1Mby1M Virtual Accelerator Investor Forum: With Tea Hea Nahm, Managing Director and Co-Founder of Storm Ventures (Part 2)

Sramana Mitra: You are comfortable investing in the nuances of SaaS, AI, AI for X. How about two trends that have come on my radar? PaaS for instance. There is a vertical SaaS trend that is going gangbusters right now. You find industry verticals where you have opportunities to do cloud and AI. You have interesting workflow automation and data-based solutions.

You touched upon horizontal AI not being as big of an interesting area for you. If you remember, Salesforce started off with a very niche solution although in a big market. Then they also opened up their platform. They have spawned a lot of companies including some large players like the Veeva’s of the world. These are unicorns that are built on top of Salesforce.

That PaaS trend is one that I’m very interested in because of something you said earlier about the technology stack. The technology stack is complex. If you had to build the full stack, it becomes very expensive. This is the draw of these PaaS solutions. There have been a few other PaaS platforms that have matured a little bit more. Atlassian has developed a PaaS strategy. Twilio has developed a PaaS strategy. Salesforce remains the PaaS success story.

How do you read this trend? Is this coming up on your deal flow?

Tea Hea Nahm: Becoming the platform is the dream of everyone and earning monopoly. The best example of that is Apple. Becoming the platform is fantastic. What we’ve found is, it’s rare for a startup to be the platform in the first few years. We invest in seed and Series A. There, it’s like a child. Our hope is they will become a platform. Usually, that’s when they’re middle-aged. That is the aspiration.

We have companies like TalkDesk in the call center space which is on the path to becoming the platform there. Do we think that becoming a platform is fantastic? Absolutely. Do we think startups can become the platform first? We generally don’t see that. We see that they have a killer application. They do something else and then they can grow into a platform.

Sramana Mitra: I don’t believe that seed and Series A startups should try to be platform companies. It’s more in Series C and D. What about the other side of PaaS nuance? Are you seeing companies that are doing vertical SaaS in some domain or AI plus vertical SaaS but are building on top of another platform?

Tea Hea Nahm: Absolutely. The platform that almost all build on top is the cloud. Vertical SaaS has been a very good area for us. We have a Banking-as-a-Service unicorn out of Germany called Solarisbank. We’re in an auto CRM unicorn called Tekion. They just raised a few billion dollars. We have a bunch of companies in digital health. Vertical SaaS has been a great area for us. We continue to think it’s good.

The reason why I was separating AI horizontal and vertical is there’s going to be a tremendous need for horizontal AI. The need is going to be there. The challenge that I see is that the cloud companies that tend to have the best AI like Google or Amazon are in the position to make the best horizontal AI. They will make it free as Google did with Tensorflow. It’s a way of attracting customers to their platform which is their cloud.

Sramana Mitra: Microsoft Azure has a very strong commitment to incorporating AI into its cloud platform.

Tea Hea Nahm: Their goal is to get everyone on their cloud. They’re going to make as much free to entice people to get on their cloud. That’s why we’re reluctant to invest in horizontal AI not because it’s not a good area. We think it’ll be tough to compete with the big platforms. When it comes to the applications, the cloud companies aren’t going to go into that. There are just so many applications.

This segment is part 2 in the series : 1Mby1M Virtual Accelerator Investor Forum: With Tea Hea Nahm, Managing Director and Co-Founder of Storm Ventures
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