Dec 5, 2016 · 32m · 20vc
20VC: Lessons Learnt From Marc Benioff & Selling To Salesforce For $2.7bn, What Product Market Fit Really Looks Like & Why Pricing Is Startup's Biggest Problem with Scott Dorsey, Managing Partner @ HighAlpha
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gold bands on the timeline = statements, start to end. Hover to read, click to jump. CC turns on captions
In this episode of The 20 Minute VC, host Harry Stebbings interviews Scott Dorsey, Managing Partner at High Alpha and former CEO of ExactTarget, to explore early-stage SaaS scaling, enterprise pricing strategies, and executive leadership under Marc Benioff. Scott also details High Alpha's hybrid studio-fund model, the transition from operator to investor, and the advantages of building tech companies in the Midwest.
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 31.3% of the talking time here. How this is scored →
Harry as informed peer 3.4 Guest teaching 3.1 Guest disagreement 0.3 Harry pushing back 0.9
speaking balance: gold is Harry, purple is the guest (3 minute bins)
Sharpest disagreement ▶ 25:37 Reframing Midwest ecosystem independence
Scott politely reframes Harry's suggestion that the goal is complete independence from Silicon Valley, arguing that global connectivity and flight access are far more critical.
Hardest push from Harry ▶ 10:37 Pressing on studio signaling riskHarry pushes directly on a potential structural flaw, asking how High Alpha prevents negative signaling risk when its venture arm passes on internal studio startups.
Biggest teaching moment ▶ 15:44 Explaining enterprise SaaS pricing strategyScott educates the host on psychological missteps in early SaaS pricing, explaining that high enterprise proposals actually build buyer trust and leverage inherent gross margins.
Harry holds his own ▶ 17:54 Demonstrating SaaS gross margin knowledgeHarry showcases sharp domain understanding by steering the conversation into key SaaS performance indicators, questioning specific gross margin benchmarks and payback period optimizations.
the scores for every segment, with the reasoning behind each
| Chapter | Topic | Harry as informed peer | Guest teaching | Guest disagreement | Harry pushing back | Why |
|---|---|---|---|---|---|---|
| Scott Dorsey's Career & ExactTarget Success | 1 | 2 | 0 | 0 | Harry introduces Scott and asks for an overview of his background and ExactTarget journey. Scott delivers a broad overview of his career with lightweight introductory banter about the Chicago Cubs. | |
| The Entrepreneurial Impact of Business School | 2 | 3 | 0 | 0 | Harry asks standard exploratory questions regarding the value of business school and working under Marc Benioff. Scott shares personal reflections and managerial insights regarding Salesforce's V2MOM framework. | |
| Establishing High Alpha's Dual Studio Model | 2 | 4 | 0 | 0 | Harry prompts Scott on the founding story of High Alpha. Scott educates the host on the distinct roles of High Alpha Studio versus High Alpha Capital. | |
| Navigating Signaling Risk in Studio Investments | 6 | 3 | 1 | 3 | Harry demonstrates strong VC knowledge by challenging Scott on how the dual fund structure avoids negative signaling risk. Scott explains how timing their venture investment to graduate studio portfolio companies mitigates this issue. | |
| Common Pitfalls & The Problem of Underpricing | 5 | 4 | 0 | 1 | Harry enthusiastically engages on SaaS pricing and ACV limits. Scott details how B2B founders habitually underprice their products and explains effective enterprise pricing levers. | |
| Evaluating SaaS Gross Margins & Unit Economics | 5 | 4 | 0 | 1 | Harry presses Scott on specific metrics, including gross margin targets and payback period optimization. Scott outlines target metrics and resource allocation strategies. | |
| The Psychological Shift from Operating to Advising | 4 | 3 | 1 | 2 | Harry asks about the mental transition from operator to investor and questions Scott on whether Midwest tech hubs should aim for total independence from Silicon Valley. Scott clarifies that global connectivity is more vital than pure independence. | |
| Quick Fire Round & High Alpha Vision | 2 | 2 | 0 | 0 | Harry guides Scott through a rapid-fire question round covering books, mentors, and High Alpha's long-term vision in an entirely collaborative tone. |
Statements from this episode (19)
Salesforce acquired ExactTarget in July 2013 with 2,000 global employees
“And then in July of 2013, we were acquired by Salesforce. That was incredible. That was a rich moment of achievement and satisfaction. We had about 2000 employees all over the world at the time”
Dorsey: Salesforce CEO Marc Benioff is an excellent manager
“What most people may not know is he's actually an excellent manager.”
