State-of-SaaS and Deep Collaboration (with Jake Saper from Emergence Capital)
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Hello, Acquired Limited Partners, and welcome to the latest episode of the LP Show. We have repeat superstar guest Jake Saper, partner at Emergence Capital, with us today. We're going to talk deep collaboration. We're going to talk enterprise SaaS. We're going to talk a lot of things. But before we do...

Just want to thank Jake. Wait, I think we got an emergency update, though, since the last pod. Jake is no longer a partner at Emergence. He is general partner at Emergence. Emergency update. Big congratulations. Thank you. Thank you. Get that party parrot going. That's right. Thank you. Jake, I think we did your background last time, so you can do it yourself this time. Give us your quick bio. So you're a general partner at Emergence. Tell us about before. Tell us about some of the companies you're involved with, and then we'll dive in.

Cool. So I'm from Austin, Texas, which is super relevant today because we're recording this podcast in the week that Texas has been battered by a terrible winter storm and had a lot of issues recovering. And my thoughts are with folks there. I did consulting out of college and I did actually a lot of energy consulting, which is relevant to what's going on in the world. I then did a startup that was developing big solar power plants in India and Africa, which was a wild, wild ride.

I came back to the States and met David in California. I did an MBA and an environmental sciences degree out here. And then transitioned to venture. My first gig was at Kleiner Perkins and their Green Growth Fund. And I joined Emergence about seven years ago and have been here ever since. Gosh, we're getting old. Seven years. We are getting old. We are getting old. And Jake, what are some of the companies that Emergence has been involved with and then you personally?

Yeah, yeah, sure. I guess super, super high-level, quick thing on emergence. The most important thing to know about our firm is that we're a very focused firm, and we're focused both in terms of what we invest in and also in terms of how we invest. So on the what side of things, all we do is B2B. It's all we've ever done. It's all we ever will do. The very first thesis that the firm ever had when the firm was started was that software would move from on-premise to the cloud. That thesis has obviously played out nicely. So the very first bet the firm made in 2003 was in Salesforce. Yeah, huge if true.

Huge of true. The true part has been great. And we've been, you know, incredible beneficiaries of it. I will actually talk about our most recent thesis and how there's been some negative implications, I think, of the rise of these applications. And we're now trying to address them. A little teaser for perhaps what's to come. But we started with horizontal SaaS investing. Second big thesis was this whole concept of building software for a specific end user in a specific industry is going to be a big deal.

People call it vertical SaaS. We call it industry cloud. And we backed Viva Systems back in the mid to late 2000s doing that. You guys were the only investor, right? Pre-IPO, just a series A straight to IPO. We were. Times are different. Yeah, times are different. They raised six million bucks from us and they spent about three of it. And it's been an amazing journey ever since. I was actually looking back, and this is relevant to kind of what's changed even in the time that we've had this conversation a year and a half ago to now.

They went public at about, I think it was a $3 billion valuation roughly around there in 2013. When we were talking in 2019, I think they were at about a $17 billion valuation. They're now at a $48 billion valuation. I'll kind of share my thoughts on what that means for the broader market in a bit. Catch us up on other more recent emergence investment Zoom. I hear that's done well. Right.

Yes. So Zoom is a video conferencing platform that has become an important part of how the way the world works. We were the first institutional investors in Zoom. We invested in 2014 and have been incredibly lucky to be on the journey with Eric and his team and frankly, incredibly humbled by what he's built and by him. I mean, the man is just incredible.

an unbelievably humble and kind human. And we are so, so lucky to get to partner with someone like that. And just to connect an interesting dot, you just mentioned that Viva only spent three of the six million that they raised. Isn't there a similar story with Zoom? There is, yeah.

We invested $20 million in Zoom. It was the largest check we'd ever written, and they never spent it. So when we invested, they were profitable and they stayed profitable. They did raise one more round of capital before they went public, but they didn't spend that either. They've been profitable almost since founding.

You've led some great investments over the last couple of years at Emergence. Give us a quick rundown of the Saper portfolio currently. The Saper portfolio, sure. I am lucky to work with a bunch of great founders. So a few of them include a guy named Rick Nucci, who is the CEO of Guru. Guru is a knowledge management platform. There's also a company that we just invested in that we haven't yet formally announced, but may be announced by the time we launch this podcast called Maze, which I'm excited to talk to you guys about.

You wrote about it in your deep collaboration thesis. I did. Were you working on the investment while you were writing the memo or did it come out of writing the post? Honestly, it was an iterative process. Like in talking to the CEO, he helped inform the development of this thesis. The reality is like that's the way we develop theses at Emergence, which is

We try to think about where the world is headed, but a lot of it comes down to spending a tremendous amount of time with our founders and understanding from them and from much more kind of like ground level perspective, what is going on in this business? What are some phenomenon that are applicable not just to this business, but to other businesses more broadly? I mentioned there's two ways we're focused as a firm. The first is in terms of what we invest in. The second is in terms of how we invest. On the how side of things, we make very, very few investments. We're very, very focused on

And that allows us to spend a ton of time with our founders, which is really, really important to us. What, you guys do like six, seven a year as a firm? Six, seven a year. And there's six partners here. And so, yeah, each of us on average makes about one investment per year, which means that we have the bandwidth to go deep and try to really help our portfolio company. So it's very much a go big or go home type strategy and allows you to really understand the

the businesses that you're involved with. And also, frankly, take out some of these insights to say, hey, back to a thesis I talked about in the last podcast around this concept of coaching networks.

We understood that in Textio, which is focused on augmented writing initially in the HR space, there are some analogies that are applicable to places like Guru, which is knowledge management. And trying to understand the ways in which those things may be, you'll be able to tie the dots together, has been an important part of our thesis development work. And what does Maze do?

What Maze does is democratize the product research process. And so specifically what I mean by that is think about what Figma did for design. Before Figma, there was Adobe focused on designers, building software for designers. And there were obviously others as well, but just use Adobe as the giant gorilla, but

Figma's insight or unlock was to say, let's not focus on designers, let's focus on design and build a product that allows lots of people, everyone who's involved in the design process to work on and collaborate on a design in one place.

That core unlock brought lots more people into the design process. It helped to iterate much more quickly. Arguably, the products that are being produced are better. Maze is trying to do the same thing in product research. It used to be that product research was either done by user researchers that in some cases would actually get people to come in behind a two-way mirror and watch them

understand what they're doing, try to record, et cetera. I attended these sessions at Microsoft. Like I was in the booth watching people trying to hunt and peck and find the icon on Office for iPad. Yeah. And you get like six data points. It takes a lot of time. It's expensive. And you're like, well, of these six people, how many liked your product? It's not a scalable process. And you can imagine it's even less scalable in a world of distributed work.

So what Maze is trying to do is to make that entirely scalable and also open to not just user researchers, but to PMs and to product marketers and to anyone else that touches the product research process. And so basically what they have is a product that plugs into all of the prototyping tools, the Figma's and the Adobe's and everyone else in the world, and allows you to turn those into what are called mazes. You enable a user to go through a prototype and understand quantitatively what's going on.

You also have kind of survey-like functionality similar to Typeform where you can also ask questions and kind of gather data that way. And then it all comes out in this beautifully quantitative report that is very specifically structured to allow for collaboration.

