I really do love New Years. Reflecting on life and setting goals to make it better definitely feels like a process worth celebrating, and since my professional life began 10 years ago I’ve really enjoyed spending some of my time off in December preparing for the year ahead. I’d layered in a lot of goals over the years like getting up early, prioritizing self-care (nails, hair, skin etc.), and writing a TON more. This year, I will continue on the journey for self control and my focus will be on stripping away things that aren’t working for me anymore.Â I’ve chosen three things I will do a lot less of in 2015.
Public Speaking — unless it is in panel or Q&A format. It stresses me out, I don’t think I’m really good at it, and I feel guilty about the amount of time it takes to prepare and write a talk (which usually means I just don’t do it, which brings the stress).
Drinking Alcohol — it’s pretty amazing that I’ve gained 40 pounds since I started running my own company 3 years ago. It’s time to turn this around, and the first thing that has to go is alcohol. Drinking socially, or to cope with stress (e.g. “I need a glass of wine to wind down”) has to be replaced with walks, yoga, reading etc. if I want to get back my normal weight.
Traveling for Business — messing up my sleep schedule for business travel is the biggest productivity and health killer in my life, and often I find that the trips I book aren’t nearly valuable enough to justify it. In 2015 I will spend a lot ofÂ time in New York and Boulder, but when I do travel I will go for 1+ week at a time whenever possible, stay in an apartment with a real bed so I can feel like I actually live there, and make sure to set aside some time to actual walk around and enjoy the place I’m visiting.
Obviously my work won’t make it possible for me to completely stop public speaking or business travel, but any activity along those linesÂ will be highly intentional and I will prioritize long term health and happiness over the short-term sparkle of opportunity. I am also hiring people on my team who can share these burdens with me, who will enjoy them and use them to build their own careers.
My online persona makes it sound like I don’t have much of a personal life, and that’s not exactly true — I just am pickier about the personal things I share as my inner life has become more developed. I look forward to sharing the New Year with my husband Kevin, my family and closest friends. In 2015 I’m sure I will travel somewhere warm and exotic, cook tons of amazing food, read a bunch of historical fiction and science fiction novels, finally furnish my roof deck and garden, celebrate as two of my favorite couples tie the knot,Â find a good reason to pop the bottle of Dom Perignon I’ve been saving, purge even more of my clothes and other clutter, and invent new things I haven’t even thought of yet.
Becoming a better CEO, learning how to work with my new board of directors, adding 50 people to the Mattermark team, continuing on my quest for a sustainable business model for high quality data journalism (I always wanted to be a writer, it just never seemed to pay very well)… these are adventures I’m already in the middle of and they’ll consume most of myÂ creative output in 2015.
For the first time in 3 years I won’t be focused on fundraising! It’s to fully explainÂ how wonderful that is, as my cofounder Andy puts, “for the first time in many years I’m working for a company where I’m confident itÂ can’t go out of business this year”. A-fucking-men to that.
So cheers to 2014, a wonderful year, and onward!
This year has been an interesting one for blogging, I’m writing a lot more drafts and publishing far fewer posts. I’ve adopted Medium as my main platform for what I’d consider to be my “professional” writing because the editing tools are superior to WordPress, and the writer’s experience being good leads me to draft more and feel excited to quickly jot down something and trust that the platform will help with distribution. I’ve been blogging lightly for my company but have handed off a lot of our professional brand voice to the talented Nick Frost, and he is hard at work building our community through blogging, email and social channels.
My Top 10 All Time Blog Posts
- Is My Startup Burn Rate Normal?
