Thumbtack CEO Marco Zappacosta raised $650K in 2009, then $100M by 2014. He explains why raising $1M is harder than $100M: early rounds need to convince investors with almost no data, while big rounds run on metrics. The pitch shifts from dream-driven to data-driven as the company scales.
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Let's spend a minute on your funding, because that's a funny story.
Which part?
The relative steps. Take me from your initial to your most recent round last year, just the numbers.
So first outside money we raised was $650K, June of 2009, from friends and family, past bosses, angels. Some of us sort of grew up here, so we had sort of people in tech. Then we raised a proper angel round in June of 2010, $1.2 million from like sort of true professional angels who didn't know us. Then we raised Series A in January of '12, $4.5 million. So for our first almost 4 years, we ran on a little over $6 million. 15 months after that, we raised $142, $143 million. That was $12.5 in May of '13, $30 in December of '13, and $100 in August of last year, of '14.
That's kind of up and to the right.
Yes. This stuff does not just happen. It was a long grind to get there. But the encouraging thing is that when it does happen, when you do finally put the pieces together, it can really click and take off very quickly.
So which is harder to raise, $1 million or $100 million?
$1 million.
Yeah.
Absolutely. I mean, honestly, they have gotten easier. Because what has happened is the business has become more obvious.
Yeah.
I don't think I've gotten— I mean, I'd like to believe I've gotten a little better at raising money, but the thing that has happened is I don't have to convince you. I can simply show you the data, and the data itself is convincing.
Yeah. I mean, there is a certain kind of romance in raising money where you're trying to excite interest and project them into the situation, and let's face it, excite some of their greed.
Yep. And if you're in the $100 million category, The ratio between dream and data that you sort of sell on changes drastically over the lifecycle of your business. At first, it's mainly dream. And at the late stages, right, going public, it's almost all data. They don't care about anything else.
Right. I agree with you about that. So, and when you started this, did you conceive that you would need $100 million?
Definitely not. I think now I have the perspective. So I think the word you used there is very interesting— need. So the businesses that end up raising the most money, I would argue, are not the ones that need the most money, but are the ones that are capable of deploying the most money effectively or with great return. You look at an Uber, had they wanted to fund the business, or an Airbnb, or us, have they wanted to fund the business purely on retained earnings? They, I'm certain, and we are basically at a stage where you could do that if you wanted to. It would mean going slower and being less aggressive, but they are absolutely at that scale. The reason Uber can raise billions of dollars in capital is because it can credibly tell the story of, hey, we can invest this Yeah. For faster growth or more growth, and it's a great opportunity.
What does a neighborhood recommendation service need with $100 million? Where's that gonna go?
Nextdoor or for us?
You.
So it's, it's, it's 2 things. It's building the product, so continuing to hire aggressively to build out all the solutions that we want to sort of provide for our professionals, and 'Cause we wanna be more than a matchmaking service. We wanna provide invoicing, scheduling software, payment software. We're building an end-to-end solution where these companies—
So you have to build a very secure, complex backend now?
Very much so.
Okay.
And then it's building the brand and helping get the word out, right? So an Uber, an Airbnb, us, we spend a lot of money on acquiring more supply. We're all supply constrained. And the way you solve that is you spend money, buy media, put on events, Advertisements, everything to gain awareness among, in our case, these service professionals to recruit them onto the platform such that we can then connect them with the customers we have.
The reason I'm spending so much time on this is I'm interested in the point at which you realize you need that and the danger of sort of seeking it too early because then you end up in this kind of grandiose dead end. You know, how did you know the time was right to raise that much money?
The market kind of tells you. You guys have probably had the experience, and we certainly had the experience, where we had to really work hard to raise all of our early rounds. It took a ton of meetings. It took a lot of nos. It was a grind. But then there comes a point, it did for us, where our brand had gotten big enough. The space had gotten hot enough. Where people started coming to us and pitching us on raising more money and taking bigger slugs of money. And that was a very different but telling experience.
Right. Right. Do people treat you differently now?
Do people treat me differently?
Well, this is interesting. One time I asked—
Not in my apartment. Not when I go home.
I asked Reid Hoffman what was weird about being a billionaire. And he had this great answer. You know, now everybody thinks all my ideas are good. That's the most self-aware thing I think I've ever heard.
Yeah, he could have said people probably think his jokes are funnier.
Right, well, no, but, you know.
All that stuff. No, I mean, I don't think inside the business things have changed. You have to stay hungry and stay humble, and I think that's part of the culture that you try and create. While we have been validated by the investor community, it's really— those aren't the true judges. The true judge is the customer and whether they are sort of coming back. Are our retention curves getting better? Are the engagement curves getting better? Is the growth curve getting faster? That's real signs of success.
Core metrics you've been using the whole time, in a way.
Yeah.
That's great. I mean, thinking about the metrics in the first place really matter.
Absolutely.
Because they will also inflect the culture. Absolutely.
And I think there is— I hate the phrase data-driven because I think it is—
Because everybody uses it now.
There's that. But actually, I think it's saying the wrong thing because data doesn't tell you where to go. Data tells you if where you got was where you wanted to go. It's a backwards-looking sort of signal. And then you and your creativity and your sort of thoughtfulness is what sort of decides where to go next. So I think it's about bringing data to bear such that you're honest with yourself around what's working and what's not, and where you are versus where you're trying to be. But then it's on you and being creative and sort of thoughtful about taking that next step.
