Building a Strong Talent Community

Redpoint‘s reputation for supporting founding teams was the main reason I joined the firm last fall to head up Talent. My role is to work with our companies and help them build the right sized recruiting and talent programs.  I love working with our founders and finding ways both big and small to help our companies grow and succeed. Now that I’ve been here six months and worked closely with Redpoint’s partners, I have an even greater appreciation for the issues our companies are facing at both the early and growth stages.

Recently we brought together a group of talent leaders from our companies, including Beepi, Vurb, Homejoy, Coin, and others, to have them meet one another and share their experiences building talent programs. Turns out this group is so passionate about talent there wasn’t enough time to cover everything, so we focused on three main themes. Below is a summary along with some practical advice from Redpoint talent leaders on what helped them be successful their roles.

Branding: What’s Your Talent Brand?

In this highly competitive market, your company’s reputation and brand are key factors in being able to hire the right talent. How you showcase who you are as an employer greatly impacts your ability to attract – and retain – great talent. Every company should be thinking about their Talent Brand and even small, early stage companies have easy opportunities to focus in this area. Highlighting your culture and employees on your company career site through things like videos, pictures, and testimonials from employees is the best place to start, but there are so many other areas to think about. Many of our companies work with LinkedIn career pages, Glassdoor, The Muse, and Stack Overflow, to tell their story where the candidates are looking for jobs. A great piece of advice from the VP of People & Brand at Pocket Gems, Carrie Simonds, is that developing the content to show off your Talent Brand shouldn’t be only recruiting’s responsibility. Partnering with Marketing and PR is a great way to develop your company’s narrative and ensure there is a consistent and compelling message across all channels. Most importantly, make sure your narrative describes an accurate picture of what it’s really like to work at your company because candidates and employees will know when it’s not authentic.

Engagement: Turning Employees into Recruiters

Everyone who is working at a high growth company needs to make recruiting a top priority. That’s right, I said everyone; growing your company shouldn’t be solely on recruiting’s plate.  The best ambassadors for your company are your employees and when employees are engaged with recruiting, it helps your brand and has the ability to attract talented stars that are already in your employees’ networks. Most companies will say that hiring and recruiting are priorities, but do their calendars reflect that? That is a question that Coin’s Head of Talent, Jack Shahin, calls critical. Actions speak louder than words. If employees aren’t spending time interviewing, attending meet ups and events to help find talent, taking time to help with outreach to candidates, then recruiting isn’t a priority.

To help employees get out there to network and meet potential candidates, pair employees up to attend events together or, even better, host an event at your own company – a great way to show off your office space and an easy way for employees to talk with many people about what it’s like to work at your company. Schedule time for an entire team to get together and have a sourcing session and don’t let them leave until they each give you 5 names of potential leads (bring food)! And since people love talking about what they do, get them to write it for a company blog – a great way for candidates to get insight on who their potential teammates will be and for these employees to feel valued.

Another great way to help employees think like recruiters is to get them involved with creating the job descriptions – ask them if they would be interested in the job the way it’s written and if not, have them help write a better version. Use interview debriefs (yes, you should be having them for every candidate) as opportunities for employees to really think about how to add the right talent to the team. Prabha Krishna, who is leading recruiting efforts at Jaunt, says when they review candidates, the interview team asks “will this candidate help us hire the next person?” By trying new ways of engaging your employees and having them be the voice of your brand, it’ll be like you have a whole company of recruiters and your recruiting efforts should be much more successful.

Success: Measuring the Value of Talent Acquisition

So your company is trying all these different recruiting methods and hiring people across the board, but how do you really know which methods are working? How do you measure the success of your efforts? There are many different types of metrics you can use .  Our group of talent leaders relied on these:  time to fill the position, cost of recruiting per hire, sources of hires, the percentage of hires that come through employee referrals, quality of hires, how long candidates are in each stage of the pipeline, offer acceptance rate, and reasons for any declines. There is also tremendous value in a satisfaction rating, by asking new hires (and candidates that ended up not getting hired) how the recruiting process went so you can get real feedback on what people are experiencing as they go through your recruiting process. By telling the right story to your business leaders, they begin to understand how valuable the talent acquisition programs truly are.

