Altos Ventures Musings

Questions, thoughts and observations about venture capital, entrepreneurship, investing and business.

Vertical Markets: A Trillion-Dollar Opportunity


According to a Gartner, vertical-specific software is by far the largest category of the software market posting $100B in sales in 2013 and accounting for 28% of the market. The second biggest category, operating systems, holds only 8% of the market, ahead of database management systems, ERP, middleware and security. $100B is a surprisingly large number given that customers in many vertical markets are notorious laggards when it comes to adopting technology. Most still rely... Read More »

The Do-It-For-Me Revolution

This article was originally published by TechCrunch April 19, 2015. Now that we are a 15 years into the software-as-a-service (SaaS) revolution, many of us in Silicon Valley are thinking hard about the next big wave in B2B software. We’re excited about many themes, including mobile enterprise, vertical SaaS and predictive analytics, but one less-obvious trend involves people power as much as computing power. We call it the Do-It-For-Me Revolution, or “DIFM” for short. DIFM is... Read More »

Beyond Competitive Advantage


Imagine two very different business worlds. One is a world in which market forces work their magic. If companies are profitable, new competitors enter and profits get worked down to nothing. If there is too much competition, companies exit (or go out of business) so that they neither lose nor make much profits. The other is a “winner take all” world ruled by monopolies which have a bad name because they are anti-competitive. They make... Read More »

SaaS: Early Innings, $1 Trillion Game


In our work as software investors, we think a lot about where we are in the adoption cycle for the current generation of software-as-service (SaaS).  We know quantitatively and qualitatively that the opportunity to bring productivity and enterprise functions to the cloud is huge, but at the same time, we worry about investing into a valuation bubble or over-funded market. Here in Silicon Valley, SaaS boosters love to say that “we’re just in the early... Read More »

Global Competition


Global Competition After this week’s massive, record breaking IPO of Alibaba, much of the attention will be on China. However, as a venture capitalist based in Silicon Valley, the IPO is yet another reminder that creativity and innovation in the technology industry will no longer be dominated by Silicon Valley or even U.S. based companies. Having made investments in Silicon Valley as well as more than a dozen companies overseas, I wanted to share two... Read More »

Decoding due diligence

Olympus Digital Camera

One of the most mystifying parts of venture fundraising is the murky process of due diligence. There is a ton of advice out there on how to get in and pitch a venture investor, but little on how to manage the boring-sounding but critical due diligence process. Yet this is where make or break happens for many venture deals. Due diligence is the homework that investors do – tech reviews, reference calls, market checks –... Read More »

Zendesk vs Why investors are split


The original version of this post was published on on May 19 2014 Contrary to what some might think, the two companies are completely different. Both are growing, but Zendesk is on a credible path to profitability and growth. Shortly after filed for its IPO last month, Zendesk filed to go public also. TechCrunch concluded that the "Zendesk IPO bears striking similarities to Box,” and I recall wanting to rebut that conclusion but never got around to it. However, the best rebuttal came last... Read More »

Analyzing a hot SaaS IPO – the S-1 Filing

When I heard that had filed for IPO, I was excited to look through their S-1 filing as the company could be the first big hit of a new generation of SaaS companies that are riding the “consumerization of IT” wave. SaaS companies such as, Dropbox, Evernote, Github and Hubspot look more like consumer software companies compared to companies such as AthenaHealth, Conerstone, ExactTarget, SuccessFactors, Veeva and Workday that have professional services staff and... Read More »

The Series B Trap – And How to Avoid It

Series B Trap

The original version of this post was published in PandoDaily on January 20 2014 Over the last two years, much has been made of the “Series A Crunch”, a steep drop off in the number of seed-funded companies that are able to close an institutional Series A financing.  For the companies that make it that far, there is another financing pitfall – something I call the “Series B Trap”.  This one is just as fatal and... Read More »

The First Decade of SaaS IPOs (2004-2013)

no software

It's been almost 10 years since's IPO on June 23, 2004. Earlier this year we decided to take a look at every SaaS IPO since then, in what we considered to be the first decade of IPOs in a new era of enterprise software. So far, there have been 40 IPOs, most of which were completed in only the past 30 months. Initially, our focus was to support the upcoming 2014 budgeting process of our... Read More »