Welcome to Episode 190! Ed Sim is the Founder & General Partner @ Boldstart Ventures, one of the leading players in early stage SaaS investing. Their MO is to be a first check VC for enterprise founders and they have backed the likes of GoToMeeting (acq by Citrix), LivePerson (IPO, NASDAQ), Divide (acq by Google), Kustomer, Snyk and BigID just to name a few. Ed is also a cofounder of MState, a growth lab for enterprise blockchain in partnership with IBM. Ed is also a board director/observer of Kustomer, Hypr Biometric, Snyk, BigID, Fortress IQ, Wallaroo Labs and Manifold. If that wasn’t enough, Ed is also the writer behind BeyondVC, a must read blog in the world of SaaS.

In Today’s Episode You Will Learn:

* How Ed made his way into the world of VC from one very meaningful high school lecture that changed his life and career path.
* What does Ed mean when he says “founders should not sell their product to enterprise in the early days?” Starting from the ground up, what can founders do to begin that relationship building process with enterprise buyers and CIOs? What can a startup do to establish that trust in the mind of large buyers? How much of a role does VC backing provide in comforting enterprise buyers?
* What would Ed advise founders contemplating the debate of going SMB up to enterprise or enterprise to SMB? What role should product play in this decision-making process? What are the leading indicators in testing the product that founders should observe for and guide their direction? Where does Ed most often see founders make mistakes here?
* How does Ed think about discounting? Would he agree with a previous guest that “discounting is now table stakes?” Rather than the financial element, what does Ed believe the founder should really be looking to get from the buyer in terms of commitment? How does Ed approach and assess pilots? To what extent should they be free or paid? What can be done to set the benchmarks for success and ensure closing?

Ed’s 60 Second SaaStr

* What does Ed know now that he wishes he had known in the beginning?
* Quality or quantity of logos?
* What would Ed most like to change in the world of SaaS?

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Jason Lemkin
Harry Stebbings
Ed Sim


Harry Stebbings: This is the official SaaStr podcast with me, Harry Stebbings. And if you haven’t already, it’d be great see you on Instagram. I’m there at hstebbings, with two Bs, 1996. And there, you can suggest both questions and guests for future episodes.

But to our guest today. And I’m thrilled to welcome back a longtime friend, slightly under the radar, but phenomenal player in SaaS, who just continues to smash it. His name, Ed Sim, Founder and General Partner of Boldstart Ventures, one of the leading players in early stage SaaS investing. Their MO is to be the first check VC for enterprise founders, and they’ve backed the likes of GoToMeeting, acquired by Citrix, LivePerson, which IPO’d on NASDAQ, Divide, which was acquired by Google, Kustomer, Snyk, and BigID, just to name a few. Ed’s also the co-founder of MState, a growth lab for enterprise blockchain, in partnership with IBM. And if that wasn’t enough, Ed is also the writer and brilliant brain behind Beyond VC, a must-read blog for me in the world of SaaS.

But that’s quite enough from me. Without further ado, I’m very, very proud to welcome back longtime friend and phenomenal player in SaaS, Ed Sim, Founder and General Partner at Boldstart Ventures.

Ed, I’m so excited to have you back on the show for a very special round two. Thank you so much for joining me today, Ed.

Ed Sim: Thank you so much, Harry. I feel like I’m in very special company. I looked at our date, and I think it was about three years ago when we did our first episode together.

Harry Stebbings: It was indeed three years ago. And you’re dating me with that. Which is quite a tricky thing to do. But I would love to start, Ed, as you said, three years ago we had round one. For those who didn’t hear round one, how did you make your way into the wonderful world of SaaS?

Ed Sim: To be honest, I ended up being a venture capitalist because I heard about it in college. Believe it or not, one of my friends’ brothers was a VC out of Boston in the early 90s, and had talked about why VC was such a wonderful career move. Of course, me not knowing anything, tried to reach out to several VC firms, and no one really responded to me. So I ended up going to Wall Street and working at JPMorgan, helping build quantitative trading models. And during that time, I learned Visual Basic and automated my job, which was basically glorified data entry. And you know, Mosaic browser came out at the time, I was going to go to business school, and I saw an ad in the newspaper for a venture capital technology associate in New York in 1996. And believe it or not, I faxed my resume and got a call back, and that was the beginning of my venture capital career 22 years ago.

