Why Your Startup Doesn’t Invest Sufficiently in its Differentiators

There are three types of product features, a seasoned head of product told me recently. MMRs, neutralizers, and differentiators. MMRs are minimum market requirements; basic features that every customer expects and demands. Neutralizers mitigate competitive threat. Differentiators are your startup’s competitive advantage. As a product manager, I’d never thought about this type of roadmap segmentation before. But it made a lot of sense to me.

When a startup has established product market fit, the differentiator is clear. This feature set distinguishes the company. It is the reason customers prefer the product to alternatives. The very first buyers buy irrespective of deficiencies. The differentiator is enough to overlook those faults.

As the product team talks to customers, they are likely to hear feedback encouraging more investment in MMRs and neutralizers. “Your product is missing this feature. We need this capability that exists in another piece of software in yours.”

This Continue reading "Why Your Startup Doesn’t Invest Sufficiently in its Differentiators"

The Startup Founder’s Almanac

I first met Elad Gil when I became an associate product manager at Google. Back then, he had an unusual habit I noticed right away. Most people carry their laptop in the same way. The laptop is closed, in hand, between the hand and the hip. Elad carries his laptop open, powered on and by the top or bottom corner. He’s so smart and has so much cognitive bandwidth, he simply doesn’t have time to wait for the computer to wake from sleep.

I’ve admired the way Elad decomposes problems and proposes solutions from those early days in Building 42. High Growth Handbook shines as a straightforward manual for startup founders. It explains the theory and the practice of building a company from his point of view and that of many luminaries.

There are a few passages from the book that struck me.

Marc Andreessen: “In fact, the general model Continue reading "The Startup Founder’s Almanac"

Lessons Learned from 20 Years at the Leading Edge of SaaS

Over the weekend, I read Tien Tzuo’s book, Subscribed. Tien is the founder and CEO of Zuora, and former CSO/CMO at Salesforce, where he started in 1999. He has been working in SaaS for nearly 20 years. He’s a thought leader in the world of subscriptions, and I learned a tremendous amount from his book.

There were three key themes that resonated with me. First, the shift to a subscription business model reinforces customer centricity. Second, pricing is one of the most powerful growth levers subscription companies have. Third, balancing customer mix across three-tier plans is critical to long-term success, and there is a right way to think about it.

In the book, Tien talks about Fender, the guitar company. Though tens of thousands of people have salivated over Fender’s guitars - notably Wayne Campbell and his love affair with the Stratocaster - 90% of people who pick up a Continue reading "Lessons Learned from 20 Years at the Leading Edge of SaaS"

Does Winner Take Most in SaaS?

There’s a theory to the idea that winner takes most in Startupland. The startup that grows a bit faster at the beginning demonstrates more momentum. The startup raises capital sooner, hires people, builds the product, markets and sells the product, grows more, and raises capital. Repeat the process for each round of capital. Is it borne out in reality?

This theory suggests that irrespective of the category, the winner should capture most of the market value. Reality is far more complicated than this simple idea. After all, most startups face turbulence in their journey. Venture capitalists finance competitors to pursue a market opportunity. M&A environments ebb and flow. Undisclosed private sales or private valuations aren’t considered. Plus, survivorship bias plagues this analysis.

Setting all of that aside, I put together a basic data set across different software sectors. I examined 11 sectors which benefited from meaningful exit activity over the Continue reading "Does Winner Take Most in SaaS?"

A Deeper Dive into the Dynamics of the Seed Market

Earlier this week, I wrote about the collapse in the number of seed investments. I received many questions about the data, all the same. Why is this happening? This is a deeper dive into the data.

First, there are fewer seed investors participating in the market than in 2015, about 40% fewer.

Second, many of the most active seed investors and institutional seed funds are investing in fewer companies. The largest accelerators in the US buck the trend, however. The lines in gray trace the investment counts by firm. The red sketches a smoothed aggregation.

Third, all but one of the most active venture capital funds have reduced their seed investment activity. In aggregate volumes have declined by half.

Fourth, syndicates size haven’t changed. The average number of major investors buying at the seed has remained about 2.7 investors per round throughout the gyrations of the market. And the

Continue reading "A Deeper Dive into the Dynamics of the Seed Market"

A Deeper Dive into the Dynamics of the Seed Market

Earlier this week, I wrote about the collapse in the number of seed investments. I received many questions about the data, all the same. Why is this happening? This is a deeper dive into the data.

First, there are fewer seed investors participating in the market than in 2015, about 40% fewer.

Second, many of the most active seed investors and institutional seed funds are investing in fewer companies. The largest accelerators in the US buck the trend, however. The lines in gray trace the investment counts by firm. The red sketches a smoothed aggregation.

