Over the past 26 years, we have grown our portfolio companies and our own team to a point where TCV is operating across three offices in the U.S. and Europe. Due to the scale and global reach of our organization, we are excited to expand TCV’s executive talent to take us to the next level.
As such, we are thrilled to announce that Edie Ashton is joining the firm as Chief Information Officer (CIO). Edie was previously at The Carlyle Group, where she spent nine years, most recently serving as segment CIO for Global Private Equity. Adding Edie to our leadership team is a critical piece of our growth trajectory and demonstrates our ongoing commitment to deploy modern technology in support of our data-centric culture.
Edie comes to TCV with deep experience in both financial services and data strategy. As CIO, she will help advance growth by focusing on talent excellence, agility, and innovation in areas such as applied AI and distributed infrastructure—bringing a deeper alignment of IT and TCV’s core business as we pursue seamless global collaboration and acceleration of our investment platform.
Edie started her career at the Capital Group and Jefferies & Company, before enjoying a decade-long run in the telecom industry, implementing data warehouses and analytics platforms at global brands such as Nextel, Sprint, and RCN. At Carlyle, Edie proved herself a versatile business-oriented technologist who introduced the first data governance program and established a diversity and inclusion plan for the IT division.
“Edie is joining TCV at the right time,” says Nathan Sanders, General Partner and Chief Operating Officer at TCV. “We are experiencing significant growth and expansion of our team globally and have seen the benefits of leveraging sophisticated IT technology across our portfolio and TCV. Edie is a proven IT leader and tech visionary, focused on results that advance the whole organization. We are thrilled to welcome her to the TCV family.”
My guest today is Jay Hoag, co-founder of TCV. If you look at Jay’s investment track record, it’s a “who’s who” of tech giants with Airbnb, Netflix, Peloton, Zillow, and a list that does not stop there. Needless to say, Jay has a Hall of Fame career. During our conversation, we talk about his own journey founding TCV, what advice he has for visionaries, and why he sees advantages for private to public crossover investors. Jay has such a wealth of experience that is on display throughout this episode. Please enjoy my conversation with Jay Hoag.
For the full show notes, transcript, and links to the best content to learn more, check out the episode page here.
opportunity comes competition, both from within one’s category (e.g.
application area) or from adjacent categories within one’s vertical (e.g. industry).
As boards and management teams wake up to the opportunity, they realize that
the race is on to capture the full potential of their vertical.
This post is a framework to help leaders of SaaS companies think through the strategic choices and hopefully increase the odds of reaching their full potential.Strategy is implemented by focused alignment of execution, talent, M&A, organizational structure, functional excellence, and financial and governance/board frameworks.
Finally, it’s important to acknowledge that very few companies have reached “full potential,” and this framework is inherently aspirational. However, “most entrepreneurs aren’t building a house, they are putting bricks in the foundation of a skyscraper” (Naval Ravikant). Aspiration is important, so hopefully this is an articulation of what is possible.
Lead the Category
This phase of the SaaS strategy is well understood. A SaaS company aspires to:
build a great product (and service)
over time, build an efficient and repeatable
go-to-market model (marketing -> sales -> onboarding)
and then “add capital” and execution
to press its advantage against sluggish incumbents or poorly capitalized
This is the
playbook that Omniture and our portfolio company ExactTarget pioneered a decade ago. Despite
massive capital inflows into SaaS and deteriorating economics, this model
generally still works today.
On the product side, scale
in data + AI can create increasing differentiation. For example, when you start
to have more data than anyone else, you can flip your product from being
reactive to proactive — having the product tell users where to look and how to
optimize the system. Both Xero and Shopify have done this well.
Five other things
to think about in this early phase that don’t get enough attention:
Scalable onboarding: Onboarding friction can be unaccounted
drivers of CAC and churn. A great onboarding process builds the trust and
confidence that are the foundations of virality/word of mouth, future cross- as
well as third party channel strategies. Carefully measure funnel metrics and be
attentive to new customer NPS. Automate early as “throwing bodies at it” can
create process debt that will be difficult to unwind later.
Expansion: Expansion drives net revenue
retention and most of the strategies we are about to discuss. With all sales
processes, it’s a lot easier to learn, iterate, and optimize with fewer bodies
and less complexity.
