20VC Thumbtack's Marco Zappacosta on The 3 Core Elements To All Board Meetings, Raising $250m from Sequoia and Why You Have To Win Supply Side Acquisition First For Marketplace Success

In this installment of the 20 minutes VC podcast, host Harry Stebbings interviews Marco Zapacosta, the founder and CEO of Thumbtack, a unicorn marketplace that connects consumers with local professionals for various services. Thumbtack, which has raised over $270 million from notable investors like Sequoia Capital and Capital G, has been recognized by Forbes 30 under 30 and as one of Glassdoor's best places to work. Zapacosta shares insights on the challenges of building a marketplace, the importance of board dynamics, and the strategic decisions behind Thumbtack's monetization models and nationwide expansion. He emphasizes the long-term vision of making Thumbtack a household name and a verb synonymous with hiring professionals, reflecting on the company's journey and future aspirations, including potential international expansion and an IPO.

• Harry Stebbings hosts the 20 minutes VC podcast, discussing behind-the-scenes aspects like gym routines and social media presence.
• Marco Zappacosta, founder and CEO of Thumbtack, is introduced as a guest on the show.
• Thumbtack is a marketplace that connects local professionals with customers and has raised significant funding from top investors.
• Marco has been recognized by Forbes 30 under 30, and Thumbtack is acknowledged as a great place to work by Glassdoor.
• The show acknowledges sponsors Ring and Cooley, highlighting their products and services.

"And who better to join us than the founder of a unicorn marketplace? So with that in mind, I'm thrilled to welcome Marco Zapacosta to the hot seat today."

The quote introduces Marco Zappacosta as a significant figure in the marketplace industry and sets the stage for the discussion.

• Marco Zappacosta and his team decided to start a business before having an idea, which is often frowned upon but can be successful.
• The team had previously worked together and sought a large problem to solve with technology.
• They identified local services as a market failure in discovery, where customers struggled to find professionals like plumbers.
• Thumbtack was founded to address this gap, and the team viewed the challenge as an exciting opportunity.

"We literally said to ourselves, what's the biggest problem that we can solve with technology, and one that we believe is inevitably going to be solved?"

This quote explains the team's approach to finding a significant problem to address with their startup, leading to the creation of Thumbtack.

• Marco Zappacosta believes founders should view board members as partners rather than superiors.
• The board serves as an accountability mechanism and a strategic brain trust.
• Engaging with board members should be a partnership where ideas are tested and strategic decisions are made.
• Founders need to develop the skill of working effectively with their board.

"I think too often founders are intimidated by the board and sort of see it as a sort of group on high that needs to be answered to, when really these are smart, capable, hardworking people that you should partner together to navigate through this sort of very challenging environment."

The quote emphasizes the importance of founders viewing their board members as partners to collaborate with rather than authority figures to answer to.

• Board meetings typically start with administrative tasks such as approving minutes and option grants.
• A business update follows, focusing on reflecting against set goals and providing insights into performance.
• The main part of the meeting should discuss one or two key strategic decisions, leveraging the board's collective expertise.

"And then the real meat of the conversation is a discussion around one, maybe two key strategic decisions that the company is facing."

This quote outlines the core purpose of board meetings, which is to discuss and make strategic decisions for the company's future.## Strategic Decision-Making

• Strategic decision-making involves considering long-term product strategy, entering new markets, fundraising, and hiring plans.
• The value lies in preparing for decisions by evaluating various options along with their pros and cons.
• It's crucial to have input from individuals who are not deeply involved in the day-to-day operations to identify blind spots.

You kind of need someone who's not all the way in to be able to call out your blind spots.

This quote emphasizes the importance of having an external perspective in strategic decision-making to point out potential oversights that those deeply involved may miss due to their close proximity to the issues.

• The board is not a monolithic entity; it consists of diverse members with different backgrounds.
• Disagreements within the board and executive team are normal and healthy.
• Decisions are not about being right or wrong but about the commitment to a chosen path based on collective reasoning.
• The board's role includes a commitment to significant decisions that shape the company's future.

I don't think of the board as a monolithic entity that has one judgment.

This quote reflects the speaker's view that a board is made up of individuals with varying opinions, and it's not accurate to consider the board as having a singular viewpoint.

