What 2020 Meant For Start-Ups
This column originally appeared in Forbes.
During the second week of March, I was meeting with a colleague at Coupa Cafe in Palo Alto, when he said “maybe none of this survives through the year.” By “this” he meant the whole world of venture- backed enterprises that both of us had been engaged with for the better parts of our professional lives. Who could second guess him? The NBA had just announced it was suspending its season; airplane travel had ground to halt; hoarding had started at some grocery stores; the CDC advised against gatherings of 50 or more and, like everyone else, I had started working from home.
The world had changed and the embryonic start-ups we had been nurturing were now facing what seemed like insurmountable odds.
What followed were months of global tragedy, illness, and anxiety. Soon all of us knew stories about colleagues and friends who had lost a relative or friend to Covid-19. Many others faced the possibility of going months without visiting aging parents, siblings, or new-born nieces, nephews, and grandchildren. Stories mounted about restaurants and small businesses going under.
Yet amid Covid’s wreckage, it is hard not to conclude that, for the start-up technology business, 2020 was a year that defied expectations, created an acceleration in business creativity, and left us with some indelible lessons. I reflect on five of them below:
One well-worn piece of advice I have given to entrepreneurs is that successful start-ups depend on focus and speed. But never has the importance of focus been more evident than when Covid-19 effectively eliminated so many distractions. Gone were the 45 minute drives between San Francisco and Menlo Park for what seemed like critical meetings. Gone were the round-trip flights out of San Jose airport for a two-hour meeting in Los Angeles. The good and the bad of business life evaporated: long commutes; late dinners with friends and colleagues; the endless industry conferences and in-person speaking invitations.
Sitting at home, free of distractions, most of the entrepreneurs in early-stage companies I worked with became intensely focused on the work at hand. All the interruptions of office life were replaced with efficient Zoom calls to move the business forward. Selling software, once part of an elaborate process of meetings, dinners, and coffees, was recast so that a sales team could establish conversations and rapid trial periods with customers suddenly open to new ideas and eager for results.
Even in larger companies, the pandemic forced organizations to decide what really mattered. Earlier in the year, Airbnb abandoned some of newer initiatives to focus on the increasingly professional hosts with multiple properties on the site. Focus helped them rebound from the initial fear about rentals to the pathway toward their IPO. (Disclosure: Greylock led the Series A in Airbnb.)
The pandemic forced all of us to reassess how we use time. On the plus side, with travel off the table, most people in business found a more open, flexible schedule. But there was also a negative side: as we became accustomed to work-from-home schedules, calendars expanded. Over the course of the last several months, doing early morning, late night, and weekend calls became more acceptable as the rigidity of a Monday-to-Friday schedule declined.
In the world of venture capital investing, everything moved faster and with greater efficiency. Investments that used to take several weeks to negotiate were increasingly finalized over a weekend. What used to be an hour-long meeting in a distant conference room became a short discussion over Zoom. For seed companies especially, the shift to video for investment discussions is probably permanent.
Larger companies also benefited. 2020 saw a record number of IPOs – almost all done without the time-consuming roadshows in New York and Boston. It is hard to believe that the cumbersome, in-person roadshow will fully return post-pandemic.
There was also a general revaluation of how to use our time and focus on new things. Nikesh Arora, the CEO of Palo Alto Networks, where I sit on the board, has told people that the greatest benefit of Covid for his leadership was the end of a near two-hour commute. He realized that the blocks of time gave him a new opportunity to re-engage with his team. He would spend an hour nearly every day talking to groups of 40-50 employees on Zoom just to hear what was on their minds.
Digital Went Mainstream.
The pandemic hastened the wide embrace of the digital revolution, even by companies who were slow to adapt. For all of these companies, the digital transformation is a one-way door: even as people return to pre-pandemic work habits, no company will back off their use of cloud, SaaS, or artificial intelligence. The success of Zoom, Salesforce’s acquisition of Slack, and increasing acceptance of Docusign, Figma, Airtable, and other collaboration tools as the new standard for enterprise work also point to an irreversible shift in how work gets done. (Disclosure: Greylock led the Series A financing at Figma.)
The result, I suspect, will not be a small handful of digital winners, but a growing army of start-ups focused on enterprise solutions. Increasingly, we are seeing digital tools focused on recruiting, training, assessment, product development, sales – all traditional needs of a large organization. The pandemic has triggered an endless series of discussions about “the future of work.” Just as 25 years ago, Microsoft Windows 95 prompted every business to operate around the PC, we will look back at 2020 as the year that the large enterprise accepted digital transformation as a necessity, not a choice.
The Security Perimeter Grows Up and Out.
The threat of cybersecurity was already a well-established issue long before Covid-19. During this pandemic year, however, the perimeter of security expanded. First, it moved “up” — up to the Cloud as more companies became dependent on digitizing their communication, their HR records, and their financial information. Next, it moved “out” — out to people’s homes and shared apartments that quickly became the place where most work was done. The result was that chief information security officers had to keep up with data moving away from traditional company data centers, and flowing in and out from an explosion of devices accessing data from the cloud.
We can see this expansion in the focus and innovation of security start-ups. Abnormal Security, for example, has developed a speciality in identifying and preventing “spear phishing” and other types of business email compromise and fraud. Obsidian Security has developed an innovative approach for bringing cyber protection to SaaS configurations, user privileges, and providing ongoing monitoring of data going in and out of a company. Even software developers are taking a fresh look at security, an area where start-up Apiiro has broken new ground with the industry’s first code risk platform. (Disclosure: Greylock led the initial funding rounds in all three companies.)
For all the obvious reasons, cybersecurity became an even larger concern for every public company board, most of whom were holding confidential discussions over video calls for the first time. The news of Russian hacks this week is yet more evidence that this area will continue to expand.
Start-up Innovation Endures.
While Covid-19 has dealt a devastating blow to thousands of small businesses, it has created an unprecedented opportunity for tech start-ups. The pandemic put to the test the thesis that the cloud and machine learning leveled the playing field, giving even embryonic companies the ability to support – and even compete with – global enterprises. In the technology world, the sheer number of newly created, and frankly experimental companies showed that the start-up culture remains as vibrant as ever. As someone who has met with thousands of entrepreneurs over the course of my career, I continue to be amazed by what a small number of determined engineers can build.
In Silicon Valley and other tech hubs, Covid-19 slowed down the frenetic pace of start-up life, filtered out a lot of the “noise,” and allowed more entrepreneurs to think deeply about how software can serve business and consumers. They are set up for what will be a fascinating – and, we hope, safer – 2021.