UI and Architecture: Like onboarding, these can be long-lead
time fixes that compound as your business scales and gets more complex. A
specific call out is to plan for an API strategy. It can facilitate future
partner strategies and increase the value and stickiness of your offering.
Pricing structure/strategy: You will constantly revisit tactics,
but it’s important to have some sense of how your pricing structure might change
Foundations for global, including a work culture that can
support distributed executives and operations, and good product feedback loops that
incorporate non-home market needs.
Hyperscale Locations, Feed
A lot of ink
has been spilled on forward investing in sales and marketing, and arguably it’s
part of a/the “lead the category” strategy. But, it’s worth a call out as it’s
important you don’t take your eye off the ball too early. So much of winning and
future monetization is getting location market share. When the wind is at your
back, go get it done! Market structures have a nasty habit of shifting, future
secular tailwinds may abate, or competitors may leapfrog your product or your go-to-market
model. If your churn and sales economics are sound, keep “feeding the beast!”
particularly powerful unlock is Channel. There are verticals and
categories, where influencers in a channel are kingmakers and can help you
engage with segments that are otherwise difficult or uneconomical to
reach. Furthermore, Channel partners’
engagement and contributions can enrich your products and increase overall
customer value. A great example is in tax software, where Xero’s wooing of accountants proved to be
an effective source of customers and a formidable competitive moat (thereby
disrupting the incumbent provider). Xero went as far as offering free practice
management tools to help accountants run and grow their business on Xero.
Win the Control Points:
Own Your Vertical
This is where management teams are faced with a paradox of choice: “Where should we go next? How should we spend the next incremental dollar? On increasing ARPU, acquiring incremental locations, or expanding into new verticals, geos or segments?” At this juncture, it is our belief that you should focus on winning the control points. In vertical SaaS, there are typically one or two control points, “systems of record.” Usually one control point in the front office (e.g. Point of Sale, CRM, e-commerce) – “that drives sales, that grows the business, that serves as the cash register.” And one control point in the back office (e.g. general ledger) – “where everything else reconciles to.” Hopefully, you provide one of the systems of record, so go build or acquire the other system(s) of record and secure the high ground!
a system of record is the last software package a customer will “turn off” in a
tough economic time.
We also like to think about the concept of “gravity”:
Workflow gravity – the system that all other systems integrate to – it’s where the most users spend the most time. Not all workflows deliver the same value; in my experience the system of record workflow tends to deliver the most value.
Data gravity – the system that creates and holds the most critical information and is the hardest to migrate. That data can be critical to a client for a wide range of applications, from understanding their customers (e.g. CRM) to managing risk (e.g. compliance). Data also can be critical in two-level situations, such as loan underwriting (e.g. a bank underwriting a merchant’s risk via POS data) or supplier information management (e.g. a client managing risk by validating supplier capabilities and quality). Data depth and scope also create gravity where AI technologies can be highly productive.
Account gravity – the user/sponsor of the system is the highest-ranking individual in the customer organization; it’s the system that requires the biggest financial outlay, etc.
other system of record is not easy. By definition, a system of record is hard
to displace and unless the market is greenfield pen and paper, competition can
be challenging. You may be able to do it organically with product innovation,
but M&A can be the more desirable path if “integration debt” is manageable.
If M&A is not possible, a slow winnowing of your competitor may be the only
approach available to you.
If you own
multiple systems of record in a vertical, the benefits are enormous:
Customer delight: automation from integrated
workflows and potentially unified data and data models allow efficiencies and
offerings unavailable before
Stronger account ownership
to capture incremental spend and drive more efficient growth
A new level of
durability and stickiness
A good example
is Veeva. The company started in 2007 with the launch of a CRM
and a sales automation platform for pharma sales reps (e.g. record their
activity, keep track of the doctors they meet with or drop off samples for, etc.).
