Thaler + AQR: Silly Things Investors Do

AQR, the giant quant hedge fund and home of geek/raconteur/super hero Cliff Asness has rolled out a new podcast called “The Curious Investor.” Here is Episode 1: “Silly Things Investors Do,” features interviews with renowned behavioral economists Richard Thaler and Nick Barberis and walks listeners through some of the most common biases that creep into…

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Dropbox is crashing despite beating Wall Street expectations, announces COO Dennis Woodside is leaving

Back when Dennis Woodside joined Dropbox as its chief operating officer more than four years ago, the company was trying to justify the $10 billion valuation it had hit in its rapid rise as a Web 2.0 darling. Now, Dropbox is a public company with a nearly $14 billion valuation, and it once again showed Wall Street that it’s able to beat expectations with a now more robust enterprise business alongside its consumer roots.

Dropbox’s second quarter results came in ahead of Wall Street’s expectations on both the earnings and revenue front. The company also announced that Dennis Woodside will be leaving the company. Woodside joined at a time when Dropbox was starting to figure out its enterprise business, which it was able to grow and transform into a strong case for Wall Street that it could finally be a successful publicly traded company. The IPO was indeed successful, with the company’s shares soaring more than 40 percent in its debut, so it makes sense that Woodside has essentially accomplished his job by getting it into a business ready for Wall Street.

“I think as a team we accomplished a ton over the last four and a half years,” Woodside said in an interview. “When I joined they were a couple hundred million in revenue and a little under 500 people. [CEO] Drew [Houston] and Arash [Ferdowsi] have built a great business, since then we’ve scaled globally. Close to half our revenue is outside the U.S., we have well over 300,000 teams for our Dropbox business product, which was nascent there. These are accomplishments of the team, and I’m pretty proud.”

The stock initially exploded in extended trading by rising more than 7 percent, though even prior to the market close and the company reporting its earnings, the stock had risen as much as 10 percent. But following that spike, Dropbox shares are now down around 5 percent. Dropbox is one of a number of SaaS companies that have gone public in recent months, including DocuSign, that have seen considerable success. While Dropbox has managed to make its case with a strong enterprise business, the company was born with consumer roots and has tried to carry over that simplicity with the enterprise products it rolls out, like its collaboration tool Dropbox Paper.

Here’s a quick rundown of the numbers:

  • Q2 Revenue: Up 27 percent year-over-year to $339.2 million, compared to estimates of $331 million in revenue.
  • Q2 GAAP Gross Margin: 73.6 percent, as compared to 65.4 percent in the same period last year.
  • Q2 adjusted earnings: 11 cents per share compared, compared to estimates of 7 cents per share.
  • Paid users: 11.9 million paying users, up from 9.9 million in the same quarter last year.
  • ARPU: $116.66, compared to $111.19 same quarter last year.

So, not only is Dropbox able to show that it can continue to grow that revenue, the actual value of its users is also going up. That’s important, because Dropbox has to show that it can continue to acquire higher-value customers — meaning it’s gradually moving up the Fortune 100 chain and getting larger and more established companies on board that can offer it bigger and bigger contracts. It also gives it the room to make larger strategic moves, like migrating onto its own architecture late last year, which, in the long run could turn out to drastically improve the margins on its business.

“We did talk earlier in the quarter about our investment over the last couple years in SMR technology, an innovative storage technology that allows us to optimize cost and performance,” Woodside said. “We continue to innovate ways that allow us to drive better performance, and that drives better economics.”

The company is still looking to make significant moves in the form of new hires, including recently announcing that it has a new VP of product and VP of product marketing, Adam Nash and Naman Khan, respectively. Dropbox’s new team under CEO Drew Houston are tasked with continuing the company’s path to cracking into larger enterprises, which can give it a much more predictable and robust business alongside the average consumers that pay to host their files online and access them from pretty much anywhere.

In addition, there are a couple executive changes as Woodside transitions out. Yamini Rangan, currently VP of Business Strategy & Operations, will become Chief Customer Officer reporting to Houston, and comms VP Lin-Hua Wu will also report to Houston.

Dropbox had its first quarterly earnings check-in and slid past the expectations that Wall Street had, though its GAAP gross margin slipped a little bit and may have offered a slight negative signal for the company. But since then, Dropbox’s stock hasn’t had any major missteps, giving it more credibility on the public markets — and more resources to attract and retain talent with compensation packages linked to that stock.

“Our retention has been quite strong,” Woodside said. “We see strong retention characteristics across the customer set we have, whether it’s large or small. Obviously larger companies have more opportunity to expand over time, so our expansion metrics are quite strong in customers of over several hundred employees. But even among small businesses, Dropbox is the kind of product that has gravity. Once you start using it and start sharing it, it becomes a place where your business is small or large is managing all its content, it tends to be a sticky experience.”

