Mar 10, 2025 · 1h 33m · 20vc
Jake Saper, GP @ Emergence Capital: "We Sold Salesforce Early and Lost Out on Billions" · 20VC with Harry Stebbings
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In this episode of 20VC, Harry Stebbings interviews Jake Saper, General Partner at Emergence Capital, exploring the firm's elite investment frameworks, high-touch collaborative diligence, and strategic lessons from early wins like Zoom. Saper also delivers a masterclass on the future of enterprise software, unpacking how artificial intelligence is rewriting the rules of SaaS growth, pricing models, and public-market exit discipline.
How this conversation actually went
Every chapter scored 0–10 on four independent dynamics. Hover any point for the reasoning behind the score. Harry holds 20.6% of the talking time here. How this is scored →
Harry as informed peer 6.4 Guest teaching 5.0 Guest disagreement 1.4 Harry pushing back 4.4
speaking balance: gold is Harry, purple is the guest (3 minute bins)
Sharpest disagreement ▶ 1:01:12 Jake rejecting Salesforce short and targeting IBM
When Harry notes that most guests cite Salesforce as their top short candidate, Jake firmly rejects the premise, countering that IBM is the true short target due to AI unlocking legacy mainframe COBOL code.
Hardest push from Harry ▶ 22:46 Harry challenging COVID exercise instructor investmentHarry forcefully rejects Jake's thesis on a COVID exercise instructor startup, calling out the limited addressable market and demanding how Jake could ever justify a five billion dollar outcome.
Biggest teaching moment ▶ 1:13:17 Jake proving $2B value gain from post-lockup public asset managementJake educates Harry on public market asset management in VC, dropping hard internal data showing Emergence generated $2 billion in extra LP returns by holding positions past lockup expiration.
Harry holds his own ▶ 52:08 Harry citing operational realities of enterprise softwareHarry demonstrates deep operational expertise by citing concrete enterprise realities—172 average software tools, slow European tech adoption, and the necessity of consultant accountability—to explain why internal enterprise AI builds fail.
the scores for every segment, with the reasoning behind each
| Chapter | Topic | Harry as informed peer | Guest teaching | Guest disagreement | Harry pushing back | Why |
|---|---|---|---|---|---|---|
| Video Highlights: Return Multiples and Outsize Outcomes | 3 | 2 | 0 | 1 | Harry sets up the interview warmly with walking tour banter before asking about Zoom. Jake details how Emergence uncovered Zoom's miscalculated churn and added GTM enterprise value. | |
| Domain Experts vs. Naive Founders | 7 | 4 | 3 | 8 | Harry challenges Jake directly, calling the concept of a prepared mind VC product bullshit and citing Keith Rabois on founder independence. Jake acknowledges the nuance while defending how prepared minds accelerate conviction. | |
| Fund Dynamics: Chorus.ai, Salesloft, and DPI | 7 | 5 | 2 | 6 | Harry directly questions whether moderate acquisition outcomes move the needle for fund DPI. Jake responds with specific fund metrics, pointing to Fund 3's 16x DPI driven by Zoom and SalesLoft. | |
| Private Equity, ARR Milestones, and AI Pivots | 8 | 4 | 2 | 8 | Harry confronts Jake on whether private equity is a false savior and whether incumbent AI pivots like Guru can compete with fast-growing category leaders like Glean. Jake defends Guru's market pull and capital efficiency. | |
| Identifying Winners and the Importance of Humility | 6 | 5 | 1 | 3 | Jake illustrates the necessity of humility in VC through the story of Zenefits versus Gusto. Harry leads a structured discussion on diligence techniques for detecting true market pull. | |
| A Lesson on False Market Pull: The COVID Exercise Business | 7 | 4 | 2 | 8 | Harry bluntly mocks and rejects the premise of Jake's COVID exercise instructor investment, demanding to know how it could ever reach a $5B outcome. Jake candidly admits to the mistake while framing the initial creator-economy thesis. | |
| Are the Best Companies Always Expensive? | 5 | 5 | 1 | 3 | Jake outlines Emergence Capital's what you have to believe framework for underwriting non-consensus or expensive deals. Harry guides the conversation through valuation dynamics and downstream dilution. | |
| Collaborative Diligence at Emergence Capital | 8 | 6 | 2 | 8 | Harry directly challenges Emergence's firm dynamics, arguing that requiring every partner on reference calls is inefficient and that Jake's zero-loss record indicates under-taking risk. Jake counters with top-decile graduation metrics. | |
