1Mby1M Virtual Accelerator Investor Forum: With Tim Guleri, Managing Director at Sierra Ventures 2021 (Part 5)

Tim Guleri: Point number one is that it would be hard. It takes too much capital. The second is data. For AI to succeed in any domain whether you are building a horizontal platform or bespoke AI for a particular application set, you have a lot of data to train these models.

Data tends to collect in these massive PaaS platforms. If you have a view that data is necessary at scale to train an AI that you are putting into the market, it again brings you back to the big three or four. I know the folks at C3 really well.

Thomas Seibel was in the CRM space when I was in the CRM space. They scaled the business on the backs of very large government contracts and by building verticalized AI applications. They are starting in those industries that are somewhat regulated. He was able to do it differently because he is Tom Seibel and he has reached into the market.

I think for your normal early-stage entrepreneur, that sales motion is quite difficult in my opinion. I feel that a dedicated AI PaaS is hard but building an AI-powered application or infrastructure is easy if you use one of the four that are available.

Sramana Mitra: I thought about it was similar to you because of the capital issue. I do know that because we emphasize bootstrapping a lot. You can’t really do a PaaS company with the entire stack being built on a bootstrap strategy. That is a no-go.

The Salesforce strategy of building a vertical app that is targeting a specific market to build the business up to a point and then opening up the platform is a possible strategy. This could also be built on top of AWS, but then there are many layers on top of AWS where you can put in the AI layer, data layer, and others. 

Once you are in the market and you have already gained some amount of critical mass, then you can start playing the platform game to get into other markets.

Tim Guleri: That I actually agree with. There are two great examples of that. An app that then became a PaaS and a PaaS that then became an app. The example of the first one is obviously Salesforce. It started with CRM and then they opened up their PaaS for general consumption. Great companies like Veeva and Velocity have come out of that.

The other example is Twilio, which started as a dial tone PaaS. Now, they are entering the application market. As you know, they are coming at the IVR cost market, which is a contact center in the cloud. They are going in the other direction. Both are possible and both have been done successfully.

Sramana Mitra: Twilio is doing an interesting business model innovation. I follow them closely. This is an interestingly played hand.

Switching gears a bit, you have talked quite a bit about where you draw your deals. Talk a little about how you find them or how they find you.

Tim Guleri: There are a couple of things. One, we have a clear positioning in the venture ecosystem as a firm. We have not wavered over the last 40 years. We are principally serving early-stage and B2B. With that clarity of mission comes a clear positioning in the market.

When entrepreneurs search for us on Google or talk to their colleagues, they get a pretty small cluster of firms that are in this cohort. We tend to get a large amount of inbound because of that. That is point number one. 

This segment is part 5 in the series : 1Mby1M Virtual Accelerator Investor Forum: With Tim Guleri, Managing Director at Sierra Ventures 2021
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