Third, all but one of the most active venture capital funds have reduced their seed investment activity. In aggregate volumes have declined by half.

Fourth, syndicates size haven’t changed. The average number of major investors buying at the seed has remained about 2.7 investors per round throughout the gyrations of the market. And the

Continue reading "A Deeper Dive into the Dynamics of the Seed Market"

A Deeper Dive into the Dynamics of the Seed Market

Earlier this week, I wrote about the collapse in the number of seed investments. I received many questions about the data, all the same. Why is this happening? This is a deeper dive into the data.

First, there are fewer seed investors participating in the market than in 2015, about 40% fewer.

Second, many of the most active seed investors and institutional seed funds are investing in fewer companies. The largest accelerators in the US buck the trend, however. The lines in gray trace the investment counts by firm. The red sketches a smoothed aggregation.

Third, all but one of the most active venture capital funds have reduced their seed investment activity. In aggregate volumes have declined by half.

Fourth, syndicates size haven’t changed. The average number of major investors buying at the seed has remained about 2.7 investors per round throughout the gyrations of the market. And the

Continue reading "A Deeper Dive into the Dynamics of the Seed Market"

Why Series As are Much Easier to Raise in 2018 than the Past 5 Years

In the last six years, the median time between seed and Series A has more than tripled from about 200 days to about 750 days. Why? The seed market is in the midst of some secular changes. Seed rounds have declined 63% from their peak. Total dollars invested have fallen by 37%. But the median round size is up 3x in the same time period. In other words, investors are concentrating capital in fewer startups.

Consequently, this smaller number of startups has substantially longer runway, fueling a longer gestation period to series A. In 2011, the median startup raised a $0.5M seed and a $3M Series A 9 months later. Today, the median startup raises a $1.5M seed and an $8M Series A 22 months later.

Some of these startups wait more than 2 years, up to 6, 7 or 8 years, to raise the Series A. The

Continue reading "Why Series As are Much Easier to Raise in 2018 than the Past 5 Years"

Why Series As are Much Easier to Raise in 2018 than the Past 5 Years

In the last six years, the median time between seed and Series A has more than tripled from about 200 days to about 750 days. Why? The seed market is in the midst of some secular changes. Seed rounds have declined 63% from their peak. Total dollars invested have fallen by 37%. But the median round size is up 3x in the same time period. In other words, investors are concentrating capital in fewer startups.

Consequently, this smaller number of startups has substantially longer runway, fueling a longer gestation period to series A. In 2011, the median startup raised a $0.5M seed and a $3M Series A 9 months later. Today, the median startup raises a $1.5M seed and an $8M Series A 22 months later.

Some of these startups wait more than 2 years, up to 6, 7 or 8 years, to raise the Series A. The

Continue reading "Why Series As are Much Easier to Raise in 2018 than the Past 5 Years"

What I’m Grateful For

Earlier this week, Redpoint announced its 7th stage fund of $400M. Over the past 10 years that I’ve been Redpoint, I have seen our firm learn, evolve and grow in many different ways - important ways - that fill me with gratitude and pride.

First, we have and will continue to plant trees we will not see. Our founders who started the firm about 20 years ago built the firm to endure for decades. They taught us the business and invested consistently in the future of firm. We plant trees outside the firm by contributing knowledge and connections through events, publishing and networking.

Second, we’ve reinforced key values that have always been, and will always be core, to our culture. We have five: founders first, think independently together (brutal intellectual honesty); open source the org (transparency inside and out); move as one, have fun (team first, individual second; Continue reading "What I’m Grateful For"

What I’m Grateful For

Earlier this week, Redpoint announced its 7th stage fund of $400M. Over the past 10 years that I’ve been Redpoint, I have seen our firm learn, evolve and grow in many different ways - important ways - that fill me with gratitude and pride.

First, we have and will continue to plant trees we will not see. Our founders who started the firm about 20 years ago built the firm to endure for decades. They taught us the business and invested consistently in the future of firm. We plant trees outside the firm by contributing knowledge and connections through events, publishing and networking.

Second, we’ve reinforced key values that have always been, and will always be core, to our culture. We have five: founders first, think independently together (brutal intellectual honesty); open source the org (transparency inside and out); move as one, have fun (team first, individual second; Continue reading "What I’m Grateful For"

What I’m Grateful For

Earlier this week, Redpoint announced its 7th stage fund of $400M. Over the past 10 years that I’ve been Redpoint, I have seen our firm learn, evolve and grow in many different ways - important ways - that fill me with gratitude and pride.

First, we have and will continue to plant trees we will not see. Our founders who started the firm about 20 years ago built the firm to endure for decades. They taught us the business and invested consistently in the future of firm. We plant trees outside the firm by contributing knowledge and connections through events, publishing and networking.

