Tom Tunguz

The SaaS Valuation Environment in Mid-2019

Tom Tunguz

Every six months or so, I take a look at how the public markets are valuing next-generation software companies. There’s been quite a bit of volatility over the last five years, and this update is no exception. As of mid-June, the public markets value software companies at all-time highs.

100k+ ACV SaaS Companies: Do Their Metrics Differ from Other SaaS Companies?

Tom Tunguz

When we published the results of the freemium survey earlier this year , we noticed respondents targeting the enterprise observed higher net dollar retention and lower churn than those startups targeting other segments.

Setting the Salesforce/Tableau Acquisition in Context

Tom Tunguz

Yesterday, Salesforce announced it would acquire Tableau for $15.7B. Tableau sells data visualization software and the team has built an incredible business. We analyzed the S-1 in 2014. The company has grown since its public offering to generate about $1.1B in revenue, growing at 29%.

Benchmarking Slack's S-1: How 7 Key Metrics Stack Up

Tom Tunguz

Slack has transformed the way we work. By replacing email with beautiful and simple internal chat, Slack has productized productivity. Founded as a gaming company called Tiny Speck in 2009, the company’s initial product, Glitch, didn’t catch on as expected.

What Is (and Isn’t) Product Management?

Speaker: Steve Johnson, VP of Products, Pragmatic Institute

Product Management is one of the most exciting - and most misunderstood - functions in technical organizations. Is it strategic or tactical? Is it a planning role or a support role? Many product professionals are unclear about what is (and isn't) product management. After all, product management spans many activities from business planning to market readiness. In this session, we’ll examine many product activities and artifacts for product strategy, planning, and growth, and introduce a simple tool that you can use in your organization to clarify the roles of product management and others. Steve Johnson explores the many roles of Product Management in this fun talk focused on why product managers should obsess on problems instead of solutions.

Redpoint SaaS Startup Key Metrics Template

Tom Tunguz

Over the last decade or so, I’ve compiled a metrics sheet to summarise a SaaS business. While no living document like this is ever perfect, this is currently the best board-level summary of the overall health of a business I have found. I’m sharing it so that others may benefit and improve it. If you have suggestions, please email me. Redpoint SaaS Metrics Template. The template is broken into six sections: People, Bookings & Revenue, Cash, Sales, Marketing, Customer Success.

Where Have All the Angels Gone?

Tom Tunguz

Rewind a decade. Angel investing was an important part of the Startupland ecosystem. Today, you can’t make the same argument. 2018 observed the fewest number of angel-led financing rounds since before 2010. Angels led 156 rounds last year, a figure that collapsed from 714 in 2015.

Benchmarking Zoom's S-1:How 7 Key Metrics Stack Up

Tom Tunguz

In the past few years, Zoom has become a verb: the act of video conferencing someone. Eight years ago, Eric Yuan, former VP Engineering at WebEx left to create a business with a better video conferencing product. He and his team authored a new codec, which is far more resilient than others.

How to Develop Best in Class Sales Efficiency

Tom Tunguz

A public market investors asked me if there are any patterns in the list of recent software IPOs with the best sales efficiencies. As I looked through the list, I noticed one. All of these businesses sell bottom up with small initial ACVs that grow dramatically.

Do SaaS Startups Still Require Less Capital than 10 Years Ago?

Tom Tunguz

In 2014, I published a post called Do Startup Require Less Capital to Succeed than 10 Years Ago ? It’s been five years and time to see how things have changed. In the analysis, I created a metric, the return on invested capital (ROIC).

The Benefits of and Questions Facing Remote and Distributed Startups

Tom Tunguz

In 2013, Scott Berkun authored a book called The Year Without Pants. Scott shared his experience working remotely for Wordpress. After I read the book, I wrote : In the coming years, video conferencing and online meetings will become much more prevalent as stories like the ones Scott shares are told and retold.

