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Tomasz Tunguz, venture capitalist at Red Point and SaaS blogging household name, was kind enough to take time to chat with us a few weeks back. Tom shared lessons learned from his experience leveraging data to make product decisions on the Google AdSense team, and from his current role growing companies at Red Point Ventures.

After founding his first company at 17 and subsequently serving as an engineer at an enterprise software company, Tom joined the Google AdSense team in sales. Shortly after, he transitioned into a dual product management role in which he was making tough calls via a process he calls “decision making auditing,” essentially walking the team through pros and cons of each viable solution.

“The number one goal for a PM, in my view, is to figure out what you can do to help whatever it is that the company needs to do or get out of the way. What are the three or four most important things that a company needs to accomplish? Let’s focus on those issues. Let’s go one by one and let’s do decision making auditing.” 

Watch the interview to hear more about:

  • The draws of working in venture capital according to Tom (hint: culture is key!)
  • How his experience as a PM influences the way Tom advises companies as a board member
  • Tom’s data-driven approach to making tough calls, aka “decision making auditing”

Check out Part 2 and Part 3 of the interview to hear how Tom recommends product managers approach planning and prioritization, and his predictions for the future of SaaS.

EXTRA BONUS: He also shares a brief overview of his upcoming book Winning with Data, available on June 17th. (You can pre-order on Amazon!)

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Video transcript:

Matt Pasienski: Adam has a very easy to pronounce last name. I'm sensitive to those things.

Adam Sewall: Well no one pronounces my name correctly.

Tomasz Tunguz: How do you say it?

Adam Sewall: It's "Sool,", but everyone says See-wall.

Matt Pasienski: No one does that. Hi, I'm Matt Pasienski. Welcome to Behind the Product. Today I'm talking with Tom Tunguz who is a venture capitalist at Red Point, where we're at. He's also an exceptionally popular blogger, and thought leader around SaaS strategies, and data driven sales strategies, and SaaS companies, so we're going to learn a ton today. I want to start right off, why don't you give a little bit about your background? I think your experience at Google, and how that kind of got you on this kind of data-centric approach to building business, and then how you've taken that approach here at Red Point?

Tomasz Tunguz: First, thanks very much for having me on the show, it's awesome. Really appreciate it. I first got an introduction into software when I was 17. My dad sent me to South America. One thing led to another, and we basically co-founded a business together. He was running engineering, he was making the product, and I was the one doing the sales and the marketing. We were selling software to law firms. That was a fun experience, we made some money. Then, I was managing it through college and grad school, but when I graduated I wanted to learn how a company was built for real. I went to work for a SaaS company called [Appian 00:01:29] in Washington D.C. that builds business process management, and I was a job engineer on large scale systems for Army, the Navy, and Homeland Security.

I stayed there for about 11 months. It was a really intense, but rewarding experience. Then I went to Google, but my GPA was too low. It was 3.3, so they wouldn't take me as a [PM 00:01:50], or an engineer. I said, "Okay, I'll go into sales." It was this kind of hybrid role, it was called an account optimizer. It was with the ad sense team, that's where Google runs ads on other peoples websites. My job was to manage the accounts of these really big publishers that generated almost no revenue for Google. It was with the social networks, so it was MySpace at the beginning, Vkontakte in Russia, and a bunch of other ones like High Five, and LinkedIn. I worked with a bunch of people, and we were just managing those accounts.

Then about a year later, I transferred into AdSense, and Brian Axe hired me as a PM in his team, and I stayed there for about two years. I worked on two different sets of projects. One was internationalization of ad sense, so translating into new language, and then also improving the targeting in Chinese, Japanese, and Korean, which are hard. It was really hard. Then it also was building targeting systems for social networks. That was an interesting problem because ad sense works, it basically creates a model of English language that's based on the internet, but the way that people were conversing on social networks was sufficiently different than the rest of the internet, so we basically had to treat it like a foreign language.

It was pretty cool. Then, so I stayed about two years at Google, I had a great time. Then I came to red point about, it'll be eight years in May.

