Posts Tagged: Clio

What type of market are you operating in?

When we look at investment opportunities, we need to consider the type of market that the potential investment is in. How much room is there for a market leader or leaders? Is it winner-takes-it-all or winner-takes-almost-all? Is there room for multiple potential winners?

Winner takes all

These markets are driven by network effects and only one company will win in the space. Examples of these winners include eBay (auctions), LinkedIn (professional networking), and YouTube (video). When these markets first emerged on the scene, there were dozens, if not hundreds, of companies vying for market share. Yet, only one dominant product survived.

Winner takes almost all

This market trend is happening across the enterprise where adoption is driven by end users, and not dictated from above by IT departments. In this case, a company or tool can emerge as a clear category leader, as word of mouth among satisfied users accelerates adoption across colleagues, departments, and companies. As a result, the tool can grab a large market share in a certain market segment or vertical. Think Mailchimp, Dropbox, Hightail or Unbounce for horizontal solutions or Clio, Jobber or Frontdesk for vertical products (disclosure some of those are portfolio companies). In particular, we see a winner takes almost all dynamic happening in vertical SaaS plays where word of mouth can quickly travel within one industry. For example, lawyers from different firms may work on the same case and spread exposure of favorite tools.

Multiple winners

When markets are not subject to network effects (or there’s minimal network effects/word of mouth), multiple winners can emerge. Today this type of market is mainly in commerce and enterprise IT.

The bottom line

As an entrepreneur, you need to understand what kind of market you are in order to create effective growth and fundraising strategies:

  • Growth strategy: Let’s say you end up being #2 in your market. While second place might be an enviable position for some, it’s essentially worthless in a winner-takes-all market. For this reason, you’ll need to be as aggressive as possible in the first few months after a category emerges to try to lock in the top spot before it’s too late. On the other hand, such an aggressive tactic doesn’t make sense in an e-commerce environment where there can be multiple winners. In this situation, you’re better off adopting a more conservative approach and ensuring you’ve reached product-market fit and nailed unit economics before accelerating.
  • Fundraising strategy: You’ll need to understand your market’s dynamics to know how much money to raise and how quickly. For example, in a winner-takes-all or winner-take-almost-all market, there’s a window to aggressively fundraise while the category is still open. However, once a category leader emerges, it will be hard to attract investors.

Of course, all of this is made even more complicated by the fact that it’s not always clear what the exact category is. For example, do Lyft, Sidecar, Hailo, and Uber all belong to the same transportation category or do they each define their own category? As an entrepreneur or investor, you’ll need to analyze the market and its current players to know how much room (if any) is left.

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Announcing our latest investment: Clio

At version one, we are big believers in the vertical SaaS opportunity. Small to mid-sized businesses have long been underusing technology. A mobile-first approach, combined with a laser-like focus on a specific vertical, can create the right toolset to help SMBs achieve huge productivity gains (I wrote about this nearly a year ago for TechCrunch).

That’s why I’m excited to announce our new investment. Clio is the leader in providing legal practice management software in the cloud. 80 percent of the legal market is made up of solo practitioners and small firms. These professionals have little support staff and no IT department…meaning they’re typically overwhelmed with all the administrative parts of their business.  That’s where Clio comes in. They’ve moved all of practice management to the cloud, including time tracking, invoicing, case management, client contact, etc.

Over the past two years, I’ve been sitting on Clio’s board for ActonCapital (who led Clio’s Series B). Over that time, I’ve been incredibly impressed with the ambition of the two founders, Jack Newton and Rian Gauvreau, as well as their amazing customer and product focus. While the legal industry has been slower to keep pace with technological advancements, it’s definitely ripe for disruption – and smaller firms are quicker to adopt new tools than larger ones. Clio now joins fellow vertical SaaS companies in the V1 portfolio, including Front Desk (scheduling/client management) and Jobber (field service).

Leading this round is Bessemer Venture Partners, with Trevor Oeschlig and Brian Feinstein joining Clio’s board. I’ll be remaining on Clio’s board for Acton and am looking forward to helping Jack and Rian build an even more impressive company and product.

Please join me in officially welcoming Jack, Rian, and their entire team to the version one community.

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Four founders share what they’ve learned

People say that hindsight is 20/20. After working knee-deep in the trenches for a year or two, you gain a better appreciation of where to focus, what to let go, and how you can do things (or should have done things) better.

There’s no shortage of advice out there for startup founders. But since entrepreneurs are usually the best qualified to give fellow entrepreneurs advice on how to deal with the challenges of the job, I’ve asked several portfolio founders to share the invaluable lessons learned from their own journeys. What follows below is a snapshot of insight and advice from these great individuals. I’ve divided their thoughts by topic: company focus, scaling the organization, firing, metrics, diving deep as a CEO, and listening to advice.

Enjoy, and feel free to continue the conversation in the comments area…

 

On product/company focus:

“One of the things I’ve learned is that as an early stage start-up, you have to do only one thing well and one thing that connects with the users. There is no need to build something that will overtake the world right away. The vision has to be there, but to get started you only need to get one thing right.”

– Ethan Song, Frank & Oak

 

“Don’t obsess over competitors. In the early days we used to panic when someone popped up with a similar offering. However, we can’t be everything to everyone and others will come in to pick up the pieces of the market that you are not addressing (or not addressing well). Rather than worry about this, obsess over your customers and stay focused on addressing your most profitable growing customer segments.”

