We know that funding is critical for the life of a startup, and founders can opt to bootstrap or raise capital from VCs. Many do both as we saw in Episode 8, when I interviewed Melody McCloskey.
Then in Episode 9, I spoke to Shruti Gandhi, the founding and managing partner at Array VC, a fund that invests in early stage startups. Shruti shared with us the different ways investors can help a company grow, plus tips for dealing with different types of investors, and how to dig into an investor’s thesis to see if they’re the right fit for you.
In today’s episode, we’re going to expand beyond the mechanics of funding, and learn about a startup that’s helping investors and founders learn all they can to make decisions when it comes to investing. Danielle Morrill is the CEO and co-founder of Mattermark, a data platform that keeps track of startups and their growth signals.
Danielle began her startup career working with Pelago, then went on to become the first employee at Twilio, and now she’s launched Mattermark.
Her goal is to make Mattermark the go-to source for information about startups and their investment potential. Think of it as Bloomberg for private companies.
In this episode, you’ll learn:
It was also fascinating to hear Danielle’s thoughts on the future of public companies and how she believes it’s more important than ever for investors and start-up founders to be as knowledgeable as possible. I’m interested to see how the Growth Score develops, too. How about you?
Share your thoughts and questions about today’s episode in the comments below.
Please subscribe to the FemgineerTV YouTube channel so you’ll be the first to know when our new episode launches. In December, Sandi MacPherson will share with us how she went from being a climate change scientist to the founder of Quibb. Her story will inspire you.
Poornima Vijayashanker: Welcome to the 10th episode of Femgineer TV, brought to you Pivotal Tracker. I’m your host, Poornima Vijayashanker, the founder of Femgineer. Femgineer is an education company where we teach innovators how to build software products so they can find freedom in their careers and reach other people’s lives and make the tech community a lot more inclusive and flexible.
When you’re in a startup, your head is in the weeds, you’re developing a product and untangling all sorts of operational issues. So it can be hard to look at the big picture and think about how your company is doing from a momentum, traffic, and investment angle. But all these things are important criteria to think about, whether you decide that you want to bootstrap your business or take funding now versus later. To help us identify what the major trends are that we need to keep track of, I’ve invited Danielle Morrill, the CEO and co-founder of Mattermark.
Mattermark launched in 2013 as a data platform for VCs. Their goal is to become the go-to platform for tracking startup growth and identifying startups that are lucrative. Hi Danielle, thanks for joining us today.
Danielle Morrill: Thank you for having me.
Poornima Vijayashanker: We go way back to probably before either one of us were in startups, but for our viewers out there, why don’t you tell us how you got lured into startup land.
Danielle Morrill: I was working in Seattle, I was working for a Fortune 500 shipping company and some friends of mine left Amazon to start a startup and I didn’t really know what that meant. I remember getting sent a link to a TechCrunch article about them, and that being my exploration of what is this whole world that the are a part of? Where I was, they were building really old school technology for shipping, pretty old school industry, and the startup was building tools for mobile, this was before there was even an iPhone app store. So it just made me very curious, what is this thing they’re doing?
Poornima Vijayashanker: So it was your first startup. Was it up in Seattle?
Danielle Morrill: It was up in Seattle, so I actually ended up joining that company about a year later and working with them for about up to 18 months or so, kind of right up before the economic crash in 2008. It was a company called Pelago, built kind of a precursor to Foursquare, so it was an app where you could check in the locations and share your locations with friends.
Poornima Vijayashanker: Nice,and then what brought you down to the Bay Area?
Danielle Morrill: Obviously, I mentioned the economy really tanked and for a while I thought I was going to start a company, but it was pretty scary to start a company at that time. I did start one and then pretty quickly met CEO of Twilio, Jeff Lawson, and he needed someone just on contract to help them with managing their developer community and I was just thrilled to have a job at that time.