Harry Stebbings: I absolutely love it. You faxed your resume in.

Ed Sim: Am I dating myself here?

Harry Stebbings: You are slightly dating yourself. I’ve never used a fax machine. That does say something.

Ed Sim: Wow.

Harry Stebbings: Yeah, I know, I’m sorry for that. But, Ed, I do want to start saying, quickly moving away from my youth, with the statement that you said to me before, which really kind of highlighted to me kind of why I was so excited to have you on the show. Because you said that founders shouldn’t sell their product to their first few customers. So I’d love to start with this and your thinking around that, and maybe if you could unpack that a little for me.

Ed Sim: Yeah, absolutely. It almost sounds counterintuitive, but just to give a little framework. What we do and specialize in. We’re the first check-in for technical enterprise founders. So everyone we fund, typically engineers with a certain view of the market, building a new product in a new area. And they also kind of want to come in and just sell their product to folks. And frankly, we have an advisory board of IT executives from banks and insurance companies and media companies, and no one really wants to be sold to. You want to go in and understand what their problems are. And what we like to say is, let’s flip the paradigm on its head not to sell anything to anyone. Let’s figure out what their problems are and how do you partner with them. How do you become a trusted partner? Because at the end of the day, no matter whether you’re a five person startup or you’re a hundred person company, your product itself is not going to solve every single problem for them. So you need to build that trusted relationship.

And so, from our perspective, we have a playbook with our founders, where we talk about an enterprise design partnership. And we have a number of Fortune 500 companies who are willing to engage in partnering with the founders at the very earliest stages, with a pointed view of, let’s say, building something in the servlet space, or building a next-gen security for open-source play. And I think if you turn it upside down and not sell anything, I think that removes a lot of the pressure, and that allows you to have real conversations with these folks.

Harry Stebbings: Can I ask, just in terms of having the opportunity to kind of build that, as you said, trusted relationship, how do you think founders today, when they’re at 0 to 10 people and very little traction, how can they have the opportunity to begin that relationship building, in the sea of enterprise startups trying to reach the CIOs of the behemoths of today?

Ed Sim: Frankly, what I think you really need is a trusted filter. And I won’t toot my own horn, but there are a lot of great VCs out there that actually work with a lot of these Fortune 500s. And my perspective is, when you’re choosing your investment partner or even choosing angel investors or board members, make sure that they have a relationship or understanding of how to get into some of these enterprises. And I think from a diligence perspective, these founders should call around and check in on their VCs and figure out, are they really actively helping out in the process? Do they have these relationships? Because at the end of the day, it’s all about trust.

The biggest thing that we’ve seen, and we’re based in New York, and everyone asks us, why do you do enterprise investing out of New York? Isn’t it all in the Valley? And I like to always say, I always go back to the point of, why did Willie Sutton rob banks? He robbed banks because that’s where the money is. So we have 55 Fortune 500 companies in New York, and every company is a technology company. Jamie Dimon from Chase says, we’re a technology company that happens to be a bank. So you think about that paradigm and that lens. Everyone’s trying to hire tons and tons of great engineers. And the frank reality is that the best engineers are going out to start their own companies or work at startups. So these banks and insurance companies and large Fortune 500s, if they don’t have a mechanism to filter and partner with the ecosystem, they’re going to die. And we’ve seen it more and more over the last five years, versus 20 years ago.

Harry Stebbings: Can I ask, post your check getting in there, as you said, often at the very earliest of stages, how do you think about that talent shortage in terms of engineers, and how do you look to navigate that challenge with the startups themselves?

Ed Sim: So, from our perspective, it’s the talent gap more on the Fortune 500 side. Because if you’re a really amazing engineer, you’re actually going to want to start your own company or go to a startup, right? You want to be somewhere exciting, somewhere fast growing.

I think second thing is, is that our job, we’re the first check in, so a lot of times we invest, it’s two, three years ahead of where the market really is, which can be scary, but exciting at the same time. So if you’re building something kind of on the leading edge but not bleeding edge, then I think it’s easier to recruit engineers, whether it’s making bets in servlets, where we have four servlets-related companies we started investing in three years ago, or intelligent automation. You hear about RPA, that’s all the rage now, but we started investing in that three years ago as well. Or even GDPR, right? Kind of managing that data. We invested in BigID, seeded it three years ago, and now it’s off to the races, right place, right time. But the reality of it is, we had to be there three years before.

