All posts in “Column”

Overnight success now requires a little more time

Ten years ago the iOS App Store launched — and the mobile revolution was off. Entrepreneurs everywhere rallied to take advantage, building category-defining consumer companies like Twitter, Uber, Lyft and Square, among many others.

There’s no better time for an entrepreneur to start a company than when a new platform like mobile emerges. The rising tide in these moments becomes a tsunami: Eager customers descend on services through word of mouth and new acquisition channels; there’s outsized press interest; and sales take off in part due to growth of the platform itself.

Now is not one of these periods. Mobile appears mature, and the next great enabling platform is still just past the horizon. That’s why many early-stage VCs have shifted their focus away from consumer and to other new enabling technologies, such as autonomous vehicles, blockchain and AI/ML.

I have a different view. I think now is a great time to build consumer companies, even without a new platform. There are three reasons for this. First, the internet has created big problems for humans, organizations and society, which entrepreneurs can attack at scale. Second, the first wave of mobile-enabled companies have laid a foundation — including processes, seasoned executives and business models — that new entrepreneurs can borrow. And third, mobile technology is still changing and evolving.

Let’s take a closer look at all three.

Solving big problems

The last wave of breakout companies created interactive platforms (Twitter, Snapchat, Instagram, etc.) that have entertained many. They didn’t solve big societal problems. There’s now a big need — and big opportunity — for companies that can help people save time, money and sanity, even as they build great businesses.

Most of us now realize the major problems that a connected, mobile, always-on world has wrought. These include:

  • Income inequality. Lower-income Americans are struggling more than ever. Entrepreneurs should be thinking of ways to help folks where they need it the most: the pocketbook. That might mean unlocking found money, ensuring that available financial resources are being used wisely or saving consumers from the growing number of “gotchas” imposed by financial institutions.
  • Too many choices. When you can buy or choose anything, it’s hard to pick what you actually want. There are wide-open opportunities for concierges, curation and trusted guides.
  • A lack of intimacy. With everything online and available at the touch of a keypad, genuine human interaction has become more rare. There’s a need for companies that can provide real care and curation for matters that affect our daily lives.

Newly available resources

After a decade of building companies for mobile, there are now untold stories, battle scars and people available for future companies to learn from. This makes it easier for startups to assemble playbooks and experienced teams. It also reduces the downside risk for investors, opening new paths to capital for companies that need it.

For instance, it’s now clear that consumer brands must define, own and curate an end-to-end experience. A great new example is GOAT, the online sneakerhead marketplace. Faced with a sneaker market full of rampant knock-offs, the founders invested in a capital- and time-intensive process to manually inspect every shoe for authenticity. The result is an experience that every sneakerhead loves and a breakthrough consumer brand.

Building a breakout consumer platform will be more complex, more challenging and often more capital-intensive than it was for the prior generation.

There are also lots of executives and teams that know how to lead and manage complex operations, especially on the ground. This is crucial to scale logistically complex ideas like Opendoor, Instacart and others.

The other thing needed to help scale these companies is capital. And right now, there are two particularly relevant new kinds of investors: 1) mega equity funds like SoftBank Vision Fund, and 2) alternative lending funds that provide non-dilutive capital to companies to finance the acquisition of traditional assets. Those capital sources enable companies like Opendoor (disclosure: I’m a personal investor) to own and manage a truly delightful end-to-end experience.

Mobile today is not mobile tomorrow

Mobile devices have come a long way over the last decade. And there will be many more meaningful improvements in the near future, allowing for new uses and new companies.

I anticipate breakthroughs that will boost the ability of the chips and subsystems on a phone to perform optimally for far longer. Right now, these are throttled due to heating issues and other problems. As companies solve these issues, they’ll create order of magnitude improvements on what our phones are capable of, bringing technologies like VR and AR, to take two examples, far forward into everyday use.

On the network side, 5G and subsequent buildouts will meaningfully change what kinds of bandwidth we can handle, enabling even more data and compute to be in the cloud.

Mobile today is about one-to-many broadcast platforms like Instagram, Twitter and Facebook. Tomorrow’s great consumer companies will leverage a better vector: one-to-one customer intimacy. Companies like Grove Collaborative (disclosure: Mayfield is an investor) are experiencing hypergrowth in part by using real people connecting with consumers over text to bring a curated, personalized experience to shopping for household staples. I expect this to be a major trend, with the companies that earn the right to communicate more with customers the ones that win.