- Zombie Startups
- Why I Won’t Be Using Betapunch for User Testing
- Solve the Problems Your Parents Have
- The $3B Exit Tumblr Could Have Had
- Mattermark Has Raised $2M in Our Second Seed Round
- I Don’t Do That Job Anymore
- Don’t Waste a Single Moment
- Zombie VCs
- The Y Combinator Index
I don’t write with traffic in mind, but I do care about the reach of posts because it helps me understand what matters to my readership and what doesn’t. If I hit a nerve, I can quickly get above 10,000 visitors but for many posts a few thousands visitors is about right. There are things I want to quickly record or comment on. What I have been happy with these past two years is that the pieces I spent the most time on, and were the longest, actually did the best. I hope this means that I am learning to forge a stronger connection betweenÂ my readers and my personal interests.
I write because it makes me feel more human to share my experiences and get feedback. Not all that feedback is friendly, and I’m not always right, but I always gain new perspective and learn from the community.Â This is my little corner of the Internet, and the people worldwideÂ who have read, shared, commented, submitted to Hacker News, discussed and digested my writing has now crossed 1 Million people. I’m proud of that, and I look forward to writing for myself and millions more for many years to come.
Full Disclosure: I bought Twitter stock in the company’s IPO and I will not be selling it anytime soon.
Each year around the holidays I head North to Washington State to hibernate for a few weeks with my parents at their house, reflect on what I’ve been doing with my life, read, gamble at the reservation casino, drink and snuggle by the fire. This past winter I decided, after a few glasses of wine, to drive my Twitter followers a little crazy. I had a lot of ideas I wanted to share, 140 characters weren’t enough to express what I wanted to say and I was too lazy to blog.
Soon, Marc Andreessen and I crossed paths (he had just gotten active on Twitter)… and he started tweetstorming too!
Are @pmarca tweets real? I can not be the only one wondering if it is a bot, or at least a ghostwriter
— Danielle Morrill (@DanielleMorrill) January 1, 2014
— Marc Andreessen (@pmarca) January 1, 2014
I got some positive feedback, and kept going:
— Semil (@semil) January 2, 2014
There were questions of ettiquette for kicking off a new tweetstorm:
Do I have to announce this is a tweetstorm or are you all used to it by now?
— Danielle Morrill (@DanielleMorrill) February 4, 2014
And some tweetstorms inspired response storms, which was really cool:
(This tweetstorm format inspired by @DanielleMorrill.)
— ZacharyCohn (@ZacharyCohn) February 10, 2014
— Chip Hazard (@chazard) March 30, 2014
Other cool things happened, including talking to the Twitter team about their timelines feature (something you can only use through the API right now)…
And other things… mostly just new friendships started and great conversations…
It even resulted in an offer to turn one tweetstorm into a book (TBD)!
I am pretty sure I did *not* invent tweetstorming (it actually has a different meaning, primarily used by activists in the past to harass brands online) but the tweetstorm — much like the hashtag, which was created by my friend Chris — is why Twitter is awesome.
On Twitter, users figure out the features and the interface for their conversations.
The year we suspended disbelief long enough to find a frighteningly ambitious startup idea. From â€œTechCrunch Killerâ€ to â€œBloomberg for Startupsâ€ andÂ beyondâ€¦
Part of my job as an early stage CEO is to protect my company from being put into a box too early. Leaving us unsorted makes investors, customers and even employees a bit uncomfortable. Itâ€™s human nature to categorize things, to crave the efficiency of communicating, â€œMattermark is XYZ for ABC.â€ It feels safe and socially correct, intellectually digestible, rational. But those motivations arenâ€™t what drive category defining innovation, and making decisions for the sake of ease is always a big red flag to me.
Donâ€™t get me wrong, there will be a time for having an extremely clear vision that we can lock in on, market against, hire against, build against. In fact, I think we might be very close to that moment of clarity. But before we go there, Iâ€™d like to share the journey of the past year after announcing the shutdown of our previous startup about a year ago on March 10, 2013.
In March of 2013 my previous startup Referly was down to just 3 of us, after reaching a peak company size of 10 people. With $350K left of the $1 Million raised during Y Combinator, we had enough money to get another project off the ground. Kevin, Andy and I cut our salaries to nothing and headed to my parentâ€™s house in Washington State for a couple weeks. We committed to nursing our pride, reading books, drinking wine, cooking, reconnecting as friends and thinking about to do next outside the fishbowl of Silicon Valley.