We all know how tough it is to attract and hire a rock star team, and having a strong talent leader in place to partner with the business is critical. The dialog with Redpoint’s Talent Leaders during this event let me see first hand how strong and creative this group is; I know we’ll continue to learn from one another for quite some time. It’s exciting to see all the great employees they on board at their companies. I can’t wait to meet up with them again and hear how they did it.

Drop me a line if you want to connect about any of these topics or if you’re interested in becoming a talent leader at one of our companies.



Redpoint’s Founders Day Re-cap

Redpoint recently hosted “The Anatomy of a Breakthrough Performance.” Held at the innovative Exploratorium museum in San Francisco, it was an event that brought together a lineup of luminaries who have indeed achieved breakthrough performances. From the America’s Cup skipper Jimmy Spithill to Navy Seal Commander Pete Naschak to peak performance guru Andy Walshe, Redpoint asked these extraordinary people to share how they have succeeded where others have failed.

The result was an illuminating and highly entertaining conversation full of valuable insights and life lessons learned through decades of trial and error. Our founders and CEOs in attendance were treated to an out-of-the-box afternoon that saw them drawing with crayons, flinging toy rockets at one another and asking questions about how they, too, can achieve that breakthrough performance.

Redpoint partner Geoff Yang kicked off the event and then handed over the reins to Walshe, the director of Red Bull’s global athletic development program, who has trained Olympians and worked with daredevil Felix Baumgartner on his record-breaking 24-mile free fall from space. Walshe was joined on stage by Spithill, Naschak, IDEO partner Brendan Boyle, SONOS CEO John MacFarlane and data scientist Eric Berlow.

Though each person’s goal requires a unique blueprint, the men stressed some common themes that can help anyone push beyond their perceived limits. Here is a quick summary of those themes:

Failure – Every single speaker highlighted the importance of failure in his quest for success.  It wasn’t so much the ugliness of the defeat itself that mattered most. Rather it was the way in which that defeat led to better, smarter ideas and execution. Failure was educational, inspirational and motivational—and it was essential to the ultimate triumph. Failure for them is not something to fear because it is inevitable with any challenging undertaking. Failure instead is a stepping stone, something to harness and tame, or the proverbial making lemonade from lemons. “Defeat is a great opportunity,” said Spithill.


Jimmy Spithill

“Adversity can be one of the best opportunities to learn about yourself and your teammates.” – Jimmy Spithill


In his case, Spithill shared some of the “curveballs” that led to last year’s dramatic comeback victory in the America’s Cup. In particular, he noted a day when his $15 million catamaran went into a nosedive and was dragged out miles beyond the Golden Gate Bridge. The damage to the vessel was one thing—and it could be repaired. But Spithill said the way his team handled the situation turned out to be “a real plus” in their ultimate quest. They learned how to be better from the experience and they also strengthened their bonds as individual contributors on a team, gaining greater trust in one another. “Adversity can be one of the best opportunities to learn about yourself and your teammates,” he said. “Champions always come back from adversity.”

Pushing Limits – Underestimating either an individual or a team is a common failing. And this can be costly, particularly for people trying to achieve the seemingly impossible, such as Baumgartner breaking the sound barrier in a free fall. Our panel shared its experiences and viewpoints about how to push people beyond their perceived physical or mental comfort zones—and explained why it is a key ingredient to generating change and optimizing performance.

Seal Commander Naschak recalled taking a group of elite athletes through eight days of rigorous physical and “mentally mind-bending” exercises, exposing them to harsh conditions in varied terrain. Despite many moments of self-doubt, each man made it through the challenges and brain scans compared from before and after the endurance test showed notable improvement. Every man said they came away with more confidence and a new perspective on their own mental and physical capabilities. “You can reset what is possible,” says Naschak.


