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Mattermark

A Harvard Business School-style

case discussion

Jeff Bussgang

General Partner, Flybridge Capital

Senior Lecturer, Harvard Business School

1. Context for the story

2. The story

3. Three decisions that need to get made

4. Take aways

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1 What Is A Harvard Business School Case? (…and who am I to teach it?)

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• Day job: venture capitalist (Flybridge Capital)

• Former day job: entrepreneur (Upromise, Open Market)

• On the side: HBS professor

• Teach Launching Technology Ventures to MBAs

• Full disclosure: invested in Mattermark

• Full disclosure: didn’t invest in Hubspot (doh!)

Who Am I?

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• Educational innovation pioneered at HBS

• Present a challenge, constraints, incomplete information

• Put student in role of decision maker

• Analyze, debate, discuss, defend – no simple answers

• Usually: read beforehand, do some homework/analysis

• Today: make it up as we go along

Case Method

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2 The Mattermark Story

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Danielle Morrill

• Community college drop out

• Startup geek, hacker, blogger

• Ran marketing at Twilio

• Started Refer.ly, YC, shut down

• Pivoted to Mattermark: mid-’13

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Value Proposition: Data on Private Companies

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• Raised $2m seed round – June 2014

• Closed $6.5m series A – December 2014

• Board meeting with new investors: tomorrow!

“Nothing focuses the mind like a hanging .” – Samuel Johnson

The Dilemma

• Pour money into sales and marketing for VC market?

• Invest in product to expand beyond VC market?

$

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Sales team hitting quota

Sales cycles short

Product usage high, growing

40% test – if product disappeared

LTV : CAC > 3

MRR growing > 10% MoM

Churn < 30% / year

NPS > 20

Criteria for Product Market Fit

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$0

$20

$40

$60

$80

$100

$120

$140 NPS (50) and usage high

MRR growth ~ 10% MoM (founder selling)

x MRR growth = flat (new VP sales hired)

x LTV : CAC = ~ 1

x Gross churn = 50-60% / year

Mattermark’s Data MRR

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An Example of LTV : CAC

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Net Promoter Score: Recommend to Others?

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NPS Example

Source: Satmetrix NPS Report 2014

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~ 500 Active VCs

x $20-30k/year willingness to pay

$10-15m / year market

x 30% market share

$3-5m/year

How Big Is VC Market?

Tiny!

Other Benefits?

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10x revenue

> $1B

Recurring

> 50%/year

< 20%/year

strong

2x revenue

< $100M

One-time

< 30%/year

> 30%/year

weak

How Valuable Is VC Market?

Market size

Business model

Growth rate

Churn

Network Effects

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• Founders had done all the selling – got to $1m ARR

• Then hired “grown up” VP Sales from industry

• He failed miserably – big company culture, didn’t dig in

• Now have 5 person sales team but no leader

BTW, Sales Leadership A Mess

• Hire a new VP from the outside?

• Promote from within (and keep founders selling)?

$

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Sales Leadership Considerations

Hire New Leader Promote From Within

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Sales Leadership Considerations

Hire New Leader

Bring a playbook

Provide exec leadership

Bring a team

Promote From Within

Playbook is unique

Positive signal to staff

Keeps founders selling

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• hire inside sales vs. outside sales?

• more reps vs. more marketing programs?

• invest in content marketing / inbound vs. outbound?

Invest in Sales or Marketing?

• Ramp up sales team?

• Ramp up marketing team?

$

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Sales Organization

Inside Sales

SMBs

ACV < $50k

Simple sale

Transactional/functional

Outside Sales

Fortune 1000

ACV > $50k

Complex sale

Emotional

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Sales Learning Curve

“Do things that don’t scale” - Paul Graham

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0

200

400

600

800

1000

Q3'14 Q4'14 Q1'15

SQLs

New Deals

Why aren’t leads converting?

• Analyze the funnel

• Training vs. Recruiting issue?

• Product vs. Sales execution?

• Timing of leads hand offs?

• Comp structure?

Leads vs. Deals

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3 Make Some Choices

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Expand in VC or other markets?

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Hire new VP or promote?

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Invest more in sales or marketing?

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4 Take Aways

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• Alignment of strategy opportunity financing

• PMF has to be tightly measured and constantly earned

• Sales & marketing alignment: results, activities, incentives

• Careful to avoid premature scaling

Take Aways

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Congratulations! You are (sort of) an HBS Graduate! (…and it cost less than $120k…)