I was still a little pissed off at Paul Graham, who months earlier had said:
â€œYouâ€™re just too plausible. Itâ€™s as if someone was writing a sitcom about startups and you needed a believable idea.â€
Every time I reflected on this conversation I would get pissed off all over again, but in a state of defeat it seemed reasonable to ask myself the previously forbidden question, â€œwhat if PG was right?â€
If PG is right, I reasoned, then I need to stop doing such plausible things.
Moving to Seattleâ€Šâ€”â€ŠWe could have stopped here.
Before Mattermark, There WasÂ Cursive
â€œMattermark Wasnâ€™t a Pivotâ€, but before there was Mattermark we almost did pivot the existing technology of Referly into a different idea, which we code named Cursive. It was clear the posts Iâ€™d been doing about startups were the biggest drivers of traffic for Referly, and we had a beautiful custom CMS. Medium and Svbtle were still much earlier in their growth curves, and appeared to validate the model so I thought maybe I would start blogging prolifically on my own platform and then invite others to join me, like a community-written TechCrunch.
I shared this with PG during office hours and he said something like:
â€œIf youâ€™re shutting down Referly why not start over with something completely different? If you want to kill TechCrunch then do that.â€
Having some direction was exciting, but I also felt the foreboding sense that running a media company had the potential to be a soul sucking grind, with little software innovation and even less margin as a business. Iâ€™d have to really love the day-to-day to make it my startup. To test the waters I went on a mission to publish at least one post every day, for 30 days. 3 that stick out in my memory:
- On April 3rd I ranked the growth of Andreessen Horowitzâ€™s portfolio companies and Marc Andreessen emailed me along with several General Partners, saying: Thanks Danielle! We should do this ourselvesÂ :-).
- On April 5th I published â€œZombie VCsâ€ using Crunchbase data to generate a list of firms who appeared to be inactive. This post electricified the VC industry and business media for a full week, intriguing and infuriating investors while revealing the lack of publicly available data. Awash in corrections and new relationships after hundreds of calls and emails, weâ€™d found something important.
- A scoop on Tumblrâ€™s revenue shortly before the Yahoo acquisition earned a link from Kara Swisher, outreach from someone at the WSJ about a potential job, and a meeting with Michael Arrington. Iâ€™ll never forget, Michael sat down looking very grumpy and read the entire 1,200 word piece in silence before looking up to proclaim, â€œyou can writeâ€. I just laughed out loud, my blogger hero just said I could write! Holy shit.
At first I imagined building a â€œTechCrunch-killerâ€ media business. I imagined a future where I would write about under-appreciated startups, analyze deals, and report on the dynamics of Silicon Valley and other startup ecosystems worldwide. I estimated TechCrunch made ~$20M in revenue a year, and that the bulk of this came from events. Much like the early days of Twilio, I rationalized the small market by telling myself the writing would initially appeal to hobbyists but that we could build a broader appeal from there, and learn as we went. Weâ€™d find a bigger market somewhere.
Building a tech startup oriented media company was a much narrower vision than Referly (my previous startup), where I felt we never settled on a single crisp sentence to describe ourselves. After more than a month adrift the clarity of focus in our new direction was appealing and 90 posts later my personal blog was squarely in Alexaâ€™s top 10,000 websites, comments and emails of appreciation had started coming in, and we were even getting tips and sources for more original reporting.
We could have stopped there.
Fun lifestyle business, but what about building a software scaleÂ company?