Naschak talks about the changes in the brain when people push past perceived limits.


Walshe agreed with that sentiment. He explained that the team behind Baumgartner’s thrilling leap into the record books shared a vision that you can “take the essence of a performance and push beyond all disciplines.” Despite the daunting task at hand, the group drew on the know-how and experiences of the best in the world to overcome the litany of challenges Baumgartner’s quest presented, from designing and building the right space suit to ensuring that Baumgartner would be physically and mentally prepared to withstand the fall.

SONOS’ MacFarlane brought this concept into a more business-like setting. He noted that it’s almost impossible to push strong teams too hard, though you can push individuals too far. Teams, he said, that are comprised of the right mix of people can typically withstand much more stress than any one member can endure. Instead of focusing on individual contributors, MacFarlane says it’s helpful to emphasize clearly defined goals to bring teams together and keep them striving, even when they may feel they are tapped out. “A higher sense of mission drives people in tough times and keeps them focused,” he says.


IDEO’s Boyle having a little fun


Unleashing creativity – New ideas do not often come without risk. Optimizing the risk –whether it comes by hiring people with a wide array of differing viewpoints and problem-solving skills or by pushing people far outside their comfort zones–is key to generating meaningful change.

IDEO’s Boyle discussed “the trap” some companies, particularly larger, established ones, encounter when they stick too much to like-minded colleagues. “New ideas don’t come from the same place,” he said. People also must be willing to shake up their routines and group mindset.

Just getting our group to find partners, pick up a crayon, and then quickly sketch portraits of each other seemed to prove the point. While Boyle said children do this task gleefully and fearlessly, adults tend to worry about the quality of their drawing or what others might think of it. The takeaway from this exercise is simply that people need to find more ways to relax and enjoy a task for what it is rather than what they think it should be.

Berlow, who is in the midst of a project dubbed “hacking creativity,” also emphasized the need for assembling groups of divergent thinkers and abilities. His team is currently working on a project to identify creativity profiles by studying the creative processes exhibited by 100 of the most well-known and high-achieving people, including Einstein, John Lennon, Andy Warhol and Steve Jobs. The goal is to form connections between people based on the way they think and work.

Culture – In a sense, creating a culture that optimizes performance requires organizations to embrace all the ideas presented by the speakers—from embracing the role of failure to nurturing the creative mind to never underestimating what the right mix of people can achieve.

SONOS’ MacFarlane emphasized the importance of establishing a higher mission that drives people to succeed as well as cultivating an atmosphere in which people feel safe even when they make mistakes. He went so far as to suggest that leaders might reward failure and risk-taking as a way to get people to test unconventional strategies or ideas.

And even when teams are progressing, be prepared for the inevitable roadblocks. Organizations that allow individuals to step away from the daily grind without fear of repercussions outperform all others. Whether drawing pictures with crayons or playing with toy rockets, Boyle recommends adopting strategies that tap into individuals’ creative energy in unconventional ways.

Culture, of course, starts at the top, with leaders most responsible for setting the tone that works best in their own organizations.

The unique event concluded with a dinner by the bay. Appropriately, the attendees were mixed up and assigned to tables with people they didn’t already know.


Reflections On YCombinator Demo Day: How The Seed Market Has Changed

Earlier this week, I attended the Spring YCombinator Demo Day. I’ve been attending for six years now. Each time, I’m impressed by the intelligence, ambition and the polish of the founders presenting companies only a few weeks or months old.

As I listened to the pitches, I wondered if the types of startups founders decide to build at YC has changed over time and whether those trends are lagging or leading indicators of the market as a whole. At each Demo Day, the YC team provides investors a list of all the companies pitching and I’ve kept a few. To get a sense of the broader trends in YC companies, I’ve compared the Winter 2012 class and the Spring 2014 class by sector (consumer v. enterprise), segment (ecommerce, education, social, gaming, delivery) and by revenue model (subscription, ads, transactional).

