Introducing Mattermark, the Deal Intelligence Company
The year we suspended disbelief long enough to find a frighteningly ambitious startup idea. From “TechCrunch Killer” to “Bloomberg for Startups” and beyond…
March 15, 2014
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. It’s human nature to categorize things, to crave the efficiency of communicating, “Mattermark is XYZ for ABC.” It feels safe and socially correct, intellectually digestible, rational. But those motivations aren’t what drive category defining innovation, and making decisions for the sake of ease is always a big red flag to me.
Don’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, I’d like to share the journey of the past year afterannouncing 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 parent’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:
“You’re just too plausible. It’s as if someone was writing a sitcom about startups and you needed a believable idea.”
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, “what if PG was right?”
If PG is right, I reasoned, then I need to stop doing such plausible things.
Moving to Seattle — We could have stopped here.
Before Mattermark, There Was Cursive
“Mattermark Wasn’t a Pivot”, 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 I’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:
“If you’re shutting down Referly why not start over with something completely different? If you want to kill TechCrunch then do that.”
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. I’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 5th I published “Zombie VCs” 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, we’d found something important.
A scoop on Tumblr’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. I’ll never forget, Michael sat down looking very grumpy and read the entire 1,200 word piece in silence before looking up to proclaim, “you can write”. I just laughed out loud, my blogger hero just said I could write! Holy shit.
At first I imagined building a “TechCrunch-killer” 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. We’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 Alexa’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 scale company?
The Research 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 BuzzFeed’s assignment desk technology. We don’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 we’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 aren’t you investing with it?
The Venture Capital Firm
Once it was clear we would add significant value and differentiation to someone else’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 wouldn’t be satisfied with small checks and a small role in the lives of my investments. I’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 dozen people?
Bloomberg for Startup Investors
Through April and May of 2013, and could feel some sort of groundswell thinking around “Quantitative VC” 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 Rao’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 wasn’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 Monday — moving 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 hadn’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 I’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 didn’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 isn’t venture capital a small market?
Yes, and we love it! Small is a relative term. The NVCA says there were 462 “active” 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 “Partner” in their bio. Based on Mattermark’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 $20M — $40M range.
As a founder who is getting these initial customers to use her product and say “wow” on a regular basis, this is glorious! It’s not the swing-for-the-fences multi-billlion dollar sized market that venture capitalists are looking for, but when you’re not fundraising that doesn’t really matter.
Let me repeat that: when you’re not fundraising, it doesn’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.
It’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 “revenue first” 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.
What’s Next for Mattermark Deal Intelligence
We’ve got a TON to learn, build, and do to reach our more broadly defined market of deal professionals — people who make a living by sheparding transactions for their organizations (investments, mergers, acquisition, partnerships, sales). Here’s one way to think about the ultimate size and scope of this opportunity:
To do this, we are going to need build a lot of product (a great topic for another post, as this one has gotten huge) and will also grow our sales and business operations part of the company insanely over the next few years. 2014 is already off to a great start:
10X growth of our annual run rate from July 2013 to February 2014
Moved out of the apartment and into a real office!
Team size increasing from 9 to 15 people by the end of March. Adding 2 full-stack developers, 2 sales ops, and 2 account executives
Current account executives are profitable and earning commission, closing more business than I did in my best month solo.
Formalized our sales process and organization, dividing out roles for outbound prospecting, inbound lead qualification, closers, and account management as recommended in “Predictable Revenue”
Added a full time account manager before $2M ARR, as recommended by SaaStr, to reduce revenue risk and scale customer success as we ramp
Defined sales territories by vertical industry focus (venture capital, private equity, corporate development, business development) with anchor customers won to prove out willingness to buy prior to bringing on an account executive
I’ve never held a sales role or managed a sales team before, and learning how to run this part of the business over the past 9 months has been very rewarding. I have much more appreciation for the unique challenges and management of revenue goals than I ever could have before, and it seems to be working, too.
We’ve grown revenue 10X in the past 8 months.
With an awesome team on track to reach our next milestone of $2 Million in annual run rate it’s time to pass the torch and hire our VP of Sales.
