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



In this episode of the 20 minutes VC, host Harry Stebbings announces his new role at Atomico and is joined by Scott Dorsey, managing partner at High Alpha, a startup studio and venture fund. Dorsey shares his journey from co-founding ExactTarget, taking it public, and its eventual $2.7 billion sale to Salesforce, where he worked with CEO Mark Benioff to integrate it into Salesforce's marketing cloud. He discusses the challenges and strategies of building a SaaS business outside traditional tech hubs, emphasizing the importance of customer validation, pricing, and packaging for early-stage companies. High Alpha's unique structure, combining a startup studio and venture arm, aims to foster entrepreneurship by pairing big ideas with capital and talent, particularly in the Midwest. Dorsey also touches on the transition from operator to investor, the value of mentorship, and his commitment to supporting tech ecosystems and entrepreneurs.

Summary Notes

Introduction to Harry Stebbing's New Role

  • Harry Stebbings announces joining Atomico, a leading European early-stage venture fund.
  • He reassures listeners that there will be no changes to the frequency or content of the 20 minutes VC or SaSa podcasts.
  • Harry expects to provide more insights into the intricacies of VC and investing due to his new role.

"I'm delighted and very proud to say that I've joined Atomico, one of Europe's leading early stage venture funds, investing from Series A and beyond."

Harry Stebbings expresses pride in joining Atomico, which indicates it's a significant move in his career and could enhance the quality of insights shared on his podcasts.

"I might just have a little more thoughts and insight on the intricacies of VC and investing."

This quote suggests that Harry's new position will bring additional depth to his discussions on venture capital and investing on the podcast.

Scott Dorsey's Background and ExactTarget Journey

  • Scott Dorsey grew up in a technology family with a father working for IBM.
  • He studied business at Indiana University and earned his MBA from the Kellogg School of Management.
  • Scott's education at Kellogg included a focus on entrepreneurship and Internet business models during the formative years of the internet.
  • He co-founded ExactTarget in early 2001, capitalizing on digital marketing and SaaS trends.
  • ExactTarget went public in 2012 and was acquired by Salesforce in 2013 for $2.7 billion.
  • Scott worked directly with Mark Benioff at Salesforce to integrate ExactTarget and other acquisitions into the Salesforce Marketing Cloud.

"I founded Exact Target in early 2001 with two tremendous co-founders, Peter McCormick and Chris Baggett."

This quote highlights the collaborative nature of ExactTarget's founding and Scott's recognition of his co-founders' contributions.

"We went public on the New York Stock Exchange in March of 2012, which was an absolute thrill."

Scott reflects on the excitement of taking ExactTarget public, marking a significant milestone in the company's history.

The Importance of Business School for Scott Dorsey

  • Scott Dorsey considered his time at business school crucial for self-development and a transition into the tech industry.
  • His MBA program provided opportunities to analyze Internet business models and immerse in the tech entrepreneurship environment.
  • Business school served as a springboard for Scott to move into tech and entrepreneurship.

"For me, it was incredibly important. Helped me build a broader set of business skills, expand my network in a really meaningful way."

Scott emphasizes the value of business school in broadening his business acumen and expanding his professional network.

"I really used graduate school as a springboard to move into tech and entrepreneurship."

The quote implies that Scott strategically leveraged his time at business school to pivot his career toward technology and starting his own business.

Working with Mark Benioff at Salesforce

  • Scott Dorsey describes working with Mark Benioff as a learning experience akin to a Ph.D. in cloud computing and SaaS.
  • He learned about Benioff's management style, including the importance of having a beginner's mind and focusing on future trends.
  • Benioff is praised for his visionary leadership and effective management skills, particularly around prioritization and focus.
  • Scott highlights Salesforce's culture of urgency, innovation, and customer-centricity.

"I reported directly to Mark and was a part of his executive leadership team and that was incredible."

Scott reflects on the privilege and learning opportunity of reporting directly to Salesforce's CEO, Mark Benioff.

"Mark, as we all know, is an extraordinary visionary, speaks often about having a beginner's mind, being very curious and being very thoughtful about what's happening in the future."

This quote underscores Mark Benioff's approach to leadership, emphasizing curiosity and forward-thinking, which likely influenced Scott's own leadership style.

Accounting and Business Software Promotion

  • Harry Stebbings briefly promotes Xero, an online accounting software for small businesses.
  • Xero offers features such as managing accounting, sending invoices, tracking cash flow, and real-time collaboration with accountants.
  • The software integrates with over 500 business apps and is used by a large customer base worldwide.
  • Pearl Rear Vision, a wireless backup camera and alert system, is also advertised as an innovative automotive technology available for any driver.

