Over the weekend, Tobi, the founder and CEO of Shopify, discussed the major reason investors passed on Shopify in the early days : market size. Good supercut about why Shopify worked https://t.co/pw92KutpEn — tobi lutke (@tobi) April 14, 2024 I remember that financing round, & I remember having the same concern, & making the same mistake. Living in the valley & driving on 101, the billboards & logo-adorned headquarters of successful companies provide a daily infusion of all the mistakes in I’ve made in guessing how a company or a market might evolve. Years later, I listened as ..read more

Recently, I was at the library & stood in front of a book that might be a good read. I fired up Gemini, asked it for a plot summary & a digest of the reviews before deciding to read it. So I started a list : what are the ways I use AI that are new in the last year? I often publish tables within these blog posts. I write posts in markdown, a language that requires making tables in a unique format that looks like this | Column 1 | Column 2 | | 2021 | 140m | There’s a nifty little plugin for my text editor called Gen that converts data in nearly any format into these tables. I type comma ..read more

First Round’s Product Market Fit Framework adds dimension & texture to a concept we all use - Product Market Fit (PMF). PMF isn’t attained permanently, but sustained over time as companies & complexities grow. As they scale, startups move up-market, expand into new geographies, add new product lines, & develop new customer acquisition motions. These complexities are initially linear but eventually multiply. The idea is best illustrated by example. Looker is one of the companies highlighted ? & a portion of their journey is detailed here : (click to zoom) In the early days of t ..read more

On April 18th at 9:30am Pacific time, Office Hours will host Evan Cheng, founder & CEO of Mysten Labs, creator of SUI. Evan & the Mysten team were instrumental in the creation of Meta’s high-performance blockchain techology before leaving to start Mysten. There are few key ideas Mysten espouses about blockchains that have led to dramatic improvements in performance & usability. First, the Move language & virtual machine form the basis of the smart contract layer. Second, the use of DAGs (directed-acyclic graphs - a concept very common in the core data world) creates tremendous ..read more

Product managers & designers working with AI face a unique challenge: designing a delightful product experience that cannot fully be predicted. Traditionally, product development followed a linear path. A PM defines the problem, a designer draws the solution, and the software teams code the product. The outcome was largely predictable, and the user experience was consistent. However, with AI, the rules have changed. Non-deterministic ML models introduce uncertainty & chaotic behavior. The same question asked four times produces different outputs. Asking the same question in different w ..read more

Rubrik, a Palo Alto-based data security company, filed their S-1 yesterday. At $784m in ARR, growing 47% with 130% net revenue retention across 6100 customers, the company should be one of top 10 fastest growing software companies alongside Klaviyo, ZScaler, & Crowdstrike - in ARR terms. Half of new customers are over $100,000 in size & contract values have grown 19% from $101k to $120k in a year. 41% of new bookings derives from those new customers. But overall revenue is growing 4.5% y/y, estimated sales efficiency is 0.11, & contribution margins are negative : Rubrik sells $1 of ..read more

AI will transform software sales. Most of the discourse so far has focused on how AI upends the sellers’ worldview. But the buyers’ process will also evolve. When researching software, operational buyers & procurement teams alike will use AI to research different offerings. Typing “Compare Salesforce & Hubspot for a 10 person sales team. which is better?” into Gemini produces this result & most importantly, a recommendation : For a Hubspot or a Salesforce seller, a few ramifications resound from the new reality that most buyers will consult AI before speaking to a rep. First, mark ..read more

Selling software will evolve to selling agents, AI that acts on behalf of users. The efficiencies for rote work are too massive to ignore for many uses. As the technology rapidly evolves, so too will the sales strategies. Sellers & the startups they represent will need to re-imagine roles. In a sense, selling AI agents is analogous to category creation. About a decade ago, Nick Mehta & the Gainsight team created the customer success category. In 2014, I remember joining a panel at the Gainsight annual conference Pulse, then in its second year. The conference didn’t highlight Gainsight ..read more

Should software assist humans or act on their behalf? In 2016, the question was easy to answer : sell Ironman not Robocop. Technology hadn’t reached the level of sophistication we have attained today where AI is 90% as capable as a high-school student, the MMLU benchmark for AI is precisely this. The next generation of software startups have a strategic question with different terminology & potentially a different conclusion. To be or not to be an agent, acting on behalf of workers? Copilots, like Github’s, complete their humans’ sentences in code, an AI pair programmer. Copilots have prov ..read more

Will AI sofware companies operate with better or worse profitability than a classic SaaS company? Initially, I thought worse since the expense of serving AI as a product is signficantly higher. But now I’m not so sure. AI SaaS may be much more profitable than the -10% average net income margins of the current crop of public businesses. Yes, AI inflates the cost to serve the product. Google queries may be 10x more expensive than standard search results. That’s an unfair comparison since Google has focused on classic query cost optimization for more than 20 years. But let’s disregard that. AI is ..read more