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. Join more than 20,000 others receiving these blog posts by email.

Valuations in the Series A and Series B Market are Booming

With a litany of articles in recent months highlighting the number of companies with valuations greater than $1B, I’ve started to wonder about the valuation trends for the highest profile venture backed companies.

Venture capitalists are increasing market prices in Series A and Series B rounds aggressively in effort to reap disproportionate returns. And the variances in the prices of different startups in these early rounds is enormous, indicating a relatively inelastic market. Investors are chasing fast-growth startups irrespective of the price.

I gathered data on 77 ...

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How to Optimize Every Decision in Your Life and Accomplish Nothing

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Even the greatest minds fear missing out. Nobel laureate Richard Feynman who assisted in the development of the atomic bomb, contributed substantial advances to quantum mechanics and particle physics, discovered the cause of the Challenger Shuttle disaster and popularized science as a witty and successful author, faced this fear when confronted with a menu.

How many different dishes should he order from a menu before settling upon a favorite? Feynman used probability theory to solve the problem. Below is the formula he developed with ...

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The Most Important Principle of Start Up Fund Raising

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The most important principle of start up fund raising is:

Raise enough money to achieve a set of milestones that will attract a subsequent round of investment from new investors.

Last week, a founder of a seed stage company came to pitch. When I told him the opportunity wasn’t a fit for us, he asked me what milestones he would need to achieve to raise a Series A - as he was raising a seed round! He was calibrating how much ...

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The Power of Market Places

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Brokers serve two key roles within ecosystems. First, they introduce buyers and sellers. Second, they lend their expertise to help buyers and sellers make the right decisions in the market.

The internet neutralizes the first value proposition of brokers by leveling the information asymmetry between buyers and sellers at a far greater scale with much better data than any broker ever could. And for products and services with relatively small price points, commodity goods or where the cost of failure is low, market places often ...

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What I Learned From a Two-Year Fund Raising Process

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Once each month I met Peter at Café Habana in Nolita for huevos rancheros drenched in tomato sauce and a glass of fresh orange juice. Mopping up yolks with tortillas, Peter and I chatted about his business: the techniques of scalable customer acquisition, the priorities of the product and engineering team, the structure of sales quotas and the ebbing and flowing dynamics of the market place he and his team were building.

After two years, Peter called to say he was raising capital for his ...

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The Cost of Bad Data is the Illusion of Knowledge

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Each time I open Salesforce in my browser, I think of Stephen Hawking. It’s because of an aphorism an entrepreneur shared with me a few weeks ago. He said:

The cost to fix a data error at the time of entry is $1. The cost to fix it an hour after it’s been entered is $10. And the cost to fix it several months later is $100+.

Take for example a venture capitalist’s CRM tool. If I mistype an email address or ...

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The Failure Fetish Fallacy: Learning is at the Core of Startup Land

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The valley and startup-land does not fetishize failure despite the increasing reports to the contrary. FailCon is not the Darwin Awards for startups. Founders do not start businesses with the express interest to fail.

Instead, the valley is infatuated with the post-mortem of failures and successes alike because within every venture are pearls of wisdom - a subtle but important difference. Extracting and applying these insights can be the difference between success and failure. This is why founders pursue ...

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A Startup’s Step-by-Step Guide to Working with Recruiters

“It’s something I thought I’d never do,” one founder told me yesterday. He had hired a recruiter to help him grow his team. But at some point in time, most quickly growing startups will need help forming their teams.

We kicked off searches at two Redpoint companies in earlier this year in addition to several last year and I’ve been taking notes on each of the processes. One of my partners, Tim Haley, was a top recruiter in the valley for many years and having his ...

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Data is Useless Unless You Can Act on It

I see a recurring three step pattern with data waves:

First data collected.
Then it’s presented.
Last it is made actionable.

In every data wave, the companies that transform data into actionable insights are the most valuable because their products not only identify but solve problems. Knowing about an issue without understanding the mechanics required to fix it causes paralysis.

Quantified self tools like FitBit and JawboneUp and Nike Fuel capture and display sleep data and while these devices confirm that I wake at 130am ...

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Discovering, Honing and Exploiting Your Startup’s Strengths

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To be truly successful, I believe startups should determine which of the four core disciplines is their strength: product, engineering, marketing and sales - and focus, focus, focus on leveraging that advantage in the market.

Product driven startups - At their outset Twitter, Pinterest and Instagram were exploratory products driven by their respective creators, Jack Dorsey Ben Silbermann, and Kevin Systrom, who were each product managers building a product of their own vision. The key innovations were the creation of new social environments.

Engineering ...

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