After becoming the dominant player in that category, Veeva saw an opportunity
to move backward into research and
development for their life science customers (developing new drugs,
conducting clinical trials and bringing those drugs to market). In 2011 Veeva
launched Vault, a suite of applications that first centered on the core content
management needs for clinical trials, regulatory submissions, and quality
documentation. The company then expanded to include a series of core data
applications that help manage clinical trials, quality processes, safety processes, etc. Veeva is expected to
finish 2019 with $1.1B in revenue (26% YoY Growth) and 37% EBIT margins. Vault
represented 51% of total revenue and grew 38% YoY. Analysts also estimate Vault
meaningfully expanded Veeva’s addressable market.
example might be front office player Shopify’s $450M acquisition of 6 River
Systems to move into back office fulfillment and warehouse management. Some
financial analysts estimate that merchants spend up to ~10-15% of their GMV on
logistics which could potentially provide multiples of Shopify’s current take
category leadership comes high market share and potentially high saturation. Long-term
growth is driven by location growth, as there’s generally a finite share of
wallet you can access. It’s important to invest in the S-curves of geos,
segments, and adjacent verticals that can unlock new location TAM. This can
take a couple of tries before you’re successful, so start this during your growth
phase when there’s less pressure on maximizing profitability.
Extend Through the Value
of growth can be transformative. By leveraging the strengths of your core
customers, you can expand into a new market with a new set of customers. Typical
patterns include moving from front office software to extend to your customer’s
customers, or from back office software and extending to suppliers. These can
be riskier bets, but success can pay out big here:
Workflow that spans multiple parties and
creates increased customer value and vendor stickiness
Two-level network effects
seems to work best by “following the money” and leveraging purchasing power. TCV
portfolio company Ariba articulated the “golden rule”— He
with the gold rules! By using their leadership in procurement software at large
corporate buyers, Ariba extended to build a robust suppliers software business
for merchants that serviced those corporate buyers. More recently, Avetta has followed a similar path in the
supplier information space by building a strong two-level network effect. We
believe corporate clients want to be on Avetta because it has the largest
network of suppliers, and suppliers want to be on Avetta because it has the
most corporate clients. Avetta’s advantage gets stronger as it scales. Moreover,
Avetta has an opportunity to help suppliers do more than just manage compliance
information. As a result, Avetta sees growth in helping suppliers grow and
operate their business.
CCC is on the third generation of this approach. They started by
serving large auto insurance carriers and then extended into autobody repair shops
that serve the carriers. CCC is now in the process of expanding to parts
suppliers. By getting all the key constituents on its software platform, CCC is
able to leverage AI and automation to massively reduce friction and provide a
great customer experience across all steps of the auto insurance process.
opportunity is similar to the supplier opportunity in terms of “following the
money.” Companies can use integrated payroll or time & attendance offerings
to establish a relationship with the employee. Employees are also consumers who
represent significant B2C opportunities such as consumer lending, insurance,
etc. There are big dollars here, but perhaps less opportunity to build significant
consumer/demand opportunity is the white whale. We believe that SaaS companies
tend to capture ~ 50-100bps of GMV for software subscription, whereas online
demand channels can take 15-20% of GMV in categories such as hotels and
restaurants. In addition to the massive revenue opportunity, Consumer also represents a strategic
flank worth monitoring carefully. Online marketplaces have large competing
salesforces that engage with your merchant customers and have strategic
interests encroach on the software layer to try to control supply. Booking.com bought Buuteeq and Hotel Ninjas to
vertically integrate into hotel supply. Uber is rapidly expanding its driver
offering to over-draft protection, a debit card, and likely lending over time
to manage driver churn. This is another example of increasing marketplace + SaaS convergence.
derivative Consumer monetization
Consumer pay:FareHarbor approaches tour and activity
operators with a free to merchant, consumer pay model: “We’ll build your
website and booking engine for free, with no work on your part; you just pay us
for payment processing and the customer will pay us a booking fee.”
Channel management:SiteMinder offers
channel management to help hotels manage existing channels in real time. SiteMinder
has extended that value proposition to “Demand Plus,” an offering that helps
hotels easily expand into new channels to scale demand.
Existing customers: While 15-20% marketplace take rates may
be sensible for new customer acquisition/discovery, companies such as Olo are looking to move existing
customers to lower cost channels through their dispatch offering while taking a
much lower percentage of GMV.