Building a breakout consumer platform will be more complex, more challenging and often more capital-intensive than it was for certain titans of the prior generation. But for those with the vision and substance to bring a valuable service to the world that solves real problems, the resources and emerging technologies will be there to help create the next groundbreaking consumer brand.

Bots distorted the 2016 Election. Will the midterms be a sequel?

The fact that Russian-linked bots penetrated social media to influence the 2016 U.S. presidential election has been well documented, and the details of the deception are still trickling out.

In fact, on Oct. 17 Twitter disclosed that foreign interference dating back to 2016 involved 4,611 accounts — most affiliated with the Internet Research Agency, a Russian troll farm. There were more than 10 million suspicious tweets and more than 2 million GIFs, videos and Periscope broadcasts.

In this season of another landmark election — a recent poll showed that about 62 percent of Americans believe the 2018 midterm elections are the most important midterms in their lifetime – it is natural to wonder if the public and private sectors have learned any lessons from the 2016 fiasco. And about what is being done to better protect against this malfeasance by nation-state actors.

There is good news and bad news here. Let’s start with the bad.

Two years after the 2016 election, social media still sometimes looks like a reality show called “Propagandists Gone Wild.” Hardly a major geopolitical event takes place in the world without automated bots generating or amplifying content that exaggerates the prevalence of a particular point of view.

In mid-October, Twitter suspended hundreds of accounts that simultaneously tweeted and retweeted pro-Saudi Arabia talking points about the disappearance of journalist Jamal Khashoggi.

On Oct. 22, the Wall Street Journal reported that Russian bots helped inflame the controversy over NFL players kneeling during the national anthem. Researchers from Clemson University told the newspaper that 491 accounts affiliated with the Internet Research Agency posted more 12,000 tweets on the issue, with activity peaking soon after a Sept. 22, 2017 speech by President Trump in which he said team owners should fire players for taking a knee during the anthem.

The problem hasn’t persisted only in the United States. Two years after bots were blamed for helping sway the 2016 Brexit vote in Britain, Twitter bots supporting the anti-immigration Sweden Democrats increased significantly this spring and summer in the leadup to that country’s elections.

These and other examples of continuing misinformation-by-bot are troubling, but it’s not all doom and gloom.  I see positive developments too.

Photo courtesy of Shutterstock/Nemanja Cosovic

First, awareness must be the first step in solving any problem, and cognizance of bot meddling has soared in the last two years amid all the disturbing headlines.

About two-thirds of Americans have heard of social media bots, and the vast majority of those people are worried bots are being used maliciously, according to a Pew Research Center survey of 4,500 U.S. adults conducted this summer. (It’s concerning, however, that much fewer of the respondents said they’re confident that can actually recognize when accounts are fake.)

Second, lawmakers are starting to take action. When California Gov. Jerry Brown on Sept. 28 signed legislation making it illegal as of July 1, 2019 to use bots – to try to influence voter opinion or for any other purpose — without divulging the source’s artificial nature, it followed anti-ticketing-bot laws nationally and in New York State as the first bot-fighting statutes in the United States.

While I support the increase in awareness and focused interest by legislators, I do feel the California law has some holes. The measure is difficult to enforce because it’s often very hard to identify who is behind a bot network, the law’s penalties aren’t clear, and an individual state is inherently limited it what it can do to attack a national and global issue. However, the law is a good start and shows that governments are starting to take the problem seriously.

Third, the social media platforms — which have faced congressional scrutiny over their failure to address bot activity in 2016 – have become more aggressive in pinpointing and eliminating bad bots.

It’s important to remember that while they have some responsibility, Twitter and Facebook are victims here too, taken for a ride by bad actors who have hijacked these commercial platforms for their own political and ideological agendas.

While it can be argued that Twitter and Facebook should have done more sooner to differentiate the human from the non-human fakes in its user rolls, it bears remembering that bots are a newly acknowledged cybersecurity challenge. The traditional paradigm of a security breach has been a hacker exploiting a software vulnerability. Bots don’t do that – they attack online business processes and thus are difficult to detect though customary vulnerability scanning methods.

I thought there was admirable transparency in Twitter’s Oct. 17 blog accompanying its release of information about the extent of misinformation operations since 2016. “It is clear that information operations and coordinated inauthentic behavior will not cease,” the company said. “These types of tactics have been around for far longer than Twitter has existed — they will adapt and change as the geopolitical terrain evolves worldwide and as new technologies emerge.”

