1Mby1M Virtual Accelerator Investor Forum: With Jake Seid of Stone Bridge Ventures (Part 2)

Sramana Mitra: What about geography? What’s your preference?

Jake Seid: Proactively, I’m focused on Silicon Valley and outside of Silicon Valley opportunistically.

Sramana Mitra: Talk about your current portfolio. What are the highlights? What have you invested in? How do you decide what you have chosen to invest in?

Jake Seid: We look at great teams, big markets, and differentiated technologies. Taking that at a high-level and then drilling in to some of the themes mentioned, consider AI and how AI is changing different important verticals. One investment in that is a company called People.ai.

It applies AI to CRM and uses AI to ingest a massive amount of data that exists in these system of records and applies insights to that sales teams can perform better, sales individuals can ramp faster, and sales executives can identify troubles and opportunities well before the end of the quarter, effectively, in real-time.

Because you’re using AI and because you’re passively collecting data, it doesn’t put extra burden on the rep to enter more information. There is this theme that you’ll see throughout the evolution of AI where a very natural insertion point is not to come and say, “I’m going to be the system of records and replace your existing system of records.” Instead, AI will be the intelligence layer on top of the system of records and deliver tremendous value. That’s one company in the vertical SaaS space.

Another company is Blend. They build software for the banking vertical. The alternative that banks have today is basically PDFs and email. Call it paper, pencil, and the fax machine. They built a SaaS platform to help banks transform their lending process. Banks are realizing they need to become digital businesses more and more. The customer experience depends on it. Their ability to be competitive in a world where there are disruptor depends on it.

Blend recently raised a $100 million round led by Greylock. Emergence came in as well. This notion of vertical SaaS is really an opportunity to come in where there aren’t incumbents, there are large vertical opportunities, and you’re basically replacing paper, pencil, and the fax machine.

Sramana Mitra: Have you had any noteworthy exits yet?

Jake Seid: Most of my portfolio is young and private. I started about six or seven quarters ago so all my companies are still private.

Sramana Mitra: I’m going to ask you a few industry trend questions on how the funding environment is operating right now. How do you process the current investment climate where capital is moving further and further upstream? The traditional VCs are raising larger and larger funds. They need to put in more capital. How does a seed investor mitigate the Series A gap?

Jake Seid: I started in venture in 2000 and have seen a number of cycles. In 2000 when I was at Lightspeed, we raised an $800 million fund for early stage investing. The difference in today’s world is that the funds for their early stage program are smaller, around $400 million. But then they reserve capital for follow-on rounds and later stage rounds.

The reason why they need these additional funds is because companies are staying private longer. With the amount of capital out there, you could get, effectively, all the benefits of an IPO without the downside of an IPO in today’s environment. To me, the notion that there are billions of dollars that just want to do late stage is not the whole story. The fact is the late stage market opportunity for investors has expanded by an order of magnitude because companies want to stay private longer and there’s an opportunity for them to stay private longer.

I don’t think that creates the Series A gap for the best companies. There is plenty of capital available for seed and Series A companies for high-quality companies. It’s quite competitive to get into the best companies. You have to bring something special to the table as an investor.

This segment is part 2 in the series : 1Mby1M Virtual Accelerator Investor Forum: With Jake Seid of Stone Bridge Ventures
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