DevOps solution for binding applications and OS’ together. Cuts out the middleman of traditional deployment solutions. Only has one founder and burned $1.5 million in 2 years for $32k in revenue.
In addition, happy fourth of July weekend, everyone!
- I really like the company and it appeals to me from a nerdy tech side. That said, great products don’t make for great businesses.
- Concerned about $1.5 million being burned with little demonstrable business goals.
- Doesn’t seem like there’s a team here.
The 6 Calacanis Characteristics (91 161 18)
|1. A startup that is based in SV||Pass.|
|2. Has at least 2 founders||Fail (1)|
|3. Has product in the market||Pass|
|4. 6 months of continuous user growth or 6 months of revenue.||Pass, but not looking good: 2019 Revenue was $32k, 2018 Revenue was $0k.|
|5. Notable investors?||Pass: Bloomberg Beta and Initialized Capital, the latter which is a bigger deal to me.|
|6. Post-funding, will have 18 months of runway||Fail: Raised $253k, burning $750k annually or $62.5k monthly, at best will have 17 months of runway at present spend.|
The 7 Thiel Questions (ETMPDDS)
- The Engineering question:
- Possibly: VMWare was transformative for its time. Docker was forced on me for my first software job, and later deploying to hosted solutions like Pantheon. I don’t see the new kids playing with stuff like this yet.
- The Timing question:
- Good: starting a new OS, not a good time. Creating a layer of abstraction on B2B solutions that still support Linux, good. That said, it seems the big differentiators are performance and security, which unusually enough, are more vitamins at this point instead of painkillers (or rather, the performance and security are not enough to fight the already existing ecosystem of Docker and containers.)
- The monopoly question:
- For sure: If this concept’s time is right and the gains real, absolutely for sure could see like RedHat or Docker.
- The people question:
- Bad: CEO is a good engineer but has no team. Has been working on this for four years.
- The distribution question:
- Bad: Selling as software engineer to big businesses, I’m not convinced he has any great distribution edges.
- The durability question:
- Good if this market exists: Similar to monopoly question, if the problem thesis is right then this would be a game changer. My concern is that people neither want nor is the team agile enough to pivot to solve a better platform.
- *What is the hopeful secret?:
- Great product makes for great business e.g. just with a better unikernel solution this company with a shell of a team can make a superior business.
What has to go right for the startup to return money on investment:
- Build a real sales team: This team is only one CEO whose a software engineer by training. My heart goes out to him, but I wasted half a decade learning that great products don’t make for great businesses.
- Become a painkiller: Similar to point one, technical specs are only impressive to nerds. And at present, it doesn’t even seem quite nerdy enough that I’ve heard inklings of this from software friends.
- Copy the playbooks of other deployment businesses: in the lifetime of innovation at deployment software, how did DigitalOcean, Docker, Redhat, VMWare and co. go deep then broad?
What the Risks Are
- Team risk: looks like the CEO & friends show.
- Product risk: I’ll be the first to concede that I’m not a DevOps engineer and someone whose orchestrating thousands of servers for constant deployment and uptime. That said, this is the first time I’ve heard of it and I don’t see many nerds talking about this.
- Milestone, burn, and ambiguity risk: The firm has burned $1.5 million in 2 years, to what business objectives? The revenue is very modest, and not that that matters too much, but I don’t see any customers that live, love, and die by this product.
Muhan’s Bonus Notes
- Has all the trappings of a tech startup in SF and I flipped many times on this decision. That said, in VC, sadly the odds of failure are so high that I’m learning we learn to adopt a bias of passing on false negatives (e.g. this company could be successful but the odds are so low that I’d rather find a company that looks similar with better characteristics.)
- For those who want a humorous read at how hard this stuff is to keep up with, even for those who work in the space, check out one of my favorite articles ever from the founder of CircleCI: link.
- When a company’s first tagline is “Upending 50 years of operating system hegemony”, that makes me concerned that it sounds more like an activist than a capitalist. Having professional competency in both, this flags to me some risk that the founder sees themselves more as a missionary than a mercenary (both of which are necessary, but at the beginning when you have no product market fit, erring on the side of mercenary is definitely more necessary.)
- Total Amount Raised: US $253k
- Total Round Size: US $1,070k
- Raise Description: Seed
- Minimum Investment: US $100 per investor
- Security Type: Crowd Note
- Valuation Cap: US $12,000,000
- Offering Type: Side by Side Offering
This is where I’ll post updates about the company. This way all my notes from offering to post-offering updates will be on one page.