In this episode of the 20 Minute VC, host Harry Stebbings interviews Santi Subotovsky, a General Partner at Emergence Capital, renowned for its focus on enterprise and SaaS investments, including successes like Salesforce and Zoom. Subotovsky shares his journey from founding a SaaS e-learning company in Argentina to becoming a venture capitalist, overcoming biases in the industry, and the importance of the "immigrant advantage" in identifying unique opportunities like Zoom. He stresses the value of building genuine relationships with founders and their teams, and the significance of investing in companies that are not only great but also the right fit. Subotovsky's commitment to intentional investment and his hands-on approach with portfolio companies reflect Emergence Capital's strategy of concentrated, early-stage investing, where the firm becomes deeply involved in the companies they back.
"We are back for another week in the world of the 20 minutes VC with me, Harry Stebbings and I answer all messages on Instagram."
This quote is Harry Stebbings welcoming listeners to a new episode and encouraging them to reach out to him on Instagram for feedback or thoughts on the show.
"And so with that, I'm so excited to welcome Santi Subatovsky to the hot seat today."
Harry Stebbings expresses excitement about having Santi Subotovsky on the show, acknowledging his positive reputation and successful track record in venture capital.
"And when we set up stride vc, they were the first call we made to help us get our story straight."
Harry Stebbings shares his personal experience with the company Multiple, highlighting their role in helping his VC firm establish its brand story.
"I moved here in 2010, determined to get into venture."
Santi Subotovsky explains his determination to join the venture capital industry after realizing its potential to help him build better companies.
"I failed miserably at leaving because it's been nine years and I'm still doing this now."
Santi humorously notes his initial intention to learn from venture capital and then leave to start another company, but he ended up staying much longer due to his passion for the work.
"So for me, I took that as a learning opportunity, and I also took it as a commitment not to applying those biases when I was going to build my next company."
Santi Subotovsky discusses how he used the biases he faced as a learning experience and a commitment to evaluate people fairly in his professional journey.
"I think I have something that is not a skill, but it's almost like a condition. And I call it the immigrant advantage."
Santi Subotovsky defines his unique advantage in the venture capital world, which he attributes to his immigrant background and the diverse challenges he has encountered.## Exposure to Different Cultures
"So that opened my mind to see the world with a different lens." "I wanted to stay in touch with my friends and family in Argentina, and I couldn't find any technology that allowed me to have a conversation."
These quotes highlight Santi's personal need for effective communication tools and how it influenced his investment decisions, demonstrating the impact of personal experiences on professional choices.
"So Eric has always been incredibly obsessed with customers." "He's always focused on finding the right customer, the right valuation, the right executive."
These quotes emphasize Eric Yuan's customer-centric approach and his prioritization of strategic business decisions, which Santi views as critical components of Zoom's success.
"My time is their time." "I spend a lot of time building relationship with the executive team."
These quotes reflect Santi's dedication to the companies he invests in and his belief in the importance of supporting the broader executive team, not just the CEO.
"I make it a priority to drive down to San Jose at least once a month and catch up with Eric." "If you don't schedule it, it won't happen."
Santi details his proactive approach to maintaining relationships with portfolio company executives, emphasizing the importance of regular, scheduled interactions.
"Those board meetings are great opportunities to align everyone, but most of the work gets done outside of board meetings."
This quote reveals Santi's realization that the true value of board meetings lies in aligning the team, with the real work being done in one-on-one interactions.
"We're just going to focus, we're going to operate like a company, and we're going to be the best at this." "We don't need to be in every great deal. We just need to make sure that the deals we're in are great."
These quotes capture Santi's philosophy on venture capital, emphasizing the importance of focus and excellence in a specific niche rather than diversification across sectors.
"The most successful companies are catering the consumer within a business setting and then the IT organization is an afterthought they build for it later on."