Harry Stebbings: We’ve kind of instantly taken the lead here into the world of enterprise. But often the question for founders is whether to start an SMB and go to enterprise, or start at enterprise and go to SMB. Most often, it’s the first. How do you think about this decision from the founders’ mindset, and what advice would you maybe give to someone contemplating it, Ed?

Ed Sim: I would give a different perspective. Think about the problem you’re solving, who you’re solving it for, and what are the replacements that you’re building for. I’ll give you a great example. So one of our enterprise application companies is called Kustomer, with a K. And the founder, Brad Birnbaum and Jeremy Suriel, had previously started a company called Assistly, which was going after the SMB space for customer service. They sold it to Salesforce, and it became Desk.com. They had an idea to go after Zendesk, and until you’ve had some of the investors of Zendesk in the past … But they had an idea to go after Zendesk. And what they saw in the customer support space was that every mechanism from which an individual customer could connect you with was siloed. Whether you sent an email or sent a chat or messages, it’s all kind of siloed together, and there wasn’t one universal interface for one customer. And what they did was say, okay, you know what, let’s start with the problem, which is if, Harry, you’re the customer, I want to know everything about you right there, which means we have to have an integrated data platform around that.

And so these guys thought that they were going to sell to SMBs, but the reality of it is, is that problem that they’re solving, having an integrated data silo with tons of data building automations around, was not an SMB problem, that as a medium to large enterprise problem. And so, you got to start with the product. In their minds, they wanted to go to SMB and do self service, but the reality of it was, was that the SMBs didn’t really care about kind of that one place for all the information, it was a larger play.

So that goes back to your question of SMB or enterprise. It has to start with the product and the problem. And that product has to match the problem. And you need to figure out what type of company that is. And then you can figure out what the model is after that. How do I build self service, if it’s SMB? How do I build kind of a pre-sales function, if it’s large enterprise?

Harry Stebbings: I absolutely love that kind of product leading and decision making there. I am interested, though. Say that we went for the enterprise. And the most common problem that founders come to me with is, enterprise sales cycles. They say, Harry, I’m at the very earliest stages. I have short runway. The sales cycles are long. How do I do this with sales rep-wise, when there’s such long ROIs? Should they also chase SMBs in the meantime to make up, with smaller revenue wins? What is your thoughts and experiences towards nailing the first enterprise customers in the first year or so, without that kind of terribly long ROI and sales cycle?

Ed Sim: Well, my first advice would be that when you actually start your business and you’re raising capital, make sure there’s at least 18 to 24 months of runway. And once again, I’m putting the lens on it of two technical founders coming into my office with pre-product. I would imagine that six months would take them to get to an alpha stage. And you start having conversations with enterprises around that time, when you can kind of show some type of user interface, to get them excited. And then there’ll be another six months of conversations, that’s 12 months. And then as you deploy in there, 12 months from kind of funding, you’ve got another three, four months to go through pilot, maybe have a few under pilot, maybe be able to convert one to kind of a full-paying customer. So I think you have to start with the milestones and then work backwards. I think that’s the most important thing. And assume it’s going to take a minimum of 18 months, if not 24 months, when you do that seed round. If you’re doing a pre-seed round, then there’s certain goals you may need, where you need seed round. But try to think about 24 months in a package, from the day you start to the day you get some of those customers.

Harry Stebbings: Would you advise again the founders in getting small revenue wins in the form of maybe SMB or smaller customers, while they’re also chasing the whale enterprise customers?

Ed Sim: Yeah, so once again, for me, it’s kind of a different kind of business case. So I’ll give you an example. So a company that’s in London and Israel is in your backyard, called Snyk, S-N-Y-K. And I think goes back to the product and who you’re targeting. Snyk is a different story altogether. It actually has a system where you can actually scan all of your open source Git repositories for security vulnerabilities. And then we offer the updates for free right there. Well, guess what? Ideally, you want to get into the enterprise eventually, but that’s a bottom-up, developer-led play, because it’s led by the product. The product dictates that developers need to use this. And then 10 developers start using, you start moving up the stack. And I have to tell you, that they’re doing about 350,000, 400,000 downloads a month now, three years later. But in the very beginning, it started out slow. They would get a single developer on. It expanded to a team. But we weren’t going after the enterprise, because the product didn’t dictate going after the enterprise.