| Handling Time Compression in VC Deals | 5 | 4 | 1 | 4 | Jake recounts meeting a founder in a field outside Denver Airport during COVID lockdown to complete diligence. Harry explores how high-touch VC processes handle modern timeline compression. | |
| High-Touch VCs vs. Fast-Moving AI Founders | 7 | 6 | 2 | 6 | Harry challenges whether Emergence's high-touch process misses hyper-growth AI founders and questions if T2D3 metrics are obsolete. Jake proposes Quadruple 120 (4x growth, 120% NDR) as the new AI SaaS benchmark. | |
| Profit Margins and the Competitive Dynamics of Open Source LLMs | 6 | 6 | 1 | 4 | Jake explains why gross margins for AI application startups will expand due to closed-source price competition and open-source fallbacks. Harry probes what enterprise adoption splits between open and closed models will actually look like. | |
| Applying the 'Pattern Breakers' Framework to Market Inflections | 7 | 5 | 1 | 3 | Harry and Jake bond over Mike Maples' Pattern Breakers framework. Harry highlights brand as an underrated moat while Jake elaborates on domain-specific LLMs and Emergence's Coaching Networks thesis. | |
| Buy vs. Build: Why the B2B SaaS Vendor is far from Dead | 8 | 4 | 1 | 2 | Harry passionately backs up Jake's defense of B2B SaaS vendors against internal enterprise builds, listing creation gaps, maintenance of 172 tools, and scapegoat accountability as proof. | |
| The Future of AI Pricing: Usage, Outcomes, and Enabled Services | 7 | 6 | 1 | 4 | Harry compares Intercom Finn's outcome-based pricing with Assembled's usage-based model. Jake details why outcome pricing struggles with human-in-the-loop touches and explains how AI-enabled services solve this. | |
| Value Accrual in AI: Why Focus Beats Incumbent Distribution | 7 | 5 | 1 | 3 | Jake explains why specialized startup focus beats incumbent distribution advantages, using Viva's expansion from a $400M initial market to a $35B market cap. Harry notes impressive incumbent execution like Adobe. | |
| Stock Short Strategies: The Bull Case for Salesforce vs. IBM's Risk | 7 | 6 | 3 | 6 | Harry challenges Jake with the prevailing sentiment that Salesforce is the premier AI short candidate. Jake rejects this, making a compelling counter-case to short IBM due to AI unlocking legacy COBOL mainframe code. | |
| Partner Alignment and the Cost of Orphaned Portfolio Deals | 7 | 6 | 1 | 4 | Harry highlights the epidemic of partner departures across venture capital. Jake explains how standard firm economics incentivize junior turnover, resulting in orphaned portfolio companies. | |
| Multi-Stage Seed Signaling Risks and Ownership Sensitivity | 6 | 5 | 2 | 5 | Harry questions whether multi-stage seed signaling risk is a genuine threat or a narrative invented by seed VCs. Jake maintains that option-style multi-stage seed investing creates real signaling damage. | |
| Public Selling Decisions and the Advantage of Long-Term LP Trust | 6 | 6 | 1 | 3 | Jake openly admits Emergence made a mistake selling Salesforce shortly after its IPO. He outlines the structured quarterly process Emergence uses to evaluate public stock holdings. | |
| Managing Public Market Holdings and the LP Trust Advantage | 7 | 6 | 1 | 4 | Jake shares internal data proving Emergence generated $2B more for LPs by actively managing public stocks post-lockup. Harry connects this to Roelof Botha's thesis on VC public portfolio management. | |
| Follow-On Reserves and Avoiding 'Mirage Product-Market Fit' | 7 | 6 | 2 | 6 | Jake introduces the concept of mirage product-market fit where fast revenue growth masks bad unit economics or unsustainable audience diversity. Harry challenges reserve allocations as prone to partner bias. | |
| Quickfire: Singing Lessons and Long-Term Stock Convictions | 4 | 4 | 1 | 3 | In the quickfire round, Jake reveals he is a classically trained singer who taught an EE TA to sing for a marriage proposal. He names Microsoft as his 10-year stock hold and recounts losing Ironclad to Sequoia. | |
| The Formula for Venture Success: Zoom as a Biggest Win | 5 | 5 | 1 | 2 | Jake describes winning the Assembled deal through an 11 PM mock board meeting test set up by the founders. He also reflects on Zoom as his biggest win and Comfy as a lesson in buyer-implementer incentive mismatch. | |
| Generational Succession: Emergence Capital's Carry Pool Strategy | 6 | 6 | 0 | 1 | Jake reveals that Emergence founders completely forfeit their carry upon retirement to empower the next generation of partners. The episode concludes with Jake sharing Sam Altman's advice on raising children for an AI-driven future. |
Statements from this episode (70)
Emergence Capital Has Returned Over $8 Billion in Cash
“The dollars in capital, we've returned a little over eight billion dollars in cash.”