Matt Pasienski: Do you think anyones actually optimizing on emoji yet? Is that, are someone targeting like oh man, the winky face?

Tomasz Tunguz: Chinese has this notion of pinion which is the romanization, like you take the character and you put it into the qwerty alphabet. I bet there's going to be a pinion for emoji, and you could target on that.

Matt Pasienski: Okay, so then you left Google and you went to Red Point?

Tomasz Tunguz: I came to Red Point. I came to red point for three reasons. One was most of the people they hired, I think it was like 90% of the partners that started as associates and then been promoted from within, so there's a real culture of investing in people. I really liked that. The second is the firm obviously had a great reputation. The third was, all the guys kind of hang out with each other outside of work. Venture firms are places where if you really love it you're going to stay at the same place for a long time, so that chemistry between the partners, and the partners and the start ups was really important.

That's what I prioritized. I've been here for eight years, I started as an associate, and then I've been promoted. Now I'm a partner, and I work with six different companies. Most of them are SaaS. They're like Expensify, Axial, I work with a consumer company called Thred Up which is the worlds largest second hand clothing exchange, actually. It looks an awful lot like a subscription business. Electric Imp, and a bunch of others.

Matt Pasienski: Very cool, and what would you say your approach is because I know you have a very distinct brand, and obviously a very popular brand around SaaS. How did you come into that, and what do you think distinguishes your approach, and your approach to working with businesses?

Tomasz Tunguz: Yeah, I think there are two different parts to it. The first is how do you work with a company, and then how do you evaluate a company? Being a product manager has influenced both. When I work with a company, I think when I'm looking up to be on the board of a company, I think about myself as being a PM on the board. The number one goal for PM, in my view, is figure out what you can do to help whatever it is that the company needs to do, or get out of the way. There's a prioritization effort which is hey, what are the three or four most important things that a company needs to accomplish? Let's focus on those issues. Let's go one by one and let's do decision making auditing. That's a really important function of both the product manager, and the board.

Matt Pasienski: What do you mean by decision making auditing?

Tomasz Tunguz: Yeah, so at Google I had the privilege of working with some really smart engineers. People who's expertise in machine learning and distributed systems far advanced. I didn't really understand what they were doing a lot of the time. The question is how do you do work in a team so that you're all demanding the best from each other even if you don't fully appreciate the depth of, there's discipline.

What I kind of came too, but was really kind of coached, was decision making auditing which means, let's walk, what are the three different options that the group perceives are viable options? Let's walk through, let's hear what the recommendation is from whoever is the expert, and let's walk through how we would make a decision, the pros and cons of each, and let's each ask the questions that we care about to try to figure out and validate that the proposal of the recommended solution is the right one.

Matt Pasienski: One thing that, that kind of decision making is obviously a best practice, but I think one of the difficulties that often occurs is getting to the point where you actually have a specific decision to make. You say what are the top three things, or what are the big things. How do you come up with that kind of analysis of these are the things that we're actually going to make a decision about? Because a lot of times it just feels like things are generally crazy, and it's not really that you have some fork in the road that you're taking, but it's just generally we need to get to some strategy. The decision is secondary to that first step of coming up with the right-

Tomasz Tunguz: At Google, being a PM, that was your job. That was it. When you're on a board it's different because the CEO is really kind of the PM of the whole company. There are two different ways it can work. Sometimes, most of the time, it's the CEO of that business who says, "These are the two or three things I perceive to be the most important. Let's talk about them at the board meeting," but often board members will say, "I agree those are important, but there is this other thing." We'll suggest, or request that we talk about some other topic. That's kind of how it works.

Matt Pasienski: One of the other strategies I've seen you blogging about is the idea of kind of putting, just for lack of a better description, you put a big spreadsheet and say hey, this is our operating model and let's really fill it in. I've found personally that that's an extraordinarily useful task because it does bring up those things that you weren't thinking about, and it puts into perspective what is more relatively important. How do you recommend product managers take an approach where they can use that type of kind of comprehensive, or even financial planning, to get to an understanding of what the world can be like in the future?

Posted by on Wednesday, April 20, 2016.


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