Which leads to the fourth reason I’m optimistic: technological advances.

In the earlier days of the internet, in the late ‘90s and early 00’s, networks were extremely susceptible to worms, viruses and other attacks because protective technology was in its early stages of development. Intrusions still happen, obviously, but security technology has grown much more sophisticated and many attacks occur due to human error rather than failure of the defense systems themselves.

Bot detection and mitigation technology keeps improving, and I think we’ll get to a state where it becomes as automatic and effective as email spam filters are today. Security capabilities that too often are siloed within networks will integrate more and more into holistic platforms better able to detect and ward off bot threats.

So while we should still worry about bots in 2018, and the world continues to wrap its arms around the problem, we’re seeing significant action that should bode well for the future.

The health of democracy and companies’ ability to conduct business online may depend on it.

Translating startup-speak for the corporate buyer

Startups salivate at the prospect of entering the enterprise — and for good reason. The enterprise is rife with legacy systems and circuitous processes that frustrate employees and hinder results — and the startup has just the perfect product to fix the problem.

Too often though, the pitch to the enterprise falls flat or a promising pilot gets sidelined. Sometimes there’s a clear obstacle, like a mismatch between product and problem to be solved, an inability to scale or the loss of an internal sponsor. But more often than one would expect, the startup’s value is simply getting lost in translation.

Even the most forward-looking enterprise leaders are operating in an environment that I like to call “GAAP-based digital strategy.” The budgeting process supports only certain kinds of purchases, like renewable software licensing fees and support contracts with fixed costs. New models, like variable costs for open-source development, require workarounds and explanation in the budget process and cause even the most eager internal champion to lose time and energy.

So what’s a startup to do? The more you can help your internal sponsor translate the cost model to adhere to the established norm, the more traction they are likely to get from the hydra of procurement and finance. Once the project has momentum, your champion can work to change the budgeting process — but that’s a tall order before your pilot is launched and showing results.

The concept of GAAP-based digital strategy extends well beyond accounting practices. Consider internal reporting: Large organizations spend an inordinate amount of time reporting up, across and down in an effort to improve transparency and inspire shared ownership of outcomes. What are the KPIs for the department you are serving? How easily will your results translate into their storytelling? Spend some time up front with your client to ensure your results align with (and show up in!) the existing framework for reporting.

Corporations are aware of how hard it is to navigate these control systems, and so they are increasingly creating “innovation departments” with dedicated funding for one-off experiments using new technology. This is often the start of the relationship between a startup and a new client.

For startups, this can be a beneficial approach, as it offers the opportunity to deliver value before wrangling with cumbersome procurement or IT requirements. But too often these divisions lurch from pilot to pilot, and struggle to find line-of-business champions willing to absorb startup technology into their operations. The biggest challenge here is that there’s often no enterprise template for the hand-off from the innovation setting — where experiments can operate in a “clean room” apart from procedures and regulations — to ongoing operations.

Here’s how one startup providing augmented reality headsets and software to a complex pharma manufacturing environment crossed over. Their pilot showed clear results: Testing with four-five headsets, their AR software measurably helped workers on the floor by augmenting the workflow with voice recording and hands-free capabilities.

The startup team then came on-site, and they partnered with the workers testing the solution to document the improvements and discuss how to ensure the process complied with regulations. This direct interaction fed into their results reporting to make the case for the 30-40 headsets needed on the shop floor. Rather than wait for middle management, the startup developed a grassroots-fortified case for moving into operations.

Similarly, a startup piloting an analytics product in a CPG enterprise was immediately pigeonholed into the IT department’s analytics budget. Surrounded by a range of solutions from business intelligence dashboards to marketing technology tools, their pilot was getting lost.

By closely analyzing results, the startup saw promising early findings in the trade promotions area. They worked through their contacts to reach the executive in charge of trade promotions, who took the pilot under her wing — and into her budget. They avoided being locked into a GAAP-based bucket (analytics), and were connected with an executive to unlock a whole different conversation.

In addition to finding your internal champion and changing the GAAP conversation, spend time understanding the larger enterprise backdrop: the initiatives and themes that are driving this quarter’s shareholder value. Help your client position the solution not only in the context of the specific problem to solve, but the overall enterprise goals.

The annual report is your friend here. The focus may be digital transformation or global collaboration or risk management, and aligning to this priority may enable your client to get buy-in internally. Make sure you are fluent in the visible, budgeted, CEO-led, cross departmental initiatives — and how your solution plays a role here.

