An HBS-style case presented to attendees at Hubspot's Inbound Conference

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Mattermark
A Harvard Business School-style
case discussion
Jeff Bussgang
General Partner, Flybridge Capital
Senior Lecturer, Harvard Business School

2. 1. Context for the story
2. The story
3. Three decisions that need to get made
4. Take aways

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

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• Day job: venture capitalist (Flybridge Capital)
• Former day job: entrepreneur (Upromise, Open Market)
• On the side: HBS professor
• Teach Launching Technology Ventures to MBAs
• Full disclosure: invested in Mattermark
• Full disclosure: didn’t invest in Hubspot (doh!)
Who Am I?

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• Educational innovation pioneered at HBS
• Present a challenge, constraints, incomplete information
• Put student in role of decision maker
• Analyze, debate, discuss, defend – no simple answers
• Usually: read beforehand, do some homework/analysis
• Today: make it up as we go along
Case Method

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2 The Mattermark Story

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Danielle Morrill
• Community college drop out
• Startup geek, hacker, blogger
• Ran marketing at Twilio
• Started Refer.ly, YC, shut down
• Pivoted to Mattermark: mid-’13

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Value Proposition: Data on Private Companies

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• Raised $2m seed round – June 2014
• Closed $6.5m series A – December 2014
• Board meeting with new investors: tomorrow!
“Nothing focuses the mind like a hanging .” – Samuel Johnson
The Dilemma
• Pour money into sales and marketing for VC market?
• Invest in product to expand beyond VC market?
$

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Sales team hitting quota
Sales cycles short
Product usage high, growing
40% test – if product disappeared
LTV : CAC > 3
MRR growing > 10% MoM
Churn < 30% / year
NPS > 20
Criteria for Product Market Fit

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$0
$20
$40
$60
$80
$100
$120
$140
 NPS (50) and usage high
 MRR growth ~ 10% MoM (founder selling)
x MRR growth = flat (new VP sales hired)
x LTV : CAC = ~ 1
x Gross churn = 50-60% / year
Mattermark’s Data
MRR

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An Example of LTV : CAC

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Net Promoter Score: Recommend to Others?

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NPS Example
Source: Satmetrix NPS Report 2014

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~ 500 Active VCs
x $20-30k/year willingness to pay
$10-15m / year market
x 30% market share
$3-5m/year
How Big Is VC Market?
Tiny!
Other Benefits?

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10x revenue
> $1B
Recurring
> 50%/year
< 20%/year
strong
2x revenue
< $100M
One-time
< 30%/year
> 30%/year
weak
How Valuable Is VC Market?
Market size
Business model
Growth rate
Churn
Network Effects

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• Founders had done all the selling – got to $1m ARR
• Then hired “grown up” VP Sales from industry
• He failed miserably – big company culture, didn’t dig in
• Now have 5 person sales team but no leader
BTW, Sales Leadership A Mess
• Hire a new VP from the outside?
• Promote from within (and keep founders selling)?
$

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Sales Leadership Considerations
Hire New Leader Promote From Within

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Sales Leadership Considerations
Hire New Leader
Bring a playbook
Provide exec leadership
Bring a team
Promote From Within
Playbook is unique
Positive signal to staff
Keeps founders selling

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• hire inside sales vs. outside sales?
• more reps vs. more marketing programs?
• invest in content marketing / inbound vs. outbound?
Invest in Sales or Marketing?
• Ramp up sales team?
• Ramp up marketing team?
$

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Sales Organization
Inside Sales
SMBs
ACV < $50k
Simple sale
Transactional/functional
Outside Sales
Fortune 1000
ACV > $50k
Complex sale
Emotional

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

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0
200
400
600
800
1000
Q3'14 Q4'14 Q1'15
SQLs
New Deals
Why aren’t leads converting?
• Analyze the funnel
• Training vs. Recruiting issue?
• Product vs. Sales execution?
• Timing of leads hand offs?
• Comp structure?
Leads vs. Deals

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3 Make Some Choices

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Expand in VC or
other markets?

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Hire new VP or
promote?

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Invest more in
sales or
marketing?

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4 Take Aways

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• Alignment of strategy  opportunity  financing
• PMF has to be tightly measured and constantly earned
• Sales & marketing alignment: results, activities, incentives
• Careful to avoid premature scaling
Take Aways

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