Eventually we got pulled into the enterprise as the larger pharma companies started using it. So once again, I go back to, not, the sales model doesn’t dictate who you go after, it’s your product and what problem you’re solving and who you’re solving it for, should dictate how you go after, whether it’s SMBs or large enterprises. We couldn’t have actually gone after large enterprises in the very beginning with that product, just because it wasn’t ready for it.

Harry Stebbings: You mention the word “pilot” there. It’s often a common point of contention that I see with founders. And it’s to what extent should they offer free pilots versus paid pilots, how long should the pilots be, what can they do to make sure there’s kind of conversion at the end. How do you think about this, and kind of ensuring efficiency with the pilot model?

Ed Sim: That is the question. And I wish there was a formula to say like, if A, then B, then C, right? But there really isn’t. And I’ve been doing this a long time. The question that you’re asking is, do I do a free-OC or do I do a POC, right? Some people may say, always get skin in the game. Charge $25k at least, or $50k at least, because it’s a million dollar deal. And others will say, don’t do anything. From my perspective, I think you’ve got to navigate and kind of understand, the goal of any kind of relationship is to figure out how quickly you can get them to pay. And from our perspective, if you look in the playbook that we have, we go back to the idea that a founder’s first three or four customers are probably either going to come from their relationships, because when they started the business they had a pointed view of the world, and they probably already have some relationships from a product that they sold prior. So it’s going to come from their relationships. It’s going to come from their investor relationships or their advisor relationships, so the first three or four are relationship driven, so that’s … even if you land those, that’s not product-market fit.

So what do you want to accomplish from that? Paying is nice, but the most important thing, I think, that the smart investors will look at downstream in the A and B round is, are they referenceable customers, and is this a daily part of their life. Is this a painkiller? Does it solve a massive problem? Are they using it every single day or multiple times a day? Or is it kind of a vitamin, they check in every two weeks, and it’s just kind of a friend doing a friend a favor.

So I think you really need to dig in a layer deeper. It’s not about how much you’re getting paid. Is this solving a massive, massive pain point for them and a problem? Do they freaking love it? Is it a daily part of their life? And then from there, you can build upon, start thinking about, do I charge them, how much do I charge them, that kind of process.

Harry Stebbings: It’s so good that you said about referenceable customers. The one I often get asked is, “Harry, is about quality or quantity of logos in the early days?” Do you have a strong opinion on this, and how founders should pursue that?

Ed Sim: Man, it’s absolutely the quality. Quality meaning, not just the name of the customer itself that might be representative of who your audience might be moving forward, but also quality meaning that the person using it is a decision maker, and it’s solving a super, super big pain for them.

And the one other thing I forgot to mention is, if you do, whether you do the free-OC or POC, the most important thing is, when you go down that path is, setting aside a statement of work to show that if we prove this out, then you will pay for this. Or these are the three deliverables I need to make. Let’s agree on this, and if this happens, then we flip the switch. Because what you need to do is set a time frame that is meaningful and that makes sense. Because you don’t want to drop an installation into a large bank, let’s say, and then have a never-ending nine month POC. That’s not going to help anyone. That’s not going to solve problems. So if someone won’t give you an agreement about what the statement of work is and what are those three things we need to prove out and actually quantify, then you should walk away and find another pilot. It’s very, very important to say no to the wrong first few customers, as it is to say yes to the right first few customers.

Harry Stebbings: Can I ask, in terms of that internal champion, who do you find has the most opportunity and effectiveness, from your experiences in selling into? And how do you think about building multiple relationships, in case that internal champion leaves?

Ed Sim: Harry, that’s an absolutely great question, because part of selling into a large enterprise is understanding the politics and the decision-making process. I’ll give you a great example. I’ll go back to Snyk, which is a company in London. They’ve grown super fast. They actually target developers. And so their outreach in the beginning was evangelizing to developers. It was a complete bottom-up strategy. The goal two or three years down the line was to get to the enterprise. And then some people say, hey, developers don’t have budgets, they don’t have this, they don’t have that. So the reality of it is, we had to actually appeal to developers, but ultimately we knew that the person buying it was going to be the security person. It was going to be the security person and the VP of IT, so two of them.