Embedded BI and Analytics: Best Practices to Monetize Your Data

Speaker: Azmat Tanauli, Senior Director of Product Strategy at Birst

By creating innovative analytics products and expanding into new markets, more and more companies are discovering new potential revenue streams. Join Azmat Tanauli, Senior Director of Product Strategy at Birst, as he walks you through how data that you're likely already collecting can be transformed into revenue!

1.01^365 = 37.7

Tom Tunguz

Before we’d leave campus - Christmas vacation or spring break or summer vacation - our rowing coach would tell us, “You’re either getting faster or you’re getting slower. There’s no such thing as staying the same.” It was his way of inspiring us to train hard during those times.

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Why Product Innovation Slows After the Series A

Tom Tunguz

You’ve found product market fit. You’ve hired a team, including some managers. Your initial, small customer base is very happy. You’ve discovered an initial channel of customer acquisition that’s working. You’ve raised a meaningful round of capital. And then, right then, product innovation decelerates to zero. The fast pace that characterized the past 12-18 months, when you would germinate an idea and write the code in less than a few days, has evaporated.

As Your Sales Team Scales, Focus on Your Middle

Tom Tunguz

Imagine a hypothetical startup with 10 account executives that is growing quickly. This startup has two AEs that outperform meaningfully, six that are at typical quota attainment, and two that are underperforming. Where should your sales enablement team focus their time?

Should Your Startup Differentiate On Pricing?

Tom Tunguz

Startups are innovation machines. They identify market opportunities, develop novel products and go out to change the world. Some companies want to change the world in one dimension: a better product or a disruptive go-to-market.

Define the What But Delegate the How

Tom Tunguz

As we grow in our careers, we first become individual contributors, then managers of individuals, and then managers of managers. That transition is a tough one, and one that comes very quickly in startups. A bit flips and a leader must begin to delegate. Delegation is the only way a leader of a team or company develops leverage in the organization. Someone told me about a Vanity Fair interview with former President Obama. I can’t seem to find it, but here’s the gist.

The Magic of Intent: Start Knowing The Goals of Your Users

Speaker: Terhi Hanninen, Senior Product Manager, Zalando, and Dr. Franziska Roth, Senior User Researcher, Zalando

It's important to know your users - what are their preferences, pain points, ultimate goals? With user research and usage data, you can get a great idea of how your users act. The tricky part is, very few users reliably act the same way every time they use your product. Join Terhi Hanninen, Senior Product Manager, and Dr. Franziska Roth, Senior User Researcher at Zalando, as they explain how they were able to reach a new level of user understanding - by taking their user research and segmenting their users by point-in-time intent. You'll leave with a strategy to change how your product team, and organization at large, understands your users.

A New Architecture for Next-Generation Software Companies: Announcing Mattermost

Tom Tunguz

The first wave of SaaS is 20 years old. Today, the SaaS model dominates. But we’re seeing the emergence of a different type of next-generation software company. A new wave of companies that is responding to the changing needs of customers by innovating their architecture.

A Random Walk Down Sand Hill Road

Tom Tunguz

Bernie Munger is famous for championing the idea of mental models. Mental models help us think about the world by simplifying very complex topics into more digestible and tractable ideas. The challenge with mental models is first learning about them and second figuring out which model applies when.

Top 10 Learnings from the Redpoint Free Trial Survey

Tom Tunguz

Top 10 Learning about Free Trials from Tomasz Tunguz. At Saastr yesterday, I presented the top 10 learnings from the Redpoint Free Trial Survey that we distributed in October. The data confirmed many rules of thumb but also raised some interesting new questions about the best way to use trials. When we distributed the survey, we never would have expected the response. About 600 companies submitted data. They span single digit ARR businesses to publicly traded SaaS companies.

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Hustle As Strategy

Tom Tunguz

In a world where there are no secrets, where innovations are quickly imitated or become obsolete, the theory of competitive advantage may have had its day. Realistically, ask yourself, If all your competitors gave their strategic plans to each other, would it really make a difference? In 1986, Amar Bhide wrote “ Hustle as Strategy ” for the Harvard Business Review. At the time, he was an assistant professor at HBS. He examined the dynamics within the financial services market.