And this is where kind of deep collaboration concept comes in. Listeners, you should know that the reason why we're getting Jake to sort of tell us all this so early isn't just like, hey, Jake, come promote your portfolio companies. It's like this all strings together in a pretty interesting thesis that deep collaboration that we're diving into today. Yeah.

Yeah, exactly. So happy to dive deeper on that now. Yeah, let's just do it. Let's go. Okay. Let me set the context for it. We went really deep on maze, but let me pull out and explain where I think this fits in in the history of enterprise software. So we'll go super far back out and then we can dive back in. Oh, it's like an acquired episode. It's like an acquired episode. So okay, this is the research section. So there's two things I think that are driving this concept and I will define it in just a second. I realize I haven't properly defined it yet.

The first thing that's happened is that there's been a massive proliferation of both productivity applications and collaboration applications. And we are in part to blame for that. We funded a lot of these companies and a lot of our competitors have as well. And there's now just a tremendous amount of places that you go to get work done and tremendous amount of places you go to talk about the work that you're doing. That's created a lot of information fragmentation. You're talking about the difference between...

PowerPoint or Excel and Slack. Yeah, as an example. You do the work in one thing, then you talk about it somewhere else. That's a great example. Or Salesforce and Slack before the acquisition. Or wherever the place is that you do the work. You're in workday, you're working on some comp thing, and then you go to Zoom to have the conversation with someone else about it. Or you call them on the phone, or you WhatsApp, or you text, or you Slack, or you Line, or you whatever. Right. Productivity and communication have become bifurcated. They've become bifurcated, increasingly at odds with one another.

And the implication of that is that it's really hard to be in flow, right? This concept, like I'm a musician and like I get in my flow state when I'm generally like in music worlds. You can also be in flow state while you're working. And if you're constantly being interrupted and having to go back and forth, like you did this thing here and then you got to go tell somebody about it here and you forgot exactly which channel you used to tell this person about. You want to go see what this other person said, but that was over a phone call. It's really hard to be in flow and actually get work done.

The second thing that's happened, not only has there been a proliferation, but the second thing that's happened, obviously, is that we've had this very sudden and abrupt shift to remote work. And before, collaboration software really existed to help transmit information. It was almost more communication. It was like task updates. It was much lighter weight because you did the deeper, harder collaboration in person. Right. So you'd use your collaboration tools to exchange information online.

But when you're actually going to try to build something together, whatever that thing is, you would default to doing that harder build in person. And so the tooling didn't actually need to be as robust as I think it now needs to be as a result of that change. Not to mention, the expectations have just changed. I mean, as soon as Google introduced live co-authoring in Google Docs, there was this notion of... I remember being at Microsoft working on Word at this point and being like, wait, so...

is that everyone's expectation now that we're not trading versions back and forth, but people need to be able to do work and collaborate at the same time. And obviously this is over a decade ago. So this is just like a hint of what's to come. But even aside from remote work, it did feel like as the tech stacks got more and more sophisticated and we were able to do things like live co-authoring, you sort of opened the door for, okay, like, is everyone to

expecting to be able to collaborate or communicate in the medium where they're doing their work everywhere now and how fast will that world arrive?

And then there's a big question around, you know, when you have a platform like Google Docs or even, you know, O365, where you are kind of trying to pair together collaboration and productivity in one place, you still don't necessarily know where to go to collaborate and work on a specific task because those are generic platforms by definition. Those are platforms that exist to do everything, not to do a specific job.

And so that actually leads me to the definition of deep collaboration. So here's how we are defining deep collaboration, which is that deep collaboration refers to software, which combines productivity and collaboration in one place to get a specific job done. So the combination, the embedding of collaboration within productivity is a critical part of it. And the job to be done concept is a critical part of it. But Jake, vertical markets are

smaller than horizontal markets. What do you mean? That's right. Come on. These are smaller opportunities that people chasing if it's not a big, broad, horizontal platform. Yes, that's right. And as you probably recall, the initial market size of Vivo was 500 million. So the good news is great entrepreneurs find ways to make markets bigger, which I think is probably what you're alluding to. Yep. We have a preference to back, you know, focused founders, you know, starting in kind of a narrower spot and then expanding from there.

But I think this concept of switching from persona-based software to job-to-be-done-based software is a really important one that is only just now kind of getting its due. Obviously, the job-to-be-done framework has been around for a while. Clay Christensen has very famously talked about it a bunch. But in terms of people building software, I think we still –

Think about building software for the buyer and the user being kind of the same group, if that makes sense. So it's like, yeah, I'm building software for FP&A. And so I'm going to build software for the FP&A user. FP&A is going to buy it and that's going to be great. Or I'm going to build software for lawyers, for the GC. GC will be the people using it. And that's just what's going to happen. The great challenge with that, obviously, is that the best work gets done cross-functionally.

Right. Like if you're an FP&A person, you have to talk to sales ops and you have to talk to like a bunch of different other places to to get information and share information to actually get to a great plan that everyone's on board with. If you're a GC, a general counsel, you have to collaborate with all the other functions that are doing contracts or anything else in the organization to actually get to a great outcome.

And the idea that we build software with just the lens of the functional persona in mind really limits the ability to collaborate. And that's why this concept of JavaScript is a core part of the deep collaboration conceit, if you will.

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to me as a relative outsider to the space, it feels like Figma really was the first company that knowingly or not proved this thesis. Like Adobe software was for designers. Figma is for design. Everybody in an organization uses Figma. Not everybody in an organization uses Photoshop. I think you're right, David. My own view is that Figma is the first like kind of breakout company to demonstrate the possibility of this. What we've been describing internally is we call this dropping the ER concept.

And what that means is basically going from focusing on designer to focusing on design, going from focus on user researchers to research, going from, you know, whatever the thing that you were doing, dropping the persona mentality and thinking about the job to be done.

And it really requires building the software with a new lens. First of all, you have to make it much easier to use because you want lots of different functions to be able to use it. You, by definition, need collaboration built in. It wouldn't work if collaboration was scattered a bunch because you're already trying to be cross-functional within the productivity application. And there's a bunch of business model implications of this that we're just now starting to think through, things like pricing.

You want to price the software differently. So if you were pitching this to me as a venture capitalist, not this thesis, but an idea predicated on this thesis, one piece of pushback I might have is, oh my God, this go-to-market strategy is going to be a nightmare. Who's your buyer? And do you have to get approval from three different people to buy? Is this a complicated sale? In the worst cases, yes. But I imagine in the best cases that you actually use all that internal enterprise momentum to get a deal done with a company. So how do you think about...

optimal ways to do go-to-market strategy where in deep collaboration and working cross-functionally, that's actually like an asset for the company making the software in their go-to-market rather than a hindrance.

Oh man, Ben, you're getting to the really good level two, level three questions here. You're clearly a talented venture capitalist. It sounds like I'm being sarcastic, but I'm actually like, you're getting to really good questions that, candidly, we're still trying to figure out. We're still pretty early in this deep collaboration thing. Figma, I think, as we said, is the best example. There's a major acquisition that took place or is taking place that we can talk about, I think, as an example of this as well. And there's a bunch of startups, but it's still early days, to be clear. Yeah.