Dorsey: Salesforce operated at a faster pace than ExactTarget
“We felt like we operated at a fast pace at ExactTarget, and the pace at Salesforce was even faster”
High Alpha Studio plans to launch 8-10 cloud startups in four years
“One is High Alpha Studio, and that's a startup studio focused on starting new enterprise cloud companies, and we've signed up to start eight to 10 new enterprise cloud companies over approximately a four-year period of time.”
Scott Dorsey: High Alpha is backed by Emergence Capital and Hyde Park
“We're funded by Emergence Capital out of the Bay Area, Gordon Ritter, phenomenal cloud investor and friend and entrepreneur. It was our lead investor, and then Hyde Park out of Chicago, and we have about 20 to 25 of us, designers, developers, analysts, subject…”
High Alpha Studio seed rounds range from $2M to $3M
“Those rounds have tended to range between two and three million dollars of capital.”
Dorsey: High Alpha Capital likely to invest in all Studio graduates
“So another way to put it is we're likely to invest in every one of our companies that come out of the high alpha studio.”
High Alpha requires up to 50 customer calls before greenlighting a startup
“So even before we decided to green light a new company, we were looking for 25, 30, 40, 50 customer conversations to really validate that we're solving a true problem.”
True product-market fit requires selling to buyers with no prior relationship
“But when you know you have product market fit is when you start selling organizations where you have no prior relationship, you know, they're not friendly.”
Most early-stage SaaS startups underprice their products due to low confidence
“Most early stage SaaS companies under, underprice their offering, and I think it's maybe lack of confidence, or lack of enterprise experience, or understandably so, being timid about a small feature set That you're putting into the market.”
ExactTarget scaled accounts from $2,000 to $10M+ on a single codebase
“You know, back in our day at ExactTarget, we were able to sell to small businesses, often two, three, four, 5000 per year, and then we're able to sell to very large enterprises. Some of our accounts were north of ten million dollars a year, and it was essentia…”
High Alpha targets SaaS gross margins above 80%
“And we look for gross margins, you know, north of 80%. If you have a strong services component, then probably north of 70%.”
Dorsey: Some High Alpha startups achieve gross margins above 90%
“Some of our companies are running north of 90%, which is really outstanding because it just gives you more money to be able to invest in R&D, invest in go to market, and really scale the business in a meaningful way.”
Scott Dorsey reveals Greenspring Associates as High Alpha Capital's lead LP
“Our lead LP is a green spring and associates out of Baltimore, a terrific fund to fund investor.”
Scott Dorsey: Biggest VC Challenge for Former Operators Is Giving Up Control
“So for me, and I think for all of us at high alpha being former operators, the biggest challenge is encouraging and nudging and trying to use our powers of persuasion, you know, to help these companies move in the direction we think is the right direction, but…”
Dorsey: Midwest tech startups must grow executive talent internally or import it
“You've got a smaller pool of software executives in the Midwest. And as a result, you have to either grow your own or pull them in from other parts of the country.”
Drive Capital is the only venture firm with scale in the Midwest
“We have drive capital in Columbus, which is excellent and a great team. They're putting meaningful capital to work in the Midwest, but really outside of drive, we have very little scale of capital and that makes it more challenging for our company.”
Dorsey: ExactTarget struck out with every VC before Bob Compton invested
“Bob was our first investor and exact target. Served as chairman for the first seven or eight years of our company's life. And he was the one angel investor with a great software and VC background that believed in us when literally nobody else did Harry. So we …”
Dorsey: High Alpha's venture studio model requires 5 to 10 years to prove out
“You know, we're not going to know whether the high alpha model works for, I mean, truly probably five, seven, 10 years when these companies hopefully break out and become, you know, meaningful and very big success stories.”