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.”
Brands like Airbnb and Peloton that have been able to build a loyal community around their products, may seem to have cultivated that community size through an alchemical mix of marketing spend, timing, and luck. But it doesn’t have to be so opaque — especially not for businesses that make community building an essential part of their blueprint to growth, even from the early days.
In this episode of Growth Hacks, Kunal and Katja talk to Jonathan Mildenhall, former CMO of Airbnb and founder and Chairman of strategic branding firm, TwentyFirstCenturyBrand, about ways to articulate the narrative of a modern brand – with community building as a key element. Jonathan walks us through a four-pillar process for creating strategic blueprints to build brand narrative, and tips for B2B brands to elicit the sort of emotional resonance that B2C brands have found with customers.
The four pillars of a modern 21st century brand that’s built to scale. Community isn’t just something that comes once a brand has been built. In fact, having a vocal, loyal community is one of the four core pillars of building a modern-day company. In addition to community building, the other three pillars for twenty-first century brands are being purpose driven, making sure your technology is well-designed and human, and focusing on storytelling.
How to perform a deep analysis on your own company and create a strategic blueprint to activate on each pillar. One of the first things Jonathan and his team at TwentyFirstCenturyBrand do when building out a new brand is to sit down with the founders and leaders of the company to do what they call a deep extraction. The purpose is to get a better understanding of the brand’s potential size and aspirations. “I don’t just mean in total numbers and size of revenue, but in terms of its cultural impact. We like to say we’re revealing the soul and purpose of the company back to the founding team,” Jonathan says.
Specific strategies on building a community that can meaningfully drive growth and brand perception. When Jonathan was the CMO of Airbnb, they had to get creative about how to use their marketing spend, which was a fraction of their competitors’ budgets. Jonathan’s team decided to activate Airbnb’s community of hosts to tell stories, by providing them photographers to take photos of their rentals and turn that into marketing collateral. Those community stories helped drive Airbnb’s initial brand narrative and turned those same hosts into vocal advocates for Airbnb with cities and potential users. Per Jonathan, “if you get community right, you can reduce acquisition costs, content creation costs, and you can drive referrals, word of mouth, and the brand narrative in ways that are unprecedented for marketers.”
Why strategic community building has to come from the C-suite. Community building is an ongoing process and a two-way conversation; not just when a brand needs the community to telegraph its approval. It’s why Jonathan believes that community engagement should come from company leadership, who can maintain that dialog with followers of the brand and the wider community: “The chief executive’s voice and presence needs to be heard.”
Lessons B2B marketers can take from B2C campaigns when it comes to eliciting an emotional connection. Whether you’re a B2B company or a B2C company, Jonathan urges marketing teams to think about more than selling a product, and instead focus on the human being receiving the message, and whether that message moves them emotionally. His advice for B2B marketers? “I would love it if B2B businesses made a greater effort to move audiences emotionally and treat them as human beings, as opposed to somebody on the other side of a business transaction,” says Jonathan.
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.
MENLO PARK, CA, January 27, 2021 – We are excited to announce the closing of TCV XI, our largest fund to date at $4 billion. With the new fund, we strive to accelerate TCV’s strong momentum and capture the vast opportunities presented by digital transformation and rapid technology adoption. This will continue our long history of partnering with exceptional founders and CEOs to build iconic technology franchises redefining their industries.
TCV turned 25 in 2020. Since 1995, we have invested more than $14 billion in over 350 growth stage technology companies. We lived up to our middle name, “crossover”, by supporting our portfolio companies throughout their entire lifecycle as private and public companies.
Over a quarter century, Netflix has gone from an outrageous idea to one of the world’s leading entertainment companies — and TCV has supported us every step of the way. I’m so grateful for the enduring partnership, which includes Jay Hoag’s wisdom and guidance as our lead independent director.”
Reed Hastings, Co-Founder and Co-CEO, Netflix Inc.
