Building an Enterprise VC Firm with Jai Das, President and Co-Founder of Sapphire Ventures | Founding the Fund 4

The Room Podcast - Claudia Laurie and Madison McIlwain

In this episode of The Room Podcast, Claudia Laurie and Madison McIlwain sit down with Jai Das, President and Co-Founder of Sapphire Ventures, to

Key takeaways

• Corporate venture arms can successfully transition into independent funds by building trust with founders through value-add services beyond capital.
• Product-market fit is the cornerstone of Sapphire Ventures' investment thesis—backing enterprise software companies that have already proven their market relevance.

Main topics

• Building a venture fund from within a corporate entity
• Enterprise software investing with a focus on product-market fit

Notable quotes

"Frameworks never make money. But if you can build a product or some kind of a service around the framework, that makes a lot of money."

"You get everybody hooked in and then you sell them other stuff around it."

Conclusion

Jai Das's journey from Oracle developer to co-founder of Sapphire Ventures illustrates how deep domain expertise, strategic

Transcript preview

Speaker 3 (0:00) frameworks never make money. But if you can build a product or some kind of a service around the framework, that makes a lot of money. Look at what, you know, our cell has done with Next.js. You get everybody hooked in and then you sell them other stuff around it. Speaker 2 (0:19) Welcome back to another episode of The Room Podcast. Speaker 1 (0:22) Claudia, I'm curious. Do you know who the first venture capitalist was? No, I don't actually, Matt. I know. It's kind of one of those questions that I think a lot of people take the claim for. I think people believe it was Arthur Rock, who famously actually was an HBS alum, so shout out. But he was the first Czech, if you can even call it that, into Fairchild Semiconductor. Wow. That is a throwback for sure. I feel like he wasn't even sure he was starting a fund at the time. He literally just said, these are eight really smart people and I probably should put some capital against this. And what was it? The 1960s, maybe even the 50s. And really that became what we call today venture capital. I mean, it's so funny you say that because the company Speaker 2 (1:05) that he first backed sounds like a story we would tell. I mean, we've been telling so many incredible founding stories of raising capital, building a team, building a business. becoming a unicorn. But there's so many parallels to that when you start a fund, if you think about it. Speaker 1 (1:19) Yeah, honestly, it's been an opportunity of a lifetime to tell over 140 founding stories of zeroed IPO companies. But we haven't taken a keen look at the investment vehicles and ultimately the startups themselves, which are the venture firms that have taken many of these companies through that journey. I mean, the way that Speaker 2 (1:37) AI is changing the companies that are being built, it's fundamentally changing the strategies and theses of incredible funds. When I was back as the founder of Prive, I always found it so interesting. interesting that the questions were always on us, but I had questions about how my VC that I've built a multi-year relationship with got started. It's like quite crazy bringing billions of dollars together to put their faith into Speaker 1 (2:02) the next generation of iconic founders. I couldn't agree more. I take for granted that I understand what things like an LPAC is, right? A Limited Partner Advisory Committee and how these decisions get made. And oh my gosh, VCs have bosses too. So in this season, we're going to sit down with respected venture capitalists to talk not only about the companies that they've backed, but the firms they've built. So with that, I'm excited to open the door. Speaker 2 (2:25) Rippling is one of those tools I wish I had even earlier when I was building my startup pride. If you're building a startup, Every minute matters, but it's surprisingly easy to lose hours to onboarding, paperwork, fixing payroll issues, or setting up laptops for new employees. We've ran into this constantly, and it's not hard work, but it's constant and it adds up. That's where Rippling comes in. Rippling is a unified platform that lets startups run HR, payroll, IT, and finance in one system from day one. Rippling's startup stack replaces disconnected tools that don't sync. now with a fully connected platform. It lets you get back to the real reason you started your company. Right now, venture-backed startups can get six months of Rippling's startup stack for free. Head to rippling.com slash the room and sign up today. That's R-I-P-P-L-I-N-G dot com slash T-H-E-R-O-O-M to sign up for six months free today. Focus on what you're building. Leave the rest to Rippling. Speaker 1 (3:27) rippling.com slash the room. Perkins Coie supports the most innovative entrepreneurs and investors in fast-moving and high-growth sectors, addressing their myriad of legal needs. But the firm doesn't just provide end-to-end legal and business counseling to its startup clients. It also facilitates introductions to key advisors and