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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 develop customer relationships, reinforce their expertise with a strong brand, define the purchasing criteria in their favor and ultimately grow faster.

Dr. Richard Cook, formerly an associate professor at the University of Chicago, published a paper in 1998 entitled How Complex Systems Fail. In his paper, Dr. Cook lists 18 observations from his research in medicine about failure of complex systems. His insights are directly applicable to running software at scale, and those observations informed our latest investment in Gremlin.

Some of his Cook’s are obvious. Complex systems are intrinsically hazardous systems. Complex systems are heavily and successfully defended against failure. Catastrophe requires multiple failures – single point failures are not enough.

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 acquired Marketo for $4.75B. By the time of the sale, revenues had grown to $321M, growing at about 21% annually and profitable. Presumably, the company traded investments in growth for profitability to service the new debt.

A founder asked me recently if there were any trends in 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 changed over the past 3 years?

First, we have more comprehensive data set, since many more companies have gone public. Second, many newer software companies generate substantial fractions of their revenue from PS. Appian is close to 50%; Pegasystems is at 37%; Horton is at 24%; Mulesoft at 20%.

Last week, Elastic filed their S-1 to go public. Elastic is a Dutch company founded in 2012. Just five years later, the company generated $159.9M in revenue. Elastic commercializes open source software called the Elastic Stack, a set of different products that enable users to search and store data in many different sources and formats. This software is used for application search, website search, enterprise search, application performance monitoring, and analytics for business and security data.

The SEC announced last week that it wants to find ways to let Main Street investors access stage private venture companies. This news item underscores an important trend that is reshaping the industry. Today in Startupland, startup access is the scarcest commodity. Everybody wants an allocation, an opportunity to invest in the very best companies. The SEC story highlights how much has changed in Startupland. In this post, I’ll touch on three.

In a post earlier this week, I argued 1% of Salesforce’s revenues creates a unicorn. More broadly, I said that the biggest SaaS companies are so large, that they must have underserved customer segments. And there is an opportunity for a startup to identify that underserved segment, build a product to serve it better, and build a unicorn. I received a lot of comments about this post, but not the kind that I expected.

How long should you let a customer use your software before they sign a contract? You could offer them a 7 day free trial. Or 14 or 21 or 30 or 90.

Longer trials might be better. The customer could delve deeper into the product, become more committed and sign a larger contract. Shorter trials drive urgency, weed out the uncommitted, and result in shorter sales cycles. Both sides have compelling arguments.

Jacob’s Ladder is a toy of thin wooden blocks attached by ribbon. If you hold it in your hand and rotate it to touch the second block, it seems to set off a cascade of blocks falling from the top. The blocks haven’t changed positions, though they do rotate. It’s a moving optical illusion. When I watch this toy, I’m reminded of the current state of the fundraising market.

There are three types of product features, a seasoned head of product told me recently. MMRs, neutralizers, and differentiators. MMRs are minimum market requirements; basic features that every customer expects and demands. Neutralizers mitigate competitive threat. Differentiators are your startup’s competitive advantage. As a product manager, I’d never thought about this type of roadmap segmentation before. But it made a lot of sense to me.

When a startup has established product market fit, the differentiator is clear. This feature set distinguishes the company. It is the reason customers prefer the product to alternatives. The very first buyers buy irrespective of deficiencies. The differentiator is enough to overlook those faults.