– Rick Perreault, Unbounce

 

On scaling the organization:

“As we scale, I’ve realized how important it is to go from a founders led company towards a management led company by bringing the right guys on board. That’s where hiring guys that are smarter and more experienced than I am has made a huge difference.”

– Ethan Song, Frank & Oak

 

“You probably need to hire your Director / VP-level executive team members much earlier than you think. As the CEO, you are the least scalable part of your company, and if you’re in rapid-growth mode you’ll find your time will rapidly evaporate as your growing team seeks your input and advice on key decisions.

So, hire excellent lieutenants that you can trust as early as possible, and trust them to execute. Hire the best people you can afford in these roles, as you need to trust them to run with and execute on their mandate. Focus on high-level goals and vision, and trust your team to execute.”

–        Jack Newton, Clio

 

“Building a team and keeping the entire team motivated and aligned towards the vision is also much harder than it seemed. I wished that I had put more focus on this earlier on.”

– Ethan Song, Frank & Oak

 

On metrics

“I wish I had understood the importance of reliable business metrics earlier on (and I don’t mean Google analytics). We were in business nearly 18 months before we realized that we were losing money on one customer price plan.”

– Rick Perreault, Unbounce

 

On firing

“You may find that you’ve made a bad hire, and you’ll know it in your gut just a few weeks or months into their time with your company. First time CEOs (and managers in general) are much too reticent to part ways with bad hires, and err on the side of giving the new recruit too many chances to improve or change. I’ve found you rarely, if ever, see the turnaround you’re looking for – you’re much further ahead making a quick decision if it’s not working out, and part ways.”

– Jack Newton, Clio

 

On diving deep

“You don’t get to deep dive on things as a CEO, but you have to do everything to the right amount of depth.”

– Kyle Vucko, Indochino

 

“The most difficult balance to strike as CEO is deciding what level you need to be involved in various decisions – not micromanaging (because you can’t scale), but not completely abstracting yourself from key aspects of your business, or putting blind trust in your executives. As CEO, you need to deeply understand every area of your business: sales, accounting/finance, support, product, marketing, etc. You simply can’t afford to have any ‘black boxes’ in your org chart.”

– Jack Newton, Clio

 

On listening to advice

“You will be most successful if you lead from a place of self.  Everyone has opinions on what you need to do, where to focus, what to hire for, how to approach tough decisions, how much/little info to share, etc. Their opinions are generally true, but you have to put your unique spin on it. The ‘what’ can be learned from others; the ‘how’ is unique to you and must be honed and honoured.”

– Kyle Vucko, Indochino

 

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The easiest path to growth and profit is up: why startups should focus on the long-tail

The easiest path to growth and profit is up, and the most deadly attacks come from below 

This quote from Clayton M. Christensen’s The Innovator’s Dilemma perfectly encapsulates how startups can find success over incumbents in their markets. Incumbents often look left, right, and above – yet sometimes they’re most vulnerable from below. The tiny market niches and startups who play there are often too small to capture an incumbent’s attention. However, it’s these small startups that begin in the long tail that have the capacity to disrupt over time.

For example, Hootsuite started as a free Twitter tool for small/medium business and casual users; it’s now a social media dashboard serving Fortune 500 companies like Seagate and Pepsico. Zendesk initially focused on tech startups and now has more than 30,000 clients including global giants like Disney and Vodafone.

For startups, the message is that you should develop your business in the long tail, focusing on those customers in your market that the incumbents don’t care about. For example, Clio, a company in my portfolio, first focused on providing legal practice management for solo lawyers and very small firms (today, Clio is now serving firms with over 50 lawyers).

Narrowing your focus to a smaller piece of the pie offers several advantages. First, customers in the long tail usually require a smaller feature set which means that you can get a MVP into the market faster. Second, you have the unique opportunity to tailor your solution for a few particular use cases… and thus make a superior solution for a certain segment of the market (one that’s much more useful than a one-size-fits-all tool from an incumbent). This will enable you to build a community of loyal, passionate customers.

In addition, by focusing on selling to smaller companies in the long tail, you’ll benefit from shorter sales cycles. Smaller businesses are far more agile when it comes to purchasing and deploying a new technology than Fortune 500 companies. It would have been a much different story had Clio first tried selling a cloud-based management tool to large legal firms (which are notoriously slow to adopt anything new).

As you build out your product and develop a brand in the long tail, your reputation in the market will spread. Enterprise SaaS products can be viral, as companies are tightly connected to dozens/hundreds/thousands of suppliers, customers, and partners. High utility products are shared, enabling you to extend from the long tail to win larger accounts and move up.

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New investment: Jobber, SalesForce-like software for handymen, gardeners

In the past few years, a few Canadian companies have emerged as category leaders in the SaaS space and I am excited to announce a new investment in a start-up that has the potential to become one those category leaders as well. Jobber is a business management software for the field service industries that allows businesses such as landscapers, painters or contract cleaners to easily manage their business from any web browser. The product offers CRM capabilities, task and calendar management, job tracking, crew scheduling, automated quoting, invoicing and more. It reminds me very much of Clio (a recent Acton investment) offering a complete business management solution for a specific vertical.

Jobber was founded by Sam Pillar and Forrest Zeisler, two super-talented engineers from Edmonton who have been building a great product over the past year by bootstrapping the company with very little money. Co-lead in the investment is Christoph Janz from Point Nine, a co-investor in Unbounce and Clio and one of the best SaaS investor out there. Really excited to be part of the Jobber story going forward!

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