My hypothesis, and we've invested in a few of these companies, so I can tell you just from having learned from their go-to-market models, is that the buyer will be the persona who feels the most pain

from this task not being done well. That being said, it's almost like there's this kind of account-based marketing approach to figure out who are all the various people that care about this. So I'll give you an example of another company that we haven't yet talked about, I don't think, called Ironclad. Ironclad is in the legal contracting space. And I think it's another great example of a deep collaboration company

They basically provide software that allows companies to draft and collaborate on contracts internally and soon externally with counterparties as well and collaborate with counterparties externally. Obviously, the general counsel is a really important persona here because they are the keeper of the contracts internally.

But if you're a salesperson and you're trying to get a contract done quickly and in the pre-Ironclad world, you did a lot of slacking or emailing or texting or bugging your lawyer to get back to you to say, please approve this. I want to get this deal done before the quarter closes, etc. But now you have this software that actually passes down the authority to allow you to do the contract within certain parameters yourself.

The salespeople are going to love us. In fact, like when I was doing diligence on ironclad, I talked to one of their big customers and one of my favorite quotes was actually from a sales enablement person who said, ironclad is the most effective piece of sales enablement software we bought in the past three years. This wasn't the buyer. Ultimately, the buyer that the person was paying for it was the GC. But because it was speeding up sales deals because of this collaboration, the cross-functional collaboration. That's such a salient example. Like,

People in the sales are like their comp depends on this. And like if they can do collaboration through this, they're probably willing to do whatever to get the money, you know, and there was no way to do that before. They're highly incentivized to use the hell out of us and they do. So in terms of usage metrics, which is another way to think about how to track the growth and success of these deep collaboration companies with an ironclad, we have an order of magnitude more usage outside of the general counsel function than we do inside it. Yeah.

And part of that is because there's just a lot more people right outside of the general counsel organization. But what it tells you is that this thing has really become kind of a cross-functional collaboration tool around a specific job to be done.

And that's like the vision that we're trying to think through with other... Yeah, pre-Ironclad, nobody outside of legal was banging on contracts. That's right. That's right. And extending this metaphor back to the company Maze that we mentioned before in the product research space, pre-Maze, and Maze is still relatively early in its journey, user research was either done, again, by a user researcher. Sometimes the PM would do it, but in most cases it actually just didn't get done. Basically, PM would come up with an idea, and

and say like, you know, I think this is great. And maybe they call some friends and be like, what do you think? Oh, okay. I think this is cool. And then they would get some engineers to start building prototypes. Engineers would build, and then you kind of get to an MVP and then you get it out, something you've actually built out into the world. And then you have to wait to that moment to actually get feedback.

But think about the countless engineering hours have been wasted doing that because you're not enabling other people, like lots of people to test really easily and collaborate on the results. Right. Or the big company example of this, again, going back to my Microsoft days is like I was never setting up the user research studies. Number one, I'm not a practitioner. So like, I don't know the right way to do it.

Number two, my job function at Microsoft as a PM wasn't one that gave me access to our pool of people who would come in to test stuff. So if I wanted to test something, I would have to go to the user researcher and say, hey, can you bandwidth to like spend a couple of weeks and do a study on this thing? And then I could, of course, participate, but they had to own the process. I don't know that much about the company, but I have to imagine what they're enabling is people to sort of directly do user research themselves. And obviously not like

put the user researcher out of work and I think there's a sort of like negative connotation there but more like enable them to increase their bandwidth by letting other people commission the stuff and get it done you know faster more directly the same way that like ironclad doesn't put a GC out of

work. It just makes the GC way more effective at their job and spread their own expertise through us, the organization, the same concept of the user researcher around maze. Like in talking about your user researchers, one of the key frustrations they have is they do all this work in a black box and they put it all together in like a PowerPoint and they try to get people to read it, but people don't even necessarily adjust it. And they're frustrated because they've done all this work and the PM goes and does whatever they want. Anyway, people, when they take ownership over something, when they actually touch it themselves and create, um,

That's when it gets deeply integrated into the process. And if you actually give the PM the ability to go out and actually design a survey and prototypes and what have you and actually send those out to users, get feedback back, and then allow the user researcher to comment and ask questions and perhaps amend the next version of the maze you do, and you have the product marketer come in and say, how should we think about pricing this? Maybe for the next version, let's add a pricing page, get feedback there. Then you're actually able to iterate on this kind of cohesive product building process versus doing it in silos. Right.

One place that my mind kind of goes is, wait, if you have to build all these additional views to the same sort of source of truth data in the software for the non-designer, for the non-general counsel, and there's not one more, there's like five more for all the different people with job functions. I'm thinking about a company I'm involved with iteratively. Of course, they have the iteratively software that comes down through your IDE and the engineer interacts with, and then there's the

dashboard that the PM uses to define the tracking events. And then there's the analyst view where they actually can see sort of like the output and the real-time data that's coming through. So I

Does this just raise the bar? Is this software harder to build if it has deep collaboration because it requires more code, requires more views, requires more designer time to understand all the different views into the software? That's such a good question, but God, you are, I'm serious when I say that you're asking such good questions. I think there are three different ways you can build this type of software. Two of them leverage core infrastructure from other places. And then the third approach is what we're calling full stack native.

I'll start with full stack native because it's easiest to understand. Figma, I would argue, is full stack native. Now, they did leverage WebGL as a really important kind of technology enabler to build what they needed to build. But Figma created the productivity software themselves, meaning they rebuilt or they built from scratch a design tool and all the collaboration functionality they built themselves as well.

So they didn't take Adobe XD or Photoshop or anything else as the core productivity tool and then add collaboration around it. They said, we're going to do the whole thing ourselves. So kind of full stack native. Now, that term I realize is overly broad because I'm sure that they've used other people's code and other things in open source to do this. But ultimately, the two core elements of productivity and collaboration, they built themselves.

Naturally, the other two ways to think about this, as you can imagine, are companies that leverage existing communication infrastructure and build job-specific productivity around it, and then companies that leverage existing productivity infrastructure and then add collaboration functionality around it. So Ironclad would be an example of the latter. Ironclad is built around Microsoft Word.

So Ironclad came to the belief that lawyers love Microsoft Word. It's pushing a rock up a hill to try to get them into some... Try it from their cold, dead fingers. Yeah, exactly. Like trying to get them to use this new whiz-bang word processor that they've built is, you know, a step too far. Even trying to get them to use like Google Docs, that's just a step too far because this is just how lawyers work, at least, you know, for the foreseeable future.

The CEO, Jason, was a lawyer himself, so kind of had that empathy as he was building this. And so they built it around Microsoft Word, and they did two really important things. The first thing they did was they added job-to-be-done specific productivity functionality around the Word website.

So there's words obviously not built for contracting in particular. So they built a bunch of stuff around it. And then they added a bunch of collaboration stuff around it. They added like, you know, the ability to push down certain approvals and permissions to certain types of people, allowing people to add mention and really deep commenting. And now they're moving into, and this is where the business I think gets like massive if they can succeed in doing it, external collaboration. Right.

where you actually can collaborate with your counterparty in the same document. You can see all the history, so you don't have to go back to the random phone call and the text message and the email and the whatever. These red lines are diffed off of two turns of the docs ago, not one turn of the docs ago, and I don't understand what changed. Imagine if you had job-to-be-done built software that had all the productivity and all the history of collaboration in one place. What a better experience it would be to do contracts.