I started working with them and he was actually living in Seattle. But pretty quickly we realized it was going to make a lot more sense to be in the Bay Area for a number of reasons and definitely our customers are here. So moved down in early 2009, so six years ago and was with that company for three and a half years.
Poornima Vijayashanker: And what was your role, like your official role at Twilio?
Danielle Morrill: It’s funny, we gave me a title: Director of Marketing. I had joined the company when I was I think 22 or 23 years old, so pretty young to be a director, but it was helpful to have a title that would open doors. I had wore a lot of hats, kind of community manager, built the support team, pretty much everything, not writing product itself, that just extended the time where the founders and that early team could really stay focused on code, so I tried to handle a lot of the business stuff. Ultimately around customer acquisition, I acquired the first 100,000 developers on that platform.
Poornima Vijayashanker: That’s awesome, and you were one of the first or the first employee there.
Danielle Morrill: Yes.
Poornima Vijayashanker: What are some critical insights or experiences that you got while you were there that you think have now helped you as a startup CEO?
Danielle Morrill: Well, I think just knowing that things are going to be crazy and kind of having tolerance for that, realizing everything is kind of broken from a business process perspective because the things that work when you’re five people don’t work when you’re 15, and then again at 50 and so on. And I was at Twilio from…the three co-founders and then myself and then up until maybe 150 people when I left. So we’re scaling through that same period right now and it gives me some sense like this is normal, the messiness of it is how it’s supposed to be, unavoidable.
Poornima Vijayashanker: Nice. So it keeps you kind of even keel and you know that these things are going to happen and you’re not surprised by any of it.
Danielle Morrill: I was surprised the first time round, especially not being the founder too, I didn’t have a lot of control. I felt like, “Oh my gosh, things are constantly breaking,” like, coming out of bigger companies, I wondered if that was a sign that we were really messed up. But now I know that’s just pretty typical.
Poornima Vijayashanker: It’s the normal.
Danielle Morrill: Yeah.
Poornima Vijayashanker: Let’s talk about your new startup, Mattermark. What inspired you to start it?
Danielle Morrill: We’ve been working at a previous company that we shut down. After we shut it down, we didn’t know what we would do next, but one of the things we were concerned about was we got pretty burned out, working on something we ultimately didn’t care about. We reflected a bit on various projects we’d done just for fun, hoping we could find some connection between those and building a good business. One that really stuck out to me was, up in Seattle I helped publish something called Seattle 2.0, it was kind of like TechCrunch but just for the Seattle ecosystem. And one of the pieces of it was something called the Startup Index.
It had just been local startups but it would really make people angry and I think that’s a really interesting signal when people are mad about something. It’s like, there’s something important there that they value that’s like being threatened.
Poornima Vijayashanker: Why were they angry about that?
Danielle Morrill: And they would be angry because they would debate the ranking, it was like, this thing’s about this company or you know…and it would create controversy. I think also in the Seattle startup culture, that was really awesome because it was sort of a passive culture so they’d get people having that discussion about who was doing well. So I thought well, what if we did it from the Bay Area, that was one argument but this would be whole another level of conversation.
So had in mind, also just generally feel like there’s a big opportunity right now to build better press coverage of technology companies and I think there’s a lot of room left for people to innovate on that. So we started out thinking media company, pretty quickly as we started to compile the data to generate that index and also to help us scoop stories, realizing that that data was super valuable as well.
We were talking to our investors and getting feedback from them and they pretty quickly asked, “Can we just access the raw data? We want to do things with it.” So that led us down this other path, of figuring out what is it they want to do with it and is that something that we could be selling.
Poornima Vijayashanker: I know it’s been mentioned like a Bloomberg for private companies, maybe you can talk about why that’s unique. What’s going on in the private company or startup ecosystem that you need this kind of information?