Take heart: This translation won’t always be a one-way street. The deeper your engagement, the more your enterprise clients will benefit from your startup’s perspective, and change technology, process and language to reflect that understanding. Ideally, GAAP-based digital strategy recedes as long-established protocols reduce structural lag with how business is conducted today. In the meantime, consider the art of translation as important as pitching the outcome.

Building a great startup requires more than genius and a great invention

Many entrepreneurs assume that an invention carries intrinsic value, but that assumption is a fallacy.

Here, the examples of the 19th and 20th century inventors Thomas Edison and Nikola Tesla are instructive. Even as aspiring entrepreneurs and inventors lionize Edison for his myriad inventions and business acumen, they conveniently fail to recognize Tesla, despite having far greater contributions to how we generate, move, and harness power. Edison is the exception, with the legendary penniless Tesla as the norm.

Universities are the epicenter of pure innovation research. But the reality is that academic research is supported by tax dollars. The zero-sum game of attracting government funding is mastered by selling two concepts: Technical merit, and and broader impact toward benefiting society as a whole. These concepts are usually at odds with building a company, which succeeds only by generating and maintaining competitive advantage through barriers to entry.

In rare cases, the transition from intellectual merit to barrier to entry is successful. In most cases, the technology, though cool, doesn’t give the a fledgling company the competitive advantage it needs to exist among incumbents, and inevitable copycats. Academics, having emphasized technical merit and broader impact to attract support for their research, often fail to solve for competitive advantage, thereby creating great technology in search for a business application.

Of course there are exceptions: Time and time again, whether it’s driven by hype or perceived existential threat, big incumbents will be quick to buy companies purely for technology.  Cruise/GM (autonomous cars), DeepMind/Google (AI), and Nervana/Intel (AI chips). But as we move from 0-1 to 1-N in a given field, success is determined by winning talent over winning technology. Technology becomes less interesting; the onus on the startup to build a real business.

If a startup chooses to take venture capital, it not only needs to build a real business, but one that will be valued in the billions. the question becomes how a startup can create durable, attractive business, with a transient, short-lived technological advantage.

Most investors understand this stark reality. Unfortunately, while dabbling in technologies which appeared like magic to them during the cleantech boom, many investors were lured back into the innovation fallacy, believing that pure technological advancement would equal value creation. Many of them re-learned this lesson the hard way. As frontier technologies are attracting broader attention, I believe many are falling back into the innovation trap.

So what should aspiring frontier inventors solve for as they seek to invest capital to translate pure discovery to building billion-dollar companies?  How can the technology be cast into an unfair advantage that will yield big margins and growth that underpin billion-dollar businesses?

Talent productivity: In this age of automation, human talent is scarce, and there is incredible value attributed to retaining and maximizing human creativity.  Leading companies seek to gain an advantage by attracting the very best talent. If your technology can help you make more scarce talent more productive, or help your customers become more productive, then you are creating an unfair advantage internally, while establishing yourself as the de facto product for your customers.

Great companies such as Tesla and Google have built tools for their own scarce talent, and build products their customers, in their own ways, can’t do without. Microsoft mastered this with its Office products in the 90s, through innovation and acquisition, Autodesk with its creativity tools, and Amazon with its AWS Suite. Supercharging talent yields one of the most valuable sources of competitive advantage: switchover cost.  When teams are empowered with tools they love, they will loathe the notion of migrating to shiny new objects, and stick to what helps them achieve their maximum potential.

Marketing and Distribution Efficiency: Companies are worth the markets they serve.  They are valued for their audience and reach.  Even if their products in of themselves don’t unlock the entire value of the market they serve, they will be valued for their potential to, at some point in the future, be able to sell to the customers that have been tee’d up with their brands. AOL leveraged cheap CD-ROMs and the postal system to get families online, and on email.

Dollar Shave Club leveraged social media and an otherwise abandoned demographic to lock down a sales channel that was ultimately valued at a billion dollars. The inventions in these examples were in how efficiently these companies built and accessed markets, which ultimately made them incredibly valuable.

Network effects: Its power has ultimately led to its abuse in startup fundraising pitches. LinkedIn, Facebook, Twitter, and Instagram generate their network effects through Internet and Mobile. Most marketplace companies need to undergo the arduous, expensive process of attracting vendors and customers.  Uber identified macro trends (e.g., urban living) and leveraged technology (GPS in cheap smartphones) to yield massive growth in building up supply (drivers) and demand (riders).

