Why Product Innovation Slows After The Series A

By Tomasz Tunguz | September 10, 2019

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, […]

The Fundraising Environment In 2019 – Three Major Shifts

By Tomasz Tunguz | July 2, 2019

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 […]

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

By Tomasz Tunguz | June 11, 2019

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. So the business pivoted to commercialize an internal tool – a Searchable Log of All […]

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

By Tomasz Tunguz | April 16, 2019

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. Their product has evolved from on-call management, which […]

Predictions for 2019

By Tomasz Tunguz | January 8, 2019

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. Facing large swings in valuation, these leaders may […]

Selling Your Product While You Build It

By Tomasz Tunguz | December 4, 2018

Customers will pay you to build your SaaS product. It’s one of the great advantages of a SaaS model. Annual prepay contracts – wherein customers pay for a year’s cost on day – is a free loan from customers. And every startup can benefit from this advance. There’s only one requirement: you must be able […]

How the Economics of Professional Services Have Changed in Software

By Tomasz Tunguz | October 30, 2018

A founder asked me recently if there were any trends in the economics of professional services across public SaaS companies. I had examined the gross margins and share of revenue from professional services about 3 years ago. Professional services are consulting fees software companies charge to customers for software configuration, customization and education. What has […]

In Early Markets, Services Can Be a Competitive Advantage

By Tomasz Tunguz | October 18, 2018

In early markets, customers prefer entire solutions, not best in class point products. These solutions often include significant professional services and education. At the beginning of a new wave, most customers don’t understand the technology well. So, they seek experts to guide them. Companies that provide services and education often win the early market. They […]

Normalization of Valuations in the Public and Private Software Markets

By Tomasz Tunguz | October 10, 2018

I’ve written quite a bit about the public market software multiples. They’ve increased to near historic levels with forward revenue multiples approaching 9x. As the public markets have appreciated, something has happened that I didn’t expect. Some public companies are now fetching the mulitples of the most attractive private companies. I thought valuations between the […]

Three Observations About the Adobe/Marketo Acquisition

By Tomasz Tunguz | October 2, 2018

About two years ago, Marketo was publicly traded and valued at roughly $1.1B. Vista Equity paid $1.8B to take the company private, a 64% premium. At the time it was taken private by Vista, Marketo generated $241M in trailing revenue, growing at 35% annually. Its net income margin was -31%. Last week, Adobe announced they […]