Danielle Morrill: I think one important piece of context to set is, most companies are private. So like 99.9% of companies are private and I think that there’s this weird mythology we bought into that the only companies that matter are the ones that you see on like Fox News or they’re listed, they’ve got tickers. But it’s weird to not see our own jobs represented in those places and it’s pretty crazy people spend so much of their waking life working and then there’s still over representation of that part of life in the media.
So we feel that there’s just a huge gap not just in terms of traction but in terms of deeper understanding of how wealth gets created in the world and private companies are private. So they don’t share as much information, they’re harder to research, they’re harder to comp. Gartner and Forrester the analyst firms don’t necessarily cover them unless they are on public company track.
The opportunities to build the tool where you could look up those companies as easily as you do public companies and get a rich set of information, everything from who works there—which you kind of can get at LinkedIn but LinkedIn is really a subset. How much money has the company raised? You can kind of get that from CrunchBase, that’s kind of a subset of information. News, you can kind of get that from Google, but that’s also kind of a subset.
So it’s like all this work you have to do, and when you start to go down that path, you realize some human being has been tasked with manually putting this together and that’s just not a great use to a smart person’s time, they want to do the analysis not the collection.
Poornima Vijayashanker: So who uses your product today?
Danielle Morrill: So, it’s about half investors. When we started out, we were very focused on investors. It’s also used pretty heavily by salespeople. Really any kind of dealmaker who needs a qualified pipeline and make sure they’re not wasting time on deals that they cannot close, can value from Mattermark. So a lot of mid-market sales reps who can’t get information on kind of those mid-sized private companies and we track a lot of those.
We track over a million companies, only I’d say 60, maybe 70,000 of those have funding information, so there’s a whole universe of other companies that are really valuable. They might be bootstrapped, they might be legacy, they were bootstrapped and now they are established companies.
Poornima Vijayashanker: And the data that you’re pulling, because you’re pulling in a lot of data. What are some of the sources that you’re pulling from and what do you do with that?
Danielle Morrill: Fortunately and unfortunately the public internet is awesome. It’s fortunate because lots of data is out there, it’s unfortunate because it’s unstructured. So we spend a lot of time structuring content into data, I guess that’s the easiest way to think of it. So news, regulatory fillngs, there are licenses of old databases out there. You’ve got sites like AngelList and CrunchBase which we kind of started with but only really talks about the venture backed part of the universe.
Then we do a lot of direct submission now with companies where they’re bringing us information that we want, so we integrate things like Google Analytics and iTunes directly into Mattermark so companies can verify those parts of their profile. We collect funding information and valuation data directly from both founders and investor. So all of that together gives you this holistic view of what’s going on inside these companies. It’s a pretty massive effort.
Poornima Vijayashanker: I know you have a feature that’s kind of like page rank for companies, I think it’s called your growth score, maybe you can tell us a little bit about that.
Danielle Morrill: When we were first getting started building Mattemark, we had this UI challenge. We have basically a grid or a spreadsheet view when you log in and the question is, what are the first 10 or 20 companies that you should see? Just like what are the first 10 or the 20 results you should see if you do a search in Google. And we tried all these default sorts, maybe they should be alphabetical—no that gets you garbage in the A section. Or maybe they should be by the total funding—well then you just get the usual suspects at the top. And no single sort was really good, I don’t think that’s shocking in retrospect.
We started thinking we need a mix of these things and we need to understand, how do we show you a combination of stuff you recognize so that you’ll trust us and then a sprinkling of things that are new, you’ve never seen among those things you recognize, so that you’ll feel you’re constantly discovering things that are new. So the growth score is how the ranking works and it’s based on the relative rate of change of a bunch of different signals. Primarily web traffic, mobile downloads, social media, employee count. We’ve actually broken out a separate score from mind share versus growth. Because it is a more holistic thing that includes things like employees and funding, but mind share is more than just about how much attention are you getting on the internet.
