Tom Tunguz

FEBRUARY 1, 2024

“For some companies, [AI is] going to be standard issue like a PC.” It’s not just for some. Many companies are moving in this direction. Across Microsoft products, OpenAI infrastructure, Github CoPilot (for coding), & Power Platform (for Office users) the growth is spectacular. Calendar Quarter Azure OpenAI Orgs, k CoPilot Users, m Power Platform Orgs, k 1/1/24 53 1.3 230 10/1/23 18 1 126 7/1/23 11 63 4/1/23 2.5 36 OpenAI & Power Platform organizations have doubled or t

AI 210

AI Azure Artificial Intelligence Generative AI 210

Tom Tunguz

JANUARY 30, 2024

Last year, I argued every company would need an AI strategy because AI would infuse most products. But, I missed an important concept in the post. Talent. In the last year, AI experience has become a status symbol on a resume & a path to materially higher salaries. I’ve spoken to many executives seeking their next role. “I’m looking for a role in an AI company” is a refrain in every conversation.

AI 148

AI Innovation Startup Technology 148

Tom Tunguz

JANUARY 28, 2024

The fastest growing software category in the public markets is security. Data follows. Security companies as a group average 29% expected revenue growth in 2024, compared to 23% for Data (or DaaS which stands for data-as-a-service). Fintech & SaaS (horizontal) average ten percentage points fewer expected growth. Anticipation of this growth propels multiples.

Software Review 288

Software Review Software Finance Acquisition 288

Tom Tunguz

JANUARY 25, 2024

ServiceNow, a $150b market cap company, made this statement yesterday in their earnings call : “In Q4, our gen AI products drove the largest net new ACV contribution for our first full quarter of any of our new product family releases ever, including our original Pro SKU.” That’s pretty sensational for a company with 3 massive business lines & enough acronyms to fill a dictionary : “With technology, customer and creator, we now have 3 workflow businesses over $1 billi

AI 163

AI Innovation Technology Subscription 163

Tom Tunguz

JANUARY 23, 2024

Last Friday’s post about delegation called The Class Missing from Business School, spurred a deluge of great advice from readers. There was a recurring theme when delegating: Identify the time-consuming & repetitive tasks by coloring or labelling your calendar, or calculating at the end of the week or month. Record a video/Loom/Scribe* detailing the process.

ChatGPT 223

ChatGPT AI Metrics Revenue 223

Tom Tunguz

JANUARY 17, 2024

I remember my graduate classes well : marketing , operations research, statistics, macroeconomics, strategy, & negotiation. But having worked for about twenty years, there’s a class missing from business school for a skill used as frequently as public speaking & negotiation : Delegation. After starting in the working world, at some point we start managing others.

Business 199

Business Interviewing Data Strategy 199

Tom Tunguz

JANUARY 11, 2024

The 10x programmer - engineers whose prodigious productivity and perspicacity change the arc of a business. But what about a 10x AE? A salesperson who books 10x more business than their next closest peer. 10x engineers use their knowledge of technology to achieve astounding feats. Why wouldn’t the same idea apply to sales? With AI, we will start to see sales outliers who meaningfully outperform & break quota expectations.

Compensation 209

Compensation AI Engineering Technology 209

Tom Tunguz

JANUARY 8, 2024

Measuring engineering productivity is a Gordian knot. How does a manager measure the performance of an engineer? Lines of code, like lines of a blog post aren’t a good metric. Most of the time, short, direct prose is better than verbose or lengthy sentences that carry on forever because they haven’t been edited & really ought to be, but someone was rushing or forgetful, & they lose the reader along the way.

Software Engineering 196

Software Engineering Software Review Engineering Software 196

Tom Tunguz

JANUARY 6, 2024

Companies aren’t bought. They’re sold. Hang around startups & venture capital long enough, & you’ll hear this aphorism. It means it’s much easier to sell a company when there’s plenty of demand. In any given year, there’s an 82% chance the value of startup liquidity will change by more than 77% - both up & down.

Startup 274

Startup Venture Capital Software Marketing 274

Tom Tunguz

DECEMBER 17, 2023

Data teams are becoming software engineering teams. On December 14th we welcomed Philip Zelitchenko , VP of Data from ZoomInfo, to talk about how he has built this discipline within his team & it was fascinating. The video is here. Like the Devops movement, the Dataops movement aims to scale the use of data within companies without increasing the headcount of the data team.

