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Series A capital is tough to come by, but Emergence's Jason Green is making those investments
In this segment Bambi Francisco interviews Jason Green, co-founder of Emergence Capital, a venture capital firm in the Silicon Valley. Green has experience in the venture capital business as a General Partner with Emergence, a General Partner with USVP and as an associate and Kauffman Fellow with Venrock, the venture capital arm of the Rockefeller family.
(Here is the edited version of the interview)
BF: It's a tough time these days to be a venture capitalist as well as an entrepreneur. But more so for entrepreneurs because many venture capitalists are sitting on their cash, or pouring it into existing portfolio companies. But your firm is actually investing. You've made some investments in the last couple of months. So is it fair to say that you're active or are you looking for companies today?
JG: Yes, very much so. I haven't been in business for a while. I think 15 years or so, but I've been through a few of these cycles. Looking back, I realized that the best companies were built during these times and quite frankly, valuations were better during these times as well. We've actually very much decided that we're going to maintain our pace to get through this.Not accelerate but not pull back either.
BF: What is that pace in regarding valuations? You made a couple of investments in November which was not a good time for investments for companies that were raising funds. Was that valuation down from earlier in the last year?
JG: Those two investments happen to be Series A investments. And you know historically, Series A investments don't tend to change that much.
BF: Isn't it $3 to $4 million for Series A?
JG: Well, usually there has to be enough for management, the investor, and the future pool for future employees.
JG: And that math does not really change that much depending on the environment. The harder part is to make people make bets during these tough times. It's a lot harder to make Series A investments because a lot of people are taking harder risks in early stage environments because it's hard to see if you get paid for that down the road. I think what allows us to make that conviction is our focus and our strategy as a fund. We now have a track record of building twenty five successful companies in what we call Technology Enabled Services.This is broadly into software as a service, business outsourcing services, and consumer servicing. Our track record of betting on companies such as Salesforce.com, even in this environment gives us a lot of conviction in the space. Because of our focus and brand, we tend to see many deals in that category.
BF: So are you seeing good quality stuff? Too many need-to companies? What are you seeing?
JG: Our quality continues to increase. We are relatively a new venture capital firm. We've been around six years now. So when we first started out, not many people knew of Technology Enabled Services was. And, secondly they were not aware that Emergence Capital existed either.
BF: How many people could say it?
JG: Yes, many could not even say it. So now it is much more formally recognized. And more importantly, Emergence has a good franshise now. I still think till this day that there is no other firm that is so focused. There is such a tremendous deal flow as well as recognizing what is working and what is not.
BF: What are you looking specifically for? I am sure there is a number of categories that could fit into these buckets.What is your specialty? And what gets you excited about taking that second step with that company that you first meet?
JG: We look for a lot of the classic things you would look for in early stage investment such as management team, markets, product, and value proposition. But I think what is interesting to us right now is having lived through what I call SAAS 1.0 and looking at many successful, early, stage companies that have built great businesses. We're looking for companies that have unique distribution sales on leverage and that is to increase the sales and marketing efficiency in each company. The ability to raise $50 million or $100 million to build out a $100 million recurring revenue business is going to be much tougher going forward. So we're looking for unique partnerships and challenges; so the product has something uniquely viral about it to leverage the usage of the product to get more customers. Or if they're some unique and compelling strategy in terms of focusing in a specific industry vertical such as healthcare or real estate, or another area where the word of mouth is much more effective.
BF: I think that a lot of people are looking for that viral component even if you're a SAAS company and not just a consumer Internet company. So what turns you off? What would make you not ask for a second meeting with a company?
JG: I would say the bar is pretty high for us to take a meeting so by the time we would actually make a commitment with anyone, we would have already gone over the product by looking at the materials to make sure they were thoughtful. Being that they want us as partners. If they are just looking for money, there are many other places to look for money. We want people to recognize our special characteristics, understand our fit, and looking for the help that we can provide. And also we need to ask ourselves, are they the kind of people we want to do business with? That's kind of the intangible. It looks good on paper but when you meet the person, you feel you cannot trust them enough to be in business with them.
BF: What is the size investment that you make? Series A, Series B?
JG:We are an early stage primarily but we've done some later stage investments. e want to bet on leaders. That's our focus. We were not around when some of these companies were being built in the early stages. But we want to capture that opportunity of going forward. So our typical investment would be in the $2 to $3 million dollar range. Series A is definitely our sweet spot. So as little as half a million and as much as $10 million.
BF: Well you heard it here. Jason Green is investing. That's good news for the thousands of entrepreneurs and you can contact him on Vator.tv. So Jason, thanks very much.
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