Customer Co-opt: By seeing consumer data pass through
their systems, some SaaS vendors are building consumer profile databases that
they might monetize over time. In the recruiting market, we’ve seen players
leverage job distribution tools to build a candidate database. Shopify
similarly has built a large shopper profile database across all their
merchants. While Shopify hasn’t monetized directly, the uplift in conversion
rate is likely significant. This model is the most capital efficient but can create
conflicts with the vendor’s core merchant customers.
benefit of extending through the value chain is that it gives you a
beachhead and a right to win in a new vertical to start the “full potential”
growth cycle again. As you do this, it’s important to reconsider your end
market and focus. When Ariba transitioned from procurement software to supply
network, they started to represent a front office “system of record” for their
suppliers. In doing so, Ariba was both a large enterprise “procurement company”
and an SMB “supplier enablement company.” The question was: “Which priority
should dominate?” When extension leads to conflicts, there are no easy answers.
As such, it is important to acknowledge that this growth strategy is ever-evolving.
In winning the key control points,
for the same reason a single system of record has a lot of “gravity,”
you now have an even stronger opportunity to turn your product into a channel. This
enables entry into adjacencies with data, workflow, and account ownership
advantages for you as well as for the end customer. The most extreme example is the “platform/ecosystem”
play, where you monetize third party vendors that want access to the channel your
product has become (e.g. Salesforce, Intuit, Shopify). However, most commonly a SaaS
vendor will pursue additional monetization with in-house or white-labeled
consideration in prioritizing adjacent function/monetization is consistency
with your core go-to-market channel and proximity to key decision makers. Go-to-market
will determine the financial leverage of the cross-sell and often the overall
success. The core advantage of SMB software here is that often the
decision-making is relatively consistent and concentrated across software
vertical is different, but there are some common functionality/monetization
patterns emerging. Each of these patterns deserves its own write-up, but for the
sake of brevity here are some highlights:
“Integrated payments -> integrated banking”: The attachment of payments to SaaS has been well covered. That trend is expanding to the attachment of integrated banking. We had an opportunity to interview two of the smartest people in the business, Tim Barash and Jackie Reses. Square is out front here with broad based merchant and consumer plays. To understand the magnitude of the opportunity, Square’s Subscription & Services (most of which are financial services) are expected to reach $1.3B in 2020. This represents 23% of 2020 total GAAP revenue and 47% of 2020 Total Gross Profit (incremental gross profit is ~90%). Brex is earlier in its progression, but we’re excited to see how the company leverages its initial corporate card and expense management offerings to extend into broader financial services.
“Follow the workflow”: At times SaaS companies have
actually observed customers at work or mapped out the physical sites to
understand all the areas their workflow touches as areas of expansion.
“TAM shark”:HashiCorp CEO
David McJannet describes expansion as “TAM Shark,” constantly circling the
biggest, fastest growing (most change/opportunity) markets. He requires product
managers to report on market size and growth of all adjacent categories to make
sure they are focused on the biggest opportunities. Generally, over a 2-3 year
period companies have one, maybe two opportunities to build distinct add-on
businesses. Make sure you’re picking the biggest markets and therefore the
typical SaaS playbook is “Lead the Category” and “Hyperscale Locations,”
clearly the full potential for vertical SaaS players is dramatically larger
than conventional SaaS wisdom would suggest. We’re excited to work with — and
hopefully invest in —the frontier players as they explore the “Full Potential
If you found this useful, let us know, and we’ll continue to publish and explore the topic. We look forward to hearing your adds, edits, and challenges.
There’s a tension between aggregating as big a profit pool as quickly as possible vs. “winning the market.”
This framework is characterized as a sequential strategy. In reality, most companies are pursuing multiple steps concurrently, and the sequence is more a reflection of prioritization.
Time horizon: this approach is a long-term strategy to winning, which may often be at odds with short-term maximization of valuation multiple and financial performance.
This approach is informed by a U.S./western/mature approach. In emerging/more greenfield markets, less focus and value chain expansion earlier in company development may make sense.
views and opinions expressed are those of the authors and do not necessarily
reflect those of TCMI, Inc. or its affiliates (“TCV”). TCV has not
verified the accuracy of any statements by the authors and disclaims any
responsibility therefor. This blog post is not an offer to sell or the
solicitation of an offer to purchase an interest in any private fund managed or
sponsored by TCV or any of the securities of any company discussed. The
TCV portfolio companies identified above are not necessarily representative of
all TCV investments, and no assumption should be made that the investments
identified were or will be profitable. For a complete list of TCV investments,
please visit www.tcv.com/all-companies/. For additional
important disclaimers regarding this document, please see “Informational
 See TCV’s SMB and Vertical SaaS investments at the end of the document.