It’s been very valuable especially over time because we at first just thought this is a UI solution, and now we think it might be potentially like a back test raw index or a long-term way of looking at companies. And we’re still perfecting it, just like page rank is actually much more than page rank today, we’re continuing that with that algorithm.
Poornima Vijayashanker: How has that changed since its initial inception?
Danielle Morrill: It changes in both depth and breadth. So depth, we just have more historical data so you can build out an algorithm that considers more around like time cycles and then breadth has more to do with just additional data points that can be fed into it and figuring out the proper waiting for those and how they move relative to each other. So we used to have a pretty straightforward formula and just like page rank, I think it used to be just how many credible links, it’s gotten a little more complicated now. And as it gets more complicated and we get bigger, people are actually trying to game it now, it’s pretty interesting.
Poornima Vijayashanker: I was going to ask have you had any, like, people contest or companies want to get the inside scoop or try to game it?
Danielle Morrill: People try to ask us, the good news is it’s so complicated that no salesperson could explain it if they wanted to and there’s no harm in helping people think about the signals. If you could make this score go up, if you could game it, you probably actually have a successful company. Because it’s very hard to game things over time, it’s very easy to do short-term hacks, it’s very hard to be a consistent hacker of these types of metrics. If you’re consistently hacking them, you’re probably actually doing something good for your company.
It’s pretty tough to game, but we do have people sometimes say we don’t want to be listed and it’s like, well then I guess you shouldn’t have a website because that’s like, you don’t want to be listed in Google either, but that’s not the way it works.
Poornima Vijayashanker: So it’s mainly to help them with discovery and keep them top of mind. You also have an index called the Startup Index, similar to what you had in Seattle. Tell me a little bit about that.
Danielle Morrill: So we kind of published different selective lists now still built around the growth score and we kind of have a top 500. I’m not really ready to say it’s the canonical 500 like the S&P 500, but we want to begin to approach some set of companies that we can look at as a bellwether for the overall market. It’s pretty hard to talk about the data set as a whole, it’s very hard for people to hold that in their minds. So getting to 500 companies with names you recognize helps people set contacts for stage in an industry. Similar to how you have a set of comps in the S&P 500.
So we continue to publish the way that those companies are doing over time to help the public understand how things are changing. Eventually we’d like that to be more like a real-time ticker, but right now we’re publishing on monthly basis.
Poornima Vijayashanker: And since these are private companies, they’re not releasing earning reports—do you have any way of getting a sense of what their revenue is and is that all important or, how do you go about it?
Danielle Morrill: We definitely don’t have a direct set of information on that, one of the things we can usually do is figure out more around the spending side of the equation with the amount of employees that they have. You can also factor in when they last raised money, so if a company has a lot of employees that continues to grow but is like not taking money in three years, that is getting funded somehow. In a long term down the road, maybe we’ll do some more estimation work there, but there are enough inputs where our customers can build models that can figure that stuff out.
A lot of these things for our customers if they need that information, they don’t need it until they are far enough along in their relationship where they can ask for it and just get it directly. So our product is very focused on how would you assess if you wanted to talk to the company in the first place. Good investors, “I don’t need to know revenue to start the conversation, I need to know revenue to discontinue the conversation.” And I think at that they’re on their own.
Poornima Vijayashanker: Aside from investors and salespeople, how do startups use your product?
Danielle Morrill: It’s a number of ways. One is to research investors, someone they’re thinking about fundraising, we have an investor’s view of they could say, “Show me all the investors in Boston who have raised a new fund in the past three years.” Maybe you’re raising a series B so you need a larger check, maybe you want to say, “Show me investors that do Bs and their fund is at least $200 million.” You can ask that kind of granular question and get back a list, which is awesome because founders spend a ton of time compiling that.