• Regular one-on-ones with board members can be highly valuable for tactical advice and strategic thinking.
• Such meetings can be informal, without a set agenda, allowing for spontaneous discussion of current concerns.
• It's beneficial to have a trusted board member who can provide quick insights based on their experience with similar issues in other companies.

So I'll be honest. First, when it was proposed, it felt like a lot.

This quote introduces the speaker's initial skepticism about the value of frequent one-on-one meetings but leads to the revelation of their actual usefulness in practice.

• Founders should consider having regular calls with a trusted individual who understands the business well.
• These calls can help founders make decisions more quickly by providing a range of possibilities based on the advisor's experience.
• The frequency and duration of these calls can vary, but the key is having access to an external perspective.

I would definitely encourage founders to have a weekly or every other week phone call.

This quote suggests that regular communication with an external advisor can be beneficial for founders, offering a blend of support and accelerated decision-making.

• Thumtec experienced significant changes in its product and platform, requiring strong commitment from the board and executive team.
• Decisions about the business model, such as moving away from a subscription model, are made with long-term goals in mind.
• The willingness to take risks and make difficult decisions can be crucial for the growth and health of the business.

And for us, we wanted to build a big, independent franchise, a household brand.

This quote explains the underlying motivation for making a bold shift in the business model—to build a long-lasting and widely recognized brand.

• Shifting business models can have a positive effect on fundraising by demonstrating the potential of the new model and the team's willingness to adapt.
• The change from a subscription model to a new monetization method showcased the team's strategic vision and attracted investment.

So, honestly, it, catalyzed it.

This quote indicates that the decision to change the business model was a catalyst for successful fundraising, as it impressed investors with the team's proactive approach and vision for the future.## Marketplace Dynamics and Fundraising Strategy

• Marketplaces should avoid being stagnant and must continuously evolve.
• Subscription-based models are not typically expected or desired in marketplace businesses.
• Fundraising is tied to the company's objectives, such as becoming a household name or having the company name become a verb.
• Large capital rounds are used to make significant investments in the product, platform, and marketing.
• Maintaining operational and capital efficiency is crucial, even with substantial capital reserves.
• Discipline in budgeting and investment is essential, which involves hiring a strong CFO.
• Companies must focus on investing in great ideas rather than spreading resources thin across many good but not excellent ideas.

"And so that meta sort of fact, I think helped a lot too. But we're a marketplace, so no one expected or wanted us to have a subscription based business, which is great in a lot of contexts, but not in a marketplace."

This quote highlights the importance of understanding the specific business model dynamics when making strategic decisions, emphasizing that a subscription model is not suitable for a marketplace.

"We're trying to shoot the moon. We want to be a household of a brand. We want thumbtack to become a verb. And to do that requires making these big bets."

Marco Zappacosta explains the ambitious goals of the company and the necessity of taking significant risks, which are supported by fundraising efforts.

"We've raised $250,000,000 and a huge chunk of that is still in the bank because of that discipline."

Marco Zappacosta emphasizes the importance of financial discipline and the role of a CFO in maintaining a strategic approach to budgeting and investment, even when there is a large amount of capital at hand.

• Supply side acquisition is a unique challenge for marketplaces with many distinct markets to fill.
• Different categories within a marketplace may require different acquisition strategies.
• Early-stage marketplaces must entice supply side participation before demand can be offered.
• As demand grows, the focus shifts to efficiently identifying and filling gaps in the marketplace.
• Different professional categories respond to different marketing strategies, e.g., creative services are more digitally savvy compared to home service companies.
• Analytical frameworks are crucial to understand where investments should be made to attract professionals.

"Supply side acquisition is something that we have worked very, very hard on for a long time. And the truth is, there's no silver bullet."

Marco Zappacosta discusses the ongoing challenge of acquiring supply side participants in a marketplace and the absence of a one-size-fits-all solution.

"So for you in London, if you're looking for a plumber, you could care less how many caterers and tutors we have. All you want is plumbers."

This quote illustrates the localized nature of supply side demand in a marketplace, where the relevance of service providers is category-specific.

• Nationwide expansion can be beneficial for leveraging non-geographically specific marketing channels.
• A robust supply side acquisition strategy can support nationwide presence and demand generation.
• Marketplaces must be prepared to adapt their strategies when entering new geographical markets, especially on an international level.

"We found a supply side acquisition strategy that could really fill up the network everywhere."

Marco Zappacosta explains how a successful supply side strategy enabled nationwide expansion early in the company's history.