sources of capital. Perkins Coie's interactive website, Startup Percolator, offers access to programs, resources, and rich dynamic content. designed to assist entrepreneurs on their startup journey. To learn more, go to StartupPercolator.com and PerkinsCooie.com. Speaker 1 (4:06) We sat down with a corporate venture veteran, Jay Doss, who is the president, managing director, and co-founder of Sapphire Ventures. He was one of the architects behind spitting out the firm from SAP's corporate balance sheet into an independent platform. And today, Sapphire manages north of $10 billion in assets by backing category-defining businesses from Box, Square, Monday.com, and MuleSoft. Jay himself grew up in India with a family of academics. After attending Brown in the States, he started his career as a developer at Oracle in the 1990s, then cut his teeth on two startups before ultimately earning an MBA at University of Chicago's Booth School. This path ultimately led him into corporate venture at Intel Capital and Agilent Ventures before he joined SAP. Sapphire's thesis is simple. Back enterprise software companies that already have product market fit. and win the deal, not on price, but on platform, with a combination of dedicated portfolio growth team built to deliver customer introductions, talent, and go-to-market help before anyone else will even call it a category. In this episode, we explore insights and themes such as what it takes to start a new venture firm out of a corporate entity, what then it looks like to take that corporate VC and earn founders' trust, and ultimately how three decades of watching enterprise buying shift from developers to sellers and now to agents, is reshaping how Jay looks at the next generation of category-defining companies. Let's open the door. Speaker 1 (5:37) First of all, Jay, thank you so much for joining us today in the room. Speaker 3 (5:41) Yeah, thank you for having me. It's a pleasure. We're Speaker 1 (5:43) delighted to have you as well. And we're going to be telling the story of you building Sapphire Ventures. So before we get into that side, we'd love to start at the beginning with all of our guests. So tell us a bit more about where you grew up and how that shaped your view of the world. So Speaker 3 (5:58) I was born in India and I was born in Calcutta, which is in the eastern part of India. And my dad was a professor. He was a professor at a couple of the IITs. And, you know, so I grew up basically surrounded by academics. And my career path was supposedly to be, you know, get a STEM degree, go to the U.S., you know, get a Ph.D. and become a professor or something like that. So I kind of upended all of that because, you know, I did not go to the IIT, which broke my dad's heart. Speaker 3 (6:34) And I did get in, but I was very lucky that I got into one of the universities here at Brown. And my dad didn't really have the means to pay for our education out here. So I was very lucky that Brown gave me a scholarship, so I kind of came out here. And although I did do electrical engineering, I actually spent all my time in computer science. And that was, again, like a black mark against me. Not quite, but I understand. Yeah, the perspective. And then the worst thing was I actually ended up not going into grad school, although I got into grad school, and then ended up joining Oracle as a developer. And at that time, this is in the 90s. San Francisco was there, but it was not really known as a mecca for anything, right? There was like startups and companies in the East Coast, like Data General. There was like, you know, IBM, Vax, all of these things you guys probably don't even remember now. Right. But yeah, I decided to move out here to the West Coast, to San Francisco, because I love the Bay Area. Right. And I've been here ever since. Speaker 1 (7:45) I mean, nothing better than the Bay Area. We've been here seven years now and we're very excited to be here probably for the long haul. And it's interesting to make that point, right? At the time, Boston itself actually was a big hub of investment and technology entrepreneurship. And it had not yet moved the center of gravity over here. Well, we're going to get to like more about ultimately the journey from Oracle to today. But you really are a founder. You started Sapphire Ventures. When you move out here, did you have the founder bug? Did you always think you'd be one? No. You Speaker 3 (8:16) know, I don't think entrepreneurship or founding companies was such a big deal like when I started out of college, right? Because then again, the path was you go to, you know, a lot of people went to business school right out of college or went into investment banking. You know, at Brown, a lot of people ended up in media. So there are a lot of people who were in LA writing screenplays and things like that, starting bands. So, you know, it was like a very different. kind of mindset of people than right now, right? My kids are in college and everybody from freshman year, all they're talking about is how can I get into YC? Speaker 1 (8:51) Yeah, I drop out. Speaker 3 (8:52) Drop out, exactly, right? So I think it was never in my cards