So that's the vision for that. That is a good example of this type of software I'm describing here that's leveraging existing productivity infrastructure to build deep cloud. And then the last category are companies that leverage existing communication infrastructure and then build job-to-be-done specific productivity around it.

So there's a company that we recently invested in that is kind of an example of that category called ClassEDU. And what Class is, is a virtual classroom built around Zoom's collaboration functionality. Oh, is it one of the early Zaps, like with their new app platform? Yes. And they've rebranded it to Zoom Apps. It turns out Zaps was less popular. But not to mention Taken. Yeah. Yeah, yeah.

Not to go too deep into the Zoom stuff, although I'm happy to if you guys want. There's two ways you can build around Zoom. You can build a Zoom app, which is something that sits inside of Zoom, or you can build on Zoom's SDK, which is pulling Zoom's infrastructure into your own application.

There's actually great examples of both within the deep cloud space. So on the SDK side of things, ClassEDU is taking the Zoom SDK. So you click into the class application, not to the Zoom application. It's built around Zoom. And so you get a lot of the benefits of that natively and you have your account and everything else.

But it's a virtual classroom environment. It has all the jobs to be done specific functionality you need there around attendance and quizzes and you know all the things that are relevant to teachers that they're kind of bootlegging today and today My understanding is that a lot of teachers are using google classroom For the productivity side of things to keep track of assignments and all the rest of it And then they're using zoom to do the collaboration side of it is similar story, right like

It is, but the reason why it doesn't fit in this category is it's not job-to-be-done specific. That's kind of more of a horizontal play. But another example of this would be actually a company from High Alpha. Ben, our friend's out there. There's a company called Luma, which is building a Zoom application on top of Zoom. And the job-to-be-done they're trying to do is to help people interview more effectively and also help people collaborate cross-functionally in the interview process more effectively. Okay.

So the idea being that, you know, you interview today and, you know, I talk to you, I talk to David, David interviews me, and then I go and repeat the same thing to Ben and the same thing to Tiffany and the same thing to all the people I'm meeting through the process. It's a bad experience for the candidate, bad experience for the company. Like the way we do this at Pioneer Square Labs is like, we're going to interview over Zoom because we're all remote right now. And then we're all going to go into Greenhouse to enter our feedback. And like the place where the interview is happening, the productivity is completely disconnected from the place where the collaboration is happening.

And you can imagine that the feedback you're putting into Greenhouse may not be the world's best and most comprehensive feedback because it's not capturing the granular sensor data that it would if it were in Zoom. Imagine if you could actually flag the 30 seconds of the interview you thought that were most relevant, you want to make sure David listened to before he interviewed me.

Imagine if there was a list of questions that, you know, David was supposed to cover. David only covered four of them. And there was this big outstanding fifth question that he was supposed to, he didn't cover. Stafford realizes that that wasn't talked about because it has NLP built in and then tells Ben, this is the first thing you have to ask for and allows you guys to collaborate more effectively and ultimately, hopefully reduces bias in hiring. Because if you actually have the snippets from the conversations, you can go back and David says, you know, Jake seems a little shifty.

And then, you know, Ben's like, I don't know. I kind of liked him. I don't know what you're talking about. And then you could go back and both look at it and hopefully reduce a bit of bias in the hiring process. That happens all the time, first of all. This brings up a similar thing to what you talked about last time you were on the show, which is machine learning enables network effects for the first time in the enterprise in a way that network effects was only sort of available to the Facebooks and Twitters of the world before. And what I'm sort of thinking of here is

We've all sort of come to realize by now the scarce resource in machine learning is not the algorithms, but the data. And so if you only had the set of data of productivity or you only had that set of data of collaboration, machine learning can only be so useful. Like if I'm going to try and run ML on my feedback in greenhouse on an interview, like it just doesn't have the data of what questions didn't get asked. And so now that you have a more comprehensive data set, it can be sort of more useful applications.

Absolutely. And to extend that train of thinking to one next level, machine learning is only as good as the relevance of the data that you have in your data set. And the challenge with generic tools, be they productivity or collaboration, is that there's a lot of irrelevant data within. But if you bound to a specific job to be done, you need a smaller data set to get quality insights from the machine.

So think about, you know, the choruses and gongs of the world that are doing this in kind of the sales domain. Because they've chosen to focus on the sales conversation, they're gathering tremendous insight on the way those conversations take place and, you know, tying it back to the system of record and understanding, did the deal close or not? And the ability, for example, of course, to do these coaching interventions is really amazing, right?

But if you think about something like Luma, which has similar infrastructure in that they're built around Zoom, listening to the conversation, but it's a very different job to be done. The types of insights that the machine will be able to draw are going to be much more relevant and much better than if it was just a generic, we listen to all conversations in Zoom and give insight type thing. I like it. It's another reason why we have a bias towards being focused. The more focused you are, the more effective the ML can be.

There is a really important overarching question to this job to be done framework and frankly, the deep collaboration framework that is still an open one that we're trying to get sharper around, which is where does the job start and where does the job stop? Let's take Ironclad, for example. So we're doing legal contracting here.

But there's all sorts of stuff in and around legal contracting, right? There's actually like the doc signature part of the legal contracting, which is kind of the very end process. There's the procurement part, which is kind of around that general space as well. So like, where does the process start and stop? And I think that's kind of a moving target. And for each company, you know, our bias is start narrowly, define the job really narrowly.

And then the expansion that you earn the right to do over time is into each adjacency, which is why I'm eating more and more of this job. Now, eventually there'll be a logical place you stop because you become too generic and you kind of have the downsides that we're talking about with being too generic. There's a very logical expansion path for a deep collaboration company in terms of expanding that job to be done, as well as obviously expanding across the personas in the organization.

Anything you want to touch on in deep collaboration right now before getting into a little bit more of a broad discussion of the state of SaaS startups? And I'm sure we'll circle back here. It's still early days in this deep cloud stuff. We're still figuring it out. I think lots of people are still figuring it out. I guess that maybe the last thing that we haven't talked about that's probably worth mentioning here is that I believe that the Salesforce acquisition of Slack is

is in many ways the consummation of this idea. Now, whether or not they're able to pull it off is going to be a really important question. But if you think about that's the bringing together of a core productivity set of tools and a core collaboration platform.

And I think part of the reason why the decision was made to make the acquisition was that Salesforce realized that an increasing amount of the job to be done of selling a product was not taking place in Salesforce. All of our portfolio companies have channels set up for each deal that they're prosecuting. It's getting relegated to just be a dumber and dumber database and all the rich applications sit on top of it. And it's a bad experience. Setting aside if you're being a strategist for Salesforce or Slack or anyone else, it's a bad experience for the user.

If you're a sales rep and you've got to go into Salesforce to update your record and track progress of the deal, but then you're actually talking about it in a completely different platform with your team, and then you actually may be using Slack Connect to talk to your customer directly within Slack, but all that's not being properly captured within Salesforce. There are tools that are kind of connective tissue there, but the reality is it should all be one thing.

