Tom Tunguz

The Radically Different Early Stage Fundraising Market

Tom Tunguz

We’ve all seen the data on the average increases in round sizes over the last four or five years. Startups are able to raise larger early rounds because of the financial environment. One way of thinking about the early-stage fundraising market is as a collection of financial products.

Which Categories of Seed Startups are Thriving? Which Aren't?

Tom Tunguz

Which sectors see more startup company formation than others? The answer has changed quite a bit over the last 8 years. Some sectors have hit their apogee and are declining. Others have grown by more than 3x. Yet others are growing geometrically. Let’s take a look. Hot Spaces.

The SaaS Correction of Late 2019

Tom Tunguz

Last week, SaaS stocks fell by about 18% on average. The chart above shows the most recent enterprise value to forward multiple for a basket of next-generation software companies. The red line is the value and the blue line is the median over the same time frame.

The Strategic Question at Seed Today

Tom Tunguz

I’ve written before about the Jacob’s Ladder of Fundraising. The Jacob’s Ladder is a children’s toy that flips over, and it’s a great metaphor for the seed market. Seed rounds are rapidly approaching and now often equal to the sizes of Series As just five years ago.

Driving Discovery and Experimentation in your Organization

Speaker: Teresa Torres, Product Discovery Coach, Product Talk, David Bland, Founder and CEO, Precoil, and Hope Gurion, Product Coach and Advisor, Fearless Product LLC

If you want to build what matters, you can't move forward blindly. But to make progress, you can't let things slow to a crawl while you focus resources on gathering data. This is where continuous discovery and experimentation come in. Join Teresa Torres (Product Discovery Coach, Product Talk), David Bland (Founder, Precoil), and Hope Gurion (Product Coach and Advisor, Fearless Product) in a panel discussion as they cover how - and why - to build a culture of discovery and experimentation in your organization.

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.

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.

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.

Viewing Valuation as a Discount of Future Value

Tom Tunguz

Why does growth rate matter so much? Why does growth rate influence valuation so much? I was reading a book recently written by a hedge fund manager who discussed valuation frameworks. His explanation was one of the best I’ve come across.

The State of the Startup IPO Market

Tom Tunguz

Over the weekend, there was quite a bit of press about the challenged state of startup IPOs this year. I was curious about the real trends in share prices, so I gathered the data on some of the more salient IPOs. The chart above shows 11 IPOs at different points in their life cycles.

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.

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).

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.

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.

The Early Discipline of Remote Startups

Tom Tunguz

In a recent interview, Sid Sijbrandij, the founder of Gitlab observed something about remote teams that I think is absolutely true. I’ve seen it in many of the remote/distributed companies we work with. He said: Remote forces you to do the things you should be doing any way earlier and better. As company scale, they need to develop infrastructure to successfully manage and coordinate large numbers of people.

Encouraging Innovation in an Established Product Culture

Speaker: Richard Cardran, Chief Creative Officer and VP Strategy, HIA Technologies

Innovation is both a process and an outcome. The best way to begin innovating your products is by innovating your internal process. We'll explore the challenges, solutions, and hands-on techniques for becoming a successful "agent of change" within a well-established product culture. We'll examine the importance of UX and user-centric feature analysis, the adaptation of Agile Methodologies to the creative process, as well as a way to drive successful culture change for setting expectations and winning approvals with cross-functional stakeholders. Innovation and Leadership go hand in hand. Join Richard Cardran, Chief Creative Officer and VP Strategy, HIA Technologies, as we assess some case studies to see how to lead with a clear strategy well-defined tactics, and an unbiased understanding of the fundamental question: "why are you innovating?"

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.

A Mental Model for Prioritizing Your Startup's Energies

Tom Tunguz

I’ve playing with a new mental model for early-stage startups: a pendulum. This pendulum oscillates between the limiting factors of the business at different stages. There only two limiting factors in this mental model: product and go to market. At the moment a startup is founded, the business is product limited. You can’t do much without a product. After the company establishes product market fit, the pendulum swings to go-to-market.

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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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.

Embedding Operational Reports: Everything Product Managers Should Know

Speaker: Dean Yao, Sr. Director of Product Marketing, Logi Analytics

Businesses are run with analytics - but companies continue to struggle with interpreting, analyzing, and distributing data. Operational reports help get information to the people who need it most, in formats they understand, and in a timeframe that matters. Join the webinar to learn how embedding operational reports can give your users a precisely formatted, ready-to-analyze view of their operational activities. World-class software teams are embedding operational reports to empower end users with interactive data visualizations, detailed information, and highly precise formats that can be shared via email, PDF, print, or online.

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?

Observations from the Enterprise Tech 30 List

Tom Tunguz

published the Enterprise Tech 30 last week. It’s a coaches poll of the top enterprise startups broken into early, mid and growth stage.

The Most Frequent Mishire in Startups

Tom Tunguz

The most frequent mishire in startups is the first head of marketing. Many different disciplines fall under marketing’s purview. The question facing founders recruiting marketers is: which is the most important to prioritize? Marketing expertise falls into three segments: product marketing, demand generation, and brand marketing. Each of these kinds of marketers have critical skills for a startup.

Benchmarking DataDog's S-1: How 7 Key Metrics Stack up

Tom Tunguz

Recently, we’ve seen a series of product-driven companies building huge customer bases with tremendous account expansion and terrific sales efficiency. DataDog is no exception. DataDog provides a very popular IT monitoring solution that has grown from its founding in 2010 to a huge business.

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.

The 37% Rule: How to Decide When to Stop Wondering and Start Deciding

Tom Tunguz

Earlier this year, I read Algorithms to Live By, a book that explains how to use insights from computer science in daily life. One of the rules is the 37% rule. It’s an important rule because it’s broadly applicable. But I had forgotten about it until I listened to the author on the Software Engineering Daily podcast. The 37% rule says that if you have a decision to make, you should spend 37% of the amount of time you have. This is called exploration period.

The 13 Critical Questions to Answer about Your Startup's Product Marketing

Tom Tunguz

Last week’s post on The Most Frequent Mishire in Startups generated the most comments on a post this year. In particular, it was this section. Though the startup may have achieved product market fit, the company may not understand the fit. Who is using the product and why? How does the buyer journey evolve with time? How do buyers describe the product amongst each other? Few early stage companies can answer those questions accurately. Why is this?

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.

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.

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.

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.

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.

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.

One Call to Make Before Picking Your Startup's Headquarters

Tom Tunguz

If you must choose a long term headquarters for your startup, call an executive recruiter who focuses in that city. Ask her about each of the key roles your company will need to hire in the next 2 to 3 years. VP Engineering, VP Product, VP Sales, VP Customer Success, VP Marketing, or VP Operations. How large is the candidate pool for each search? Which are the hardest searches to complete in this geography? Where are the best talent pools to sift through?

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.

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.