Data 240

Data Government Scale Headcount 240

Tom Tunguz

DECEMBER 13, 2023

The typical software startup raised their Series A 15 months after raising their seed at 2x their seed valuation. A year ago, that Series A would have been raised three months earlier at 3.5x the valuation. Here’s another way of visualizing the data. The red dot is 2023 - the other years are in grey. Across rounds for the 50th & 75th percentile of companies, step-up valuations are the lowest multiples in about ten years.

Venture Capital 308

Venture Capital Startup Investment Software 308

Tom Tunguz

DECEMBER 3, 2023

These are the top 10 posts by engagement for 2023 at tomtunguz.com. Reflecting on them, they cover the doldrums of the first half of the year, the euphoria of AI reinvigorating the second half, & the valuation environment. The next five posts all mentioned major exits : Klaviyo, Loom, & the many take-privates in 2023. I’m grateful to everyone who read, commented, debated, & shared these posts & others.

Artificial Intelligence 169

Artificial Intelligence ChatGPT AI Generative AI 169

Tom Tunguz

NOVEMBER 28, 2023

Snowflake announced earnings yesterday, echoing the strength within software companies more broadly & underscoring the shift in enterprise buyer behavior to normal after three quarters of extensive cost cuts. “Q3 product revenue grew 34% year-over-year to reach $698 million. Non-GAAP adjusted free cash flow was $111 million, representing 7% year-over-year growth.

GCP(Google Cloud Platform) 155

GCP(Google Cloud Platform) Azure Data Startup 155

Tom Tunguz

NOVEMBER 21, 2023

I can remember at each career inflection point the person who took a bet on me. When I joined Google it was Kim. When I moved to product, Marissa & Brian. Then to Redpoint, it was the early stage team : Geoff, Tim, Chris, & Scott. Lloyd & Frank at Looker for their Series A. Today, it’s the team & the LPs at Theory. That’s the very beginning of the list.

234

234

Tom Tunguz

NOVEMBER 21, 2023

Title: The Evolution of Data Teams and Data Security Over the past few years, we’ve seen a significant change in the way data teams operate. No longer are they just post-analysis teams; they are now becoming software engineering teams that use data to build products. This shift has brought with it a new reality for data security. With many of these teams now using sensitive data to build products, the importance of data security cannot be overstated.

Government 207

Government compliance Software Engineering Engineering 207

Tom Tunguz

NOVEMBER 19, 2023

Last week, OpenAI suffered management team infighting over the key direction of the company. The schism inside the company resulted in Sam Altman’s firing & Greg Brockman’s departure. This outcome injects uncertainty in the market including key partners (Microsoft & investors) & employees about the company’s future. Microsoft, recognizing risk with a key technology partner in one of their most important markets, stabilizes its future by hiring Altman, Brockman, &

Artificial Intelligence 228

Artificial Intelligence AI Government Leadership 228

Tom Tunguz

NOVEMBER 15, 2023

How much does AI cost? It depends on a a few different dimensions, but for a typical use case where a user enters a query & expects about a 200 word response, the cost varies from $0.03 to $3.60. Different models cost different amounts. Also, the size of the context window is an important factor. The context window is a fancy way of saying the quantity of background information the user can provide to the AI.

Artificial Intelligence 340

Artificial Intelligence AI Trends Engineering 340

Tom Tunguz

NOVEMBER 9, 2023

Vendr’s quarterly report on SaaS purchasing trends summarize the sentiment of the software market. Q2 was tough but Q3 is looking up. The average sales cycle has lengthened from 32 to 44 days for net new software, a 37% increase. Slower cycles & fewer new purchases : 19% of software purchases are net new in 2023 ; just 17% in Q3. Still about 1-in-5, but down from 30% last year.

Software 296

Software Trends Pricing Data 296

Tom Tunguz

NOVEMBER 8, 2023

At the IMPACT Summit yesterday, I shared our Top 10 Trends for Data in 2024. LLMs Transform the Stack : Large language models transform data in many ways. First, they have driven an increased demand for data and are causing a complete architecture inside companies. Second, they change the way that we manipulate data. Analysts will use automated data analysis, and it will be an expected tool in every product : notebooks, BI, databases, etc.