To me, and again, who knows if the integration is going to actually work out the way this is envisioned, but if the integration actually works out well, I think this is a brilliant move because it becomes a deep collaboration, perhaps the largest deep collaboration platform in the world.

You have several theses at Emergence that you're prosecuting at any one given time. It's not like you're only looking at deep collaboration. Just to repeat it, we have three priority themes at any given time. And when we want to add another one, we have to kill another one. So we're trying to stay focused on having three. To be clear, deep collaboration is not yet a priority theme.

we're still kind of building the conviction internally to be able to elevate it to say, yeah, we think this has a lot of steam and here's the one that we're not going to focus on as much. So you're kind of getting, you know, how the sausage is being made right now. We're still figuring this stuff out, but like I have a lot of excitement around it and think there's potential.

I love it. What are the current three priority themes? So the first one is still industry cloud, this vertical SaaS concept that continues to really dominate. The second is the deskless workforce and the fact that 80% of the world doesn't do their work at a desk, but 95% of the software that's been built for workers is built for desk-bound workers. So it's

a crazy mismatch. And the last is this coaching networks concept that we talked about last time around using machine learning to help coach workers on how to do their jobs better in real time with Textio and Guru and Chorus and others being examples of that. You know, Ben touched on this a few minutes ago, vertical versus horizontal. How do you guys think about the future of breakout companies in enterprise companies

software broadly defined when, when you've got something like a Figma, I don't know. I mean, like with the evaluation of our environment, we're in who knows, but people certainly believe that that can be a very, very, very large business.

And it's just focused on design versus a horizontal thing like a Salesforce or a Zoom that have been, you know, your enormous, enormous winners at emergence. And, you know, I could think of plenty of other examples for other firms over time. When you're thinking about prosecuting an investment, like, how are you thinking about this? Are you thinking that

that verticals are always going to be better. And so we should mostly invest in verticals. They can be bigger than you ever think. Are you thinking that there may still be use cases where a broad horizontal piece of software like a Zoom will still be an opportunity in the future?

Yeah. The reality is that both are true. And if you just look at our track record, like Viva was obviously the narrow bet. Zoom was a super, you know, counterintuitive bet, right? At the time I was lucky to be on that diligence team then. And it was, there were lots of platforms that existed that did video conferencing and,

Ultimately, the conviction we came to was that, A, it was actually a technology bet in the sense that the codec that Zoom had built was sufficiently better than the other codecs. It was really hard to improve codecs once you started to roll. And B, that Eric and his team were the world's best people to build it. And so we made this risky horizontal bet that had this potential upside.

Right, because you could have rewound back to 2014 and said, you know, if I think the future of video is actually going to be vertical, like the technology out there is good enough. If you really want to improve, you're going to use do video collaboration for specific use cases. Yeah. That turned out not to be true. That's a really interesting point, David. So the history of our firm has been, and this is not planned because you look back and kind of rewrite, you know, you tell the story once you look at what's happened. But, you know, the first bet was Salesforce. Yeah.

Salesforce became this phenomenal platform, right? Horizontal platform upon which lots of vertical specific applications, including Viva, were built. The hope actually is that Zoom is the next Salesforce in the sense that Zoom can become a horizontal platform upon which lots of other vertical specific applications are built.

The great hope here is that Zoom becomes Salesforce in the sense that it becomes the next major horizontal platform upon which these job-to-be-done specific applications can be built. That's the vision with this ClassEDU company. That's the vision with this Luma company. It's a vision with lots and lots of companies. The whole Zoom apps ecosystem is intended to try to create those jobs-to-be-done specific applications that can leverage the horizontal infrastructure that Zoom has built. Why would you go build your own

video codecs these days. It's funny, David, where I thought you were going with that question is sort of the Ben Thompson assertion from a couple of years ago, the end of everything that, hey, look, big tech settled. And so Apple's won their corner, Google's won their corner, Facebook's won their corner. Those are going to be the big companies, those are going to be the big platforms. And kind of from here on out, we're going to be chasing big opportunities, but not as big as those. Like there's not going to be another rising $2 trillion tech company that enters the arena here.

Jake, what do you think about that? I think that it's more up in the air than it ever has been. And part of that is because of, I think, bipartisan nervousness around that status quo.

in Washington. So we'll see how that goes. And this is not a fully big thought, but perhaps you'll let me talk my way through it. If you believe it to be true that those companies will be more nervous about making acquisitions, particularly acquisitions into new markets, because of fear of backlash on the Hill, then what that means is that the acquisition landscape for the second tier of companies may become actually more interesting.

The Shopify's and Twilio's and others in the world may actually have more ability to make interesting adjacent acquisitions because the ones that would typically go to the really big folks who are willing to pay whatever price or able to pay whatever price aren't able to because of regulatory concerns. And so you actually may see that second layer start to become more interesting and threatened.

I don't know. I'm kind of thinking out loud with that. But that could actually be an interesting dynamic. You know, when I think back to it many years ago when I was an institutional VC, that kind of Ben Thompson-y thinking of like big tech had settled in. And you were playing for... Yeah, you could get IPOs occasionally, you know, if you're really, really lucky. But like the reality is most of your companies were going to get bought. You were playing for one of the big players to buy them for a lot of money. But I feel like what's happened in the last few years is...

So many more companies can go public, can get liquidity, can be viable standalone businesses than anybody ever imagined before. So you don't have to be betting as an investment thesis going into a company of like, especially on the enterprise side of like, yeah, I think this is going to be strategic and going to get bought. What do you guys think about that? Yeah, this actually underpins this kind of whole question around just like the SaaS market is really hot right now. Is it sustainable? Is it a bubble, etc.?

My take on that, and this I think relates to your point, is that the TAMs are just much bigger than everyone thought. If you believe the TAMs were constrained and big tech had all the big TAMs that existed, then yeah, that logic made sense. But if instead you believe that you can build a $50 billion company selling pharmaceutical software because the pharma companies are now buying much more software than you ever imagined they would because they need software to do their jobs better...

then the calculation becomes really different because it's very unlikely that Google or Facebook or Amazon are going to capture that market. And it doesn't matter if Salesforce wants to buy Viva or not. Like, great, they want to buy it for $100 billion. Sure. They don't. It'll be a $50 billion public company. You're still happy. Exactly. And back to the earlier point, I think that for the top tier of big tech, they may not be able to buy. It doesn't matter price. They may just be blocked off from doing at least under this administration. Yeah.

Back to kind of like state of SaaS for a second, if we can kind of tie up on that, like things are frothier than they've ever been. And certainly you can see in the public market multiples and, you know, I can speak to it in the private markets as well. And define frothy for us. Like how do you sort of numerically box that?

I mean, numerically, you just look at the revenue multiples. So the multiple of like what the company is worth to its revenue. And again, in classic private equity, you do it on an EBITDA basis. But for most software companies, you value it on revenue or even ARR or even next year's ARR, which is like a way to be even less conservative. Exactly. Yeah. And of course, that's because many of these companies don't have EBITDA. Correct. Correct. Most of them don't. To be clear, one thing that's different about this and Pets.com, just to make super clear, like this is not Pets.com, is that

While these businesses are not profitable, almost all of them could be profitable at a moment's notice if they chose to stop growing as quickly. Because the gross margins are high. They're super unit profitable. They're 70% plus unit profitable. They're just pouring a ton into R&D and sales and marketing.