"Xero is beautiful, easy to use online accounting software for small businesses."

Harry Stebbings provides a succinct endorsement of Xero, suggesting its aesthetic appeal and user-friendliness for small business accounting.

"Pearl Rear Vision is the only wireless backup camera and alert system that installs in minutes and updates throughout its lifetime."

The quote promotes Pearl Rear Vision's unique selling points: ease of installation, wireless capability, and continuous software updates.


  • Harry Stebbings concludes the introduction and hands over to Scott Dorsey for the main discussion.
  • The conversation is set to delve into Scott's experiences and insights from his career and work at High Alpha.

"However, enough from me. So I'm so delighted to hand over to Scott Dorsey, managing director at High Alpha."

Harry transitions from the podcast introduction to the main content, featuring the guest Scott Dorsey, which sets the stage for an in-depth conversation about entrepreneurship and venture capital.

Transition to High Alpha

  • Scott Dorsey transitioned to High Alpha after 13 years at ExactTarget.
  • High Alpha was founded as a new venture, distinct from his previous role.
  • The transition marked a shift from being solely an operator to also being an investor operator.

After 13 years of building exact target, it really felt like the right time for me to step aside, give others an opportunity to step up within the marketing cloud and lead the future of the company, which is great, and do something brand new. And that's something brand new is high Alpha.

Scott Dorsey felt it was the right moment to transition to a new venture, High Alpha, allowing others to lead at ExactTarget while he embarked on a new challenge.

High Alpha's Structure and Strategy

  • High Alpha combines a startup studio and a venture arm.
  • High Alpha Studio focuses on starting new enterprise cloud companies.
  • High Alpha Capital invests in SaaS companies that have achieved product-market fit.
  • The studio aims to launch 8-10 new companies over a four-year period.
  • High Alpha is funded by Emergence Capital and Hyde Park.
  • The team consists of designers, developers, analysts, and subject matter experts.

We have two components. One is high Alpha studio, and that's a startup studio focused on starting new enterprise cloud companies... And then high Alpha Capital is our venture arm, focused on investing in not only our companies when we feel like they have product market fit and they're ready for a meaningful seed round, but also investing in other hot SaaS companies throughout North America.

High Alpha has a dual structure that includes a startup studio to create new companies and a venture arm to invest in them and other promising SaaS businesses.

Addressing Negative Signaling

  • High Alpha uses its own seed capital to start companies.
  • Companies are only put forward for larger seed rounds when they show product-market fit.
  • High Alpha Capital invests in these companies, alongside other investors.
  • The approach aims to minimize negative signaling by only investing when confident in the company's success.

We're only going to be putting our own money and bringing other capital together when a company is actually graduating from studio and ready to go.

Scott Dorsey explains that High Alpha only invests additional capital when a company is ready to graduate from the studio, which helps avoid negative signaling.

Defining Product-Market Fit

  • Product-market fit is assessed through customer conversations.
  • The goal is to solve significant problems that impact customer businesses.
  • Early revenue traction and customer adoption are indicators of product-market fit.
  • High Alpha looks for startups that offer solutions driving revenue and lowering costs.

We look at customer conversations being very important... We look for early revenue traction. We look for early customer traction.

Scott Dorsey emphasizes the importance of customer feedback and early revenue as indicators of product-market fit.

Challenges in Achieving Product-Market Fit

  • Startups often begin by selling to friends and colleagues.
  • True product-market fit is evident when selling to organizations with no prior relationship.
  • Funding, momentum, hiring, and customer acquisition are common challenges.
  • Pricing and packaging are critical, and many startups underprice their products.

Often we start, or our co founders and entrepreneurs start by selling to friends and colleagues... Some of the biggest challenges for our early companies and many others that I see throughout the country, certainly funding is a challenge... I would say another big challenge is pricing and packaging.

Scott Dorsey discusses the initial sales approach and the broader challenges that startups face, including funding and pricing strategies.

Pricing Strategies in SaaS

  • Early-stage SaaS companies often underprice their offerings.
  • High Alpha encourages selling product and services together with a higher price tag.
  • Proper pricing signals confidence and seriousness to enterprise customers.

Most early stage SaaS companies underprice their offering... We try to work with our companies to not be afraid to sell product and services together in the early days and put a bigger price tag in front of the enterprise.