The ResearchÂ Lab
Byproducts of work are a gold mine. In the process of writing articles I created hundreds of spreadsheets to research markets, compare companies, and come up with unique angles. I published raw spreadsheets in many of my posts, and received a lot of requests to download them. As programmers, we were inspired by things we had heard about BuzzFeedâ€™s assignment desk technology. We donâ€™t know exactly how it worked, but the idea that they had built tools and processes to detect the most buzzworthy topics at any given time across the web was fascinating. We imagined we might do the same thing, but with a focus narrowed in on tech companies.
They told us about the money they spent commissioning custom research from GLG consultations, 451 Research Group and other expensive resources. They showed us their own spreadsheets and internal apps. They asked us if weâ€™d consider coming on board full time to build an internal research team and make investments based on our data and methodology.
We could have stopped there.
If this data is so valuable, and you really have a unique angle, why arenâ€™t you investing withÂ it?
The Venture CapitalÂ Firm
Once it was clear we would add significant value and differentiation to someone elseâ€™s VC firm, the logical next step was to consider starting one ourselves. Could we raise 10, 20 or even 50 Million to test out various data-driven approaches to investing in startups? We spoke with several established investment professionals who could have come on board to help us run the thing, and it seemed promising. But we knew if we decided to run a fund we would not be able to be objective, share all our data and views as openly, or remain a trusted source charging people for our research.
I knew if I became a VC I wouldnâ€™t be satisfied with small checks and a small role in the lives of my investments. Iâ€™d want to lead deals and dedicate the next 10+ years of my life to becoming part of the top 10%, both in results and in value add. Wait! My subconscious screamed.
We could have stopped there.
Are we going to be satisfied building software for a dozenÂ people?
Bloomberg for Startup Investors
Through April and May of 2013, and could feel some sort of groundswell thinking around â€œQuantitative VCâ€ which saw various firms positioning themselves based on their sourcing and research tools. Google Ventures, Greylock, Correlation Ventures, Andreessen Horowitz and Sequoia were widely known to have some kind of data-driven aspect to their operations, although no one shared any details.
Leena Raoâ€™s trend-piece in TechCrunch on June 1st was the moment things began to come clear. It was like someone started the play clock, and I wasnâ€™t even through reading the piece before I started drafting an email to pitch Mattermark to her. I remember it was a Friday, and so we went out for our launch on a Mondayâ€Šâ€”â€Šmoving into our new shared apartment, sick as a dog, after coding furiously for 48 hours to productize the damn thing.
We made people sign up on a wait list, because we hadnâ€™t really optimized anything. It was ugly. It was slow. But it was the start of relieving pain for a set of customers who had been neglected for far too long. In the next three weeks Iâ€™d spent more time in Menlo Park than I ever had in my life, cruising up and down Sand Hill Road meeting with partnership after partnership. Except this time there was no pitch, there was no angle other than: let me show you this thing we made, let me teach you how to use it. I scribbled more than 100 pages of furiously scrawled notes.
I didnâ€™t truly know what customer development meant before these four intense weeks. I thought I had done it with Referly, but I realized had been lazy and unfocused by comparison.
A few short weeks after launch, Union Square Ventures became our first paying customer and Albert Wenger penned a post endorsing our product to the community of investors and we were off to the racing signing up VCs.
We could have stopped there.
The Deal Intelligence Company
Our customers are venture capitalists, so they think like VCs and often ask:
But isnâ€™t venture capital a smallÂ market?
Yes, and we love it! Small is a relative term. The NVCA says there were 462 â€œactiveâ€ VC firms in the US in 2010, and when you include all firms who have raised money since 2002 that number climbs to 791. Using the AngelList API, we found 6,961 users with the word â€œPartnerâ€ in their bio.Based on Mattermarkâ€™s pricing of $499/month per user, or $50,000/year per firm, the annual revenue opportunity for this initial market is somewhere in the $20Mâ€Šâ€”â€Š$40M range.
As a founder who is getting these initial customers to use her product and say â€œwowâ€ on a regular basis, this is glorious! Itâ€™s not the swing-for-the-fences multi-billlion dollar sized market that venture capitalists are looking for, but when youâ€™re not fundraising that doesnâ€™t really matter.