And the R&D thing is the scary thing. I fear for many of them, or there's some class where the total absolute margin dollars that they're creating from selling their product are not actually outrunning the R&D alone. So if they chose tomorrow to stop sales and marketing, they still have a big fixed cost org sitting there that they need to support, even if they weren't actively spending on growth. So that would be sort of the middle ground counter-argument there.

I would argue that was a situation where there's bad accounting because if there's people that exist to keep the core product you've built running and delivering value to your existing customers, that should not be in R&D. That should be in COGS, cost of goods sold. And so R&D should only be forward-looking product building and everything else should be in COGS. That's not the way...

all people do the accounting, but like that's the purest way to think about it. Yeah, that makes sense. My view is mostly constrained to early stage companies, but who doesn't put their engineering headcount in R&D? You know, even if they're supporting existing customers. As you get a little more mature, often you have kind of a support eng org and that goes into COGS and then you kind of have R&D, which is really thinking about next generation stuff. But you're right, it changes as you get more mature as a company. You were talking about revenue multiples. Tell us where we were at some point and where we are now. Yeah.

At times in my career, we've been at kind of like 5 to 8x revenue. And mostly that's what giving you credit for the rest of this year, 5 to 8x, where you predict...

you're going to be at the end of the year? Yeah. I mean, sometimes people use the denominator of next 12 months revenue. So like it, you can be a little more and then you kind of, you would lower the multiple, but like generally in that range, basically what I'm about to say is that it's an order of magnitude different now. So it doesn't actually matter if you're using this year or next year, because ultimately what's happened is that if you look at the most highly valued public SaaS companies, they're trading at 40 to 50 X and that, that is the highest it's ever been. And

And then when you kind of pull that back into the private markets, the same thing is happening downstream where there are companies that are raising at really high prices, some of which don't even have revenue. And so it's an infinite multiple. Your average investment that Emergence is making right now, and you guys almost exclusively do A's and B's, right? Correct. Yep. Whatever framework is being used for valuation, right?

How often is actual revenue projections entering the picture versus just not? At the A, the revenue multiple concept, you generally don't price on a revenue multiple. It's priced kind of on market is the reality. What is the market price for this deal? Or perhaps slightly below it if the founder is willing to take a discount to work with you. But you have to think about revenue growth because ultimately you're funding this business in the future. So it's super important. You may be basing it a little bit less on exactly where the company is today.

You do have to believe in this TAM story. But these CEOs aren't coming to you and being like, I think I'm going to hit 10 million revenue run rate next year. So I'm looking for a $300 million 30x. That's not in the conversation. What they're saying is my buddy raised this, therefore this is what I think I should get. That's the reality of where things are. And that kind of brings me to the second reason why the market is so hot. The first, I think, is a legitimate reason that there's a longstanding trend, which is that the TAMs are bigger than people thought.

Cloud is taking over revenue and market share that was considered real world or physical is now in the cloud. And part of what Zoom is taking revenue away from is commercial real estate and airline revenue.

And that's all kind of going into that market cap. Thinking about something like Snowflake, you know, this concept is that like data is not a tech thing. Data is an every company thing. And so needing a place to, you know, store and make use of that is a much bigger thing than I think people even thought a few years ago. And so that trend is here to stay. I'm obviously, I wouldn't do this job if I didn't believe that these TAMs were big and growing. So...

That is all goodness. And as a VC, I'm excited to continue to bet on that. The other reason why I think the markets are so frothy, and again, frothy defined as just kind of revenue multiples as an example, is because of interest rates. Zerp. Yeah. I mean, ultimately what's happened is that because interest rates are so low,

People with money are looking for places to put it to earn money. And there's not that many places to do it, right? Putting it in debt doesn't pay as much anymore. Pays zero. Yeah, it's pay zero or sometimes negative in certain situations. And putting it in equities is more attractive. And when you look at like the public market performance, tech equities and particularly enterprise tech equities, but equities more broadly, tech equities more broadly have performed really well relative to the rest of the market.

And then you kind of continue that line of thinking and the LPs, the investors are like, well, I'll go earlier stage and do early stage tech equity. Which has performed even better than public tech. Which has performed even better. And so unsurprisingly, because it's a market, capital has just flooded into early stage technology and late stage technology. It's just technology investing, private market technology investing. And that has in part driven up the prices of these deals. There's just so many more places that founders can raise capital from.

And therefore, you know, it has an inflationary effect on the pricing. Yeah. So it's more capital chasing more deals. Like the number of companies is going up, but the amount of capital going into the system is way outpacing the amount of sort of new companies. So you are seeing that valuation growth.

That's correct. And another way to think about it, though, is segmenting it. It's not just kind of companies, it's like great companies. Because like, while more companies are being built, because it's easier to build a company than ever before, AWS is almost free, you know, etc, etc. There's still a limited number of great companies, but there's more and more capital chasing after that. And so the entrepreneurs need to make a choice in terms of what do they want, right?

There's really cheap, what we would call passive capital that is available to great founders where, hey, take my money, no board seat, let's check in in a year, but I don't care, you don't need to report to me, whatever. And that model, I think for the right entrepreneur, is a great model. It's all about what they actually want.

versus a model more like ours, which is like, we're really signing up to get in the trenches with you and try to help you build out your BDR to SDR to AE ratios and figure out what your first call sales pitch deck should look like and help you hire your first VP of sales. The nitty gritty stuff. This is not my forte. Whenever someone starts talking about this stuff, I'm like, oh man, I really hope they can raise from Jake. That would be ideal. Thank you.

That's such a good point, though. I was talking to a founder this morning who is founder of a very, very hot company, going to raise a great round, has lots of firms interested. It's a very esoteric thing. And they are true industry experts in what they do that came from the industry. And he was like, you know, honestly, I don't want somebody to come in and be that because they're not going to know what they're talking about. I know what I'm talking about. I want...

Somebody who's going to be great, not going to cause me problems, like good brand, all that, like fine. But it's a bug, not a feature if you think you're going to help me because I definitely know better than you. Yeah. This all comes down to, and David, forgive like the touchy-feely Stanford reference here, but to me, like this all comes down to self-awareness.

on both parts, on the founder's part and on the VC's part, right? It's really important for the founder to know what she wants. Like, what does she need? What does she want? What are her blind spots? And what is she looking for? You're kind of hiring. You think about like hiring somebody. You're hiring a board member who's really hard to fire. So like, what is the thing that you want?

and need. And if you are self-aware enough to know that, then Godspeed. If this person really believes they know their space really well, then they shouldn't give up a board seat. They should solve for the lowest solution possible and the lowest involvement possible.

And that's the right thing for that person. The same thing is actually true, I think, on the VC side of things. The reality is that there's lots of ways to be good at venture. There's lots of firms that have done this and lots of people have done this in lots of different ways. I can pick on somebody because I'm not a venture. You could be Tiger, right? Or you could be Lee Fixel and be like, I'm not going to do anything for you. But he's a great investor. He's made a lot of money. Yes. I assume he probably really enjoys that style of investing. Right.