Scott Dorsey agrees that SaaS companies tend to underprice and advises on the importance of setting a price that reflects the value offered to customers.

Enterprise IT Budgets and SaaS Model Efficiency

  • Large organizations with substantial IT budgets are prime targets for SaaS products due to the potential to significantly enhance productivity.
  • High gross margins are characteristic of the SaaS business model, with low incremental costs for acquiring new customers.
  • Pricing in SaaS is primarily dependent on the demonstrated and delivered value to the customer, highlighting the importance of ROI.

"The enterprise. These large organizations have very, very large it budgets, and if you can move the needle for them from a productivity perspective, the rewards are great."

This quote emphasizes the lucrative opportunity that large enterprises with significant IT budgets present for SaaS companies, particularly when they can demonstrate productivity improvements.

"The incremental cost of bringing a new customer on board is very, very low. So pricing literally comes down to your ability, your ability to prove and deliver value and really show that ROI."

The quote highlights the low cost of customer acquisition in the SaaS model and underscores the importance of value demonstration in pricing strategies.

Variable Pricing Mechanisms in SaaS

  • Variable pricing based on usage, such as the number of messages sent, number of users, and feature sets, allows for flexibility and scalability in SaaS pricing models.
  • Different feature sets were developed for small businesses and enterprises to cater to varying needs and budgets.
  • Retention and account growth are key SaaS metrics, with the capability to grow accounts over time being particularly important.

"Well, we did have a variable pricing mechanism based on number of messages sent as it related to email and mobile messaging, but also number of users, and then also just feature set."

This quote describes the variable pricing strategy used at ExactTarget, which was based on usage metrics and feature access, allowing for scalability and adaptability to different customer segments.

Gross Margin Targets in SaaS Businesses

  • Early years in a SaaS business are focused on development and market entry, with gross margin being a secondary concern.
  • As the business matures, gross margins become more critical, with margins north of 80% (or 70% with a strong services component) being particularly exciting.
  • High gross margins enable further investment in R&D and market expansion, with some companies achieving margins above 90% due to cloud platform efficiencies.

"And we look for gross margins north of 80%. If you have a strong services component, then probably north of 70%."

This quote sets the benchmark for desirable gross margins in SaaS companies, indicating the levels that are considered highly favorable for business growth and investment potential.

Capital Efficiency and Unit Economics in SaaS

  • SaaS companies allocate a significant portion of their expenses to human resources, necessitating careful resource allocation and capital efficiency.
  • Understanding unit economics is crucial to determine when to invest more capital or refine the product-market fit.

"So we spend a fair amount of time really trying to be thoughtful about capital efficiency and how to allocate resources in the most meaningful way, and really understanding our unit economics."

The quote underscores the importance of capital efficiency and resource allocation in SaaS businesses, highlighting the focus on unit economics to guide investment decisions.

Transition from SaaS CEO to Venture Capital

  • The transition from an operator to an investor involves a steep learning curve, supported by advisors and mentors.
  • Former SaaS executives bring pattern recognition from their experiences to the venture capital industry.
  • The venture capital role is more advisory, with a focus on talent, growth, and strong co-investors for smaller funds.

"I'm still a work in process. I've really only been, I would say, in the venture industry for a year and a half."

This quote reflects the ongoing learning process experienced by a former SaaS CEO as they transition into the venture capital industry.

"We look for talent, we look for amazing ceos that have a big vision and have a track record of being able to execute strong leadership teams."

The quote reveals the criteria used in venture capital to evaluate potential investments, emphasizing the importance of talented leadership and the ability to execute a vision.

Challenges and Surprises in Venture Capital

  • The shift from being a decision-maker to an advisor is a significant change for former operators now in venture capital.
  • The challenge lies in influencing portfolio companies while allowing CEOs to make their own decisions and learn from outcomes.

"The biggest challenge is encouraging and nudging and trying to use our powers of persuasion to help these companies move in the direction we think is the right direction."

This quote speaks to the challenge of guiding portfolio companies without direct control over decision-making, a significant adjustment for former operators in venture capital.

Building Businesses Outside Core Tech Ecosystems

  • Building a successful SaaS company outside of traditional tech hubs like Silicon Valley or the East Coast can leverage local strengths such as university talent pools.
  • Being a prominent tech company in a smaller market can lead to advantages like less competition for talent and higher employee loyalty.

"We were the beneficiaries of building a market leading cloud company outside of Silicon Valley or outside of the east coast."

