Tomasz Tunguz on Venture Capital - The Intercom Blog

Summary

Tomasz Tunguz, a partner at Redpoint Ventures, discusses the key metrics he looks for in potential investments, including sustainable competitive differentiators and revenue benchmarks. He identifies three types of sustainable competitive advantage: a founder’s market discovery, difficult-to-replicate technology, or a new distribution mechanism. For Series A investments, he typically partners with companies at $50,000-100,000 MRR, but also invests in pre-revenue ideas, noting that 27% of Series A rounds had no revenue. He looks for short sale cycles under 45 days and negative net churn as signs of product-market fit, and advises founders to always have a plan to reach profitability on current cash. Investors view businesses as collections of risk, and founders should address how they will mitigate major risks in their pitch.

Takeaways

1. 1

   Sustainable competitive differentiators fall into three categories: founder market discovery, difficult-to-replicate technology, or new distribution mechanism.

2. 2

   For Series A, typical MRR range is $50,000-100,000, but 27% of Series A rounds have no revenue; investors look for short sale cycles under 45 days and negative net churn.

3. 3

   Founders should always have a plan to reach profitability on current cash, and investors view businesses as collections of risk that need to be mitigated.

FAQ