The Scoop
Startup Tome, which launched in 2022 with a buzzy generative AI presentation tool, is restructuring the company to focus on its paying customers who generate revenue: Sales teams that use its product to create customized decks in a fraction of their usual timeframe.
The overhaul will mean laying off about 20% of its 59 employees, including members of the consumer go-to-market team and product developers, who paid more attention to users who used Tome products for free. They will be replaced with an enterprise sales staff to target potential new clients, as well as developers focused on business-to-business software products, Tome Co-founder and CEO Keith Peiris told Semafor in an exclusive interview.
“I think the real business is identifying those couple thousand sales and marketing leaders using the product and then selling them something really sophisticated for their whole company,” Peiris said.
The change highlights how the business models of the AI boom differ from the Web 2.0 era, when eyeballs and advertising were the two most important metrics of success. Tome, whose founders come from Meta, originally envisioned the product as a tool that attracted professionals and consumers. Its 20 million users, most of whom don’t pay, have created “Tomes” for a wide variety of purposes, from dinner party invitations, to post-surgery medical instructions, to startup pitch decks.
But the company noticed recently that sales organizations were willing to pay for added features. With its latest focus, Tome has been rolling out new capabilities specific to the sales industry, going beyond just the visual and into the content of sales pitches with tasks like research and customer personalization.
For instance, Tome is working on an AI tool that can scrape U.S. Securities and Exchange Commission filings for valuable information that could be useful in sales pitches to public companies. It also connects to Salesforce data and can mine internal sales call transcripts with past customers.
Peiris consulted on the change with one of the company’s early backers, former PayPal executive and LinkedIn co-founder Reid Hoffman, who advised Tome that a more narrow focus, at least in the short term, could help the company generate revenue while also leaving intact the possibility of broader ambitions. “It could very well be that you go back to ‘it’s the decision making persuasion tool for everybody’ at some X time down the road,” Hoffman told Semafor. “But this is the way you get there by being amazing for these people.”
Hoffman said he went through something similar at LinkedIn, when the company originally focused on individuals but the real customers turned out to be companies. “It increases my view of the likelihood and odds of success, because you start with something that is focused and intense, do really well at it, and then depending on how well you succeeded, you can broaden out from that,” he said.
Peiris said these new features and the more bespoke nature of the business required different skill sets than those belonging to the more consumer-focused product developers Tome initially hired.
“I grew up with the Facebooks and Instagrams of the world, and the way that we build products there is a little bit different,” Peiris said. The new focus will require software that’s “going to be a lot more information-processing oriented versus aesthetic oriented,” he said. “So we’re going to be sadly parting ways with a talented product management team and rebuilding that from scratch.”
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Tome has been testing out its new product road map with a handful of pilot customers, including the authentication startup Stytch. Pete Prowitt, Stytch’s head of revenue, said he first came across Tome when a prospective employee used it in a mock sales exercise. “At the time, I didn’t get it,” Prowitt said in an interview.
A few months into his job at Stytch, the same employee kept using Tome to make sales decks, which were more effective and took a fraction of the time to make than the ones Prowitt spent months designing.
Tome recently did a presentation on the new features for Stytch’s sales team. It showed how from a single prompt, Tome could generate a sales deck tailored to specific customers, including which competitors that customer is currently using. “It was like a pin drop kind of demo because it shows so well. It’s so cool,” Prowitt said.
Reed’s view
Tome is an interesting startup to watch if you want to see a microcosm of the AI boom right now, or perhaps foreshadowing of what’s to come.
The social media era was defined by startups that scaled to tens of millions of users before they even started thinking about revenue. The business models of companies founded around a generative AI-enabled tool are still hazy. The best AI models, like Anthropic’s Claude 3 Opus or OpenAI’s GPT-4, are still relatively expensive to run.
At least for now, most AI startups will need to find some revenue source or risk cutting their runways dangerously short. My guess is that many will need to find some lucrative but somewhat narrow customer base that is willing to spend money. (In time, the infrastructure will catch up and we’ll go back to the days of relatively inexpensive cloud costs for hyper growth startups).
The other reason Tome is interesting is because of who’s invested in it. It was conceived with the help of Hoffman, who’s become one of the great thinkers on startup strategy.
I asked him whether he thought people might look at Tome laying off some employees as a sign that the AI boom might be about to go bust. It was only a couple of weeks ago that Inflection AI, a company Hoffman helped found, was essentially subsumed by Microsoft. “People want either the ‘conquers the world’ or the ‘going down in flames’ story,” he said. Tome is a good example of what is going to happen over the next year, as companies look for product-market fits.
Room for Disagreement
The Information, citing anonymous sources, reported in an article last week that it was Peiris and co-founder Henri Liriani who wanted to target startup founders and freelancers as customers, which faced pushback from some staff who thought enterprise users were the best focus.
“Tome, like a number of other AI startups, has struggled with internal divisions over the best target market for its product, said current and former employees,” The Information reported. “While some staffers believed that a presentation tool would be best-suited for enterprise users like salespeople and marketers who made presentations on a daily basis, Tome’s founders initially wanted to emphasize selling to individuals like startup founders and freelancers.”
Notable
- The tech industry was known for many years as the place of constant growth. But lately, tech companies have gotten comfortable with laying people off when it makes financial sense. Reuters reported that the tech industry is leading other sectors in layoff announcements, with 42,442 this year.