With the venture industry increasingly dominated by a handful of multibillion dollar powerhouses, smaller boutique firms have arisen to focus on particular startup sectors or stages. In this week's edition of Elevator Pitch, we meet the co-founder of a firm with a particularly specialized investment strategy.
San Mateo's Emergence Capital Partners focuses not just on software, not just on enterprise software, but on enterprise software delivered over the cloud. Software as a service, or SaaS, is one of the most popular catchphrases in tech investing, and Brian Jacobs and his partners have ridden the wave to big-ticket investments in companies like Salesforce.com and SuccessFactors.
Q: How'd you get into this racket?
A: I started working for a VC firm (Security Pacific Venture Capital) while I was in business school at Stanford. I was planning to start a technology company when I graduated, but I wanted to learn the inside scoop on how to get funded.
One thing led to another, and before I knew what happened I had spent 10-plus years funding startups. I finally did my own startup when I co-founded Emergence Capital in 2003.
Q: What do you like about venture capital?
A: We work with people who intend to change the world. Every day we meet new people with new ideas. It doesn't always work, but it's very gratifying to partner with passionate people who are betting it all to make a difference.
Q: What kinds of pitches are you looking for now?
A: We like early stage companies that have achieved product/market fit without spending a lot of money.
Q: What's the biggest mistake entrepreneurs make?
A: Many entrepreneurs get swept up by the fundraising game. It's tempting to think that raising a big round means you have succeeded. In many cases, a company founder and all of his or her shareholders will do better by raising less money, not more.
Q: What's the next big thing going to be?
A: Mobile business applications will be even bigger than Web applications, because virtually all workers can access the cloud from their mobile device. Many large industries, like health care, retail and transportation, employ workers who don't sit at desks. Mobile business applications are the key to bringing these workers into the cloud.
Q: Emergence only invests in SaaS companies -- that seems like an incredibly specialized niche. How'd you hit on that?
A: Over the last 10 years, the largest category of venture capital investment has been software. Software as a service is disrupting and enlarging the market. SaaS may have seemed like a niche in 2003, but today it is one of the most exciting sectors for entrepreneurs and venture investors.
SaaS dramatically lowers the price of using software, and we know that when prices decline, market size increases because more customers can afford to buy. Today, customers are equipping all of their workers with cloud-based software from Emergence portfolio companies such as Salesforce, SuccessFactors, Yammer and Box.
Q: Are there really enough startups focused on cloud-based enterprise software to keep you and your partners fed?
A: Innovation leads to more innovation. The cloud enables us to rethink how business is run, and we see new ideas every day.
Since we founded Emergence, each year we have seen an increasing number of exciting opportunities focused on cloud-based enterprise software. And we believe that trend is accelerating.
Contact Peter Delevett at 408-271-3638. Follow him at Twitter.com/mercwiretap.