So as we started going after the developers, evangelizing at the conferences, then you go top down and market to some of these security folks. And then, boom, when you go into a large enterprise and get brought in, it’s both of them involved. And in this case, we wanted the security budget. Because that’s a very big budget. There were other folks that weren’t solving the problem as well as we were, and they can move faster with a bigger budget from our perspective.

So I think you need to understand and kind of map and start thinking that through in the very beginning, as you start your marketing and start your outreach.

Harry Stebbings: I absolutely love that kind of bottoms up until there’s enough critical mass. And then you go top down. Can I ask, what do you think is that inflection point for the willingness for top down to really work with enough traction?

Ed Sim: The willingness for top down, you mean in the bottom up to top down model? Or going top down first?

Harry Stebbings: Yeah, like how much do you need bottoms up to convince the CIOs, the internal buyers, to purchase your product? Is it 30% traction within the organization, is 50% traction, is it these three internal functions? What do they need to see within the internal workings to get comfortable buying it?

Ed Sim: I would say that there’s no hard and fast rule for that, to be honest with you. And typically, I’m thinking about some of our first few enterprise customers at Snyk, for example. It was maybe three people using it. But they’re running it on top of all their Git repos. We just made it so easy for folks to use, that they loved it and they reached back out to us, and said, hey, can we just work on that enterprise license and have this for our 800 developers and thousands of repos.

So I don’t think there’s an actual answer, because I think in every industry, it’s different. Because this was a kind of a novel solution, leveraging GitHub and Bitbucket and other solutions. I think in areas that are more competitive, like let’s say, messaging like Slack, that’s a different kind of sale. You’re going to need a lot more penetration and departments to do it. Or maybe even like an Elasticsearch. In Elasticsearch, I know some of the folks over there, before they sold their first bank, they had eight different departments using Elasticsearch in various different ways, and then the head of sales had to go in there and navigate and try to organize all eight of those departments together just to do one enterprise-wide license. And that took, I think, a very long process.

Harry Stebbings: Can I ask, in terms of getting those customers in the early days, we spoke about pilots earlier as one mechanism. Another mechanism that is often used is discounting. How do you think about discounting? I had a guest on the show the other day that said discounting today is table stakes. Would you agree with him, and what have your experiences been in kind of startups really employing the discounting strategy effectively, or not effectively?

Ed Sim: Now would you say this is for the first few customers, or in perpetuity, I guess, is the question.

Harry Stebbings: Let’s start with the first few, and then move to in perpetuity.

Ed Sim: So I wouldn’t start with … I mean, I think discounting is the last thing, period. Because what I think you need to do when you’re selling your first few customers is, I like to say you market the vision, you sell the product. And so you need to get that enterprise person to know that you, and what you’re building, and your team is going to build something for the long term three years from now. This is the road map that we’ve laid out. Today, we happen to have this product, but this is where we’re going to move forward. And by the way, we would love your input into the direction of where we’re going. We’re not going to customize anything for you, but if it’s for a market and you happen to want it, we’ll work with you on it.

So I think you need to sell that vision, show that you’re the right people for it. And once they kind of buy into that, what you really want to get from them is engineering resource, make sure they’ll invest the time. Because what most people don’t understand is that, it’s not about asking the $25 to $50k. If there’s like data integration challenges or what not, and if they give you two resources to actually move data to your platform, etc. Etc., that’s an investment. And so you want to make sure that they’re going to invest some of their time into this. And the third part that I would say is, at the end of the day when it comes down to the money situation, I’m less concerned about the money situation the first few customers. As I said, it’s all about getting the referenceable customers in the first place. So discounting is usually the last part of it.

And if we do do discounts, kind of like okay, in year one, we’ll give you 30% discount or 40% discount, and then we’ll reassess it after year one. So it’s not stable, regardless of how you do it. The expectation is always that, because they’re a partner of yours, both of you are willing to make an investment. Investment on their side from time, resources, maybe some capital, investment from your side in maybe giving a discount. But that’ll get reset if you deliver on everything you need to do.

Harry Stebbings: In terms of the discounting themselves, often one sees discounting with multi-year contracts. How do you think about the importance of prepaid multi-year contracts? And if they’re not prepaid, is it not just shifting that customer success function to finance?