TCV is delighted to announce that Gopi Vaddi, a seasoned investor with broad international experience, has joined the firm as a General Partner. Founded in 1995, TCV has invested over $13 billion in more than 350 consumer and enterprise technology companies, including $2 billion in Europe, where Gopi will be focused. TCV investments in Europe include Believe, FlixMobility, Brillen.de, RELEX Solutions, RMS, Sitecore, Sportradar, Spotify, The Pracuj Group, and WorldRemit.
Gopi is an excellent fit with TCV’s long-term strategy and
focus of investing across geographies and domains, often far from major
technology and financial hubs. He was born and raised in India, took degrees in
business administration and electrical engineering in the U.S. and India, and
has experience investing in the U.S., Europe, and Asia. Most recently, he was a
partner at Providence Equity’s growth fund, where he worked on growth buyouts
and minority investments in software and payments. At TCV, Gopi will focus on
software and software-enabled businesses covering business applications, vertical
software, digital marketplaces, and infrastructure software.
“We take as much care in adding a new partner as we do in making a new investment,” said Jake Reynolds, General Partner at TCV. “Gopi’s success springs from the same qualities that have driven TCV for nearly a quarter-century: deep domain knowledge, keen market insight, and a passionate commitment to helping entrepreneurs achieve category leadership. He also complements the firm’s broad growth-biased investment approach with expertise in software buyouts and buy-and-build investing.”
Gopi understands TCV’s approach, just as we recognize the value he has brought to his investments, including a willingness to roll up his sleeves and work side by side with management. As a citizen of the world who started his career as an engineer and data modeler, he has an innate ability to identify and partner with the next generation of category leaders and the entrepreneurs steering them.
We are thrilled to welcome Gopi to the team.
The General Partners of TCV
companies identified above are not necessarily representative of all TCV
investments and no assumption should be made that the investments identified
were or will be profitable. For a complete list of TCV investments, please
visit www.tcv.com/portfolio-list/. For additional important disclaimers regarding this post,
From starting a football newsletter as a teenager that led to an internship with the NFL, to pioneering e-commerce at The Walt Disney Company and leading Fandango and Shopzilla.com as CEO, Chuck Davis has great stories and valuable lessons to share.
Chuck Davis is the CEO & Chairman of Prodege, an internet and media company that is dedicated to “creating rewarding moments” for its members by rewarding them with more than $700 million in cash and free gift cards since inception.
Hear more about Chuck’s journey on this video interview for tastytrade‘s “Bootstrapping in America” episode, hosted by Tom Sosnoff & Tony Battista.
Chuck Davis is a Venture Partner at TCV. Prodege and tastytrade are TCV portfolio companies. Fandango was a TCV portfolio company.
On the heels of the final rounds of the 50thUS Open Tennis Championship, TCV’s General Partner John Doran sat down with George Mulhern, former tennis pro and CEO of Cradlepoint to discuss lessons learned on and off the court. In addition to being CEO of Cradlepoint, a global leader in cloud solutions for 4G/5G-enabled networks, George has been instrumental in driving economic growth in the Northwest region as a venture capitalist. Throughout his 20+ year career, George has drawn on his experiences on the tennis court to succeed through the highs and lows of the ultra-competitive tech industry.
Key takeaways include:
How to develop a competitive mentality that keeps you focused
The right attitude for responding to adversity
Why the mindset of your company’s culture determines long-term success
John Doran: It’s not every day I get to talk with a fellow tennis player about what the game can teach tech founders and CEOs. How far did your tennis career take you?
George Mulhern: I went to college on a tennis scholarship and then played for a short time on the American Express Satellite tour, which is like the minor league of professional men’s tennis. That was far enough to know that I would have to make my living doing something else.
John Doran: What did tennis teach you about competing in the technology business?
George Mulhern: One of the most important competitive things you learn in tennis is to never give up when you are behind. You can turn around a match completely, like a major pivot in technology, if you keep your head and adjust your strategy and tactics. It truly is not over until it’s over. An equally valuable lesson, one you usually learn the hard way, is to never let up when you are ahead. If you lose momentum it is much tougher to get back on top, and you also give a big shot of confidence to your opponent. The same is true in business. You can never rest on your past successes. Every day is a new game and you have to approach it with the intention and intensity to win.