This quote reflects Santi's observation of the shifting dynamics in SaaS, where the emphasis has moved towards user experience before addressing enterprise IT requirements.## Enterprise Focus and End User Delight
"So now that changed and you need to build and delight that end user. But you need to make sure that you're solving a real business problem because that's how you're going to get to the bigger, more enterprise contracts and that's how you're going to get it to embrace your solution."
The quote emphasizes the shift in enterprise software development towards user-centric design while highlighting the necessity of addressing core business issues to achieve significant enterprise adoption.
"The entire firm is focused on the same category. So then when we make an investment and we partner with a team, our entire firm is going to dive in, help them set the right strategy, the right recruiting processes, helping bring in the right people."
This quote illustrates Emergence's collaborative approach, where the entire firm dedicates its resources to support the strategic and operational needs of their portfolio companies.
"We're going to be incredibly concentrated early on, and then we're going to help those companies find the right partners to support them along the way."
This quote explains Emergence's investment philosophy, highlighting a shift from continuous investment to strategic early-stage concentration and subsequent partnership facilitation.
"A lot of entrepreneurs underestimate the negative effect of signaling they raise from this multistage fund."
The quote addresses the potential negative implications for companies that receive initial funding from multi-stage funds but do not receive follow-on investments, which can be interpreted as a lack of confidence by other potential investors.
"We want to make sure that when we're investing, we're not checking boxes and following a preset process."
This quote conveys Emergence's flexible investment approach, which values collective excitement over rigid investment criteria when partnering with entrepreneurs.
"It's like getting married after meeting someone online for two weeks, chatting, and then the next thing you do is you get married."
The quote draws a parallel between rushed fundraising and hasty marriages, suggesting that both can lead to problematic outcomes due to a lack of proper relationship building.
"I see the future of venture changing a lot, and I see it changing not just towards this huge fund and a lot of early stage seed funds."
Santi Subotovsky predicts significant changes in the venture capital industry, anticipating a shift away from traditional fund structures towards more varied and specialized funding options for entrepreneurs.## Evolution of Venture Capital
"Venture capital should be used for discovery, for product development early on, when you're taking a risk, then when the model is working out, you should be able to access a different type of capital."
This quote emphasizes the traditional role of venture capital in early stages of a business and suggests a shift towards specialized capital for later stages.
"So would you actually agree with naval, who always says about the unbundling, so to speak, of the funding mechanism, into funding itself in pure capital guidance itself, in terms of Santi's wisdom in scaling fast businesses?"
This quote explores the idea of breaking down the funding process into more focused components, which the speaker agrees with.
"The book that I recommend a lot of the entrepreneurs that I work with to read is candid by Voltaire."
Santi suggests "Candide" for its valuable insights on overcoming adversity, a common experience for entrepreneurs.
"There was one person who helped me out, Alex Mendez, who's now a dear friend, mentor, and the founder of Storm Ventures."
This quote recounts a personal story of how mentorship and support from Alex Mendez were key to Santi's success and personal growth.
"I believe that in the next ten years, we're going to see a lot of the leading companies in those categories disrupted by new generations of companies that are rebuilding the entire stack, taking into account how the world works."
Santi shares his belief that there is untapped potential in reinventing core productivity tools, contrary to the Silicon Valley trend of chasing the latest tech fads.
"So, the biggest myth that I've had is when I first joined emergence, one of my good friends and classmates, Matthew Prince and Michelle, were getting started with Cloudflare."
This quote reveals a past investment decision that didn't go as hoped, illustrating the challenges of venture capital and the importance of learning from such experiences.
"Eric follows through, works incredibly hard, has a very long term vision, and doesn't care about being told it can be done."
This quote highlights Eric's commitment to building a genuine company culture at Zoom and how it has contributed to the company's success.
"So I can talk about OpenPap. It's a next gen access control company, and this also came from my own personal frustration."
Santi shares his enthusiasm for OpenPap, a company that addresses a personal pain point and has the potential to revolutionize access control.
"As I said, it was phenomenal hearing back from every single founder I emailed."
This quote signifies the importance of maintaining good relationships with founders and the positive impact it has on a venture capitalist's reputation.