“I have so many companies coming in pitching features, not big ideas…focus on building a company that is a big opportunity,” emphasized John Somorjai, EVP of Corporate Development and Salesforce Ventures, during Berkeley Innovators’ first ever Venture Capital Panel on September 30th. Presented by the CITRIS Foundry and the Cal Startup Network, the panel also included Doug Renert, founding partner of Tandem Capital, and Jason Lemkin, MD of Storm Ventures.
Somorjai, Renert and Lemkin, all Boalt Hall alumni, spoke of their unique transitions into tech, highlighting the greater access that people today, with non-tech educational backgrounds have to jobs in startups and the entrepreneurship scene: “The reason you can transition is because these are all cross functional roles [philosophy, law]…10 years ago, if you weren’t an engineer it was near impossible to get a startup job,” stated Lemkin.
Lemkin began his journey at a startup focused law firm. He launched his career as an entrepreneur soon after and went on to establish Echosign, a web-based electronic signature and content management system integrated into the Salesforce ecosystem, eventually being acquired by Adobe. He has been investing as a VC in SaaS companies for the past 2 years.
Renert started out at a tech law firm, where he was first exposed to startups, tech companies, and Silicon Valley. He transitioned into business at Oracle, simultaneously pursuing an evening MBA, and started Tandem Capital 8 years ago, an early stage seed fund that invests in mobile hardware and software.
Somorjai, a corporate venture capitalist, shifted to corporate development while at Oracle too, going on to join Ingenio, an e-commerce focused startup, before starting his successful run at Salesforce 10 years ago. Being part of a big company that consists of a variety of career paths, according to Somorjai, actually presents an easier platform to change out of a particular field, provided of course that one makes the conscious effort to network and build a solid reputation. This way, the company will be more willing to “take a chance on you.” Renert, on the other hand, advocated the startup route as a means to transition out, reiterating the “no barriers” attitude that startups possess.
An insightful discussion ensued, with the three venture capitalists delving into the core traits they each look for in potential investments, bringing to light the differences between the corporate and traditional VC world. While Lemkin’s focus is much more specific, in that he only invests in Saas Companies that have the potential to go from 1– 10 million in 5 quarters, both Renert and Somorjai stated similar characteristics as key, such as innovation, the caliber of the team, and the quality and the size of the opportunity. “The bar is set pretty high, but then so are the rewards.”
The fact that Salesforce’s primary purpose is about building an ecosystem of the best partners in cloud computing, coupled with the multiple companies that seek the SV experience and credibility, means that Salesforce can be more precise about its investments. Traditional early-stage venture capital firms however, as Renert pointed out, exhibit different behaviors. Their priority is return of capital, and they spend much more time generating interest and subsequent deals.
The speakers went on to address the consequent transparency surrounding VC. “There is an endless thirst for this knowledge,” claimed Lemkin, who advocated an increase of transparency on social media. His article “Why VCs need Unicorns just to survive” on his blogging community Saastr, can be read here:https://www.saastr.com/why-vcs-need-unicorns-just-to-survive.
Amongst some of the pointers presented by the three panelists, one really stood out: more than the company and anything else that people take into account, one’s deciding factor should be the quality of their boss. It is important to work with a boss who is essentially the perfect mentor. This ties into looking for a VC who will have a keen entrepreneurial sense and give great advice – a VC that won’t be a hindrance when you are looking for an exit strategy.
The three speakers then identified various trends in their individual spaces. Renert observed that today’s market is generally more consumer oriented. He was slightly critical of the on-demand economy, stating that some of the companies, some unicorns in particular, (Uber was mentioned) use VC money to subsidize the market when they should really be looking to gradually increase charges, once they know they own the market. “It’s a frenzy that will backfire.”
Lemkin’s idea was that everything would become “Saasified”. Creating disruptive technology to displace all those people and effectively turning them into a button would be much more efficient – the number of engineers required to develop the product would decrease by about 80%. Somorjai agreed, further mentioning the demands for functionalities such as payments and messaging within the huge app economy, and the presence of rapidly growing companies, such as Stripe and Twilio that develop these complex processes so that software developers don’t have to.
An interactive session sealed the discussion with a few entrepreneurs in the audience giving impromptu elevator pitches to the three VCs. Feedback was focused mainly on the importance of metrics: How did the product acquire users and how quickly, how fast was it growing and what was the retention rate? Lemkin advised the entrepreneurs to focus on the MSP – Minimum Sellable Product. If a startup is able to get 10 customers to buy its product for $10 a month, then it is guaranteed to emerge a success– if it can crack what it would take to get someone to pay $10 a month for its product, then it can figure out what it takes to get someone to pay $20 and so on.
“Do something that makes you happy, and you’ll probably do pretty well at it.” Somorjai didn’t say anything out of the ordinary. It does, however, emphasize the path the three VC’s initially took, and the incredible journeys that followed.The panel was an overall success and was an intriguing and educational experience, with the VCs being extremely eager to share as much as they possibly could with the crowd of young entrepreneurs. I thoroughly enjoyed the evening and I can only anticipate what Berkeley Innovators has in line next!