Ed Sim: I think the multi-year contract is definitely something we’re seeing across the board in our portfolio, whether it’s two year contracts or three year contracts. And a lot of the folks will offer discount, let’s say a 10%, if you prepay all of it annually, or even more if you prepay three years. So as you know, Harry, cash is king for startups. To the extent that you can actually use your customers to finance some of that earlier, I think, is an absolutely massive opportunity. And I think you would be nuts not to even offer some of that discounting in the future for cash flow up front.

Harry Stebbings: Also, another smaller but very important element that I wanted to discuss, was in terms of tipping over these first enterprise customers, how important is the investor base that you’ve assembled, in terms of providing that validation?

Ed Sim: I think it’s absolutely massive. And most importantly, once again, it’s not just us, there are other VC firms too, but we have a very active IT executive advisory board. We’ve got a very active IT network that we work very closely with. And even during the diligence process, we will engage with these folks to figure out, hey, if this is something that’s quite interesting, please give some feedback during the diligence process. And sometimes these folks will become pilot customers during the diligence process very early on, knowing how early these customers are. So I think part of our job, the investor base job, is to find those right people who are willing to engage with startups earlier in the life cycle, versus waiting for a more mature company. And I think that that is a huge difference that can cut significant time down from you discovering that first few customers.

Harry Stebbings: Can I ask, Ed, we’ve spoken about kind of all about scaling from 0 to 1 today. The ultimate graduation to the 1 stage is the raising of the next round. I’m interested, how have we seen the benchmarks required to raise that next round change? What do you think maybe they are today, having seen multiple of these happen very successfully? And what are your thoughts on kind of the benchmarks to raise that round?

Ed Sim: I have actually written a post in the past about various benchmarks for a Series A round. And I’ll give you some stats in Fund Three that we have right now. The 20 portfolio companies that we have, we’ve gotten, I think eight Series A rounds done. And the median amount raised is about $10 to $12 million in that Series A round. And if we looked at the stats across the board, I think five of the eight were preemptive rounds that were done, where there was less traction, maybe a few interesting pilot customers, maybe one or two converted.

So I think what I’m trying to say is, if you have an amazing team, if you have two or three huge referenceable customers that you can easily extrapolate to being much, much bigger opportunities down the line, I think that sometimes metrics get thrown out the door for opportunity and vision.

And then you have the other companies that are all metric-driven. And frankly, I think once you start doing that Series A round that’s not more of a Vision A round, but more of a metric-driven round, you can get spun up in circles, kind of with people just waiting and waiting and waiting, and looking at metrics. I would say there’s two kinds of A rounds done, and fortunately we’ve had opportunities and founders that have been more of the former versus the latter.

Harry Stebbings: In terms of the valuations, you mentioned the $8 to $10 million rounds. That’s kind of looking at it, say, maybe a thirty pre, with maybe not such a significant customer base or revenue metrics. How do you think about the valuation inflection point between seed and A? And is that maybe more prominent than ever?

Ed Sim: I think it’s absolutely more prominent than ever. If you look at the amount of capital out there, I think it’s a function of two things, the amount of capital out there, and then also the idea that these founders can accomplish more with less, and then also seed firms like ourselves, right. It’s not just that we give folks their first few million bucks in, but the founder comes to us and says, hey, I’m sitting here doing three pilots right now. I need to hire two more engineers to deliver on these pilots, so I need a pre-sales person to deliver on a pilot. Should I go and raise money? Seed firms with a little bit more capital may say, look, this is what we do, like hey, why don’t you take another million dollars more from us, or another million and a half dollars from us and some other insiders. And let’s price that slightly higher price than the seed, but obviously less than the A, and we’ll give you another nine to 12 months of runway, and we can always go back, hit the well later. And I think that’s a dynamic. So it goes both ways. It’s from the bottom on the seed side, it’s also from the A round firms having much more capital, kind of managed under their watch.

Harry Stebbings: You mentioned the portfolio companies within Fund Three there. I do want to finish before the quick fire. On a statement that you said, which is why seeding SaaS companies is dead, and infrastructure is the way to go, unpack this for me, and is this not slightly shooting yourself in the foot, Ed?