The quote illustrates the successful experience of building a leading tech company away from the major tech hubs, suggesting alternative strategies for leveraging local strengths.

Indianapolis Business Environment

  • Indianapolis offers a supportive city and state with a lower cost structure.
  • The affordable housing market contributes to a lower cost of living.
  • Lower costs allow businesses to hire more aggressively and invest more in development and go-to-market strategies.
  • Challenges include access to capital and a smaller pool of software executives.
  • Strategies to overcome challenges include bringing in coastal investors and growing or attracting talent.

"ing, very supportive city and state, and a lower cost structure here in Indianapolis, the housing market is very affordable."

This quote highlights the benefits of the business environment in Indianapolis, emphasizing the supportive local government and cost-effective living conditions that are attractive for businesses.

"I think challenges, one of the challenges is access to capital, and we were able to compensate for that at exact target because we did bring in coastal investors who love what we're doing, and they were important part of the business."

Scott Dorsey identifies access to capital as a challenge in Indianapolis but notes how ExactTarget overcame this by attracting investors from outside the region.

"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."

Scott Dorsey points out the limited availability of software executives in the Midwest, suggesting that companies may need to develop internal talent or recruit from elsewhere.

Vision for Midwest Tech Ecosystem

  • Scott Dorsey envisions more capital investment in the Midwest.
  • Drive Capital in Columbus is an example of a firm providing meaningful capital in the region.
  • Connectivity with other tech ecosystems is crucial for global business integration.
  • Efforts are being made to ensure non-stop flights and strong connections to major tech hubs.

"I would like to see more scale of capital in the midwest."

Scott Dorsey expresses the desire for increased capital investment in the Midwest to support local companies.

"So as surprising as this might sound, we've also been putting a lot of energy into making sure we have non stop flights and just strong know out to San Francisco and other parts of the country and other parts of the world."

Scott Dorsey discusses the importance of connectivity and how efforts are being made to improve transportation links to integrate with the broader tech ecosystem.

High Alpha's Model of Entrepreneurship

  • High Alpha combines entrepreneurship with capital investment.
  • High Alpha Studio and High Alpha Capital are two separate entities that work together.
  • The model focuses on co-founder partnerships and providing the right capital.
  • The success of this model will be evaluated over a long-term horizon.

"Just pioneering a new model of entrepreneurship and really dialing up the high Alpha studio and the high alpha capital as two separate entities, but then getting them to work together in a way that works for the entrepreneur and also works for our investors."

Scott Dorsey describes High Alpha's innovative approach to entrepreneurship, which involves synergizing their studio and capital branches to benefit both entrepreneurs and investors.

"We're not going to know whether the high off model works for, I mean, truly probably 5710 years when these companies hopefully break out and become meaningful and very big success stories."

Scott Dorsey acknowledges the long-term nature of proving High Alpha's business model, indicating that it will take years to see the full results of their entrepreneurial ventures.

Personal Insights and Favorites

  • Scott Dorsey's favorite book is "Good to Great" by Jim Collins for its timeless business concepts.
  • Bob Compton, an early investor in ExactTarget, is highlighted as a significant mentor.
  • High Alpha consumes and shares a wide range of industry content, with a particular interest in SaaStr.
  • The transition from operations to venture capital involves patience and a long feedback loop.

"Good to great by Jim Collins. This is referenced by many. I absolutely love good to great."

Scott Dorsey praises "Good to Great" for its enduring business principles and mentions how it influenced the culture at ExactTarget.

"Amazing guy named Bob Compton. Bob was our first investor in exact target, served as chairman for the first seven or eight years of our company's life."

Scott Dorsey credits Bob Compton as a pivotal mentor and investor who helped change the trajectory of ExactTarget.

"I'm a big fan of what Jason Lempkin is doing at Saster, so we love all the saster content."

Scott Dorsey expresses admiration for the content produced by SaaStr and its founder, Jason Lemkin, indicating its value to High Alpha.

Future Outlook for High Alpha

  • The goal is to validate High Alpha's model of entrepreneurship.
  • High Alpha aims to support tech entrepreneurs and ecosystems.
  • The vision includes giving back to the industry and creating a platform for top investors and entrepreneurs.

"Yeah, the grand vision is really proving that this model of entrepreneurship can be successful, that blending big ideas with strong co founders and entrepreneurs and then providing the right capital, that's a formula for success that gives back to the industry in a meaningful way."

Scott Dorsey outlines High Alpha's grand vision to establish a successful entrepreneurship model that contributes positively to the tech industry.

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