The pandemic accelerated innovation in many of TCV’s key areas of sector specialization, including SaaS, edtech, remote collaboration, fitness, media/entertainment, touchless commerce, and digital banking. In 2020 we made big bets in companies aligned with secular technology trends across fintech (Klarna, Mambu, Mollie, Revolut, Wealthsimple), digital health and fitness (Strava), e-commerce enablement (Spryker) and SaaS (OneTrust, Oversight, Redis Labs).
We specifically sought out TCV in our last private fundraise. They are the best late-stage growth capital partner and have proven this discernibly and tangibly to us while we were private, while they increased their stake via a large IPO purchase, and on an ongoing basis. Their knowledge of and experience with digital media, global technology platforms and subscription businesses, stemming from their long-term involvement with leading franchises such as Netflix, Spotify, Dollar Shave Club, and many more continues to help us in immeasurable ways as we push to become the global digital fitness winner.”
John Foley, Founder and CEO of Peloton
Our experience enabled us to decisively guide our portfolio companies through a historic year of uncertainty and opportunity and help them grow and thrive. In spite of unprecedented global challenges, TCV’s portfolio enjoyed IPOs and was proactively sought after by strategic acquirers. Airbnb went public, and the sales of AxiomSL, Genesys, Cradlepoint, and Silver Peak represented major liquidity events.
We embark upon TCV XI with over 100 people across offices in Silicon Valley, New York, and London. Through several strategic hires, we deepened our domain expertise in addition to making investments in the technology hubs of Europe, Asia-Pacific, and Latin America. TCV’s investments beyond North America today exceed $4 billion.
Looking ahead, we continue to help our companies reach the mountain top, knowing that the path will never be a straight line. We remain dedicated to supporting management teams on their journey to become market leaders that provide their customers with a tremendous value proposition.
We are humbled by the ongoing support of new and returning investors, which enabled us to raise a record sized fund. Just as importantly, we are honored by all the great entrepreneurs we have worked with over the past 25 years, as their vision and relentless execution has been our foundation. We look forward to backing entrepreneurs with our new fund that we believe will become the next generation of iconic companies, in this incredibly fertile technology industry.
Jay Hoag, a Founding General Partner at TCV
We are excited about the year ahead and the decades to follow.
The General Partners of TCV
January 07, 2021 — BERLIN, MIAMI & SINGAPORE–(BUSINESS WIRE)–Mambu, the market-leading SaaS banking platform, today announced its latest funding round of €110 million ($134 million USD) in new capital. This round was led by TCV, whose investments include Netflix, RELEX, Spotify, and WorldRemit. Additional investment was received by Tiger Global and Arena Holdings, as well as existing investors Bessemer Venture Partners, Runa Capital and Acton Capital Partners. The new round brings the company’s valuation to over €1.7 billion.
With this new round of financing, Mambu will continue to accelerate its rapid growth and deepen its footprint in the more than 50 countries in which it already operates and focus on markets like Brazil, Japan, and the United States. This announcement follows another year of approximately 100% YoY growth for Mambu in a banking software market which Gartner currently values at over $100 billion and is forecasting to grow at double-digits. FT Partners was the exclusive financial advisor on this transaction.
Mambu’s SaaS banking platform sets it apart from traditional core banking players as it drastically accelerates and simplifies the way financial products are built and serviced by any financial institution. Mambu’s platform is used by traditional banks, fintech startups, financial institutions, nonprofits and other businesses to power their financial products and services. Counting the likes of ABN AMRO, N26, OakNorth, Orange and Santander among its customer base, Mambu is powering both the building of new fintechs as well as the migration of existing financial institutions onto a tech stack fit for the fintech era. Mambu is continuing to expand both the breadth and depth of its platform and is planning to double the team to over 1000 Mambuvians by 2022.
Eugene Danilkis, founder and CEO of Mambu said: “When Mambu launched in 2011, we knew the future of banking would have to be built on agile and flexible technology. Nearly a decade later, this is more true now than ever, particularly given developments over the past year. As an increasing number of challenger and established banks sign on to prepare themselves to thrive in the fintech era, we have, and will continue to provide them with a world-class platform on which to build modern, agile customer-centric businesses.