These are the trends I observed in the data:

Mild shift toward enterprise: In 2012, 48% of YC startups were enterprise. In 2014, enterprise startups were 57% of the class.

Within enterprise, there has been a shift toward industry specific Software-as-a-Service (vertical SaaS) at the expense of horizontal SaaS. Vertical SaaS startups comprised 29% of the 2012 enterprise companies and 40% of the 2014 class. To make this idea more concrete, here are two examples. VidPresso provides software to the TV broadcast industry and is an example of vertical SaaS. ZenPayoll, a provider of payroll services, serves many different types of businesses and is a horizontal SaaS company.

Platforms-as-a-Service, which enable developers to build and scale applications (Heroku), have also seen a decline in numbers. In 2012, there were 5 PaaS companies while in 2014, I counted 2. Shifting to consumer, social apps have fallen from 24% of consumer startups to 15% at the most recent demo day. Unlike the 2012 class, there were no gaming companies in 2014. Food delivery companies, education companies and consumer market places have cropped up in their place.

As for revenue models, subscription remains dominant. 53% of 2012 YC companies chose this revenue model and 56% chose it in 2014.

Also notable is a marked increase in the number of non-profits. The 2014 class graduated 6 of them, up from zero in 2012.

All in all, YC startups do seem to be shifting with the market and/or YC partners are screening for startups that are more reflective of the environment. The shifts toward vertical SaaS and away from social and gaming apparent in this class are consistent with the patterns I’m seeing in the fund raising market. Unfortunately, the data isn’t able to tell us who is setting the trend. In any case, I’ll be tracking these trends in the future and hope to be able to draw more conclusions over time.


The Four Key Steps In Startup Fund Raising Processes

Raising capital from venture capitalists at any stage can seem like a very strange, ambiguous and amorphous process. I’ve written about the way Redpoint diligences/researches a startup and its market and what questions we tend to ask at each stage. In this post, I’ll focus on the process from entrepreneur’s point of view.

When raising capital, entrepreneurs will see potential investors move through four phases of investment decision-making process: screening, socialization, diligence, and decision. I’ve drawn a schematic that illustrates this evolution above. The chart also shows a line indicating the progression from one step to the next, using data from my own investment funnels.

Screening: the first call and/or first meeting. The screening step can include associates, principals and/or one or two partners. In this phase, investors are evaluating the risks of the investment, the market size, and the industry, to determine if it’s a fit with their fund size and investment goals. Looking at my CRM data, roughly 15% of startups continue onto the next stage.

Socialization: excited by a startup’s pitch and prospects, the partner/team who met with the company will share their knowledge with other members of the firm. VCs typically ask for second meetings during socialization. In second meetings, founders repeat the pitch to a broader group within the firm, though typically not the entirety of the partnership. If the deal team resonates with the founders and the opportunity and vice-versa, the deal team begins diligence. Again, about 15% of startups move onto diligence.

Diligence: the deal team begins researching the opportunity and share their findings with the broader partnership. This includes evaluating the team, the market, product roadmap and sales pipeline. Behind the scenes, VCs call contacts in industry to refine their point of view. As the research progresses, VCs will often volley questions back to the startup, seeking clarification. Typically, the diligence process is focused on a few key questions like market size, defensibility, regulatory risk, or competition. Increasingly, investors and founders discuss deal structure and outline deal terms at this stage. After diligence, about 10% of startups continue to the final “Partner Meeting,” a meeting of all the partners in a venture firm, or the entirety of the VC’s investment committee.

Decision: This the “Partner Meeting.” Beforehand, the deal team briefs the partnership on all the diligence materials, key questions, and deal terms. Founders pitch the entire partnership. After the meeting, all the partners debrief on the opportunity. Some firms provide deal teams latitude to make decisions on their own; others have implemented rigid voting processes to seek approval for investment. Granted approval and with a term sheet in hand, VCs then must convince an entrepreneur to sign their term sheet and partner with them. In the past 2 years, I’ve been lucky to invest in three companies (Axial, Electric Imp and Looker), for a success rate of 6% in this stage, or 0.2% throughout the process.

