Jeff Manuel, Managing Director at SVB Private Bank recently had the opportunity to share time with Jason Pressman, Managing Director of Shasta Ventures, to reflect on the challenges that entrepreneurs face, opportunities for VCs in today’s marketplace and how our industry can help entrepreneurs succeed.
Jeff Manuel (JM): What is the common thread with your successful founders?
Jason Pressman (JP): Every great company starts with people. We have seen again and again that a creative, driven entrepreneur who is pragmatic rather than dogmatic is best able to navigate the deep ambiguity of starting something from nothing and ultimately find a product that truly solves a customer’s need. Also, entrepreneurs with strong track records of iteration who are going after big markets. We find this iterative characteristic to be more important than prior successes or failures.
JM: In our Private Bank practice, we support founders and see the struggles and opportunities they may face. The pressures of driving the growth of their companies are often amplified by the stress of maintaining balance at home. We believe our role is to provide simplicity with our clients’ personal finances to allow them to continue to scale their businesses. With all the unique challenges entrepreneurs face, how can we help them the most?
JP: I think the answer is to continue to provide exceptional service with empathy.
"Opportunities in the consumer sector are enormous because of unprecedented global distribution available via mobile devices." - Jason Pressman
JM: What are you seeing in market?
JP: Opportunities in the consumer sector are enormous because of unprecedented global distribution available via mobile devices and the web enables new businesses to grow to enormous scale faster than ever. Subscription businesses such as Dollar Shave Club, which offers razors and personal grooming products, and The Farmer's Dog, which provides high-quality healthy dog food on your door step, are thriving because they efficiently offer valuable services and products that address every day needs.
In the Enterprise, there are big opportunities in Software-as-a-Service (SaaS) and at multiple layers within the software stack. High-growth startups like Zuora, which helps companies build subscription businesses, and Anaplan, which offers a financial planning platform, are powering cloud adoption in the enterprise and are capitalizing on this shift. And beneath these smart applications, infrastructure software companies are changing how businesses operate in domains such as enterprise search (Lucidworks), cloud security (CloudPassage), application development (Lightbend) and more.
There’s a very intriguing technology play taking place with emerging platforms that include voice, the Internet of Things (IoT), robots, drones, space and virtual reality. Every day we see products and experiences that were never before possible – not only flying cars but also miniature satellites, the size of toasters, being launched into space and virtual reality experiences that simulate real-world scenarios – from flying wingtip-to-wingtip with the Blue Angels and diving with great white sharks to standing on the stage of “Hamilton”, surrounded by the cast singing “Wait for It."
JM: We believe that specialization is key for success vs. a generalist approach. Institutionally, we have segmented our practices to focus on key areas including hardware vs. software, consumer vs. enterprise and investor vs. entrepreneur. What can entrepreneurs do to ensure their idea is a good investment?
JP: For consumer products, they need to solve a true market problem. You can measure this by growth rate (organic is best but paid can work too) and repeat engagement across cohorts. For purely digital businesses, you want people to consistently reuse the services provided at very low costs. The low marginal cost of providing the service is key. When a company finally settles on a business model, the unit economics and margins all matter.
In enterprise and emerging platforms, product-market fit is important and we tend to be more thesis-driven and invest earlier. The reason is that these companies are more capital intensive to get started – I like to say that companies in these categories cannot be created by two kids in a dorm room and $250K in seed money. They usually require $5M-10M in capital to build the product, get it to market and understand how it plays in the hands of customers (consumers or enterprise).
JM: Multiple industries are getting disrupted, including venture capital, fintech and banking. VC firms are building out teams to support companies with recruiting, data analytics and other areas. How do you try to differentiate yourself from other investors? How do you think we do so as a Private Bank?
JP: I try to be responsive and thoughtful all the time. But I also endeavor to have empathy for them – to share in the feelings they have. It might sound silly, but it’s quite different and I think it’s what makes SVB different as well. At Shasta, we make about ten investments per year across the firm so that each investment professional is only working with a handful of companies at any given time. This allows us to give each company and entrepreneur the attention they need and deserve. I want entrepreneurs to succeed, and am available to answer any of their questions at any time. SVB Private Bank provides fast, responsive service, but you also go further. You have a single relationship manager to help meet a client’s needs and you’re always there to have empathy for what the customer feels. You craft financial solutions to help meet your clients’ needs but it’s really the empathy that makes a huge difference. It really, really matters!
The first half of 2017 has showcased incredible technology advances –finally a flying car in the news! – historic rounds of funding and several successful IPOs. That being said, I realize that evaluating the investment opportunities, strategies, and challenges that lie ahead is becoming even more important in today’s competitive and dynamic landscape.
JM: Thank you Jason for sitting down and talking with me. We see pieces of this conversation every day and helping entrepreneurs and their investors achieve success is why we exist as a Private Bank. It is very powerful when we are able to partner with investors like you and use your insights to provide differentiated service to founders we work with.
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