Let me repeat that: when youâ€™re not fundraising, it doesnâ€™t really matter whether your immediate customer base is swing-for-the-fences large.
What a liberating realization!
This knowledge, combined with our wonderful seed investors and very healthy annual revenue growth (averaging 40% MoM since we started charging in July 2013) bought us time to explore adjacent market spaces to our initial set of customers. The wonderful thing about speaking frequently to happy customers is that they tell us all sorts of useful things about the world they live in, and as those relationships deepen we have opportunities to continue solving more and more of their problems.
Once we began to demonstrate that we could build quickly and be responsive to feedback and feature requests, our customers started introducing us to their friends from adjacent social circles and professional ecosystems. It turned out these folks had similar problems Mattermark could solve, and this is how we discovered that Mattermark was useful for much more than venture capital deal sourcing.
VCs hang out with angel investors, investment banks, limited partners, growth and private equity professionals, wealth managers, venture bankers and of course meet with hundreds of startup founders each week. As we began talking to all these constituents we learned more about their problems and it became clear Mattermark could be useful to each of these people in different ways, often with only very small improvements that also benefited all our existing customers.
Itâ€™s funny looking back, because at first most of these requests were actually kind of annoying, and felt like one-off opportunities that were getting in the way of our existing product roadmap. It was tempting to brush them away as distractions and stay the course with our core product and core customer base, but on our mission to be â€œrevenue firstâ€ this time (and also running on very little cash before our bridge round) we were easily persuaded by money. For example, even before we started charging for our SaaS product a customer offered to sign a $50,000 contract to build new functionality that was way down our list, but would ultimately be hugely beneficial to our customers as well as strategic to opening up future markets, so we built it.
With our first taste of revenue it was only a matter of time (about 3 weeks) before we would begin charging for monthly subscriptions to the suite of Mattermark data and tools.
Whatâ€™s Next for Mattermark Deal Intelligence
Weâ€™ve got a TON to learn, build, and do to reach our more broadly defined market of deal professionalsâ€Šâ€”â€Špeople who make a living by sheparding transactions for their organizations (investments, mergers, acquisition, partnerships, sales). Hereâ€™s one way to think about the ultimate size and scope of this opportunity:
I build software to help venture capitalists source deals, here are the ones I wish I hadÂ done
Over the past few years Iâ€™ve made a handful of personal angel investments in founders who I think are incredible, and I am proud to be a small part ofÂ InternMatch (Andrew and Nathan), Bitnami (Erica and Daniel), LE TOTE(Rakesh and Brett) and Estimote (Jakub, Lukasz and Rafal).
I have two themes I am passionate about:
- Software Developer Productivity (Bitnami & Estimote)
- Actualizing Ourselves as â€œGrown Upsâ€ (Internmatch and LE TOTE)
Both themes come from my own experiences, as a software developer / developer marketing for Twilio and as a 20-something making my way from kid to adult. Iâ€™ve been fortunate to know the founders of these companies, and how I came to invest in each one is its own story for another time. 3 of the 4 are still pre Series A, and I am looking forward to watching them grow.
There are many startups I wish I had invested in, whether they fit into these themes or not. Much respect to the folks who identified how awesome they are early and made a deal happen. Hindsight is 20/20 but many of these companies still have many funding rounds to go. As it stands, Iâ€™m a happy paying customer of several of them:
RelateIQâ€Šâ€”â€ŠBest CRM Iâ€™ve ever used, hands down. I am a paying customer and it is actually starting to replace email for me as well (see me rant about how much I love them as far back as June 2013). Our entire company uses.
Instacartâ€Šâ€”â€ŠIâ€™m healthier with fresh food, and use it several times a week. (Much love to my YC batchmates!) We use it both for personal and work.
DigitalOceanâ€Šâ€”â€Šwhen developers love it, it has to be good (first made this call in June 2013). Simple cloud hosting is awesome.