“This latest funding round allows us to accelerate our mission to make banking better for a billion people around the world and address one of the largest, most complex global market opportunities that’s still in the infancy of cloud,” he said.
TCV General Partner,John Doran who joins the Mambu board, said: “Mambu was one of the first companies to leverage the opportunity to move banking software into the cloud. The team has built a highly composable, truly cloud-native product in a multi-billion dollar, rapidly-growing market traditionally dominated by large, slow-moving on-prem vendors. We have been following Mambu’s progress for many years and are truly delighted to be able to partner with Eugene and the entire Mambu team on their journey to expand their offerings to customers worldwide.”
Mambu is the SaaS banking platform that is changing financial services. This rapidly growing company was launched in 2011 and is enabling customers to build modern banking and lending offerings fast, securely and simply. Through its composable banking approach, the platform gives customers the ability to design and service nearly any financial product while rapidly integrating to the best-of-service ecosystem of complementary solutions around the world. Mambu has a global network of nearly 500 employees supports 160 customers in over 50 countries. It counts N26, OakNorth, ABN AMRO and Santander amongst its extensive list of customers. For more information, please visit our website or connect with us on Twitter, LinkedIn, YouTube and Facebook.
Founded in 1995, TCV provides capital to growth-stage private and public companies in the technology industry. Since its inception, TCV has invested over $14 billion in leading technology companies, including more than $2.5 billion in fintech, and has helped guide CEOs through more than 125 IPOs and strategic acquisitions.
TCV’s investments include Airbnb, AxiomSL, Dollar Shave Club, ExactTarget, Expedia, Facebook, LinkedIn, Netflix, Nubank, Payoneer, Splunk, Spotify, WorldRemit, and Zillow. In Europe, TCV has invested over $2 billion in companies including Believe Digital, Brillen.de, Perfecto, FlixMobility, Klarna, Mollie, OneTrust, RELEX Solutions, Revolut, RMS, Sportradar, Spryker, The Pracuj Group, and WorldRemit. TCV is headquartered in Menlo Park, California, with offices in New York and London. For more information about TCV, including a complete list of TCV investments, visit https://www.tcv.com/
Jay Hoag, TCV founding general partner of TCV and board member for several firms, joins CNBC’s ‘Squawk Alley’ to discuss Disney’s reorganization strategy as it shifts its focus to streaming, the state of media and entertainment, and the tech trends he’s seeing during Covid-19.
Keeping our team members safe and helping our companies navigate COVID-19 and prepare for the rebound has been our main focus at TCV. Our Portfolio Operations group, along with our Investment, Legal, Marketing and Capital Markets teams, are providing a surge of support for our companies. The takeaways of these efforts are the main themes of this newsletter. We hope that you will find nuggets you can apply in your business, in areas such as talent, sales and marketing, systems and technology, and more.
Revolut raises $500
million in Series D funding, valuing the business at $5.5 billion, making Revolut
one of the highest valued fintech companies in the world
The round was led by
US-based investor TCV, with a number of existing investors also participating
in the round
Revolut will use the
capital to further strengthen product development in existing markets, roll-out
banking operations in Europe and increase daily engagement
LONDON, 25 February 2020 — Revolut, the global financial platform with over 10 million customers worldwide, has today raised an additional $500 million in Series D funding, taking the total amount raised by the company to $836 million.
funding round was led by US-based growth capital firm TCV, with a number of
existing investors also participating. The latest funding round values the
business at $5.5 billion, making Revolut one of the highest valued fintech
companies in the world.
capital was secured on the back of high customer demand and engagement and a
strong financial performance last year. In 2019, Revolut increased customer
growth by 169%, the number of daily active customers by 380%, and saw financial
revenues in 2018 grow by 354%.