"We're live in every city in the United States. We have pros just about everywhere, and now are working to get ever more demand."

This quote indicates the current status of Thumbtack's nationwide presence and the shift in focus towards increasing demand.

• The notion that one side of a marketplace will always be unhappy is challenged.
• Marketplaces like Amazon and Airbnb demonstrate that it is possible to satisfy both supply and demand sides.
• Service differentiation beyond price is key to maintaining a positive experience for both sides of the marketplace.
• Structurally, a marketplace does not have to favor one side over the other, particularly when services are not commodified.

"I think that's bogus I think that's definitely not true of Amazon. It's definitely not true of Airbnb, and it shouldn't be true of a service marketplace either."

Marco Zappacosta refutes the idea that marketplaces must inherently displease one side, citing successful examples where both sides are content.

"Our pros are earning $72 an hour and are able to differentiate themselves on more than just price."

This quote exemplifies how service providers in the Thumbtack marketplace can stand out based on factors other than price, contributing to a balanced marketplace.## Marketplace Dynamics

• Marketplace dynamics differ based on the services offered; for ride-sharing, speed and cost are paramount.
• In contrast, for services like wedding photography or home painting, the focus is on matching the right professional with the client's needs.
• Efficient matching and appropriate pricing in a marketplace should result in high satisfaction for both service providers and clients.

"In our marketplace, you're looking to hire a talented professional to do something you can't do yourself. Say, be your wedding photographer, tutor your child in the sats, paint the exterior of your home, and therefore, there's a lot of discretion that goes into it."

This quote highlights the importance of understanding the unique needs of a marketplace where specialized skills are sought after by clients who require a specific match for their personal needs.

• Acknowledges the common misjudgment of short-term achievements versus long-term possibilities.
• Reflects on the success of companies like Dropbox and their time to IPO to illustrate the patience required for significant accomplishments.
• Emphasizes the importance of maintaining a long-term perspective in building a successful business.

"Someone relayed to me at some point the Bill Gates quote, that people overestimate what they can do in a year and underestimate what they can do in a decade."

This quote serves as a reminder of the value of patience and long-term vision in the pursuit of building a substantial and impactful business.

• Expresses gratitude for the support received from angel investor Jason Calicanis.
• Credits Jason's Open Angel Forum for helping to kickstart Thumbtack's angel investment round.
• Highlights the importance of early support in the success of a startup.

"It's the best. I love having him in my corner."

This quote conveys the speaker's appreciation for the angel investor's support and the positive impact it has had on the company's journey.

• Discusses the challenge of establishing a household brand that is the default for professional service searches.
• Emphasizes the difficulty in delivering consistent and reliable experiences across various categories and demands.
• The goal is to credibly promise customers that Thumbtack is the best place to hire a professional for any service.

"My big sort of fear or anxiety is around building a household brand and building an experience that is consistent and reliable enough such that we become the default starting point for all of these searches."

This quote reflects the speaker's focus on creating a trusted and dependable brand that stands out as the go-to solution in the professional services marketplace.

• Anticipates international expansion and a potential IPO for Thumbtack within the next five years.
• Aspires for Thumbtack to become a verb synonymous with finding professional services, indicating market dominance and trust.
• The vision is to be the immediate and trusted solution when seeking professional services.

"I want us to become a verb. And that's something that I think we can do over the next five years to become that solution."

The quote captures the speaker's ambition for Thumbtack to become an integral part of the language and process people use when seeking professional services, signifying ultimate trust and market penetration.

• The quick fire round is a favorite segment of the host where rapid questions are asked for immediate responses.
• Marco Zappacosta agrees to participate in the quick fire round.

"So I say a short statement, Marco, and then you give me your immediate thoughts in about 60 seconds or less."

This quote sets up the quick fire round, a segment designed for fast-paced, concise answers to short statements.

• Marco is currently reading "The Wizard and the Prophet" by Charles Mann.
• The book discusses the 20th-century environmental movement and the two contrasting schools of thought it generated.
• Mann's historical perspective provides insight into environmental challenges without advocating a specific solution.

"It's called the wizard and the prophet. It's by Charles Mann, who's a historian, and he wrote these books, 1491 and 1493, about pre-colonial America, which were incredible."

This quote serves as a book recommendation and offers a glimpse into the environmental themes and historical context presented by the author, which Marco finds compelling.