Foundr Magazine publishes in-depth interviews with the world’s greatest entrepreneurs. Our articles highlight key takeaways from each month’s cover feature. We talked with Marco Zappacosta, co-founder and CEO of Thumbtack, about how to raise money and get your startup funded. To read more, subscribe to the magazine.
How did Thumbtack co-founder and CEO Marco Zappacosta get his job? He invented it.
Raised by entrepreneurs in Silicon Valley, he understood early in life that a career path like this was possible. Perhaps not surprisingly, then, his first job was a startup venture that landed him a growing business with a $3.2 billion valuation.
A process that began in childhood while sitting around the dinner table talking to his parents about their work has evolved into a lifelong endeavor of problem-solving, thinking critically about what people and markets need, and building ever-evolving solutions.
Thumbtack is now the leading platform of its kind, streamlining the $500 billion home services market in an online space and servicing customers and professionals from every ZIP code in the United States. The company has secured $698.2 million in capital, raised through eight funding rounds backed by 34 investors.
Throughout the pandemic, Thumbtack has adapted to the needs of consumers and employees, growing the business to more than 1,000 employees and counting. They continue to expand their platform and create new ways to maintain an efficient, cohesive remote workplace environment.
In August 2008, Zappacosta and his fellow co-founder invested their money and committed to the project full time.
Without a track record to lean on, they knew they had to build something at the onset to prove to investors what they were capable of.
In the summer of 2009, they raised funds from friends and family—people who, as Zappacosta says, “are ultimately investing in people they believe in. The concepts have to resonate, but more than anything, they have to know and like and believe in that person.”
Through those investments, they added a few members to their team and built out the first version of the marketplace to drive growth. In the summer of 2010, they grew their team to around 10 people and were ready to raise funds from angels.
The Thumbtack team understood that to build a marketplace, you have to begin with supply. In their case, this meant professionals.
They worked with folks who were motivated to grow their business and could see the value in Thumbtack’s platform as a means to reach more customers. Zappacosta refers to this as building “network-independent value,” the first version of which was a tool to repost their Thumbtack profiles to Craigslist, create more professional-looking ads and pictures, and import reviews.
At the onset, the Thumbtack team had to work to find and entice these professionals to the platform. Because the pros were invested in the quality of their profiles, Zappacosta says Thumbtack had “by far the best content for this sector of small business on the internet.”
This organically increased their Google search traffic, becoming, as he says, “the flywheel that we put together. These pros came, built out their profiles.
They could then publish those in other places and get customers. Then that content brought customers to us directly, and at a certain point, we could say, ‘Hey, you don’t have to worry about publishing your profile elsewhere. You know, we now have the customers that you’re looking for.’ From there, we could attract pros on the basis of having customers for them.”
Throughout Thumbtack’s growth, Zappacosta and his team have continued to focus on identifying what is broken in the industry.
At the onset, it was not clear which of the myriad problems was the most important. He says it was only through “building a product, seeing what people use and what sort of feedback we got from them to really appreciate that the most broken thing in our industry was this matchmaking or discovery process.”
Once they homed in on developing this solution, they were ready for major VC funding. They have now raised more than half a billion in capital through eight funding rounds.
Zappacosta’s method of learning and growing through the process of building a business is mirrored in his approach to workplace culture, a facet of his company he understands as emergent.
The culture began to coalesce through the shared values of the team members who were drawn to Thumbtack early on, a group of people all passionate about building this kind of solution.
In 2013, when they began to hire at a larger scale, questions around these values emerged, and the task of defining the culture at Thumbtack presented itself.
“That first value-defining exercise was really about looking inward and trying to assess what shared value system this early team had created and come together around,” Zappacosta says. “Culture then becomes more of an engineered effort, more deliberate.”
This active approach has led to a more conscious evolution of values as the needs of the business change.
“You also start thinking about values as being the best version of yourself, not simply reflecting who you are.”
Active and intentional learning and growing are embedded in Thumbtack’s culture through its implementation of 360 reviews. Zappacosta recognizes the necessity of cultivating a culture that is open to feedback, where it is celebrated and appreciated.
“Getting into this startup world, you’re kind of constantly failing,” he says. “You’re always not doing as well as you want for your customers. Your organization is always not … as complete as you want it to be. You’re always thinking of what’s next or what could be better.” He sees sharing feedback as a solution to this feeling.
The leadership team at Thumbtack leads by example, sharing their lists of what they’re working on at their global all-hands meetings.
“I think it’s so powerful for the company to hear even the most senior leaders talk about what they’re working on and how they’re working to get better and how they appreciate the feedback that their peers and reports gave them, and they took it to heart. They internalize it.”
3 Insights From Marco Zappacosta
1. On raising capital
You’ve got to understand what the other side is looking for. … In many cases, investors you’re talking to are thinking about what investors in the next round are going to be thinking about, to see if you understand the journey that you’re on and the bridge that you need to cross, to have confidence that you can navigate that path successfully.
These things are narratives. We are creatures who love a good story. That is really critical when you’re communicating something and engaging investors about an opportunity.
Don’t let anybody ever tell you it’s easy. It’s always hard, but I think it does change. The ratio of dream-to-data goes from being very dream-heavy early on to very data-heavy later on because at first there’s nothing, and so it really is the dream and the vision and the team that’s bringing that to life because truthfully, there’s not much else. In the later stages, they want to see the spreadsheet and the data and understand numerically what’s happening and, through that, gain confidence about the future. … Investors are sort of looking for different things at different stages.
2. On the uses of PR:
I’m inclined to think of PR through the growth that it can have for the consumer product for the business itself more than as a way to drive a successful investment process. Investors are happy to chat. They’re always down to have a coffee or to learn more about your business. Soliciting inbound offers is what they do. So typically, having the conversation is not hard. You need to have crossed some chasm of either having the network directly or people in your network that can connect you, but once you can get introduced, you’ll get the meeting.
The much harder part is getting these people to get excited about the business over and above all the other businesses that they’re seeing. For that, I think PR is not going to get you very far. It is much more about the substance. But I do think PR is incredible for driving brand and customer growth.
Read more: Startup Funding: How Does It Work and What Are Your Options?
3. On raising venture capital versus bootstrapping:
I think the vast majority of businesses should not raise venture capital and aren’t organized around raising venture capital. … Venture [capital] is appropriate when you’re building something that has really high fixed costs, where there’s entry costs to build and market the product. To get it to operating scale is very significant. It may take years of R&D and years of investment to realize any revenue, let alone profit. That’s when venture [capital] is typically very appropriate.