to be a founder, right? And I kind of fell into it by chance because I started out at Oracle. And one of the things that are still an issue right now to be a founder is that if you're on a H-1B visa, you really can't do anything, right? You're kind of beholden and, you know, handcuffed to that company. So I didn't even think about it, you know, while I was at Oracle. But then when I left Oracle, as soon as I got my green card, the first thing I did was join a couple of startups, right? And that's kind of made me go through the whole founder journey. Speaker 1 (9:29) Yeah. Well, tell us a little bit more of what it was like to be a... engineer at Oracle in the 90s. I think there was a moment when Oracle lost its relevancy in the zeitgeist, but with the conversation around data centers, it's certainly back. So we'd love to just be inside those rooms. Speaker 3 (9:46) You know, I think one of the things that you learn at Oracle is that technology is not actually what makes you win, right? Yes, you have to have a good enough product, but it's all about go-to-market and sales and marketing, right? And Oracle was probably, was not the number one database when I was there, but they were very, very good at kind of selling and having a great go-to-market team and got distribution, right? And over time, I think Oracle just kind of lost relevancy because the way that Oracle was built was that everything went up to Larry Ellison. And I think the innovation kind of engine disappeared. Like when you have people who have been there for 25 years, you really can't innovate. And, you know, you would bring in other people, you know, you get into politics. And so I think that's what happened. And I think now they've kind of pivoted into becoming a data center business, right? If you look at their financials. Their software subscription went down like 2 % last quarter. So yeah, so they're like a data center business, which is kind of interesting because I'm digressing a little bit because data center businesses were not looked upon as being great businesses. And we, unfortunately, we passed on CoreWeave because of our experience with the first generation of data centers. And it kind of ties back to how I got into venture. because you know there was a first generation data center called exodus that came up during the dot-com bubble and, you know, when, you know, these cloud companies were called ASPs, application service providers. Thank Speaker 1 (11:21) you for saying that out loud. Speaker 3 (11:25) Right? And, you know, and that kind of went, really got going, but the whole thing was, you know, it didn't really have huge margins. So at the end of the day, data centers kind of became these commodity businesses, right? Became almost like REITs. They're like, you know, real estate businesses, right? So, yeah, but when you look at it, you know, the change that has happened with AI, and we'll get into that, has really changed the whole dynamic about data centers, about, you know, asset-heavy businesses, right? People would kind of shy away. You guys all the way around VCs. Nobody would do an asset-heavy business for many years. But now you look at it, you know, all the stuff that we are doing are all very, very asset-heavy, right? Especially in the infrastructure side. Speaker 1 (12:08) It's fascinating. And what I think is really interesting is some versions of the history book related to cloud would say that Oracle dropped the ball. It was their game to win and they didn't. Do you agree with that take? Speaker 3 (12:20) Yes, I think they, you know, but I think the other challenge was that Oracle kind of, you know, was focused so much on just the database. that they didn't really build applications, Speaker 1 (12:32) you Speaker 3 (12:32) know, they didn't do a great job of building applications on top of it, right? They missed out, like, on the middleware side, right? Like, a mule solve, they could have bought some, they had their own thing that didn't really work. I think the innovation kind of went away because, you know, in some ways, they had such a control over their customers, you know, and customers would complain, right? Like, hey, Oracle raised prices 10 % every year, and we can't really do that. So they stopped innovating because I think they didn't really have competition on the day. database business. So I think that's what happened. You know, you can't really buy your way through innovation, right? Because you always end up buying the wrong company, or even if you buy them, they all disappear. And I think that's what happened. Speaker 1 (13:13) Well, tell us about your startup stint post getting your green card and how that ultimately led you back into big corporate with SAP. As soon as I left Speaker 3 (13:22) Oracle, I joined a couple of startups, right? And one of the second startup that I ended up with, and I'm going to date myself, was this company that had been almost like the first spin-in kind of company that was set up by Sun to actually develop Java, right? So, you know, this was in Java, like, you know, I joined that company and, you know, and I was working on, you know, what they were doing. And one