So part of it's about like, it's a very personal question. Like, what do you enjoy doing? So for me, I deeply enjoy doing the stuff that I was just talking about. Like I deeply enjoy getting deep and like being on, you know, every recruiting call for the VP of sales and like trying to figure out who is the right fit for this particular founder and using my network to try to vet this person and sell this person. Like I get a lot of energy. I did two of those this morning. I get a lot of energy from it.

I get less energy from like the passive, like, okay, I see that the company is doing well. Like I don't, that's just a personal thing.

And so you need to find as a VC, you have to first of all, you have to find a platform that's aligned with the thing you want to do. And then you as a platform have to ensure that you're focusing yourselves on deals and situations where that works. And then you have to fight this concept of FOMO, which I think we may have talked about in the last podcast, but like... Well, what's so beautiful about all this is it's like, yeah, this is how the internet works. Like it rewards niches. Like you want to be the very, very best at what you do. And if what you do is very narrow...

That's fine because there's a lot of stuff on the internet. There are a lot of people on the internet. There are a lot of companies in the world and being the best at a particular niche is a winning strategy. There is no such thing as the world's best generalist. There's no such thing as that person. Maybe Mario Gabrielli excluded from that. That's his niche. Perhaps Mario will take the title of that. Yeah.

But you could argue he would be the best writer of content or community creator for this. In reality, what he's doing is a little more narrow than that. And the more narrow you make your niche, David, to your point, the higher likely you have to be the world's best person at that thing. And so the trick is to figure out something that's big enough to be interesting to you and small enough that you have a chance to be truly great at it, if that's your desire. Yeah.

It's really hard to fight that tendency though in venture. Yeah. When you said the fear of FOMO thing, I want to put a fine point on something you said earlier and then transition us to another little topic here. The fine point earlier is when you had the entrepreneur coming to you saying, my buddy's getting this.

What is really happening when prices are getting more quote unquote expensive or when the multiple of EBITDA revenue next 12 months, whatever, is going up, it's just the investor saying, I'm willing to take more risk. I'm willing to basically pay the same amount of money, but take more risk or pay more money to take the same risk.

And that is how you get into that sort of bubble conversation where there is an economic equation that sort of works where there's a certain amount you should pay for risk. And if you want to make these arguments that valuations are going up because TAMs are going up, awesome. I fundamentally believe that. If what is actually driving them is way more money coming in and people taking more risk for the same dollars, that doesn't end well because at some point people realize that and go, shoot, all of our risk models are wrong.

Yep. And I think it's bad for the founder. Oh, it's bad for everyone. Of course the VCs are going to say that. I know. Exactly. David is like the independent friendly angel can call us out on this. That's right, everybody. I am the neutral third party. The neutral party here. God, I never in my life when I thought, oh, when we started Acquired, like David will be the entrepreneur whisperer, non-VC. Yeah.

I really do believe it's true. When I've advised mutual friends of David and mine on raising capital, I think that you should raise your A when you feel pretty confident that you have product market fit. Because that capital can be then used to help you scale your go-to-market, which can then help you raise a growth round. That makes a lot of sense. If you raise the A before you find product market fit, you blow the cash on trying to find product market fit, you've got this big hole in your cap table, you're going to try to raise the next round with no product market fit, and it's going to be a harder thing. And at some point, the music stops.

It's also just bad culturally. Companies perform better when they feel a little bit of cash constraint. If you've got $100 million and you have no product market fit, you can kind of take forever to try to get there. There's no sense of urgency. There's no sense of drive. It's just a focus. And ultimately, all a startup has is focus.

Yeah.

Yeah, absolutely. I'm curious actually to think about the other criteria. Ben, what were the other criteria that you guys were thinking about? The second one was, would you want to work for this person? Yeah, that's mine. It theoretically should show up eventually in market cap. There's a touchy feeliness to it.

But ultimately, it does feel like you could evaluate every CEO on absolute market cap dollars generated under their run because everything sort of feeds into that. And the third one is how good is this company for the world? And I guess not the company, but this particular CEO's impact in the world, either with their company or then what they did with the money that they generated, which is...

to be fair, David, like that was a ludicrous thing to throw into the criteria because it is uncorrelated from their financial returns in the way that our society functions. Like I do believe they should also do three, but you can't judge the caliber of a CEO for their shareholders on criteria three. I think, yes. I didn't get to articulate this on the episode, but what I was thinking was you could say the tobacco CEOs were like great CEOs. Like I would

definitely not want to put them on Mount Rushmore, no matter how good capital allocators or leaders they were. I see what you're saying. So you're not like getting jewel as one of your sort of like, yeah, I do think that this concept though, back to like the touch and feel a concept of self-awareness, like you, you have to figure out what motivates you as a leader, be that as a VC or as a CEO, like, are you motivated, you know, to create those products or you motivate you something else in the world? I genuinely believe that like part of what drives Eric at zoom is like seeing life happen and,

on that platform. I'll tell you, like for me and for my partners, we have the great benefit of being able to choose our investors. And we made a choice a little while ago to focus almost exclusively on nonprofits.

So almost all of the money that we invest on behalf of is on causes that we are all motivated by, be it social justice or climate change or that kind of thing. And it really matters. Like it changes how I think about waking up and doing this. Like if I'm feeling tired and I'm feeling down and I really don't have the energy to do it, but I had like a call the day before with a foundation and talked about the impact that some of our distributions have done. It really does change my behaviors.

And so a lot of this is just about like figuring out what is the things or set of things that will drive you when things aren't as good and setting yourself up in a situation where that's institutionalized.

Can you just tell us a little bit about the impact that Zoom had on your firm? It's pretty enormous. Most firms never experience something like this. And I got to imagine, of course, it's wonderful. But I got to imagine there are just a whole bunch of consequences of... I'll brag for you guys. I mean, the Zoom investment alone generated, what, $10 billion plus of returns for you guys? Yeah.

We still carry a lot of it. We still have a lot of our shares. So who knows what it will ultimately be, but it's been tremendous. I want to like talk about my partner, Santi, who led that investment, who serves on the board today and who is himself an insanely humble human. I am so, so grateful for the way he's responded to this.

This type of success is not just career defining. It's like, you know, he will be one of the greatest VCs in the world based upon this return alone. And he is as humble and collaborative now as he was when I met him nine years ago. And as focused now on ensuring that we act with a we all mentality and not in like fiefdoms as he ever has been. And I'm so, so grateful for that.

I don't take it for granted. I have friends in other places where that's not the case. Yeah, firms in history that this has happened, something like this has happened to, and it's completely ripped the firm apart. Yeah. I think part of it is like the founders of the firm, and Santi wasn't a founder. He was kind of groomed through the firm the same way I was. All of our partners have been kind of picked up mid-career and taught how to do the job. But the founders of the firm had some early success with things like Salesforce and Viva, right?

and themselves behaved the same way that Santi's behaving now. So there's a precedent that gets set. And the same thing happens as people think about retiring.