Product Huntâ€Šâ€”â€Šwell they donâ€™t actually have any funding, yet. Ryan?
Magistoâ€Šâ€”â€Šmobile video editing is hard, this is awesome and magical so I pay for it.
It would be easy to just list all the fastest growing or biggest exits Iâ€™ve heard of, but thatâ€™s not really the point. Mark Suster wrote a post about the importance of falling in love with the founders as an investorâ€Šâ€”â€Šand in all these cases Iâ€™ve fallen in love with the experiences these products enable.
Thanks to these companies for being awesome and useful, and hopefully Iâ€™ll catch you next time!
Who would you put in your fantasy VC portfolio?
We completely started over, hereâ€™s what happened.
After shutting down our previous product I was depressed, disillusioned with consumer tech, and definitely had blood in my mouth. I took the huge chip on my shoulder on a mission: for 30 days I would write a post every day, starting with our own post-mortem.
I wanted to talk about things no one else was saying in Silicon Valley, like which VCs were wasting foundersâ€™ time, or how much revenue Tumblr actually had leading up to being acquired by Yahoo. I scored a coupleâ€œscoopletsâ€ and seriously considered never going out in public again. Maybe Iâ€™d just sit in my apartment and write until my pageviews surpassed those of TechCrunch. Lots of attention, very little social pressure. In retrospect it was a pretty dark time.
I read every single blog post Michael Arrington ever wrote. Whatever you think of Arrington, this guy is without a doubt the most important thing that has ever happened to media coverage of startupsâ€Šâ€”â€Šbecause he made calls. Heâ€™d actually pick a company and say â€œI think this is going to big, hereâ€™s whyâ€. And then heâ€™d take other startups and tear them to shreds with public product feedback. It was so much more than a PR machine.
Maybe Iâ€™d be the next Michael Arrington, I mused.
In order to make calls, I realized that I needed to take a much broader view of startups. I needed to know about new products much earlier and I needed to be trying things out every day. If I wanted to say something was going to be big I needed to measure it and compare it to other companiesâ€¦ so I started making spreadsheets. Lots and lots of spreadsheets.
At first they were completely manual. What was the Alexa rank of the company? How about Twitter followers? Facebook page likes? Did they have an app ranked in the App Store? What did Google trends think? To write a single story ranking just 100 companies it took me 20 hours to collect all the data I needed, and as soon as I collected it, it was stale again.
These spreadsheets needed to be code.
So we began to produce the spreadsheets at scale, and write crawlers, and consume APIs, and create processes to do quality assurance on the data. We had nothing else to do, weâ€™d shut down Referly and werenâ€™t paying ourselves until we launched something new. We had no idea what to launch.
Eventually (and this is all happening in a super-compressed 8 week period from mid-March to mid-May of 2013) our investors asked us what we were up to. I think it was April.
We drove down to Sand Hill Road and showed them our â€œstory generatorâ€. They asked if they could use it, we asked for a little bit more money so we could hire another engineer to help us. They said yes. Holy shit, weâ€™re back!
Our initial plan of attack was to work on the project, which we hadnâ€™t even named yet, through the summer and launch it in September after VCs came back from their fabled month of vacation in August. But then Leena Rao published â€œThe Quantitative VCâ€, and closed the article with:
Bloomberg and Thomson Reuters have made multi-billion dollar businesses from charging premium prices to data-hungry public investors. With an increasing appetite for data on Sand Hill road, will the same happen in the VC world? For now, most VCs will continue to rely on whatâ€™s publicly available, perhaps until a clever startup packages something better.
I emailed Leena about 10 seconds later, and we launched Mattermark after just 6 weeks of coding (and blogging). I pitched our launch story on Friday, to go live on a Monday. In the 48 hours in between we had to actually build a website other people could use, which was mostly just things like the signup and login flow, a settings page, a front page and some terms of service. Fortunately the app itself was stable and already being used heavily by a couple dozen peopleâ€¦ but it was still a scramble.