For founders, it’s important to understand where they are in the process with investors for two reasons. First, so as not to misjudge the finish line either by running out of capital in the midst of a process or presume success at too early a stage. Second, to build auction pressure in financings to create negotiating leverage on terms. Keeping VCs in stride with each other is one tactic to accomplish this goal.

The first part to ensuring a successful fund raising process is understanding the milestones. But ideally, after this process is completed, a founding team and an investor have built a strong and mutually beneficial relationship that will last many years and throughout the company’s ups and downs.


Lessons in Enjoying the Ride: BlueKai Acquired by Oracle

Today, Oracle announced that it is acquiring BlueKai, the leading data management SaaS provider for digital marketers, and a Redpoint portfolio company.  Congratulations to the BlueKai team and to Oracle on a terrific combination.

As an early stage VC, this is the kind of investment I live for, and I’m not talking about the financial return (though that is certainly good too) — I’m talking about the ride.   From the earliest identification of a market opportunity, to the recruitment of an extraordinarily talented team, to the twists and turns along the way in finding the real business, to the acknowledgement in the end that we’ve helped shape an emerging leader in a market that matters.

Taking a moment to look back, I have a few highlights of the ride with BlueKai – similar moments most startups see in their often challenging road to success.


Seeing the opportunity early

We were lucky to have been the only VC investor in Right Media, and to have seen the programmatic display ad market happening earlier than most.  If programmatic was going to be big, then audience data would be critical to informing marketer’s ad buying decisions, maybe even more important than the page context itself.  Then in 2007 Google bought Doubleclick, Yahoo bought Right Media, and the programmatic ad race was on.  Marketers and publishers would need to leverage audience data to take advantage of this shift.

It was clear: we needed to find an audience data platform play – before someone else did.


Confluence of talent: finding the right team

I met Omar Tawakol (now CEO of BlueKai) in a search process for one of my companies and was immediately blown away.  He possessed the rare combination of technical chops, product discipline, strategic vision and salesmanship.  If you’ve met him, you know exactly what I mean.  Fortunately he declined the job offer we had discussed, and we agreed to stay in touch regarding future opportunities to work together.   I subsequently introduced Omar to Alex Hooshmand (now BlueKai’s head of product) with whom I had worked at Right Media.  I connected them with a simple, “You guys should talk!”  With a bit of cajoling, Grant Ries and Mike Bigby hopped aboard, and completed the perfect founding team to go after the opportunity.  For this market, attracting the right the team was just as important as building the right product, and in this case both were perfectly aligned.

Of course when the moment came, our answer was simple: Heck yes, we’ll invest!


Twists and Turns: Making the right calls at the right time

Three years into the ride, we realized that the audience data exchange BlueKai had developed was only one piece of the puzzle.  As liquidity continued to grow within the exchange, marketers and publishers started asking if they could leverage BlueKai’s platform to manage their own data assets.  We became convinced that this software play could be as important an opportunity as the exchange, but to pursue it would mean a shift in strategy and business model, significant team changes, and the need for additional capital to fund what was an intriguing, but unproven model.  A huge risk was in front of the team and it was a challenging, and ultimately, defining moment.


Defining a market

The BlueKai team acted decisively: quickly doing another financing, transitioning the go-to-market team from media-centric to SaaS-centric, and repositioning BlueKai as a SaaS platform for marketers and publishers.  Fast forward two and a half years, and BlueKai has defined a new marketing SaaS category – the data management platform – and positioned itself as the emerging leader in the space.  A marquee list of online marketers and publishers adopted the BlueKai DMP platform to power audience-driven marketing activities across their websites, social media platforms, mobile, the Web and beyond.  And today’s announcement of the acquisition of BlueKai by Oracle further validates the importance and scale of the market opportunity.