90% of Emergence Capital Deals Raise Follow-On Rounds
“Nine out of 10 of our deals have gone on to raise successful following rounds.”
20% of Emergence Capital Investments Hit $1B+ Valuations
“One out of five have gone on to raise rounds at north of a billion dollars.”
10% of Emergence Capital's Early-Stage Deals Go Public
“One out of 10 of our early stage investments have gone public.”
Emergence Invested in Zoom at a 100x Revenue Multiple in 2014
“It would have been, it was going to be priced at two hundred million dollar post money valuation, and this, again, remember the company was at around two million in revenue, And this was a hundred X revenue in 2014, right?”
Zoom Founder Eric Yuan Originally Miscalculated Churn by Counting Upgrades
“Eric himself was miscalculating churn. Specifically, he was counting upgrades from, you know, low tier to high tier as churn. He was counting pausing as a churn. And so he was unnecessarily burdening the business with churn.”
Zoom was profitable when Emergence Capital invested in 2014
“It was competitive both because the, there was early growth, but also because the company was profitable. And so we didn't have to raise capital.”
All PLG companies eventually need to layer on enterprise sales motions
“As exciting as bottoms up PLG is, all PLG companies eventually need to layer on enterprise software motions to be sustainable and enduring.”
Saper: No VC Firm Makes All Its Money from 'Prepared Minds'
“The reality is, I don't think any venture firm makes all their money on prepared minds. I just think that that is bullshit.”
Emergence Capital's Fund III Has Reached a 16x DPI
“That fund, I believe was fund three, which is the same fund that has Zoom. It's the same fund that has some other really large outcomes. And so that fund is already at a, I think it's a 16 times DPI.”
Salesloft Was the Highest Multiple Ever Paid by PE for Software
“Which was the biggest outcome that it was the highest multiple ever paid by private equity for a software company. Companies required for 2.3 billion dollars.”
Saper: Zoom Returned Emergence Capital's Fund III Over 10x
“Zoom returned it, you know, more than 10.”
Saper: Emergence Capital's Fund III Is Top Decile Even Without Zoom
“The cool thing about that fund, though, is even if you took Zoom out, it would still be a top to sell fund.”
Saper: AI web app builders will disrupt Squarespace and Webflow
“But those businesses will clearly disrupt the square space and the web flows and et cetera.”
Saper: Private equity will consolidate most legacy website builders
“I think there will be consolidation, there will be private equity, and there will be a few that reinvent themselves. There will be a few that are nimble enough to figure out how to adapt to the new era, but I think most will get consolidated.”
Saper: Private equity typically pays 3x to 5x ARR for acquisitions
“Savior is too strong of a word because most private equity outcomes don't generate incredible returns for the VC. So savior is not the right. It may be savior in the sense that like would get your money back. The sales loft outcome was an awesome one, but that…”
Emergence Capital backed Gusto over faster-growing rival Zenefits
“We had just invested in Gusto, which was a competitor that was growing not quite as quickly as Zenefits. But the reality is Gusto has endured and become a massive company, and Zenefits didn't.”
Saper: True market pull requires buyers having tried hacking DIY solutions
“It's not a desperate problem if someone hasn't, if your buyer hasn't tried to hack together something on their own to solve it, or if they haven't bought an inferior product to solve it, or if they're not spending countless hours themselves dealing with it. Ot…”
Saper: Market pull is more important than founder quality in startup investments
“The first one is market pull. Like that is the most important thing, I think, when you're evaluating a potential investment or starting a company. The second is the founder, because it's the founder's job to figure out how do you build something defensible in …”
Saper: Top Emergence investments like Zoom were expensive, but Veeva wasn't
“They are not always expensive, but they are often expensive. So if I look back at our portfolio, Gusto was expensive. Zoom was expensive. Yammer was expensive. A lot of the good ones, Ironclad was expensive. But some of them weren't. Viva wasn't expensive beca…”
Jake Saper: Emergence Capital requires a 3-5 hypothesis chart for diligence
“Every diligence exercise results in a chart, and the chart is, what are the three to five what you have to believes? What is the data supporting is what you have to believe? And what is the data negating is what you have to believe?”
Jake Saper Has Never Had a VC Investment Go to Zero
“No, what you mean is I've never none of my deals have ever gone to zero.”