The reaction was far greater than I could ever have imagined, and it began to wake me up from that haze of not knowing what would come next. With a product to build and real customers to manage, my writing began to drop off. But with hundreds of requests for access I knew we needed to keep feeding the community growth and decided to launch an email newsletter to keep people engaged while we worked out the kinks.
The pressure of blogging publicly had started to stress me out, so communicating with a semi-private focused audience was a welcome change. I wanted to challenge myself to keep producing content on schedule and what began as a weekly missive became a daily letter.
In the process Iâ€™ve learned a lot about email marketing and building a community and I think any company looking to build long-term relationships with customers and the customer ecosystem should consider this strategy.
So what about Mattermark today?
Fast forward 8 months and weâ€™ve built our newsletter readership to more than 10,000 subscribers. My dreams of being the next TechCrunch/Arrington have shifted toward building the best sourcing and research tools for investors, corporate dev, biz dev, sales and marketing professionals who are looking to do deals with startups.
We are proud to have more than a hundred paying customers, and in October we reached ramen profitability. Since then weâ€™ve plowed all our earnings back into building the business faster, and the team has grown from just us 3 cofounders to 9 fantastic people who I am grateful to have on board to achieve our mission of bringing visibility to startup dealmaking. We even moved out of our apartment to a real office a few weeks ago!
This weekend Iâ€™m re-reading the 146 email newsletters Iâ€™ve written since we began, and reflecting on these early days of Mattermark because I can sense they will become a blur amidst the pace of growth ahead of us. Donâ€™t get me wrong, it was painful and embarrassing to restart from nothing a year ago, but looking back now I am so happy we made the decision to pull the plug and try something else. Thank you to everyone who helped us along the way.
On the evening of June 8th, eight months ago today, I penned my first email newsletter to a readership of 802 people. The email was Mattermark Weekly Issue #1 and if youâ€™re curious, you can read it here. This weekend, Iâ€™m looking back.
I look forward to publishing and iterating on Mattermark Daily for many years to come. Subscribe to my newsletter, written daily with love
- Today I wrote about some potential methods for benchmarking startup investors, and on a call with a client this afternoon I was asked how I handle the inevitable pushback from investors who aren’t in the top 10 of the list. This the same question I regularly face regarding our approach to assigning scores to startups and the pushback I receive there is similar. My answer right now is simple: this is not predictive.
While this frustrating from a data science perspective, not to mention as an investor (who doesn’t want to predict the next Facebook or Twitter!?) it is heartening as a founder — because every day is another chance to turn it all around.
When we look at metrics, whether they’re “soft” KPIs like web traffic or hard ones like cash flow, it is a reflection of the past. It might be an indicator of the future but we don’t have enough data to backtest and prove that yet. It takes much less energy to make something in motion go faster than does to get it started moving in the first place, so I think a company that has momentum this week is more likely to have momentum next week. Still the most I think we could predict right now is which startups will be competitive for their next round of funding.
The future isn’t promised, in either the positive or negative sense. In financial advising and investing the phrase my Dad always reminded me of went like this: “past performance does not guarantee future results”. Nowhere is this more true than in startups. While we’re busy working on making our measurements, algorithms, and data collection a better reflection of each fund’s reality I hope investors are dropping notes to their companies with helpful value add to bring the bottom to the middle, the middle to the top, and the top to their ultimate outcomes.
I’m proud to say I’m still doing the same thing. As with most of my journals, I don’t usually write much when things are going exceptionally well in my life. For more writing on startups definitely check out the blog on Mattermark and subscribe to our newsletter.
We’ve all heard that line about the 10 year “overnight” successes.
A friend* recently told me a key metric of his company was growing 4% week-over-week. Actually, he related with some dismay that it was only growing at 4%, and he was looking to build another product to make their company more attractive for raising the next round of funding.