Artificial Intelligence 199

Artificial Intelligence Trends Data Software Review 199

Tom Tunguz

NOVEMBER 5, 2023

Six quarters ago, profitability became the most important factor to public software valuations. 14 public software companies have reported earnings in this quarter so far. These companies’ earnings surprise has been prodigious. Earnings surprise is the difference between how much the market expected in earnings compared to actuals. Positive surprise means a better result than expected.

Software 304

Software Management Revenue Marketing 304

Tom Tunguz

OCTOBER 30, 2023

The Federal Trade Commission’s focus on technology has transfigured the M&A market for startups. The Google anti-trust lawsuit & Amazon anti-trust cases may stifle those companies’ ability to acquire startups for significant sums. Facebook has faced a similar suit for illegal monopolization, which resulted perhaps indirectly in the divestment of two of its more recent acquisitions.

Acquisition 247

Acquisition Startup Pricing Technology 247

Tom Tunguz

OCTOBER 23, 2023

Yesterday, both Google and Microsoft announced their earnings for their cloud businesses. I’ve been tracking the growth rates of these companies and product lines for the last 18 months to develop a broad gauge of enterprise buying patterns after the downturn. In the chart, it’s immediately evident that Mongo has seen dramatic increase in growth rate last quarter.

AI Search 309

AI Search AI Cloud Azure 309

Tom Tunguz

OCTOBER 19, 2023

The patois of data teams has become a dialect of modern engineering teams because the commonalities in the stack. Core Eng Data Eng Products Data Products Microservices Data Mesh Service Level Agreements Data Contracts Access Control Data Security Observability Data Observability This convergence signals how far data teams have evolved into core engineering teams.

Software Engineering 195

Software Engineering Engineering AI Data 195

Tom Tunguz

OCTOBER 17, 2023

On Thursday, November 2nd at 9:30 AM Pacific, Office Hours welcomes Raj Sarkar to talk about Unleashing Outbound Marketing Fury. Raj started his career as a marketing manager at Cisco focused on the SMB market. He then jooined Google to become the lead product marketing manager on Google Cloud Platform (GCP). Next, he headed marketing at Atlassian for Trello, Confluence, Jira for Business Teams & other products.

GCP(Google Cloud Platform) 147

GCP(Google Cloud Platform) Marketing SMB Cloud 147

Tom Tunguz

OCTOBER 6, 2023

Over the last few weeks I’ve been experimenting with chaining together large language models. I dictate emails & blog posts often. Recently, I started using Whisper for drafting emails and documents. (Initially there were some issues with memory management, but I’ve since found a compiled version that works well on my Mac called whisper.cpp ) After tying Google’s Duet I wondered if I could replicate something similar.

Artificial Intelligence 150

Artificial Intelligence Machine Learning Communication Data 150

Tom Tunguz

OCTOBER 2, 2023

Eliciting product feedback elegantly is a competitive advantage for LLM-software. Over the weekend, I queried Google’s Bard, & noticed the elegant feedback loop the product team has incorporated into their product. I asked Bard to compare the 3rd-row leg room of the leading 7-passenger SUVs. At the bottom of the post is a little G button, which double-checks the response using Google searches.

Artificial Intelligence 173

Artificial Intelligence SaaS Software Data 173

Tom Tunguz

SEPTEMBER 25, 2023

Artisanal chocolate, artisanal candles, artisanal silk scarves. What about an artisanal email? LLM’s powerful content generation abilities will soon automate many emails we send. Sales teams have started using software that identifies leads, researches them, identifies commonalities (a shared university affiliation or a passion for a sports team), drafts the email, & sends it.

Artificial Intelligence 154

Artificial Intelligence Scale Headcount Scaling 154

Tom Tunguz

SEPTEMBER 16, 2023

Last week, Databricks announced their Series I financing at $43b. At the same time, they released quarterly figures similar to a public company’s reporting. Those numbers provide the first public view into one of the most valuable private companies in the world. It’s also an opportunity to compare Databricks to Snowflake. Two mammoths competing for customers’ workloads offer different architectures.

