A Conversation with Chris Tottman on the Strategic Pivots That Built Category-Defining Companies Chris Tottman is a partner at Notion.vc and has spent over 30 years building and investing in technology companies. He started his career trading options on the London Stock Exchange floor before founding multiple companies, including MessageLabs, which became Europe’s first major SaaS business before its acquisition by Symantec. Today, he invests in early-stage technology businesses while maintaining what he calls “a constant itch to create, collaborate, and work with people to help them build the best companies they can.” Key Takeaways On Discovery vs. Proving Yourself Right Great founders don’t over-index on proving their original idea. They stay in constant discovery mode, asking what problems keep customers awake at night and what users are actually doing with the product. On Finding Problems Worth Solving Look for pain that makes someone bang the desk. Pain that makes them think, “If I don’t solve this, I might get fired.” That’s where innovation and the wave of adoption comes from. On Market Definition “Uncomfortably narrow” is the goal. The smaller the market definition, the easier it is to target. Wide definitions like “enterprise, SME, global” become impossible to market effectively. On Official Strategy vs. Revealed Strategy Your official strategy is what you tell investors and put on your roadmap. Your revealed strategy is what your usage data shows customers actually value. The gap between those two is where billion-dollar pivots happen. On the Discovery Process Whiteboard out the whole value chain of a product, looking at where time goes and where money goes. Run B2B and B2C research. Have multiple minds working on it, asking “What if this is true? Is that also true?” That’s how you find the biggest, most pressing problems worth solving. The Difference Between Good Founders and Great Founders Michael Goitein: Chris, we started talking about pivots and that notion that when a company starts, they might have a vision, an idea. But what they ultimately become successful for can be miles from what they started out as. You have these incredible stories that I wanted you to share. Chris Tottman: I think the good thing about the stories is that they show two different ways of trying to figure out what the company can potentially become and how to bridge from where you are today to a bigger version of the world. What we find at Notion is that the difference between good founders and great founders is that great founders don’t try to prove themselves right to the end of the world. They have an idea and take it to market, but they don’t spend their time trying to prove that original idea is the killer idea. Even if customers are buying it. What they do instead is stay constantly in discovery mode. They keep asking questions about what problems keep customers awake at night. What are users actually doing? What are they really getting value from? From ISP to Europe’s First Massive SaaS Business Chris Tottman: In the early ‘90s, I was working with a couple of my closest friends who were building the IP networks. They had an ISP with a proposition for SMEs, connecting companies to the internet. To give you context on how early this was: the first two-meg leased line we sold cost £200,000 a year in 1995. Two meg. Companies were struggling just to connect a local area network within their building to the outside world. We built technology so somebody could just plug in a box that had a mail server, some security, and web space all bundled together. Super easy. It was flying off the shelves. We had a tremendously successful company. But here’s the key lesson. We didn’t just sell to customers. We spent significant time in exploration mode, really asking deeper questions about what was keeping them awake at night. What’s stopping them from being successful? How do they lose against competitors? Three or four things started to come up. One was more sophisticated technology around websites. Another was blacklisting certain sites. And third on the list, almost as an afterthought, customers said: “You keep delivering us viruses.” Two things were happening. I could see the engineers, just through their body language, really itching to get to that third item. And it wasn’t the first thing on the list. It wasn’t the obvious thing. One of the founders said, “Is this a little bit like clean water? Back before critical infrastructure, how did you get clean water? You boiled it yourself. But now that’s all done centrally. The internet is the same. We have all this processing power. Since we’re responsible for delivering mail to our customers, should we be responsible for cleaning it?” We decided to back that idea. We created an alpha over a few months, then switched this technology on so we could route our customers’ traffic through this security tower we’d built. One of the engineers had put a bell on it so that every time we caught something nasty, the bell went off. When we switched it on, a shriek emitted out of the terminal. We didn’t know what it was. It was horrendous. We switched the terminal off. Then the poor engineer realized it was his fault. Every millisecond, we were catching something bad. We knew immediately that we’d hit this internet oil. This was a real gusher of a proof point. That created a course of events where we had to internalize: what do we do about this? Because every email user in the world has this problem. Is it B2B? Is it B2C? We created an entirely new company called MessageLabs. It became the first major SaaS business in Europe. We reached $150 million in annual revenue within about eight years and sold to Symantec. But it came from that process. When you’re with customers, don’t just sell your technology. Spend significant time in exploration mode, really understanding what’s going on in their minds. If you’re doing a really great job for customers, you probably have two or three businesses you could build on the back of that insider understanding. From Social Postcards to Direct Booking Economics Chris Tottman: This was around 2013, the early advent of social channels. The founders came to me with an idea in the hotel space. Wouldn’t it be great if hotel brands could use check-in and check-out moments to get user-generated content? They would provide guests with a digital postcard of their stay that guests could post on social media. My first meeting with this founder was in a beautiful London square. I like walking meetings. He was really compelling, but I didn’t like the proposition. I was thinking of the loop: I’m checking in, I’m checking out, I do this thing, I put it on social media, some random person sees it in my network. Are they likely to want to go to that destination? It felt too weak. Too far away from a transaction. But the founder was compelling. And he mentioned something intriguing: online booking agents like Booking.com and Kayak were starting to take significant percentages of booking revenue. As I walked back, I kept thinking about it. Put yourself in the position of a young entrepreneur in the hotel space. You finance the building. You spend millions fitting it out. You assemble an incredible workforce. You open up, and you haven’t even taken a dollar in revenue yet. The CAC payback must be three to four years. And then 15 to 20% of all revenue goes to a digital booking engine? There was something there. So we invited them into the office for whiteboard sessions. We mapped out the whole value chain of the industry. The journey someone goes through when booking a holiday. We looked at where time goes and where money goes. They came with analysis showing that if you’re a small hotel with no purchasing power, booking engines were taking over 30 to 40% of booking revenue. Even big chains were giving up 15 to 20%. And the numbers were getting worse every year. Then they did B2B and B2C customer research. What they found was fascinating. 65% of consumers had the hotel website open because it had better photographs, more detail. They felt more kinship with the hotel itself. But those same consumers also thought the online travel agencies (“OTA”) booking engine was cheaper. The analysis showed that wasn’t necessarily true. And hotels could dynamically price against what was being offered online. So they conceived the product: a pop-up on the hotel website showing three OTA prices alongside the hotel price, which was never more than the OTAs. A “never priced better” approach. I gave them £250,000 to build that product. We launched three months later. It went wildfire. The pent-up demand from hotels wanting to drive consumers to book direct was enormous. In the first two months, we sold to 250 to 350 hotels. Within a couple of years, we had about 1,000 at the mid-market, plus two of the eight biggest hotel chains. The technology itself wasn’t thick enough initially. There wasn’t a big enough moat. So we knew we had to drive the price down to create more demand, more buyers, and then create more sophistication in the product. But it was so interesting to see that process of mapping out the whole industry, having four or five different minds working on it, doing the analysis purely in pursuit of looking for a big enough problem, and trying to conceive a product that might solve the biggest, most pressing problem for those buyers. That’s probably a $20 million revenue business today, serving most of the biggest hotels on the planet. The Mindset That Matters Michael Goitein: Just to toss a wrench into the conversation, we got a question about product-market fit. Once you’re starting to see traction, how do you drive toward it? Chris Tottman: That’s the silver bullet question. We all argue about what product-market fit even is. It’s not something particularly stable. The hyp