I was shocked.
The base number that this 4% growth is accumulating on top of is in the billions, without much marketing or distribution yet. They found a problem many people had, solved it elegantly, and then forgot to tell those people about it.
Instead of doubling down on something that was working, going big and blowing it out of the water, they went chasing after another adjacent product without real market validation, significant platform risk, and delusions of grandeur. All to raise a Series A.
I’ve seen this story play out before, and it doesn’t end well.
Double Digit Growth Addiction
Paul Graham’s essay on Growth is extremely important reading for early stage startup founders, and this guideline in particular is quite useful:
A good growth rate during YC is 5-7% a week. If you can hit 10% a week you’re doing exceptionally well. If you can only manage 1%, it’s a sign you haven’t yet figured out what you’re doing.
Important context for this advice, which I believe is often missed, is that the majority of companies in YC launch during the tail end of the program.
If your startup has some success in the years following graduation from the incubator, you’ll discover the painful truth: it’s incredibly difficult to grow 10% week-over-week once your TechCrunch spike is gone, you’re 3 months out from demo day, and you’re still not doing marketing because [enter excuse here].
Gone are the days of the lovely hockey stick graph you proudly showed investors from the Demo Day stage. It’s been six months now and their money is in the bank, but the rush of winning those signatures has long passed. You feel like every update you send them is a bit anti-climatic. “Grew 14% this month,” you write, and paste in a graph with bars as blue as you feel.
The 6 Month Crisis
For startups who are funded, it’s easy for founders to tell themselves that fundraising isn’t the most important thing but a lot harder to feel it, know it, and truly believe it. Often raising a round is the first external-facing “win” you’ve experienced in months. It becomes a new emotional local maximum, and six months after raising you might find yourself looking for the next burst of excitement and validation to match it.
Long gone are the double digit numbers, because the base you’re growing from is much bigger now. You can’t hand crank this machine you’ve built anymore. You need people to help you feed it. There aren’t enough hours in the day. You’re a generalist but now you need specialists.
Things have changed, and that’s okay.
Building a company is quite different from starting one. The shine of being a “startup” wears off, and it’s time to be a business. As soon as you’ve found some product market fit your job shifts from finding the market to capturing it. If you don’t make this mental switch, and keep fighting for the new hotness, you’ll be like so many companies with too many ideas and too little execution. You’ll die.
Most wins you’ll have are incremental, so subtle that you might not even realize you’re winning. When seasoned CEOs say the harder road lies ahead as you toast champagne to a milestone like a financing round closed, big contract signed, crucial hire started, key acquisition completed etc… they know the truth.
All that vision, all that ambition, all those grand dreams of the future… they felt so close as you pitched your big vision but as you wallow in the weeds and details of really nailing each sales call, each deployment, each planning session, each new hire… all that feels so far away. In some ways, you might feel held back.
It’s so tempting to dabble. Now that you have money in the bank, a team around you, and some traction you feel you could build anything. You can see your market more clearly than anyone else on Earth, and you’re intimately aware of the problems your customers face. You want to solve all of them. You want to be their hero.
Your ego is going to hate you for this, and it will fight you.
The Longest Road
Building a startup is about fighting all the temptation that lies out there for a maker. You can prototype anything, maybe you also have some visibility and platform to speak from, it’s easy to think you can dabble in anything that could be a big market opportunity. The “Crossing the Chasm” strategy of tackling and winning a beach-head, which sounded so right and so daunting 6 months ago, is now happening. You haven’t won yet but like a soldier who yearns for home you’re looking to the future and, if you allow it, that distraction can become so acute you’ll die in a daze on the battlefield. You might not even know you’re dead.
Investors, advisors and other people will also start seeing the future more clearly – because you did a great job painting the picture for them. They’ll try to get you to talk about what’s next, they’ll add more temptation to focus on the next battle when you haven’t yet won this one.
Don’t let them.
*details have been changed to protect the anonymous