Every Emergence Capital partner does reference calls on every investment
“So what it means is that for every investment we make, every partner does reference calls. Every partner calls customers. Every partner calls management references. Every partner does backchannel references.”
Stebbings: Having associates conduct reference calls is a major VC mistake
“I think one of the biggest mistakes that firms make is when they get associates to just go and do the, Reference course. I mean, I'm nothing against associates, but there's so much in tonality, in the pause, in the facial expression.”
Regal.ai Reached $1.5M Revenue and 6 Term Sheets Pre-Series A
“There was a Series A in a company called Regal.ai. It was very hot. I think he had Six term sheets from top venture firms. Company had grown from zero to, I think it was one and a half million in a year, which pre AI was like very, very good.”
Bolt Scaled From Zero to $20M Revenue in Two Months
“We're seeing examples like Bolt, you know, which went zero to 20 in two months”
Together.ai Scaled From $2M to Over $100M Revenue in 15 Months
“Together is a good one, where we were in the A in 15 months ago, they were at two million revenue. The business is now north of a hundred million revenue.”
The New SaaS Benchmark for the AI Era Is 'Quadruple 120'
“If I were to posit a replacement for the triple, triple, double, double phrase, Maybe it's something like quadruple one 20. And what I mean by that is, yes, you should be growing very quickly, perhaps quadrupling year over year, triple quadrupling, et cetera. …”
Saper: Emergence's AI Application Portfolio Companies Seeing Gross Margin Increases
“Most of our application layer companies that are providing applications on top of these products are seeing gross margin increase over time because of that competitive dynamic.”
Saper: Emergence Invested in Together.ai Believing Open-Source LLMs Will Become Dominant
“The clearest what you have to believe for that investment was that open source LLMs will be a dominant part of the market over time. That enterprises, that businesses are going to want to buy and use open source models and not just anthropic open AI and the cl…”
Saper: Average AI startup retention cohorts will disappoint, but outliers will excel
“On the average, I think they'll disappoint. And I think there'll be outliers that are better than we expect.”
Saper: Specialized LLMs will proliferate and mostly originate from open source
“I do think that you're going to see a lot of specialized LLMs. And I think that a lot of them will come from open source back to the earlier point.”
Saper: Domain-specific LLMs will derive insights frontier models like OpenAI cannot match
“And if you build domain specific large language models using that data, you're going to have insights that even an open AI won't be able to have.”
Saper: B2B software vendors will survive AI-enabled internal code generation
“I believe that B to B software, I believe software vendors have an important role in the future, even if the bolts of the world, the curses of the world make coding cheap, easy, in some cases free.”
Saper: Enterprise software buyers purchase problem-solving perspectives, not code
“When you're buying software from a vendor, you're not just buying the code, you're buying an opinion perspective on how to solve a problem.”
Expecting Ordinary Enterprises to Build Custom Vertical AI Tools Is Moronic
“Majority of Enterprises, especially in Europe, do not know what Slack is, let alone what Notion is. So the fact that they're going to create their own verticalized AI tools is absolutely fucking moronic.”
Saper: AI-enabled services are the easiest model for outcome pricing
“The easiest form of outcomes based pricing today in AI is AI enabled services.”
Saper: Focused startups are outpacing incumbents in capturing AI value
“The thing I've changed my mind on is I'm less fearful that incumbents will be able to accrue most of the value. The reality is, like, it still early days in this game, and things could change, but thus far, the startups are outpacing, the focus startups are ou…”
Saper: Veeva's market was only $400M when Emergence invested
“When we made the investment in Viva, a CRM for pharmaceutical companies, the entire market for that was four hundred million dollars globally.”
Enterprise AI Buyers Are Using Tools to Freeze Hiring, Not Fire
“Most buyers of this stuff aren't firing people. What they're doing is not hiring new people. And so they're trying to be more efficient with whatever they currently have.”
If Jake Saper Were to Short a Public Stock, It Would Be IBM
“If I were to short a stock publicly, it'd be IBM.”
Saper: 75% of Fortune 500 companies still run core applications on mainframes
“75% of the fortune 500 still run their core applications on refrigerators in their closet.”
A Major Enterprise Will Suffer a Damaging AI Agent Failure
“In fact, likely that some big enterprise is going to deploy an agent and the agent's going to do something really bad”
Saper: VC partner turnover creates orphaned deals that harm founders
“And it is really, really bad for our founders. Because what happens is these founders become orphaned deals.”