Nine Companies Share 30+ Best Practices for Creating Embedded Analytics Products

In this 4-part series, product and technology leaders share insights for successfully going to market with a data product. Download the eBook now, and find out how you can embed analytics in your solution, from building your business case to designing and launching your product.

The Two Things You Need From Early Customers that Matter More than Cash

Tom Tunguz

As you start to go to market, there are two things to prioritize from early customers that matter more than cash. Feedback and marketing rights. The feedback matters for obvious reasons. The product is early; customer feedback will help you hew the raw granite of your initial product into shape.

Series A SaaS Startup Benchmarks for 2018

Tom Tunguz

How far along was the typical SaaS Series A in 2018? The median business was at $1.8M in ARR and growing at 250%. The chart below shows a representative sample of SaaS Series As’ ARR and projected ARR growth rate for 2018.

Infinity Wells and Deep Work

Tom Tunguz

Over the weekend, the NY Times interviewed a classmate of mine from Dartmouth and fellow oarsman on the freshman crew team, Cal Newport, about his book and his idea, Deep Work.

The Fundraising Environment in 2019 - Three Major Shifts

Tom Tunguz

In a recent meeting, a founder asked me what I thought of the fundraising environment. My answer was: it’s become incredibly sophisticated along three dimensions: diversity of product offering, pricing sophistication, and efficiency of investment processes. If you read eBoys or Done Deals or Creative Capital, you’ll get a sense of the early days of the venture industry. It started out with six men at a famous restaurant in San Francisco hearing pitches over lunch.

Your 2-Part Metrics Audit for High-Value Products

Speaker: Sam McAfee, Product Development Consultant, Startup Patterns

You know what they say: what's measured improves. As product managers we're in a golden age of being able to get all sorts of metrics and run all sorts of experiments. But what are your measurements and analytics focused on? Are they really truly objective? Do they contribute to the ultimate vision of your product? And is everybody clear on that vision? Join Sam McAfee, Product Development Consultant, as he takes you through a two-part measurement audit. First, you'll learn how to make sure your measurements actually align with your product strategy. And second, you'll learn how to evaluate your culture of using measurements, so future experiments will more consistently provide high-value results.

How Much ARR Can a CSM Manage?

Tom Tunguz

How much can a customer success manager manage? I’d heard the wisdom of $1-2M in ARR per year and around 80 accounts. But I hadn’t come across any data. Last summer, Gainsight posted the results of their survey on the topic.

What Makes a Great Leader?

Tom Tunguz

It’s very difficult question to answer. How do you judge a leader? Is it financial success? The loyalty they engender? Their ability to inspire? There are war-time leaders and peace-time leaders. Leaders may be understated or zealous.

Mattermost's $50M Series B

Tom Tunguz

Just a few months ago, we partnered with Mattermost and led the Series A. We believe that open source applications will be an important part of the future of software because of their security, lower costs of customer acquisition and the flexibility they offer customers. Today, Mattermost is announcing a $50M Series A from Y Combinator Continuity and Battery. I’m thrilled to partner with Ali Rowghani from YCombinator and Neeraj Agarwal from Battery for the next leg of the journey.

Should Your Startup Employ Both Assisted and Unassisted Trials to Acquire Customers?

Tom Tunguz

A founder posed me a question earlier this week: Do you have any data/perspective on whether it’s worth keeping the unassisted free trial flow vs. providing only one path which leads to a demo and an assisted free trial? This is a complex question. Let’s break it down.

Top 10 industries for monetizing data: Is yours one of them?

Find out which industries, use cases, and business applications are the best opportunities for data monetization. Understand what data is being monetized, who wants it, and why. Use data you already own to create new revenue sources. Download the eBook today!

