Responding to a popular request, we are now sharing transcripts of our investor podcast interviews in this new series. The following interview with Brian Jacobs, Emergence Capital was recorded in October 2014.
Brian Jacobs is General Partner, Emergence Capital, SaaS/Cloud domain experts boasting a fabulous portfolio, including solid exits like SuccessFactors, Yammer, and Veeva. He discusses his views on where cloud opportunities are likely to be at this point. While we’re in a mature market, he is still bullish on innovation.
Sramana Mitra: Silicon Valley seems like an incredibly arrogant place. Silicon Valley was actually afraid when the dot-com bubble had burst. You can actually feel the fear in the air. Against that backdrop, Emergence
Capital was founded by Brian and his two partners, Jason Green and Gordon Ritter. It was a contrarian investment thesis. It was a completely contrarian bet on this whole service-oriented software business model, which came to be known as SaaS.
Imagine an era when none of this existed and these three guys were building or raising a fund to invest in this category. That takes vision. That takes guts. I have tremendous respect for people who have vision and guts and do crazy things. Welcome Brian!
Brian Jacobs: Thank you. I’m happy to join you today. I know you’ve helped, probably, a million entrepreneurs by now.
Sramana Mitra: Let’s start with some of your overview of where you started investing in cloud computing. A lot of water has flowed under the bridge. How do you see the evolution of cloud computing? Then we’ll get to the present landscape.
Brian Jacobs: As you described, we found ourselves in a very unique situation back in the bust. The venture capital industry was paralyzed. Many of them had grown to be much too large for the markets that were available. Many of them had experimented with some crazy business models in the bubble. We’re trying to explain to their investors why they tried such unproven investments. We could see that there were some companies that were using the web technologies for business computing.
Of course, Salesforce was one of the leaders and a company that we knew well. We could see all of the advantages that came from this model. We realized that this was the new architecture. When technology goes through an architectural change, tremendous opportunities are created because it makes it very hard for the incumbents to transition to a new architecture. It’s easier for a startup to build a business than for an established company which has a big install base and lots of legacy practices that are hard to change with the new paradigm. This was a fantastic opportunity.
Our first investment was in Salesforce. We saw how well that worked and we set off to find the next Salesforce. Unfortunately, what we found is that’s a very unique company even today. There have been few companies that could really have as much success as Salesforce. Our primary thought process was, “Let’s look at the big categories of software and find a cloud company that is going to disrupt those big categories.
We did invest in companies like SuccessFactors in the human resources space. We invested in Intact in the financial services category and a number of these horizontal SaaS companies. That proved to be quite successful for us but as we know, there’re only a few of these large horizontal categories. Everybody has a sales organization. Everybody has a marketing organization. Everyone has a finance organization. Everyone has a human resources organization. When you get beyond that, there’s really not that many categories of large software where there’s an ecosystem of competitors and the opportunity to disrupt them.