I’ve been sick this week, and stuck at home and up coughing… so reading the Internet a lot and trying not to get into any legit Twitter fights. I realized that I read a lot of non-tech stuff other people might find interesting, and because I love to write newsletters… I’m gonna write another one curating my hodgepodge of curiosities in one place.
WHAT I’LL BE SENDING YOU: CURATED LINKS TO STUFF TO READ
A lot of my reading has to do with traversing the archives of the Internet, exploring fiction, history, economics… and generally learning about the world. I am 30 years old, and so in some ways I feel like I have only very recently realized I am supposed to be an adult.
I don’t read much self-help stuff, but when I do and it is good, it usually has a big influence on me. I read a ton of tech news, but really only the headlines. You won’t find much of that here (if any) as I started The Mattermark Daily almost 3 years ago to curate those topics, and we still produce and send it Monday-Thursday and Sunday. If you’re into that, you can subscribe at www.mattermark.com/newsletters
I am not sure how often I will send these yet, but I will send one this weekend for sure. I will not spam you or use your email address for any other purpose besides this newsletter.
Next Story — Overcoming the Tyranny of “Should”
Currently Reading - Overcoming the Tyranny of “Should”
I ask my cofounders these questions from time to time. They say yes and give me a hug, and my ego is placated. But later on I still wonder am I really doing a good job? Am I leveraging every moment of time the way I should?
There are a lot of articles telling us what we should do to be good, often formulated to demonstrate how to be more like whoever the hero CEO is. Wake up early. Time block your calendar. Raise now. Get that big valuation so it will be easier to recruit. Everywhere I turn on Medium someone has advice for what I should do, and I tell myself to listen because I want to be open to feedback and I want to learn. But sometimes when I am able to quiet that story down, I catch myself listening because it is just so much easier to have someone else figure out what I should do.
“I’m tired. Could you bargain with fate for me please? Thanks.”
As we head into a more difficult funding climate, I expect there will be a lot of founders saying, “but I did everything I should have done… why can’t I raise a round? It’s unfair.” Where did that should came from? How can you justify your sense of justice getting riled up with “it’s unfair” when you didn’t even do the dirty work of picking the should yourself?
Shortcuts I Took
Sometimes I needed an answer right now, and seemed like a good idea to short-circuit the hard work of sitting still and figuring out what actually works with the most recent piece of startup productivity porn. It was a quick way to alleviate my angst, it was a self-centered solution that was more about resolving my own cognitive dissonance than getting it right.
In a hurry I’d implement someone else’s should unexamined, but all borrowing shoulds second-hand got me was second rate results. The worst part was that among the ideas thrown at me, I didn’t consider most of the really crazy ones… I stuck with the plausible shit, without considering the source. Re-arranging my calendar when I could have hired 20 sales reps. Might as well be re-arranging the fucking deck chairs on the Titanic.
So about half-way into the year I said fuck it. FUCK. IT. I’m gonna do crazy shit. I’m sick of being plausible and how the hell did I get this way anyway. Real self over in the corner flagged down ideal self and said, “hey remember me, I’m the college dropout who took a ton of personal and professional risk to have the life we always wanted? Frankly, you’re letting me down lately.”
It’s harder to explain this part, and I suppose this is normally where you’d find a step-by-step walkthrough of what I did to change my approach. It would actually be a list of shoulds for you, but thinly veiled as my own story.
I sat still. I let my inner voice be louder and more trusted than the outside voices. I hung out with myself, wrote and read and drank wine and lit candles and looked at the view and stayed still thinking and stayed in as friends joked I was “getting old” and I didn’t care anymore because fuck you I’m 30. I didn’t assume the answers were anywhere else. I read my old diaries and imagined I was 15. I read books I loved in school and imagined I was 9. I remembered my life so far, and I wrote down things I’ve already learned from it and I didn’t publish them for anyone else to read. I made things just for me, like paintings and really good food.
None of these activities would necessarily have meaning for another person but I knew they were what I needed. I remembered myself, I apologized to myself, I forgave myself, and gave her permission to let go of should.