There's lots of firms where when senior people retire, they hold on to the carried interest for long periods of time, which has a demotivating effect on the rest of the firm. And I am deeply grateful for the way that the founders have thought about transitioning in such a graceful way. There's so much selflessness and collaboration built into the way that we treat each other that it is the only place that I want to do this. And it is, God willing, the place that I will do this until I retire eventually.

I feel emotional talking about it, but I'm really proud of these people because they have not let this money and the success change their behaviors at all. And if anything, the reaction within the firm has been, how do we go get more foundations and more endowments to invest in us so that we can share this wealth? We've spent so much time over the past three months trying to figure out what are the causes we each deeply care about and we think are underrepresented in the world that we want to have access to this asset class that's so hot.

It's hard to put in words how beautiful that is to witness as someone who is adjacent to that success, but has himself not had that success yet. Thank you for talking about it and sharing. It's such a testament to your partner, Santi. I mean, thanks to you who had him on for the Zoom episode. I mean, his story as an immigrant.

being frankly discriminated against by venture firms trying to break into the industry. How many times did he have to try to get his green card? He tried a ton, but he didn't try as many times as Eric, who I think tried 10 times. So like, you know, they had a lot to bond on that front. Totally. Well, all of that is the most critical thing is like, don't let this incredible success blow things up. Like stay humble, stay focused, stay hungry. How are you thinking about the Zoom process?

happening in terms of a playing offense coming out of it? Like, how can you leverage it and make yourselves even better? Yeah, for sure. That's a really good question. The first thing it just really tactically is we really want to support the Zoom ecosystem. Like, you know, we want to support companies built on top of Zoom the same way we did the Salesforce investment and then supported companies like Viva and ServiceMax and Steelbrick and a bunch of others built on top of that ecosystem. And

It's goodness for the core original investment, and obviously it's goodness for new investments. And we believe that if you are building something in and around the Zoom ecosystem, we are pretty well suited to help you navigate that ecosystem. We think we have a competitive advantage to offer founders, and we think it's also really good for Zoom because Zoom wants to become a platform in addition to the core product it provides today.

So that's the first most tactical answer, which is like, we really want to be, you know, the main player in the ecosystem that's enabling this next generation of companies to be built.

That's part of it. There's also just some foundational kind of org stuff we're thinking about on like, how do we provide more value to our companies? You know, we have the great benefit of being focused. So when we think about our platform team, we don't have to hire people who have consumer expertise and who have marketplace expertise and who have this and that. We can just say like, who are the world's best people who know how to build and scale enterprise software companies?

And we can get them and we can afford to have them part of our family. And so we're doing a lot of thinking now on like, how do we be, our second core value is we strive to be the most important partner to our founders. And what we're trying to do is funnel some of this success we've had to try to double down on that and make sure that's the case with our next founders, our next founders, our next founders. It's the R&D thing, actually, back to the earlier point. Like we're trying to reinvest this back into the engine so that it benefits the new founders that we're backing. Yeah.

The last thing I'd say, actually, I realized that this is even more kind of touchy-feely and this episode's going in an interesting direction, but I'm happy to share it. Full disclosure to all LPs, Jake and I were in, what was it called? Lead Labs. Lead Labs together, yeah. And a billion-dollar company came out of our six-person group. That's right. Branch Metrics. Branch Metrics. So shout out to our friends at Branch.

To answer both your questions, David, in terms of like, what has the impact been? And also, how are we trying to strengthen the core going forward? We have invested a lot in strengthening our interpersonal relationships. So we've actually hired a facilitator. We meet with her monthly and we talk about anything that is top of mind, but particularly things that are vulnerabilities for us.

So it's about sharing what's going on in our lives so we know what's going on in each other's lives and we can support each other with what's happening with each other's families and that kind of thing. As well as sharing what we call pinches or interpersonal issues where it's like, hey, Santi, when you said this this way in this pitch, it made me feel a little like, it didn't make me feel heard or it made me feel frustrated or what have you. And being able to voice that to him and not bottling it up and just pretending like it didn't happen allows for a much deeper level of connection.

It also allows for things like expectation setting. We had a really good conversation a couple weeks ago where we laid out what are our expectations for each other?

incoming funds? Like, what do we really want? And be really, really detailed and explicit about it so that if any of us are not living up to those expectations, we can go back and say, like, we all agree to this. Like, something's changed. Let's figure out what's going on. And we have this wonderful facilitator who's able to help us have those conversations and kind of facilitate us through to, you know, the hardness to the goodness. Yeah.

LPs will always tell you that like maybe acquired LPs too, but institutional LPs will tell you that like partnership dynamics are everything in a venture firm. And there's no amount of money that is too much money to invest in it.

It's money and it's time. We're spending a lot of our time on this. I will tell you, I feel so connected to these people as people. Beyond the main jobs, I know what's happening. I feel in my gut when things go well for them, when things go badly for them, I really care deeply, deeply. And it also means that when we're talking about work stuff, we're just playing it at a much deeper level. It's a different thing. It's not transactional. It's like we're all here trying to do this thing together.

And we've recommitted to the underdog mentality collectively and said, what got us here won't get us there. And we need to think really sharply about how do we adjust our strategy and our dynamics to make sure we're able to replicate the success. It's the commitment to vulnerability. It's something I hadn't spent a lot of time on prior to our experience, David, in grad school. And it's something now that I so deeply believe that vulnerability brings strength. I just can't shout that from the rooftops loudly enough. I love that.

Man, I can think of no better way to wrap this episode. One plea I'd make actually, but like to founders that are listening, find a peer group. Find a peer group of other founders that you can be vulnerable with. You spend so much of your time wearing armor, fighting everything, particularly if you're a solo founder, but even if you're not, you're just constantly in battle mode. You need to find an outlet of people who are experiencing the same thing that you can be vulnerable with.

The good news is there's more and more of these groups popping up. You can do it informally. You can just find a group of peers you know. You should definitely set guidelines. And certainly, strict confidentiality is guideline number one. But there's other guidelines around how you can run these groups effectively. But there's also formally facilitated groups. And if you guys want, I can share some. You can put in the show notes of examples of this. But it's so important for founder health, mental health. Frankly, I think it's important for company performance.

I deeply believe in this concept. I've got a peer group of other VCs at other firms and we meet regularly and have a tea group and share our vulnerabilities. And it makes me stronger and feel more connected to this industry. Nobody should ever shed a tear for VCs, but it's hard to perform at the highest levels anywhere. As a VC though, at a firm like Emergence or PSL, you have a

built in partner group. You have partners, but yeah, as a, as a founder, it can be very, very lonely. So definitely underscore that. This was really fun guys. Thank you for, um, super fun. Thank you for creating the space for this conversation. Jake, thank you for joining us. Well, there will be part three of the story at some point down the road when, when you get your next, uh, idea about a new thesis, come tell us about it.

Well, I'm excited to come tell you about these, the ones that are starting to succeed in these earlier theses. You know, I got to come back and actually deliver. You're going to come raise fun three with us where the fun two, episode two is really about like people really liked fun one and you know, it was qualitatively good. Fun three, I got to show markups guys. I got to come back with markups. That's exactly it. Yeah. All right. All right, guys. Later. This was great. Thank you. LPs. We'll see you next time.