Your Company is a Product Used By Your Employees

Tom Tunguz

In their book, It Doesn’t Have to Be Crazy at Work , Jason Fried and David Heinemeier Hansson, the founders of 37Signals share how they’ve built and run their very successful company Basecamp. There’s a novel idea in the book: your company is a product used by its employees. [W]hen

What a Valuation Implies About a Business

Tom Tunguz

As I looked through the list of public SaaS companies this morning, I read their forward multiples. ZScaler: 23.1x; Okta: 21.8x; Veeva: 18.8x; Coupa: 18.6x; Shopify: 17.0x. Those multiples are calculated by dividing the projected future revenue of the company by its enterprise value today. But what do they mean? What do they imply? First, we need to set some context. There are two kinds of companies: those valued on growth and those valued on profits.

A Common Mistake in Hiring Plans

Tom Tunguz

As you build out your startup’s financial model for 2019, a key component will be the hiring plan. You’ll need to calculate the number of managers and individual contributors to achieve your goals. But don’t forget to plan for mishires. You will make mistakes hiring people.

Benchmarking PagerDuty's S-1:How 7 Key Metrics Stack Up

Tom Tunguz

PagerDuty was founded in 2009 by 3 former Amazon engineers who were often on-call. To engineers, being on call means carrying a pager to respond to crises when software breaks or services go down. In the 10 years since that day, PagerDuty has built an exceptional business.

Measure the Immeasurable: Beyond Vanity Metrics

Speaker: Sari Harrison, Product Management Instructor, Product School

As a product manager, it's your job to realize your product’s vision by executing your chosen strategy. It’s also your job to deliver value to the business. Ultimately, these two outcomes are aligned so the temptation is to focus primarily on business metrics. Doing this can cause you to lose focus on the real value you are trying to achieve, in favor of moving the vanity metrics such as launches and time spent. Join Sari Harrison, Product Management Instructor at Product School, as she explains how to use immeasurable success criteria along with your more standard KPIs to deliver products that don't just get used a lot, but deliver real value.

Predictions for 2019

Tom Tunguz

Here are some predictions for 2019 and a review of my thoughts for 2018, many of which were wrong. The M&A market slows meaningfully , especially at the multi-billion dollar level. The recent seasickness in the public markets forces most CEOs adopt a more conservative approach to acquisitions.

In Defense of Troublemakers

Tom Tunguz

In Defense of Troublemakers. I love the title. Who doesn’t want to be a troublemaker? Charlan Nemeth is a professor at Berkeley of Psychology. She’s studied the role of dissent in group decision-making and written this book on the topic. It’s a critical part of a functioning team.

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Office Hours with Guillaume Cabane on June 27

Tom Tunguz

Next week, on the 27th of June, Redpoint will host Office Hours with Guillaume Cabane. Guillaume is an exceptional marketer. He built the highly successful growth practices at Segment and Drift. He stands out because of his persistence at the cutting edge. I remember when he told me of how he used the Clearbit Reveal API to change the content of conversations in Drift pop-ups to meaningfully improve conversion.

Before You Raise a Round of Funding, Ask Yourself This Question

Tom Tunguz

Before you raise your next round, ask yourself this question. Are there any key people you need to hire? Essential executives, critical engineers, important managers or anyone else? Your common stock value, or 409a valuation will increase the second you receive a term sheet. And the strike price of any new options will increase with the 409a valuation. Let’s take a step back. When you hire someone, you’ll grant them a salary and options.

Build Delightful Products with Customer Validation

Speaker: John Little, Head of Product Marketing, Centercode

When it comes to delivering a solid product/market fit, customer validation is key. After all, you want to provide customers with a product that not only fills the need, but is delightful -- right? To get there, you need to commit to a vital blend of market research, strategy, and user testing. Join John Little, Head of Product Marketing at Centercode, as he explains a two-part approach to customer validation. First, how do you strategically identify your top product areas that need attention prior to release. And second, how do you turn user data into strategic priorities that help the right teams make the right decisions.