And another big piece is around market comps, so figuring out who else in my space raised recently from what investors and what terms and also who are my competitors and how do I make sure I’m not going on and pitching to a VC who has just backed my competitor. Just general market intelligence and I think one way or another, founders do get that information, but right now I think it’s a lot more reading, it’s a lot more going through news articles and blog posts. I actually think there’s value in doing that, too, but some of the stuff like making a list of investors, that’s not really where the value is, the value is in having those first conversations with those investors and I think that people can get to that a lot faster with using us.
Poornima Vijayashanker: Definitely. Yeah, I have a lot of startups and I advise that basically use virtual systems to figure out investors in their niche and then figuring out if they’re active, when the last investment was. So I’m going to tell them about Mattermark and it helps save time for them.
Danielle Morrill: It’s kind of like one of the things that I find really sad, or one of the things that I really want to fix, is that each one of those VAs basically builds a spreadsheet and it’s like how many times has the same spreadsheet and built all over again. So we’re kind of like this dynamic canonical spreadsheet that you don’t have to keep building again and again.
Poornima Vijayashanker: And for companies that might be bootstrapping or they don’t necessarily care about investment right now, I assume that looking up the competition and just keeping up with those trends is important, but are there other areas they can benefit?
Danielle Morrill: I think with market research it’s a little harder. I don’t generally see bootstrapped companies spending much money on that, which I think is fine. I think that if they are in a market where they get pretty good revenue per customer they can use us to research and identify very targeted prospect lists, so we do see that a lot, so we’re really popular with sales development teams. And bootstrapped company, often those companies are a bit smaller, often the founders are still doing that work, and so it’s just an issue of if you’ve got the CEO or someone running the biz dev team that’s identifying those targets, their time is at a premium in a bootstrapped company.
So we can definitely be very helpful to them. We have special pricing for startups, too, so it’s really not that expensive, it’s about $100 a month to use Mattermark. We love working with bootstrapped companies, we think that we can actually help them the most because they are built most outside of the echo chamber of startup information so they don’t always know about their comps or they don’t always know about these—startups can be their customer.
Poornima Vijayashanker: Given that your customers are investors as well as these sales development folks, let’s talk about the investors. How has their behavior changed since using a product like Mattermark?
Danielle Morrill: When we started out about two years ago, there was a very new idea that you would use data to invest. So there’s definitely an attitude of venture investing being an art, being craft, and I would never say it’s not in the sense that human relationships are so nuanced—of course there’s an art to that. But a lot of the work is done before the relationships, a lot of that research the associates in particular do, is not an art—it is a science.
Outside of startup investors, a lot of this process is really codified, so what we’ve seen is we’ve seen people hiring teams that have a much higher level of rigor. We’ve seen them hire software engineers to work inside of their companies, so that the bigger firms are hiring their own dedicated engineering team. We’re just seeing a lot more curiosity around data and I think that’s a great place to start. I don’t necessarily think there are that many investors who’ve really built a unique angle off data yet, although I think there’s an aspiration for that but I think it’s more just the subtle shift of, maybe I could answer that question with data and then letting that be in the toolkit every time that question comes up.
I think in two years that’s a pretty good cultural shift to see, and then I think there are a handful of firms, many of them below the radar, that are really building an entire thesis around data and that’s also something we’re going to see more of.
Poornima Vijayashanker: VC firms, and you think they’re happening at any stage whether it’s early or later stage?
Danielle Morrill: I think it’s actually—I’d say there’s a barbell, it’s on the late stage, I think that later stage investing starts to look more like public market investing, so it’s attractive to people who maybe want to move. They want to move earlier so if you’re an investment banker and you’re use to taking companies public, you know that the people who are in the company before it went public get a pretty great premium for that. So coming down into the late-stage rounds instead is great, so that’s one piece.
The other side is the volume issue, so on the seed side there’s just so much to look at, I think some people really value taking data as a way to provide that first filter, so I’m seeing both of those things happening. I’d say the place where it’s not changing as much as like the B and the C, the middle, because those are really rounds that are getting done by traditional investors falling on, so that is the part I see the least disruption. For founders it’s probably…I don’t know how it feels for founders but, if anything I think, hopefully investors are asking smarter questions and they’re less likely to get tricked by something that’s shiny.