Our portfolio company Zoox will benefit from every car benefitting from edge cases every vehicle encounters: akin to the driving population immediately learning from special situations any individual driver encounters. Startups should think about how their inventions can enable network effects where none existed, so that they are able to achieve massive scale and barriers by the time competitors inevitably get access to the same technology.

Offering an end-to-end solution: There isn’t intrinsic value in a piece of technology; it’s offering a complete solution that delivers on an unmet need deep-pocketed customers are begging for. Does your invention, when coupled to a few other products, yield a solution that’s worth far more than the sum of its parts? For example, are you selling a chip, along with design environments, sample neural network frameworks, and datasets, that will empower your customers to deliver magical products? Or, in contrast, does it make more sense to offer standard chips, licensing software, or tag data?

If the answer is to offer components of the solution, then prepare to enter a commodity, margin-eroding, race-to-the-bottom business. The former, “vertical” approach is characteristic of more nascent technologies, such as operating robots-taxis, quantum computing, and launching small payloads into space. As the technology matures and becomes more modular, vendors can sell standard components into standard supply chains, but face the pressure of commoditization.

A simple example is Personal Computers, where Intel and Microsoft attracted outsized margins while other vendors of disk drives, motherboards, printers, and memory faced crushing downward pricing pressure.  As technology matures, the earlier vertical players must differentiate with their brands, reach to customers, and differentiated product, while leveraging what’s likely going to be an endless number of vendors providing technology into their supply chains.

A magical new technology does not go far beyond the resumes of the founding team.

What gets me excited is how the team will leverage the innovation, and attract more amazing people to establish a dominant position in a market that doesn’t yet exist. Is this team and technology the kernel of a virtuous cycle that will punch above its weight to attract more money, more talent, and be recognized for more than it’s product?

10 lessons from Marketo’s growth to a multi-billion-dollar exit

With Adobe’s acquisition of Marketo, I have been reflecting on what an amazing and pioneering company Marketo has been since it was founded in 2006. There are very few tech companies that have defined a new category, executed a successful IPO, been acquired by a private equity firm for more than four times the company’s initial IPO market value and now, at a price of $4.75 billion, become the largest acquisition of a world-class company like Adobe.

The credit for this dream-come-true Silicon Valley company goes to the co-founding team of Phil Fernandez, Jon Miller and David Morandi, who together built an amazing customer-first product, defined a breakthrough category and launched a marketing automation company that continues to delight and amaze partners and customers alike.

I had the unique pleasure of meeting the founding team in 2006 when they shared their vision and passion for marketing automation. At the time, all they had was a PowerPoint deck. But it was clear then that they had a special idea and the unique capability to build a breakthrough product to deliver on their vision.

In all honesty, I couldn’t know how truly extraordinary the company would become. Thankfully, I was lucky enough that the team chose me and my former partner Bruce Cleveland as their first investor and also was fortunate to serve on the board for 10 years. Most recently, I was thrilled that Phil joined me at Shasta. One of the qualities I admire most about Phil — which was apparent all those years ago and continues to this day — is that he never stops iterating to do things better or faster or more efficiently or more thoughtfully. Phil always carried a notebook that said “THINK” on the cover, which epitomizes how he approaches his work.

Phil recently shared his “10 Things I’d Do Even Better If I Did It Again” presentation with our team and our founder/CEO community. We believe his insights are “10 Must-Dos” for today’s software entrepreneurs. It’s hard for entrepreneurs to know the trade-offs required when making the tough decisions — especially early on ­– but what follows is what I learned from Phil, and the key takeaways from his talk that I believe can help more founders create iconic companies with lasting value. (Note: Click here to view excerpts of Phil’s talk.)

Have one person own revenue

If your company is like every other company, there are two executives — vice president of Sales and the chief marketing officer — who are regularly locking horns because they are each tasked with taking different approaches to the same goal of increasing revenue. How do you solve this?

Hire a chief revenue officer (CRO) who can see both perspectives, plus give the context that sales and marketing are missing. This seat understands the big picture and doesn’t belong in marketing or sales. The CRO needs to talk strategically about life cycle revenue — across the customer journey. She or he should be a storyteller who can look at the numbers and the models and explain it all in plain English to the executive team so that everyone understands. Like a chief people officer, you’re going to have to spend on a CRO — but it’s worth it in the long run.