The BlueKai team is an amazing example for startups at the challenging and defining points in their journey.  Their story is a good reminder for founders to listen carefully to what the market is telling you, and to be bold enough to adjust course in response to the feedback.


Congratulations again to the BlueKai team – and thanks for an amazing ride.



Backing Acompli & the Value of a Veteran Team

Last year, I wrote this post detailing what I would do if I was starting my last company, Zimbra, today. I wrote about the massive opportunity for a smart company to serve the professional market with a real, thoughtful solution for mobile email. Just a few months later, I was lucky to begin working with the team answering this exact challenge: Acompli.

Today, we are thrilled to officially welcome the Acompli team to the Redpoint portfolio. Backing their Series A was an easy decision. They have an incredible, proven team at the helm of an amazing product.

Javier, Acompli’s CEO was an EIR with us here at Redpoint after he sold his last company to VMWare,  Co-Founders Kevin Henrikson and JJ both worked with me at Zimbra, and Kevin was an EIR with us as well – albeit shortly, as he and Javier quickly got to work on Acompli while here at Redpoint.

Beyond their incredible product and vision, the value of a proven team like Acompli’s is huge. In this video, Javier and I discuss the pros and cons of working with startup veterans, what went into building the initial Acompli team, and how Javier is approaching being a CEO the second time around. Enjoy, and request your invite for Acompli today!


Why Startups Face Increasing Competition In Raising Series As And Bs

Has it become harder to raise money? is a question I hear all the time. On one hand, the total dollars invested by VCs is relatively flat at just under $30B per year, according to the NVCA. On the other hand, the stories of difficulty raising series As and Bs have become a steady drumbeat.

To get some sense of the patterns, I analyzed 917 companies from seed through Series B over the past 14 years, using Crunchbase data. I’ve divided the companies into cohorts by the year they raised their seed investment. Click on the charts to view interactive ones.

The chart shows the narrow funnel seed stage companies must pass through to raise a series A. There are three observations we can make from the chart. First, the number of seed investments in the Crunchbase data has increased by 4x in 4 years. Some of this growth is better data recording, but I suspect the majority of the growth is driven by increased seed investments. Second, the total number of Series As has also increased, but it’s hard to say whether that’s data accuracy or ground-truth. Third, the total number of Series Bs is remaining relatively constant, even for the newer cohorts, like the 2012 class.

Across all these cohorts, the mean success rate to raise an A after a Seed is 27%, to raise a B after an A is 35%, and the whole way through the funnel, Seed to B, is 11.5%. Said another way, only 12% of companies who raise a Seed will raise a B.

If you’re wondering how these trends have changed over time, this next chart will answer that question for you. The x-axis shows calendar year and the y-axis shows the % of companies that raised a round. The blue line shows the percentage of companies raising an A after a seed; the orange line shows the percent of post-Series A companies raising a B; the green line shows the percent of post-Seed companies who have run the gauntlet successfully to raise a Series B. The secular decline in all of these ratios screams of increased competition.

According to analysis by my partner Jamie Davidson on typical periods between financings peaks around 9 months so the follow on rates for Series Bs should be accurate up until the 2011 class, which gives these startups more than 2 years to raise their B. Data from 2012 and 2013 will show lower success rates because most of these companies won’t be mature enough to be in the market for a B.

Despite the noisy data, it’s reasonable to conclude the financing market has become more competitive, driven by an increase in the total number of startups raising seed capital and a relatively constant inflow of capital into venture capital.

Originally posted on Tomasz’s personal blog, here.


The Mininum Size Seed Round To Maximize Series A Follow On Investment

How large of a seed round should founders raise to maximize their chances of raising a Series A? Smaller seed rounds are simpler and faster to raise because they typically require fewer investors. They may also require less dilution because of the smaller investment size. On the other hand, to raise a Series A, the startup needs enough runway to hire a team and prove certain milestones to Series A investors.