Writing this down this morning, I remembered at Founder Bootcamp they would bring us all back together with the pretty sound of the Buddhist singing bowl. Jerry invited us to bow in, and I remember the first time we did I looked around the circle like, “Oh geez, what crazy hippy shit did I sign us up for?” But I did it anyway and got past the awkwardness, and as we did it over and over again for days it started to take on more meaning, and naturally I got curious about this ritual. There is a great essay from Sojun Mel Weitsman at the Berkeley Zen Center that does a good job explaining it. I pulled the relevant quote but if you have time I highly recommend reading the whole thing:
How do you bow to yourself? You can’t see your own eyes, you can’t see your own nose, we don’t see our own face. It’s pretty hard to bow in this direction [toward ourselves], we’re always bowing in that direction [away from ourselves]. If you bow in that direction, you meet yourself. So who is this self? That question begs the other. If I bow to myself, then who is this “myself” that I’m bowing to? Therein is the fundamental koan, who is myself, and how do I bow to myself?
You don’t have to be a Buddhist to appreciate this idea of bowing as a ritual, both to yourself for introspection and also as an offering to others. It’s just a simple acknowledgement. Actually, I’m learning you can bow to anything.
I wasn’t planning to put this essay into this post, it just kind of came to mind as I was writing and now I’ve re-read it and there is another part that is also very relevant to “the tyranny of should”:
If you think about all the things that you promised yourself you would do and didn’t do, and look back on that, you’d be amazed at all the intentions you had that you didn’t honor. Sometimes this holds us back. So that’s why we have such a thing as the Bodhisattva Ceremony. We avow all of our ancient karma and unrealized intentions, and renew and honor our intention to continue. This is one of the most important factors of practice, that you have an intention, and honor it. Everything else flows from there. Enlightenment, peace, it’s all there in our intention. We also fall off, but when we fall off, we come back. As a matter-of-fact, we’re always getting sidetracked. That’s the nature of our life: to have this intention, get sidetracked, and come back. One of the obstacles is, “Now that I’ve fallen off, I can’t come back.” Or, “I’ve been bad.” So the nature of practice is to make the effort, that no matter what happens, to keep renewing or returning to our intention.
With these thoughts, I’m bowing in to 2016 and renewing my intention.
“Wait, I just read this entire post and you still haven’t come to the point... Intention to what? What are you going to do?” you ask. “What should I do?”
I don’t have an answer for you, I can only smile.
Next Story — Fundraising Tweetstorm August 23, 2015
Currently Reading - Fundraising Tweetstorm August 23, 2015
People used to worry about the “IPO window” closing before they could get their company significantly far along to exit. Now, with the rise of massive private rounds from late stage private equity and crossover investors, founders something new to worry about: Did you miss the unicorn window?
Most venture-backed startups run at a loss, but there is a special variant of unicorn companies operating at gross margins that look nothing like traditional software businesses. These companies are in trouble, and will have the hardest time raising. Maybe we should call them ‘zombie unicorns’.
These are the companies who are spending $1 to make $0.20, with the hope that customer acquisition will pay off down the road (Draft Kings, Fan Duel). These are the companies who have to re-acquire their customer every time they want a repeat purchase (Kabam). These are the companies with unit economics that just don’t make sense (WeWork).
Some companies are trying all sorts of spreadsheet magic to make their numbers look good, but you better believe this is also one of the reasons they’re not going public. When you get ready to go public all that magic goes away, and the audited financials you need to have require you to use legitimate definitions for Cost of Goods Sold.
The Unicorn Backlog
As speculation of valuation compression at the later stages swirl, I’ve realized odds that my own startup will capitalize on one of the biggest run-ups in valuations of the past two decades is unlikely. The unicorn window is closing, and for the 816 U.S. startups with > $50M in lifetime funding who’ve raised sometime in the past 2 years, this might be a problem.
10% of the 8,000 active VC-backed companies in the U.S. have raised more than $50 million, and they at various stages of the unicorn backlog.
For the 7,195 other U.S. startups who have raised some money in the past 2 years, but not more than $50M, building a solid business with economics that make sense on a sane time horizon is all that matters.
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