Business 310

Business Cloud Finance AI 310

Tom Tunguz

SEPTEMBER 7, 2023

I’ve been fascinated by dictation software for many years. Speaking has struck me as the most natural interface. It also happens to be at least 3 times faster than typing. When OpenAI released their dictation model Whisper , I was keen to try it. So I installed it on my MacBook Pro. Over the last few weeks, I’ve been using it. As expected, it’s sensational.

Machine Learning 201

Machine Learning Artificial Intelligence Cloud Benchmarks 201

Tom Tunguz

SEPTEMBER 6, 2023

Historically, software-as-a-service (SaaS) has been built on databases with structured data, as you might find in an Excel spreadsheet. But the ability of large language models to extract insights from unstructured information changes this architecture : data repositories like data lakes are becoming essential parts of modern SaaS stacks. For example, next generation marketing software might ingest structured data from Google Analytics and lead capture software as before.

Artificial Intelligence 309

Artificial Intelligence Software Data Scale 309

Tom Tunguz

AUGUST 26, 2023

On Friday, Klaviyo filed their S-1 - one of the first software companies to do so since the beginning of the economic downturn in late 2022. It’s a marvel of business with strong growth, great efficiency & the potential to reignite interest in SaaS IPOs. Klaviyo is a customer data platform company which ingests marketing data & empowers their customers to automate their marketing with data & AI.

Benchmarks 182

Benchmarks Venture Capital Marketing SMB 182

Tom Tunguz

AUGUST 26, 2023

On Friday, Klayviyo filed their S-1 - one of the first software companies to do so since the beginning of the economic downturn in late 2022. It’s a marvel of business with strong growth, great efficiency & the potential to reignite interest in SaaS IPOs. Klayviyo is a customer data platform company which ingests marketing data & empowers their customers to automate their marketing with data & AI.

Benchmarks 171

Benchmarks Venture Capital Marketing SMB 171

Tom Tunguz

AUGUST 22, 2023

If we needed another exclamation point on the tremendous growth opportunity, NVidia’s earnings punctuated the euphoria with gusto. Revenue grew 88% in a quarter, nearly doubling. The company had projected $11b & exceeded projections by $2.5b or 26%. The Data Center business, which sells to clouds & consumer companies drove nearly all of the growth, surging 141% quarter-over-quarter to $10.3b & nearly 3x annually.

AI 246

AI Pricing Business Cloud 246

Tom Tunguz

AUGUST 16, 2023

The Fed no longer predicts a recession. Economic data is turning more positive, eg housing starts exceeded forecasts. 80% of public companies beating earnings estimates - three percentage points higher than the 5 year average. On the other hand, enough uncertainty permeates the market to depress prices. Public software companies’ share prices have fallen 10% on average in the last 30 days dotted with positive notes like the stabilization cloud growth rates for Microsoft & Google.

Startup 186

Startup Scale Strategy Forecasting 186

Tom Tunguz

AUGUST 7, 2023

Carta released their state of the market report. A few data points stood out to me Downrounds constitute 20% of all rounds, up 2x from historical norms. Bridge rounds account for 38% of all rounds in Q2. Cooley reported 2.9% of rounds recapitalized the company. Recaps effectively delete the previous cap table & start a new one. These are all signs of the harder fundraising times.

Venture Capital 100

Venture Capital Software Review Data Marketing 100

Tom Tunguz

AUGUST 6, 2023

What will a venture capital turnaround feel like? Will it be gradual or sudden? What will change the sentiment in the market? In 2008, I had just become a venture capitalist. Three months later, Lehman fell & the Global Financial Crisis started. CNBC played in the lobby of our office & I remember watching domino tip domino into a cascading collapse.

Venture Capital 202

Venture Capital Acquisition Investment Marketing 202

Tom Tunguz

JULY 25, 2023

I’m watching public company earnings to identify early trends in the software market to inform startups’ plans for 2023. Yesterday, Microsoft & Google announced earnings. Amazon, Cloudflare, & Mongo announce soon. At last, we see a change in slope in the annual growth rates of the cloud services. Both Google & Microsoft announced growth rates in GCP & Azure that held steady from one quarter to the next.

Azure 218

Azure GCP(Google Cloud Platform) AI Cloud 218