Hire a chief people officer (CPO) ASAP

Your company needs a leader of “all things people” who can make sure your workplace is welcoming, diverse and responsive to employee needs. For the staff to have trust, this person needs to be in a role that is empowered by the organization and not just by the CEO. Hire the most senior, overqualified HR executive into your business as early as possible — Series A level — and have him or her report directly to the CEO. By constantly listening to people — which is really hard when you’re working really hard — the CPO will help build your culture and be the eyes and ears for the CEO. Investing early in HR will come back to you tenfold through employee retention, team morale and an enviable culture.

Give back when it makes no sense

The day you think you’ve got to get a product release out the door and there’s no time to do anything else is the day you get out and give back in whatever way makes sense for your company and your community. Give employees time off to volunteer. Pick a cause for your company to support. Or, consider starting a charitable foundation with pre-public stock. It will create a spirit and energy that will give back to your team five or 10 times whatever it is costing you.

Charge your first customer

Phil personally wrote a stupid thing on their website that said, “At Marketo, your success doesn’t have a price.” That copy stayed up for years as a testament to how customer-centric they were. They were proud that they weren’t charging for services. But as Phil said, that was a big mistake; they should have been charging from day one.

When you’re a startup, short-range thinking is seductive, but long-range thinking is powerful.

There really isn’t any friction about asking customers to pay for services. If you say, “Look, this product is great. It’s going to transform your business but it’s not easy and it will cost money,” they will spend it. Feature-level sales is a great way to justify why you are charging what you are charging, and it keeps customers renewing services and adding more features as their business grows and changes. To make this strategy work, gear your sales metrics toward incremental increases over time­ instead of pushing sales reps to sell as much as they can all at once. Customers will pay for quality products that meet their needs.

Build a world-class Rev Ops/Sales Enablement team

You need a VP-level Rev Ops/Sales Enablement executive by the time your company reaches $2-3 million in revenue. That individual must think holistically about how revenue is happening, from the early lead in the door and the sale to renewal and the up-sale; understanding full lifetime value and thinking about it in a modeling sense. She or he needs to be a storyteller — one who can look at the numbers, look at the models and then explain it in plain English to the executive team. That’s gold.

Focus on continuous ARPU expansion

Today, to increase ARPU (average revenue per user), you need to design feature-level packaging every bit as much as how you design product functionally. The same people on product management ought to be thinking together with Rev Ops and Sales about how you dish out the product, how you launch the pieces, how you turn on pieces and how you enable pieces. It becomes a part of the art of product design as much as the art of revenue design — and that’s where these two rules of thought really come together. Basically, you need to design an expansion pass.

Incubate new product initiatives

Marketo failed in defining a multi-product company, from when it was $30 million a year to when it was $300 million a year. If you’re going to bring a second product line into the company — whether it’s organic or inorganic — it needs to be incubated. It needs to have its own dedicated sales team and its own separate quotas. If you’re thinking about becoming a multi-product company, do not pass Go, do not collect $200; go read Geoffrey Moores’ Zone to Win, the only business book Phil has ever recommended.

Pursue constant technology renewal

The pace at which tech is moving and the competitive advantage that new tech is providing over old tech has never been like this during the past 35 years. Today, you need someone that’s charged with thinking not about product but about the future. You need to value technical currency. If you’re three years old on your technology and a new company enters your market — the degree of agility, pace and performance the new entrant has in running circles around your company will win over a five-year cycle. Every time.

Always be seeking more TAM

No matter how good your initial tenure is, no matter how good it feels, no matter how amazing you see your company, as the CEO, as a leader, have a Plan B. Know what’s next, know where you’re going next and make sure you’re always talking about it. Be absolutely zealous about ensuring you know the next piece of TAM you’re going to go after. Think about what’s going to happen if you have more money; what would you do next? Give yourself that opportunity to dream, but make it real, make it defensible.

Watch the clock during scale up

When you’re a startup, short-range thinking is seductive, but long-range thinking is powerful. Always be watching the time. The tension between operating leverage and scale-up investment is really dangerous. At Marketo, they got to it late and their growth slowed a little too much. Live in the real world and focus on cash and on making the investments so you have the capacity when you need it. Have a long-range planning process and understand the day when you’ll need $2 million of ramp capacity. Don’t let the tyranny of a seductive short-range model triumph over what the real world is telling you about the dynamics of growing the business. Understand what it takes to really scale.