Contrary Research Rundown #6
Wiz, Gusto, & The AI Hype Cycle
Research Rundown
There is a consistent trend right now of complex processes taking on new life when they're combined with data-driven insights. We highlighted one example this week in the story of Benchling, and how they're optimizing the $7B life science R&D market. A complex bio-research process is made more effective through software, particularly the ability to analyze data. Pushing beyond the straightforward process of making an analog process more effective through data-driven software, you get into an even more set of complex processes being revolutionized: generative AI.
The last few weeks there has been a frenzy around AI. This buzz began to take traction earlier this week when Stable diffusion, the parent company of Stability AI, an artificial intelligence tool that makes digital art announced they reached unicorn status after raising a new round. The company, which generates images from text, raised a $100M seed round at a $1B valuation led by Coatue and Lightspeed Venture Partners. With over 10 million total users, Stability AI differentiates itself with an open-source model that uses a generative AI technique called diffusion. In a similar fashion, Jasper AI just raised a $125M Series A at a $1.5B valuation. The company allows people to create blog posts, art & images, marketing copy, and sales emails using AI. The company went from launch to unicorn in 18 months. These feel like some real 2021 valuations, something Eric Newcomer covers in his newsletter.
AI is nothing new; just about every private company we've covered is leveraging it in one way or another. What is powerful about this trend is the way the technology is stepping into a process, rather than just augmenting. These aren't tools to provide some insights, and then let you do whatever you want. These are creating something out of nothing. Consistently we see this trend; when companies remove the need for people to be involved they revolutionize a category in terms of cost and creation.
Another consistent trend we see across private companies is the expansion from point solution to platform. The ability for any company to become a large, standalone public company often rests in its ability to broaden their product's coverage. This week is no exception, whether it's extending across the HR and finance stack, touching more of the security landscape, or building into the broader AI lifecycle.
Wiz: Over the past two years, the pandemic accelerated cloud migration. Between 2018 to 2021, public cloud revenue grew more than 10x from $32B to 400B+. Wiz offers a comprehensive suite of cloud security solutions to help companies protect their cloud infrastructure and workloads.
DataRobot: More than 80% of all machine learning and AI projects never make it to production and stall before deployment. DataRobot is a ‘picks and shovel’ AI platform built to solve this problem. DataRobot enables enterprises to build, deploy, and monitor machine learning models at scale.
Gusto: Payroll management software is some of the oldest software in the US. The industry is dominated by old-school solutions, with 29% of companies using a system that is 10+ years old. Gusto sells a cloud-based payroll software for SMBs to manage all their payroll operations.
The AI Hype Cycle: Speaking of generative AI, earlier this week, Sequoia shared a market map of the Generative AI Landscape, breaking down the industry's key components. Sonya Huang had a Twitter thread that discussed several of the key players in the space. Coatue put out a similar piece about the explosion of AI. Evan Armstrong wrote about evaluating the modern AI value chain. He goes over how a company selling, or utilizing AI will have some of the same core activities, and how every company that calls itself an AI company will try and continue to create opportunities for value capture.
A Developer Toy Takes On AWS, Roblox, and GitHub: The founder of Replit, Amjad Masad, sat down with Ben Thompson at Stratechery. Replit also introduced the Replit App this week as they continue to focus on democratizing access to programming so that everyone in the world can build technology. Amjad had a few tweets that provided more snapshots of the platform. The app is not just for learning, but developers can build anything as it provides access to a powerful computer running in the cloud. If you missed our full memo on Replit, you can find it here.
Data Infrastructure Ties Get Deeper: Teams can now create Python-based models in dbt, and have them run natively in Snowflake. With Snowflake's Snowpark Python capabilities, you no longer need to maintain, and pay for separate infrastructure to run Python code. More details can be found here. Earlier this month, we wrote about dbt labs, and covered Snowflake's product last month in our deep dive.
Why Figma Sold To Adobe: Figma CEO and co-founder Dylan Field sat down with TechCrunch’s Ron Miller to discuss the deal and his motivations for selling to Adobe.
Adding Entertainment To Community Engagement: Discord is updating its popular chat app with a handful of new features, including a full directory of apps that allow developers to build tools for the platform. The app directory will give server admins a one-stop shop for users to customize their servers. Discord also launched their Activities product this week. Rhys Wood published a piece about the product, an app store for games that can be played during chats. Discord has become one of the most popular messaging apps as the go-to service for close-knit gaming communities. To read about about Discord’s business model, read our full memo.
Payroll Goes Global: A timely announcement, given our coverage of Gusto this week. One Gusto competitor, Rippling, announced their intentions to expand internationally with Rippling Global. This product will be the first native global payroll system. With Rippling, you can pay employees who work in different countries and tax jurisdictions in a single-pay run. Each employee is paid in their local currency. Garry Tan shared, on Twitter, that Rippling has 83% of their code base in a global payroll "monolith." As they expand globally, only 17% of the code is specific to an individual country. Yet another example of a product suite expanding to become a true multi-product, multi-stage, and multi-geo platform.
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