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 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 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 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

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 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

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 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

Tom Tunguz

JULY 27, 2023

AI will automate 25-50% of white collar work including data analysis. Does that will data teams shrink in size? On the contrary, while AI can automate some work, it will also demand much more from data teams. Typical tasks - writing SQL & charting data - will become mostly automated. This ease of use will enable data teams to focus elsewhere : on the sea of demand for data coming from the edges of the company.

AI 175

AI Data Data Analysis compliance 175

Tom Tunguz

JULY 19, 2023

For many startups today feel like they are operating under dark skies. It’s supposed to be hard - you’re changing the world. Reflecting on the last three quarters : Startups have parted with colleagues to extend runway in a difficult fundraising market. Some have significant balance sheets & discovered the ostensible product-market fit isn’t as strong as the business may have believed.

Forecasting 176

Forecasting Startup Pricing Investment 176

Tom Tunguz

JULY 10, 2023

Large language models enable fracking of documents. Historically, extracting value from unstructured text files has been difficult. But LLMs do this beautifully, pumping value from one of the hardest places to mine. We have a collection of thousands of notes researching startups. We are tinkering with deploying large language models on top of them. Here are some quick observations about our initial experiments : The Future is Constellations of Models.

Artificial Intelligence 146

Artificial Intelligence Systems Review Machine Learning Government 146

Tom Tunguz

JULY 4, 2023

In August of last year, public markets switched from valuing SaaS companies primarily on growth to primarily on profitability. In the past two months, high-flying software companies have seen 40-112% increases in valuation. I wondered if the public markets have begun to change the way they value these businesses. The answer is yes - if you’re a top quartile company.

Software 223

Software Marketing AI Metrics 223

Tom Tunguz

JUNE 22, 2023

MotherDuck announced their product, managed DuckDB in the cloud, is available by invitation. I have a raft of extra early invitations that I’ll distribute randomly on Monday. If you’d like to put your email in for a chance to receive one, just fill out this form. DuckDB is one of the most powerful, lightweight, & fastest adopted analytical databases.

Cloud 195

Cloud Data Management 195

Tom Tunguz

JUNE 7, 2023

In the mid-2010s, every web1 company became a web2 company. This time it’s different. Many web3 companies will become web2 companies, too. Why will web3 companies dress like SaaS mutton? If the current pace continues, web3 startup fundraising will fall by 73% in 2023. The absence of those dollars will flatten & shrink the already modest addressable market for web3 software & infrastructure.

Blockchain 285

Blockchain SaaS Scale Cloud 285

Tom Tunguz

MAY 7, 2023

I’ve been tinkering with LLMs. First, I created a chatbot using all my blog posts. Then I created a model to produce blog entries based on my writing. As I went through this process, I asked myself some questions along the way : Does the ML model ingest my posts & keep them? What if I’d like to remove them from the logs or training set or output for others?

ChatGPT 220

ChatGPT User Experience Engineering Startup 220

Tom Tunguz

MAY 1, 2023

When a startup is born, founders lead sales. Design partners, pilots, or founder-led sales - they have many names - these customers work with a startup to solve a problem. Conversations about contracts & pricing are kicked down the road until the customer sees value & the path to capture it. Said another way, founder-led sales are sales engineering sales, not account executive sales.

Scale 189

Scale Engineering Outsourced Development Sales 189

Tom Tunguz

APRIL 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 later this week. Google Cloud Platform (GCP) & Microsoft Azure had strong quarters with about 28% annual revenue growth each.

AI Search 225

AI Search AI Azure GCP(Google Cloud Platform) 225

Tom Tunguz

APRIL 18, 2023

Every company will be an AI company. Every startup needs an AI strategy - not just for fundraising or press appeal. User expectations have changed. When one email composer window autocompletes sentences, every email product will need to follow. When one customer support bot provides a meaningfully better experience to answer questions, every competitor will match it.

AI 242

AI Artificial Intelligence Strategy Startup 242

Tom Tunguz

APRIL 8, 2023

Blockchains are databases application developers use to build novel user experiences. Just as hundreds of different databases exist in web2, different blockchains have evolved in web3. In September, I published the State of Web3 in Data. I’ve been watching one of those charts very closely : slide 25 which tracked L2s & L1s. Layer 2s (or L2s) like Arbitrum & Optimism, sit atop Ethereum (an L1).

Blockchain 201

Blockchain Application Development User Experience Development 201

Tom Tunguz

MARCH 30, 2023

As generative AI captivates Startupland, startups will do what they have always done: integrate new technology to build transformative businesses. Incumbents have seized the moment with Microsoft, Adobe, & others integrating generative AI into their products quickest. In response, startups must develop moats to stake out their market. What are these moats?

Artificial Intelligence 325

Artificial Intelligence AI Machine Learning Generative AI 325

Tom Tunguz

MARCH 19, 2023

“Our analysis indicates that approximately 19% of jobs have at least 50% of their tasks exposed to GPTs when considering both current model capabilities and anticipated GPT-powered software.” That’s the conclusion from OpenAI’s recent paper “ GPTs are GPTs: An Early Look at the Labor Market Impact Potential of Large Language Models.

Artificial Intelligence 209

Artificial Intelligence AI Search Government Banking 209

Tom Tunguz

MARCH 11, 2023

Within the span of a few days, Startupland has experience an extraordinary set of events. The collapse of Silicon Valley Bank & 2 two others, then the intervention of the US Treasury to backstop deposits. During that time, founders & management teams responded with tremendous fortitude under pressure, developing contingency plans to assure the success of their businesses - yet again!

Payment Solutions 191

Payment Solutions Banking Payment Services Startup 191

Tom Tunguz

FEBRUARY 20, 2023

In CloudFlare’s latest earnings report , the management team highlighted the strength of enterprise buyers within their customer base. I wondered if this were broadly true. Do public software companies with largely enterprise customer bases benefit from superior growth to their peers with mid-market or SMB focuses? Enterprise & Mid-Market public companies have seen a relatively constant decline in growth rates through the last six years.

SMB 294

SMB Enterprise Software Strategy 294

Tom Tunguz

FEBRUARY 2, 2023

I’m watching public company earnings to identify early weaknesses in the software market. Yesterday, Google & Amazon announced earnings which completes the picture. Growth will continue to slow this year. A year ago, AWS, GCP, & Azure averaged 44% annual growth. Today, that figure has dropped to 27%. Amazon also guided to lower growth rates in the future.

GCP(Google Cloud Platform) 305

GCP(Google Cloud Platform) Cloud AWS Sales Hiring 305

Tom Tunguz

FEBRUARY 1, 2023

In his most recent earnings conference call, Microsoft’s Satya Nadella said “Every product of Microsoft will have some of the same AI capabilities to completely transform the product.” Today, Microsoft Teams launched AI features in Teams for a fee. Teams will summarize meetings, create chapters in those meetings, extract tasks, translate in real time, & develop templates for future meetings.

AI 190

AI Machine Learning Artificial Intelligence Innovation 190