Tomasz Tunguz is partner at Redpoint
. I write daily, data-driven blog posts about key questions facing startups. I co-authored the
book, Winning with Data
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Advances in machine learning are transforming the software world. Two of the most exciting applications of machine learning are speech recognition and natural language processing. After researching the space for more than a year, we are thrilled to announce our investment in and partnership with Chorus, a pioneer in speech analysis for sales.
Win probability charts like the one above have become the icons of popular predictive data analysis. I love data, but let me whisper a heresy to you. I detest these charts. I Instead of provoking thought, insight and questions, they close minds. They support the ideas of inevitability, of odds too great to overcome.
I met a physicist this week who told me all the Nobel laureates he had met in his studies have been the most modest of physicists. "They realize how small they are in the world, after discovering something incredibly special and new." Separately, I referenced an executive this week. A former colleague of this person told me," this is not a person who sees a model work once or twice, and instantly subscribes to the notion that it will work every time for every business."
Which is the more important priority? Growth or churn? Churn or growth? Early-stage companies have limited resources to focus their efforts. On one hand, growth is important in order to raise a venture capital round. Growth shows demand for a product. On the other hand, churn is a huge source of friction and raises questions of product market fit.
How much should a founder raise for their startup? I imagine almost every founder contemplating a fundraising round ponders this question. There are many different paths to developing an answer. The right answer that every startup founder has told me is as much capital as possible at the highest possible price. But what strategies exist to justify increasing the round size and consequently price? These are the three most common I've observed.
Over the last seven years, software startup investing has changed quite a bit. In 2010, classic SaaS was booming, the benefits of a subscription model were finally becoming clear to the public markets and the mass-market. Since then, many other types of software businesses have been created in new categories like agriculture technology and robotics. Which of these markets are growing the fastest for investment dollars?
Cisco announced yesterday it would acquire AppDynamics for $3.7B. We've analyzed AppDynamic's growth and key metrics, because the business had filed its S-1 to go public. However, the management team and board changed plans and made history. By my estimate, AppDynamics is the fifth largest software acquisition in modern times. More astounding, the AppDynamics acquisition does set the absolute high water mark in one regard - acquisition multiple. It's a very promising predictor of the 2017 M&A environment.
For the nine years I've been a venture capitalist, there's always been a buzzword of the year. Solomo (social local mobile). Mobile-first. Realtime. Big data. 2016 was the year of machine learning. Is ML just another wave to crash and dissipate on the trough of disillusionment?
Over the last few days, I've been reading Shoe Dog, Phil Knight's autobiographical tale describing the formation of Nike, and I think it might be one of the very best founding stories I've read. Easy to read, brimming with passion, full of harrowing business crises, the book is an inspiration to anyone who has a crazy idea and commits to persevering.
I've been struggling with the right way to enable commenting on this blog for a long time. In 2013, I wrote a post called Letter to the Editor about my challenges with comments. Several months ago, I deployed a chat widget at the bottom off this page as an experiment. Here are my observations so far.