complexity boomed too, so players who will win are those that are making data and collaboration between stakeholders easier

2. Shipping & logistics sees growth primarily in collaboration software between shippers, brokers, and carriers to enable real-time pricing.

3. Retail faces new regulation and policy changes making it more cumbersome to track cross platform marketing, with players emerging to help supply chain stakeholders collaborate better with retailers and e-commerce brands.

👉️ Click here to read the full article: Menlo VC article

Discord Activities: The Return of Social Gaming

Discord recently announced their own integrated gaming platform that allows users to play in-built games without leaving the platform. A16Z attempts to answer that if previous attempts at web-based gaming platforms have failed, such as Facebook Games, Miniclip, Snap Games, and many others, what gives Discord Activities the right to win? The answer lies in what caused the failure of the previous failures. All platforms that have previously tried to build gaming platforms, have done so in a platform that’s core operations had nothing to do with gaming. Facebook and Snapchat are both primarily social networking platforms, with a gaming element that takes away from the experience. On the other hand, Discord is primarily a gaming social networking platform, creating a fertile ground for adoption. The second reason is that other gaming-only platforms (such as Miniclip) lacked the social element that makes a platform one that users keep coming back to. Discord’s foundation is built for developers to fully utilize existing social channels. Games Activities on Discord can leverage chat, voice, and video features to create more immersive and engaging experiences.

👉️ Click here to read the full article: a16z article