Interest rates will stay low for 20 years, says Bank of England expert

Outgoing MPC member Ian McCafferty predicts rates below 5% and wages up 4%

The era of low interest rates will last for at least another 20 years, despite gently rising official borrowing costs in the coming years, one of the Bank of England’s leading policymakers has forecast.

In a valedictory interview before leaving Threadneedle Street’s monetary policy committee (MPC) at the end of the month, Ian McCafferty said structural changes in the global economy meant UK borrowers and savers should get used to interest rates being “significantly” below the 5% average in the 10 years leading up to the financial crisis.

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Blissfully grabs $3.5 million seed investment to help companies get their SaaS in gear

Blissfully, a New York City startup that helps companies understand their SaaS usage inside their organizations, announced it has received a $3.5 million seed round.

The investment was led by Hummer Winblad Venture Partners. Hubspot, Founder Collective, and several unnamed pre-seed investors also participated. They got a $1.5 million pre-seed investment, bringing the total so far to $5 million, according the company.

Company co-founder and CEO Ariel Diaz says Blissfully actually helped him and his co-founder solve a problem they were having tracking the SaaS usage at their previous startups. Like many companies, they were using spreadsheets to track this information and they found it was untenable as the company grew beyond 30 or 40 people. They figured there had to be a better way, so they built one.

Their product is much more than simply a database of the SaaS products in use inside an organization. It can integrate with existing company systems like single sign-on tools such as Okta and OneLogIn, financial reporting systems and G Suite login information. “We are trying to automate as much of the data collection as possible to discover what you’re using, who’s using it and how much you are spending,” he said.

Blissfully SaaS report. Screenshot: Blissfully

Their scans often turn up products customers thought they had canceled or those that IT had asked employees to stop using. More than finding Shadow IT, the product also gives insight to overall SaaS spend, which many companies have trouble getting a grip on. They can find most usage with a scan. Some data such as customized contract information may have to be manually entered into the system, he says.

Hubspot CEO Brian Halligan, whose company is one of the investors in this round, sees a growing need for this kind of tool. “The widespread growth of SaaS across companies of all sizes is a leading indicator of the market need for Blissfully. As business’ investments in SaaS increase, they lose visibility into issues ranging from spending to security,” Halligan said in a statement.

The company offers a freemium and pay model and is available in the G Suite Marketplace. If you go for the free version, you can scan your systems for SaaS usage, but if you want to do more complex integrations with company systems, you have to pay. They currently have 10 employees and 500 customers with a mix of paying and free.

One interesting aspect of the Blissfully tool is that it is built entirely using Serverless architecture on AWS Lambda.

Prometheus monitoring tool joins Kubernetes as CNCF’s latest ‘graduated’ project

The Cloud Native Computing Foundation (CNCF) may not be a household name, but it houses some important open source projects including Kubernetes, the fast-growing container orchestration tool. Today, CNCF announced that the Prometheus monitoring and alerting tool had joined Kubernetes as the second “graduated” project in the organization’s history.

The announcement was made at PromCon, the project’s dedicated conference being held in Munich this week. According to Chris Aniszczyk, CTO and COO at CNCF, a graduated project reflects the overall maturity where it has reached a tipping point in terms of diversity of contribution, community and adoption.

For Prometheus that means 20 active maintainers, more than 1,000 contributors and more than 13,000 commits. Its contributors include the likes of DigitalOcean, Weaveworks, ShowMax and Uber.

CNCF projects start in the sandbox, move onto incubation and finally to graduation. To achieve graduation level, they need to adopt the CNCF Code of Conduct, have passed an independent security audit and defined a community governance structure. Finally it needs to show an “ongoing commitment to code quality and security best practices,” according to the organization.

Aniszczyk says the tool consists of a time series database combined with a query language that lets developers search for issues or anomalies in their system and get analytics back based on their queries. Not surprisingly, it is especially well suited to containers.

Like Kubernetes, the project that became Prometheus has its roots inside Google. Google was one of the first companies to work with containers and developed Borg (the Kubernetes predecessor) and Borgmon (the Prometheus predecessor). While Borg’s job was to manage container orchestration, Borgmon’s job was to monitor the process and give engineers feedback and insight into what was happening to the containers as they moved through their lifecycle.

While its roots go back to Borgmon, Prometheus as we know it today was developed by a couple of former Google engineers at SoundCloud in 2012. It joined Kubernetes as the second CNCF project in May 2016, and appropriately is the second graduate.

The Cloud Native Computing Foundation’s role in all of this to help promote cloud native computing, the notion that you can manage your infrastructure wherever it lives in a common way, greatly reducing the complexity of managing on-prem and cloud resources. It is part of the Linux Foundation and boasts some of the biggest names in tech as members.