Thumbtack Defies Conventional Wisdom, Scores $125 Million — More

Thumbtack

Local home services marketplace Thumbtack is now a so-called “unicorn.” I hate that term. But it means the company is worth at least $1 billion.

With a new $125 million round of funding, announced yesterday, Thumbtack is valued at $1.25 billion. Last August the company announced a $100 million round. That means within essentially a year the company has raised $225 million.

When I heard about the $100 million last year I was surprised. After all, Thumbtack is essentially Service Magic 2.0 (nothing special in a sense). It also doesn’t have a consumer brand and does no consumer marketing today.

In its blog post announcing yesterday’s massive round, the company said that it was rejected 42 times for its Series A funding. This just shows the lack of confidence, independence and vision that characterize most VC investing. Yet everyone wants a piece of something already proven — hence the big later rounds.

That brings me to what’s “proven” about Thumbtack. I would guess that 9.5 out of 10 people on the street probably wouldn’t be able to tell you what the company was about or did  — although Republican presidential candidate Jeb Bush visited Thumbtack on a recent swing through Silicon Valley and gave it some general media publicity.

But Thumbtack has been steadily executing since 2011. I spoke with Marco Zappacosta, Thumbtack’s co-founder and CEO, yesterday about the company’s funding and its success to date.

He told me that Thumbtack has 200,000 paying small business advertisers but no sales reps — zero. He said that Thumbtack is entirely self service and that its retention numbers are impressive. He wouldn’t share them with me specifically except to say that “We’ve had small businesses working with us for years.”

He added that the retention discussion “is the strongest part of our [VC] pitch.” Currently 95% of the company’s referrals and traffic are organic; only 5% is coming from any paid advertising that Thumbtack does. As an aside Zappacosta added that 75% of SMBs respond to leads via their mobile phones. I thought that was pretty interesting.

The last two paragraphs explain the $225 million in a nutshell:

  • 95% of consumer traffic organic and word of mouth
  • No sales reps
  • Total SMB self-service model
  • 200,000 paying local advertisers
  • High retention rates

This is extremely impressive and defies most of the well established, conventional thinking in the industry. As I said there’s really nothing special or terribly inspired about the model; the company’s success is about execution. But with $225 million in the bank the company is going to start executive on building its brand.

I’ve asked Marco Zappacosta to tell the Thumbtack story at next year’s LSA 16. I promise it will be very interesting.

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9 Responses to “Thumbtack Defies Conventional Wisdom, Scores $125 Million — More”

  1. David Mihm says at

    Been saying it for years. If you have a simple enough product that actually demonstrates results, self-serve is an entirely viable way to sell to SMBs.  Kudos to Thumbtack for proving this.  Looking forward to Marco’s talk at LSA 16 already.

  2. Greg Sterling says at

    It’s pretty interesting.

  3. Sol says at

    Absolutely fantastic.

  4. Mike Wilson says at

    Great to see automation and self-service getting this level of commercial traction met with substantial and credible investor support – Especially with traditional models becoming economically unviable. Congrats to Marco and the Thumbtack team.

  5. Jeffrey Magner says at

    Greg, that 75% mobile stat is super interesting & impressive. My hope is that they build out a powerful, slick, and effect platform as they scale. 

  6. Greg Sterling says at

    Totally agree.

  7. Roger That says at

    “No sales reps”? On Glassdoor, one ex-employee  calls Thumbtack “a call center for hipsters” Also, Google “Thumbtack complaints”. Some hard-core selling is taking place somehow, somewhere, either inbound or outbound. You don’t get “200,000” customers without sales reps. 

  8. Greg Sterling says at

    So you’re probably right. I was a bit naive here. He said “no sales reps” and I should have asked about inside sales. He probably meant outside or field sales reps.

  9. Greg Sterling says at

    I confirmed yesterday in a meeting with the company that there are no sales reps. There are some customer service (post acquisition) support people. But they said no one is doing outreach before acquisition.

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