Using Crunchbase data from 2005 to 2012, I’ve plotted the follow-on rates by size of seed investment quintiles across 2906 companies in that period. Startups who raised $300k or less in their seed raised Series As about 12% of the time. Founders who raised between $300k and $600k doubled their odds of raising an A to better than 24%, and those who raised between $600k and $900k increased the probability an additional 50%, reaching 33%. After that point, the marginal capital demonstrates diminishing returns.

The data indicates that larger seed rounds substantially increase the odds of raising a Series A. This could be due to a number of reasons. First, founders with larger seed rounds benefit from more time to establish product market fit. Second, the additional capital enables seed stage startups to be more aggressive ramping the business either through marketing efforts, recruiting efforts or other tactics. Third, larger seed rounds likely have one or two institutional investors who have invested the substantial majority of the round, and given their larger fund sizes are willing and able to lead the Series A.

More runway implies better odds of success.

Originally posted on Tomasz’s personal blog, here.


The Super Bowl of Startups: Interview with DraftKings CEO Jason Robins


As Super Bowl XLVIII fades into the history books (hopefully never again to be so lop-sided a defeat), another game is quietly gaining steam as the place to be for the most avid sports fanatics. DraftKings, a leader in online fantasy sports games, has seen its customer base, daily engagement, and giveaway prize totals surge almost as quickly as the Seattle Seahawks have transformed themselves into Super Bowl champions.

Launched in 2012, DraftKings paid out $50 million in prizes in 2013 to thousands of players who excelled in weekly fantasy football, daily fantasy baseball, daily fantasy basketball and daily fantasy hockey. In just the last four months, the Boston-based upstart’s user base has grown fourfold, with nearly 50,000 active daily users and as many as one million registered players. Even better, DraftKings users spend an average of more than two hours every day on the site.

All this before the company’s new mobile app was launched a few weeks ago and new games, such as golf, were added to the existing stable of sports. CEO Jason Robins says his company is poised to blow past these impressive numbers in 2014, thanks to more aggressive marketing and a slew of product enhancements.

With just 32 employees thus far, accomplishing so much so quickly is no easy feat. In a candid interview, Robins opens up about what he believes has been key to DraftKings high-octane growth and about the unique challenges that lie head.


Q: What has been your formula for success?

A: We have spent a lot of time focusing on the brand and the customer experience. Three things have been key: For the customer, we want everything to be fun, easy to use, and engaging. We look at a lot of metrics for every feature we roll out. We see what’s working and what isn’t by testing everything with a group of customers.


 Q. Can you give an example of how that has worked?

A. In the beginning of the NFL season, we launched a feature so people could send private challenges to friends. The social aspect of fantasy sports is huge and we needed to provide an easier way for people to play against their friends. After launching the feature, we found that a lot of challenges were not getting accepted. We wanted to know why and figured out that a lot of challenges were being lost in people’s email inbox.. At the same time, many of these same people were coming to our website without knowing about the challenges their friends were sending.

So we launched a new system of notifications on our website so people could see an alarm bell that shows a challenge. As soon as we launched this feature, our declines of challenges went down—70% on the first day. We will soon launch a push notification on our mobile app, which should make it even better. If you are out and about, you will know when someone has challenged you to a game. In addition, we just launched a feature where you can reserve a seat for a game without having to pick your team right away. People know they want to play but maybe can’t pick their team at that time. So this lets them accept a friend’s challenge and then later set their lineup. We have seen another 45% drop in cancellations with that.

All this was about tackling one key metric: the cancellation rate of game challenges.


Q. What are some things that have surprised you in getting the business off the ground?

A. Sometimes we are surprised by how our users respond to new features. We launched something called Lineups, which is a way to easily manage your teams. If you create 40 different teams and have players across many games, it can be hard to manage when a key player you had on 30 teams suddenly is out because of an injury. Previously you would have to edit out that play in each game. Now you can get the guy out of your lineups automatically. We knew this would be popular but it has become one of the defining features of our product.