Saper: Multi-stage VC seed programs create signaling risk for founders
“Most multi-stage firms treat their seed programs as an option program, right? They write small checks. Often it's their junior people writing these small checks and they use it as a way to track the company to see if it breaks out. If it does, then they try to…”
Saper: Emergence Capital targets double-digit ownership on partner-led seed bets
“So when we make a seed investment, we treat it like a core bet. It's a partner that's doing the deal. We're generally owning double digit percentages so that we really care.”
Saper: VCs have no defensible reason to hold public stock without board inside info
“If we didn't have inside information, we'd have no defensible reason to hold the position. But as long as we're on the board, we have that information, you know, we can hold it.”
Emergence Capital bought extra Doximity shares at IPO and returned 3x
“In some cases we buy. So in the case of Doximity, you know, we were huge believers. We invested at the A, accompanied really well. We actually bought more at the IPO. And that's been a great investment. We've already returned three X you know, from where that …”
Selling Stocks at Lockup Would Have Lost LPs $2 Billion
“If we had sold them all at lockup, we would have returned two billion dollars less to our LPs.”
Emergence Missed Out on $2 Billion by Not Selling Stocks at Peak
“What's interesting, and this just is like totally coincidental, if we had sold all of our shares at peak price of whatever, whenever the peak price proposed for that stock, we would have made two billion dollars more for our LPs.”
Saper: Fragmented customer use cases create mirage product-market fit
“One of the cases in traditional SaaS is you're selling a product to a very diverse audience. Who's all using it for different things. And so you think like, oh, I've got product market fit, but the reality is like someone's using your thing for this over here …”
Saper: Revenue growth without high margins isn't product-market fit
“What that doesn't tell you is have you used AI to provide a high margin service, right? You can sell a lot of something, but if you haven't figured out a way to have a good business model around it, then it's not really product market fit.”
Saper Discloses Emergence Capital Has Participated in Pay-to-Play Rounds
“I personally have not yet been part of a pay to play. My firm certainly has but it sucks. It just feels bad on all accounts, but sometimes it's necessary to get the company funded.”
The Tech IPO Market Will Not Reopen Until Early 2026
“I tend to think next year. Like, I think there's enough uncertainty in the market right now, particularly in the macro and the political situation that there's a lot of people that are nervous. So my best guess would be like the beginning of next year.”
Jake Saper: Microsoft is the safest 10-year stock index for B2B software
“I think Microsoft, and the reason that's the case is because I'm obviously long B to B software, and that's probably the best index.”
Jake Saper lost the Ironclad deal to Jess Lee at Sequoia
“The first deal I lost, I think I've lost two or three deals in my career so far. The first deal I lost was Ironclad. And I lost it to Jess Lee at Sequoia.”
Ironclad has surpassed $100 million in annual revenue
“The company's now north of a hundred million in revenue.”
Ironclad built an AI product named Jurist that competes with Harvey
“And in addition to contract management, which is a much, you know, bigger thing, we also have this AI product that we've built. It's called Jurist, which is a Harvey competitor. It's pretty cool. And it's grown real quick.”
Jake Saper Would Sell Grok at a $50 Billion Valuation
“So I sell Grok, and I think the reason I sell Grok is I don't yet know how, what niche they've carved out in the market.”
Saper: OpenAI feels expensive at $300 billion valuation
“OpenAI feels expensive, but they have a strong consumer brand.”
Saper: Buy Anthropic at $60 billion valuation if application layer improves
“I probably buy Anthropic assuming they can figure out the app, you know, the app stuff more.”
Assembled was Stripe's first seed investment
“Stripe did this seed. It was the, I think was the very first deal that Stripe did as a seed investment.”
Emergence Capital knew Fund 5 founders 13 months before investing
“In our last fund, in fund five, we did this analysis. We knew the founders on average, 13 months before we made the investment.”
Shorts cut from this episode
▶ 3 reasons AI won’t replace software vendors 🤖 · 20VC with H (@50:29)
▶ “Why most venture firms are broken” ⛓️ · 20VC with Harry Ste (@1:04:34)
▶ “We’re the VC firm who do things differently” 🔥 · 20VC with (@30:59)
▶ The framework for investing success! 🚀 · 20VC with Harry St (@26:10)
▶ This is how to find the best products 🚀 · 20VC with Harry S (@19:38)
▶ Is IBM in trouble? 🤔 · 20VC with Harry Stebbings (@1:01:45)
▶ Why Salesforce WINS even when its not the best CRM 📈 · 20VC (@47:12)
▶ This VC firm has a CRAZY portfolio 💰 · 20VC with Harry Steb (@0:01)