John Doran: Pro players often talk about knowing their competition and anticipating how a certain player will try to compete against them. Do you see parallels in your business life?
George Mulhern: My experience was that no matter how much you study your competition before a match, it is impossible to completely predict how they will behave. It is more important to have keen situational awareness, flexibility in your own game and the agility and willingness to rapidly adapt. Then you’re ready no matter what the opponent comes at you with.
John Doran: In tennis, top players often try to balance their strengths and stamina and stay in a match with a view to turning around the momentum. Has there ever been a time when you would conserve energy against an opponent in a long match?
George Mulhern: The context for those comments is that players today are achieving a level of conditioning that is unprecedented for tennis. They’re hitting harder and running more for every ball. So you can win a match by outlasting the other player, not just outplaying them. The same is true in technology. If you are investing enough time and effort into that level of conditioning, you don’t need to conserve your energy. Your competitor should run out of gas before you do. By conditioning I mean ensuring that you have, or are acquiring, the skills and capabilities your company needs to sustain success for as long as you stay in business.
John Doran: It’s often said that success in tennis is as much about the mental side of the game as it is about physical talent. In your world now, as CEO, having a strong mental game is fairly pivotal as well. How do you keep your mental game sharp in the tech business?
George Mulhern: There are all kinds of distractions when you are playing competitive tennis: fans, competitors, weather, injuries, illness, even the last shot you missed. You need the mental toughness to put all those things aside and focus on what is most important, which is the point you are playing right now. It is the same in the tech business. The distractions are different – there is always the latest shiny object grabbing at your attention – but the challenge is the same. You have to stay focused on the key value drivers of your business.
John Doran: On the WTA tour, I understand that coaching is now allowed during matches at certain times, giving the coach a potentially bigger influence on the outcome of a match. Can you share any feedback that you took from your tennis coaches over the years that you still use today?
George Mulhern: My college coach, whom I now think of more as “Yoda,” taught me it’s not about who has the best strokes or shots. It’s about a simple decision you have to make: (Yoda voice) “Winner, do you want to be?” If you do want to win, then the challenges of becoming a winner don’t feel like a sacrifice. They energize you. You are more than willing to put in the hours of practice and conditioning. You embrace the need to change something in your game if that’s necessary, and you summon the courage to fight until the last shot of the match even when you’re tired and it starts to feel hopeless.
John Doran: Applying the coaching metaphor to your business experience, what kind of performance feedback is most valuable?
George Mulhern: Direct and honest is the best. As you rise in an organization, more people will tell you how great you are. You have to find the folks that will tell you the things that aren’t so positive and nice to hear. As you move into higher levels of leadership you need to grow a thicker skin, but with some permeability so you can accept critical feedback and not over-personalize it. It’s just business. You use the feedback to improve and move on.
John Doran: One of the commonalties about this generation of top tennis players, especially in the men’s game, is the ability of the top players to continually improve and add to their games, allowing people such as Federer, Nadal, and Djokovic to stay on top for so long. In the business and technology world, how do you ensure you’re making the necessary improvements to your game to stay ahead of the competition?
George Mulhern: My first year of college tennis, it really hit home to me that I had to get better every day, because there are a whole bunch of other guys out there who certainly are. It is the same in technology. Every technology company’s culture has to instill a sense of urgency and willingness to embrace and adapt to change. Your existing competitors are striving to improve, new competitors are starting up, and they all want to take your market share. At Cradlepoint we say, “stay humble and hungry, or you will be.”
John Doran: Even the greatest tennis players of all time have lost big matches throughout their careers. What can business leaders learn from that? How do they recover?
George Mulhern: It’s one match. Learn from it, adapt where you need to, and get over it. People in your organization will take their cues from you and react the way you do, so don’t run around like your hair is on fire. Just go to work on finding the path to the next success.
John Doran: Did any of the great tennis players of the past inspire you in ways that affected your success in business?
George Mulhern: One of my life lessons came from a tennis idol of mine – Arthur Ashe. When he was asked what it takes to become a champion, he said “start where you are, use what you have, do what you can.” Whenever I am faced with what seems like an insurmountable challenge or problem, I remember that quote. If you just take that first step, the next step becomes clearer, and then so does the next.
John Doran: Thanks so much for your insights, George.