Another lesson we have learned is about marketing. I came from Vistaprint, which had success with digital marketing channels at an incredible level of scale before venturing into offline advertising. It took us awhile to realize that wouldn’t work for us at DraftKings. Broadcast marketing channels have been easier for us to scale than digital.


 Q. Is it difficult to build a virtual business that is so dependent on the real world?

A. The beauty of sports is that you already start with a great product. It’s the world’s greatest reality show. We don’t have to create the content. It’s already there. For us, it’s more about how to add to an already interesting experience. Our app fits in particularly well. For example, if you are at a game, it can be a second-screen experience. It opens up a lot of different ways to add on to the experience.


Q. What have been some of the biggest challenges?

A. We are a product-focused culture and we always have to make sure we continue to pay as much attention to the technology and back-end operations. We have a very complicated product with constant transactions occurring. So the issue of security is always there and we have to have a really strong infrastructure that is error free. We can’t have people lose trust.

When we roll out a new feature, we make a list of all the negative things that could happen from launching the feature. Not just bugs but product design etc. We have to have an answer for each one or we don’t roll out the feature. We want to grow fast but there’s a lot of tricky stuff on the technical side.


Q. What keeps you up at night?

A. Staying ahead of the competition on the innovation front and making sure that everything we do is high quality. I also worry about hiring and retaining the best talent. It’s a little easier because of the business we are in. People feel a lot of passion for sports. It also helps being in Boston.




Do Larger Seed Rounds Lead To Bigger Series As?

In What’s Up with the Series A, Nikhil Basu Trivedi documents the bifurcation in the Series A market. While there are a handful of startups that raise blockbuster Series As of greater than $10M, the average Series A investment size remains relatively constant over the past 6 years just around $5.3M for US technology companies according to Crunchbase data[1].

After reading his post, I wondered if a big seed round is a leading indicator of a big series A. In other words, would larger seed rounds provide enough negotiating leverage in fundraising conversations to bolster average check sizes and increase pre-money valuations?

Let’s go to the data. Below is a chart of 726 startups who raised a seed and a follow-on Series A anytime from 2005-2013. The x-axis is the size of the seed round in $k and the y-axis is the size of the Series A in $M. Each dot represents one startup.

There isn’t a clear pattern within the data but we can make three important observations. First, Series As rarely exceed $10M for companies with seed stage financing and the distribution of these financings tends to be relatively independent of seed investment size. Second, in the top right, we see a cluster of large-seed and large Series A companies, but the sample size is quite small, only 4. Third, the correlation between the size of the seed round and the size of the Series A is tenuous at about 0.25 R2. I can’t argue larger seed rounds precede larger As.

But, there is a nugget of useful insight in the data. Below I’ve charted the distribution of seed investments by size on the left, and the distribution of Series A investmens by size on the right. They are quite different.

Seed investments are uniformly distributed, but Series A investments follow a power-law distribution. Fundraising is never simple or easy, but there is a marked difference in the difficulty of raising a large seed compared to large A. Roughly 18% of startups in this data set raised a $1.5M+ series seed, but fewer than 8.5% of these startups raised a Series A of greater than $10M.

Said another way, there is 3x more capital available for sub-$10M Series As than for greater than $10M As. In contrast, the amount of capital invested in seeds greater than $1M is about twice as big compared to small seeds, which is quite likely an artifact of the rise of the dedicated seed fund and traditional VCs’ entry into the seed market.

All in all, larger seeds may not have a strong effect on the size of the Series A a startup can raise. But, at least at this point in the market, it’s becoming easier for founders to raise substantial seed rounds.

[1] The numbers I’m using here differ from Nikhil’s because in addition to geography, I filtered the industry to tech companies, which seem to garner larger investments than the average Series A.


*Originally posted on Tomasz’s personal blog, here.