Ed Sim: It is, in a way. But you look at a lot of the SaaS companies we seeded, they are more like in 2010, 2012, 2013, 2014. These are companies like Front or SuperHuman. I feel like those areas, everyone and their mother was funding kind of SaaS applications, kind of from 2010 to 2014. And as you can see the results of that, there’ve been a lot of companies that have gone public, you know the DocuSigns of the world, even much older than that. And I think that the barrier to entry to create a SaaS application, kind of a front end application, is pretty low. And I think what … if you look at where the world is going, because we have the enterprise IT lens, we are going to the biggest digital transformation in history, where everyone’s going from legacy data centers to the cloud. And I think we’re just 10% of the way in there, number one. And I think number two is, you look at kind of the stats. You know, even if you look at a Gartner stat, 75% of app purchases from the large enterprises is not going to be from buying applications, it’s going to be building their own. And that kind of makes sense, because if you’re trying to codify your DNA and your business process, you’re going to build that yourself.

And then the second part is that engineers and developers. I think there’s like 22 million or 25 million active users in GitHub right now. So imagine kind of … and they don’t have everyone. So the growth of developers and engineering is going through the roof. So to combine all those trends together, investing in developer products, developer ecosystems, security, cloud-native infrastructure, and helping these large enterprises do things better, faster, cheaper, that is where the world is going, versus packaged applications.

And then there’s only so many new CRM kind of applications or a satellite of a Salesforce plug-in that you can fund these days. That’s not going to give you the outsize returns. And so if you look at the infrastructure space, there is so much money being spent, so much dislocation, that we think there’s tremendous legs there moving forward. That’s where we’ve probably put 80% of fund into over the last three, four years.

Harry Stebbings: I couldn’t agree with you more. I think we’ve been trying to get a more efficient way of doing that, video calls and more efficiency RM for the past 20 years. But I would love to move into my favorite of any interview there, Ed, now, being the quick fire round. So I say a short statement and then you give me your immediate thoughts. Are you ready to roll?

Ed Sim: Let’s do it.

Harry Stebbings: So what would you most like to change in the world of SaaS today?

Ed Sim: That is a really, really great question. I just think there’s way too many SaaS applications out there that are niche-oriented, that aren’t solving problems. And I think that we need to have people think bigger.

Harry Stebbings: When I say success in SaaS, who’s the first person that comes to mind and why?

Ed Sim: Marc Benioff, because he invented kind of the whole SaaS framework, with the no on prem, no enterprise software, and they’re crushing it right now.

Harry Stebbings: What do you know now that you maybe wish you’d known at the beginning, of your time in VC?

Ed Sim: I always like to say, Harry, that I’m always learning, right? And so when I first started in VC, they always said it’s about the people, and I’ll even say it today. It’s always about the people. And that always changes. You’ve got to really be perceptive and understanding. So I would just say that that’s something that I’m always working on.

Harry Stebbings: Do you agree with the commonly held notion that founders should sell up to a million in ARR?

Ed Sim: I don’t think there’s a steady benchmark, to be honest with you, of selling up to a million or not, or $500k. But I do think that founders should be the ones responsible for the first three to five deals that they close, so that they can share that learnings with the people they hire.

Harry Stebbings: Final question, Ed. What does product market fit look like to you? Brad Feld says it’s 500k ARR, Jason Lemkin says it’s 10 unaffiliated customers. What’s product market fit to you?

Ed Sim: From my perspective, product market fit is when you get your first three to four cold customers that no one has a relationship with, from kind of outbound marketing. That, to me, is the ultimate test. And you can’t get those, usually, unless you have some referenceable customers from before, which are probably some friendly relationships. So it’s a combination of that and kind of part of the playbook, I guess.

Harry Stebbings: Ed, you know I always love chatting. I’m so excited for the future ahead with Boldstart and I can’t thank you enough for joining me today.

Ed Sim: Thank you, Harry, this is quite enjoyable. And congratulations, by the way, on your own fund. You’ve just been absolutely amazing. Watching you over the last three years, just learning and building your fund, I think that’s super, super exciting. So I see great things ahead for you, as well.

Harry Stebbings: Now I’m sure you all know how much passion and love I have for doing this show. But it really is relationships like mine with Ed that make me so grateful to be able to do it. Ed is an absolutely phenomenal player in the world of SaaS, and I was so proud to feature him there. Such exciting times ahead for Boldstart. And if you’d like to see more from us behind the scenes, you can on Instagram at hstebbings1996, with two Bs. Likewise, you can find Ed on Twitter, @EdSim, that really is a must. And his blog is BeyondVC.com.

But that’s it for today. And as always, we so appreciate all your support and cannot wait to bring you a wonderful episode next week.


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