Poornima Vijayashanker: And are they mostly companies that are in the US or do you do international startups as well?
Danielle Morrill: We do do international startups, I would say our coverage is the best in the United States, actually I’d say our coverage is the best any where where things are in the English language. Because of the way we process information it’s still going to be a lot of work for us to fully globalize what we’re doing. We have pretty awesome coverage in Brazil, in the UK, in Israel, and then India, China, kind of where are real hubs. I think it’s really hard though, like Africa, for example, is an area we’ve really struggled to track down startups.
We have angel investors who are sending us spreadsheets full of companies that we just load into Mattermark at this point. So it’s very very early days for those areas.
Poornima Vijayashanker: How do you think behavior for startups has changed or founder behavior?
Danielle Morrill: I think this is very much part of a trend that was already happening before we came along which is founders are becoming more sophisticated, more capable of communicating through metrics. I think there’s a huge conversation going on right now about financial information and founders taking a lot more ownership of having the right controls in place. So I think knowing that the hard questions are going to be asked just raises the bar on you to come prepared for a higher level of rigor.
I think also the seed deals being done now, they’re so large, or really serious A deals, and so I think founders are starting to expect series A-level diligence questions, which I think is super healthy. I think also they’re finding out which investors aren’t necessarily as sophisticated. Sometimes questions you ask say a lot about you, and so I think that there’s just a lot more…people on both sides are asking usually better questions that are more rigorous and I think that can only result in good things.
Poornima Vijayashanker: That’s great. So last question for you. What is your long-term vision for Mattermark and how do you see it making an impact in the private markets and beyond?
Danielle Morrill: Ultimately we’d like to track all 250 million companies globally. We’d like you to be able to look up any company and get rich information on that company and then integrate that into your workflow, whether that’s starting to invest, or starting to think them as the sales lead or supplier or a vendor or financial transaction, whatever that starting point is. And being a utility on the same level with Wikipedia or Google or LinkedIn where getting that information is a promise behind our brand that if you want to look up a company, there’s no better place to start.
As far as the impact on the private markets, I think there is a future where private markets are a lot more like the public markets, and so I think it’s really a good idea for investors to be as knowledgeable as possible. I think that’s just happening with AngelList and a lot of other market trends and we’re just a piece of that wave. Basically I think a lot of wealth creation can happen from various small numbers of people now, it’s really exciting.
Poornima Vijayashanker: Yeah, wonderful. Any final words for our viewers about Mattermark.
Danielle Morrill: I think I would be remiss if i didn’t say we’re hiring. Particularly in marketing right now, we have a really strong content marketing arm, if you love to write about data, maybe been an analyst or a broker in the past, we would really love to work with you. We have a lot of investment bankers and consultants and I think people who normally maybe it’s not considered “cool” for them to join a startup, we love these people, we love spreadsheet nerds, so all of those people in the world if you’re listening, they should apply.
Then of course on the software engineering side, really everything is an option so if you think what we’re doing is cool, I think that is really what we care about. But particularly in machine learning, we do quite a bit with machine learning and neural networks, it’s pretty fun. So if that’s a passion for listeners, then I would hope they’d reach out.
Poornima Vijayashanker: Thank you, Danielle, for joining us today.
Danielle Morrill: Thank you.
Poornima Vijayashanker: And thank you viewers for joining us today as well and special thanks to our sponsor, Pivotal Tracker, for helping and producing this episode of Femgineer TV. If you’ve enjoyed this episode of Femgineer TV, then please it with your friends, your teammates, and your boss, and let us know in the blog comments below, what your favorite part of the episode was. Subscribe to Femgineer’s YouTube channel to receive the next and last episode for the 2015 season. Thanks for tuning in today and I’m looking forward to reading your comments.
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