Second, we’ve reinforced key values that have always been, and will always be core, to our culture. We have five: founders first, think independently together (brutal intellectual honesty); open source the org (transparency inside and out); move as one, have fun (team first, individual second; Continue reading "What I’m Grateful For"

The Three Layers of Management

Imagine you come across three builders working on the same project. You ask each the same question: what are you working on? The first says, “I lay one brick after the other.” The second says, “I’m building a wall.” The third, “I’m erecting a cathedral.” What is the moral of this aphorism?

I see two.

The first is to keep the greater vision of our work in mind. Said another way, “If you wish to build a ship, do not divide the men into teams and send them to the forest to cut wood. Instead, teach them to long for the vast and endless.”

The second is we work on different levels. Without the vision of the cathedral, we may never motivate ourselves to achieve grandeur. Instead, we might create a cluster of one-room, square red brick houses. Equally true: without the focus on the bricks Continue reading "The Three Layers of Management"

The Three Layers of Management

Imagine you come across three builders working on the same project. You ask each the same question: what are you working on? The first says, “I lay one brick after the other.” The second says, “I’m building a wall.” The third, “I’m erecting a cathedral.” What is the moral of this aphorism?

I see two.

The first is to keep the greater vision of our work in mind. Said another way, “If you wish to build a ship, do not divide the men into teams and send them to the forest to cut wood. Instead, teach them to long for the vast and endless.”

The second is we work on different levels. Without the vision of the cathedral, we may never motivate ourselves to achieve grandeur. Instead, we might create a cluster of one-room, square red brick houses. Equally true: without the focus on the bricks Continue reading "The Three Layers of Management"

The Three Layers of Management

Imagine you come across three builders working on the same project. You ask each the same question: what are you working on? The first says, “I lay one brick after the other.” The second says, “I’m building a wall.” The third, “I’m erecting a cathedral.” What is the moral of this aphorism?

I see two.

The first is to keep the greater vision of our work in mind. Said another way, “If you wish to build a ship, do not divide the men into teams and send them to the forest to cut wood. Instead, teach them to long for the vast and endless.”

The second is we work on different levels. Without the vision of the cathedral, we may never motivate ourselves to achieve grandeur. Instead, we might create a cluster of one-room, square red brick houses. Equally true: without the focus on the bricks Continue reading "The Three Layers of Management"

Our Investment in Kustomer

We’re excited to announce our partnership with and investment in Kustomer. Kustomer is a New York City-based company building the next-generation of customer support platform.

In my first role at Google, I provided account management and customer support to internet publishers.

I remember trying to understand the context around a particular customer case. How large is the customer? What recent interactions have we had with the customer? How satisfied are they? Who is the point of contact? Which products are they using? The information was found in five or six different systems.

I also remember trying to remediate problems. Some were simple. Password reset or account balance inquiries. But others required coordination with different systems and teams: refunds and policy review. Orchestrating those processes isn’t easy.

Kustomer is the software I wish I had when supporting customers. Brad, Jeremy and the rest of the Kustomer team have operated in the Continue reading "Our Investment in Kustomer"

Our Investment in Kustomer

We’re excited to announce our partnership with and investment in Kustomer. Kustomer is a New York City-based company building the next-generation of customer support platform.

In my first role at Google, I provided account management and customer support to internet publishers.

I remember trying to understand the context around a particular customer case. How large is the customer? What recent interactions have we had with the customer? How satisfied are they? Who is the point of contact? Which products are they using? The information was found in five or six different systems.

I also remember trying to remediate problems. Some were simple. Password reset or account balance inquiries. But others required coordination with different systems and teams: refunds and policy review. Orchestrating those processes isn’t easy.

Kustomer is the software I wish I had when supporting customers. Brad, Jeremy and the rest of the Kustomer team have operated in the Continue reading "Our Investment in Kustomer"

Our Investment in Kustomer

We’re excited to announce our partnership with and investment in Kustomer. Kustomer is a New York City-based company building the next-generation of customer support platform.

In my first role at Google, I provided account management and customer support to internet publishers.

I remember trying to understand the context around a particular customer case. How large is the customer? What recent interactions have we had with the customer? How satisfied are they? Who is the point of contact? Which products are they using? The information was found in five or six different systems.

I also remember trying to remediate problems. Some were simple. Password reset or account balance inquiries. But others required coordination with different systems and teams: refunds and policy review. Orchestrating those processes isn’t easy.

Kustomer is the software I wish I had when supporting customers. Brad, Jeremy and the rest of the Kustomer team have operated in the Continue reading "Our Investment in Kustomer"