capital will be focused on the customer experience and used to strengthen
Revolut’s core retail and business offering in existing markets, with a
particular focus on product development that will help accelerate daily usage
of accounts. Future plans include lending services for retail and business
customers, extending high interest savings accounts beyond the UK, further
improving customer service and rolling out banking operations across
also focus on further developing its Premium and Metal subscription accounts,
which have proven to be a successful revenue stream for the business, growing
by 154% last year. Revolut’s Premium and Metal accounts include a variety of
benefits for customers, such as unlimited foreign exchange, airport lounge
access, commission-free stock trading and travel insurance.
continue to invest in expanding its workforce across multiple locations. The
company now employs over 2,000 people, and last year made a number of senior
appointments across the business in order to scale up its governance. Last
year, Revolut appointed Martin Gilbert, the former Co-Chief Executive of
Standard Life Aberdeen, as Chairman of the Board. Caroline Britton, a former
Audit Partner at Deloitte, and Bruce Wallace, the former Chief Operations
Officer at Silicon Valley Bank, were both appointed as Non-Executive
on the new investment, Nik Storonsky, Founder & CEO at Revolut said: “We’re
on a mission to build a global financial platform – a single app where our
customers can manage all of their daily finances, and this investment
demonstrates investor confidence in our business model. Going forward, our
focus is on rolling-out banking operations in Europe, increasing the number of
people who use Revolut as their daily account, and striving towards
profitability. TCV has a long history of backing founders who are changing
their industries on a global scale, so we are excited to partner with them as
we prepare for the next stage of our journey.”
on the investment, John Doran, General Partner at TCV said: “We are delighted
to partner with Nik, Vlad and the entire Revolut team. Using a modern
technology stack and with a relentless focus on delighting customers, Revolut
has built a truly exceptional customer experience that is exceeding anything
that existing banks can offer. We look forward to supporting the team on their
journey to build Revolut into one of the biggest financial services companies
in the world.”
on the investment, John Glen MP, the UK Economic Secretary and City Minister
said: “It is clear that the UK fintech sector continues to thrive, and
Revolut’s announcement, which comes on the back of record-breaking fintech
venture capital investment in 2019, is a clear indicator of our strength as a
place for fintech business as we leave the EU.”
— END —
here to transform the way money works. As an innovative, new kind of
financial platform, it gives people the power to spend, invest and transfer
money without the sky-high fees charged by the big banks.
launching in 2015 in the UK, Revolut has expanded significantly beyond its
origins as an FX product, adding new features all the time, including
Commission-Free Stock Trading, Cryptocurrencies, Business Accounts and
in London, with 2,000 people in 23 offices, Revolut is now one of the biggest
Fintech communities in the world, with over 10 million customers globally.
Since launch, Revolut has processed over 1bn transactions worth over $130bn.
Revolut Press Contact Chad West, Director, Global Communications firstname.lastname@example.org l +447860651737
1995, TCV provides capital to growth-stage private and public companies in the
technology industry. Since its inception, TCV has invested over $13 billion in
leading technology companies, including more than $1.5 billion in fintech, and
has helped guide CEOs through more than 120 IPOs and strategic acquisitions.
investments include Airbnb, AxiomSL, Dollar Shave Club, ExactTarget, Expedia,
Facebook, LinkedIn, Netflix, Nubank, Payoneer, Splunk, Spotify, Toast,
WorldRemit, Xero, and Zillow. In Europe, TCV has invested $2 billion in
companies including Believe Digital, Brillen.de,
Perfecto, FlixMobility, RELEX Solutions, RMS, Sportradar, The Pracuj Group, and
WorldRemit. TCV is headquartered in Menlo Park, California, with offices in New
York and London. For more information about TCV, including a complete list of
TCV investments, visit https://www.tcv.com/.
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.
I hope to write about these supporting pieces over time, but I wanted to start
with strategy first.
think 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.
of the SaaS strategy is well understood so I won’t spend much time on it. 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
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 my 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.
I also like
to think about the concept of “gravity”:
gravity – the system that all other systems integrate to – it’swhere 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.
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.
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. I 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 me know, and we’ll continue to publish and explore the topic. I
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.