The Art of SaaS Investing (with Jake Saper, Partner at Emergence Capital)

David Rosenthal (0:00)

Is duct tape in... Oh, no. Stop it, stop it.

Ben Gilbert (0:06)

It just happened over there.

David Rosenthal (0:08)

I accidentally opened one of our old episodes and it started playing really loudly.

Jake Saper (0:19)

Are we live?

David Rosenthal (0:20)

No. I mean, we can be if you want to be.

Jake Saper (0:23)

No.

Ben Gilbert (0:23)

Open Periscope if you want to be live. That's not what this is.

Jake Saper (0:25)

So do you guys want to know a super secret Zoom hack?

Ben Gilbert (0:32)

Absolutely.

Jake Saper (0:34)

So.

David Rosenthal (0:34)

We are recording everything you say.

Jake Saper (0:35)

Great, perfect.

Ben Gilbert (0:36)

Can we release this? Can our listeners know?

Jake Saper (0:38)

Yeah, absolutely. There is a feature that is basically a beautification plugin.

Ben Gilbert (0:44)

Yes, I've seen this.

Jake Saper (0:46)

And it basically blurs your face.

David Rosenthal (0:49)

Oh, nice.

Jake Saper (0:49)

To like a very unnoticeable extent, but enough to get rid of any blemishes or wrinkles. So it's basically like digital Botox. I mean, I've been doing it for-

David Rosenthal (0:59)

Should we do it now?

Jake Saper (1:00)

For years. And I think when entrepreneurs meet me first on Zoom and then meet me in person, there's a level of disappointment.

Ben Gilbert (1:07)

Touch up my appearance. Here it is.

David Rosenthal (1:09)

Where is it? Manage participants?

Jake Saper (1:10)

Yeah.

David Rosenthal (1:12)

Oh yeah.

Jake Saper (1:12)

So Ben, how do we look?

Ben Gilbert (1:14)

Touched up.

Well, this is great radio. I can tell you that much.

David Rosenthal (1:21)

So compelling.

We were talking to an entrepreneur who wants to start a men's makeup company. So this is synergy here.

Jake Saper (1:29)

Well, software may be eating his world.

David Rosenthal (1:32)

Indeed.

Ben Gilbert (1:32)

Well, listeners, we are super, super lucky to have the one, the only Jake Saper with us on the show today.

As you can tell, we decided just to launch right into it. But I'm recording from Seattle. I'm looking at David and Jake's smiling faces from the Wave Capital podcast room. It's good to see you guys.

Jake Saper (1:52)

Nice to be here.

David Rosenthal (1:55)

Great to have Jake here.

So Jake, in addition to being my classmate from a long time ago back in business school, and we had many great experiences together there, which we won't go into on the show. Jake is a partner at Emergence Capital, which, in my opinion, is the best SaaS investor, early stage SaaS investor in Silicon Valley, and we are super honored to have him on the show to talk about something that Ben and I have done, occasionally do in our current VC lives, but are by no means experts on, which is SaaS investing.

So Jake, when you joined Emergence?

Jake Saper (2:39)

2014

David Rosenthal (2:40)

2014, right. Almost five years, wow. And you worked at Klein & Perkins before that, our summer in business school.

Before that, you did consulting and worked in energy, right?

Jake Saper (2:52)

All true.

David Rosenthal (2:53)

All true, all true. And Emergence, you don't have to just take my word for it that they're really great. They were early investors in companies like Salesforce, Veeva Systems, SuccessFactors, Box, Zoom, Gusto, and Yammer.

They've had quite a number of successes and many more to come. Most importantly though, Jake played a lead role in the Silicon Valley sensation, Soma the Musical. So if we have time, we might get into that too.

Jake Saper (3:25)

That's the most important thing of all.

David Rosenthal (3:32)

Let's start with my first question for you, which I sort of know the answer to, but our audience doesn't. How did you guys at Emergence decide to only focus on SaaS?

It was not obvious when the firm started.

Ben Gilbert (3:48)

And even on top of that too, let's start from square zero. What is SaaS and what is not SaaS?

Jake Saper (3:55)

Sure. Well, that's actually interestingly a harder question these days to answer. So very technically speaking, SaaS obviously stands for software as a service and it's the idea that you're delivering software on a continuous basis versus on more of an upfront license purchased basis. This has been conflated with cloud in the sense that you can deploy SaaS is most commonly deployed in the cloud. The reality is SaaS is a business model and cloud is a deployment methodology. And so those two things are often conflated, but the reality is you can have a SaaS business model for an on-prem product and you can have a cloud.