Understanding the SaaS Investment Model

Published on
November 10th, 2020
Duration
69 minutes

What the Election Outcome Means for Markets and the Economy


Understanding the SaaS Investment Model

The Interview ·
Featuring Gordon Ritter

Published on: November 10th, 2020 • Duration: 69 minutes

Cloud investor Gordon Ritter, founder of Emergence Capital, one of the first venture capital firms to invest exclusively in software-as-a-service, or SaaS, manages portfolio companies that have a market cap of $400B+ and 13 IPOs or exits greater than $500 million, including high-profile exits like Zoom and Salesforce. He joins Real Vision founder and CEO, Raoul Pal, for a conversation about the evolution of the software sector, how fast the SaaS investing market is today, the future of machine learning, the challenges ahead in data privacy, and the digitization of education. Filmed November 5, 2020. Key Learnings: The premise of SaaS is that a piece of software is hosted on a cloud infrastructure (operated through a web browser), and businesses pay a monthly fee to get access to this software. Investors in SaaS companies have reaped huge benefits, and the widespread adoption of SaaS platforms across business and personal applications doesn't appear to be slowing down.

Comments

Transcript

  • RC
    Robert C.
    15 November 2020 @ 06:21
    ??
  • TS
    Thomas S.
    14 November 2020 @ 12:20
    Gentlemen .... very interesting discussion. Lots of food for thought. 2 follow-ups, 1) how does a retail investor play some of these names/themes. many of the ideas mentioned still are within private companies ? 2) covid's impact on the economy, and its related spillover effects for credit and looming insolvencies, may continue for longer and be deeper than current estimates. will this push out adoption curves and developer revenues for a few years ? seems that potential customer corporations may not spend capital freely under this economic environment. many corps may be focused on just surviving versus improving processes via new technology.
  • WD
    William D.
    12 November 2020 @ 00:26
    The Chorus company uses Zoom video to psychologically profile unwitting subjects and then sells that data, much more sophisticated data than Facebook has, to sales departments of its customers so that they can better manipulate a sales target into buying a product that the target of his/her own free will wouldn't purchase. And he pans Facebook for its ethics whilst investing in Facebook's business model, 2.0? Second, AI interference creates all sorts of complications. Does the subject know that AI has profiled him/her, and what the conclusion is? Is the subject aware that the conversation is a little unnatural, and that the sales person is AI assisted? Humans are perceptive. Does this defeat the natural bond that a skilled salesperson can quickly build? Doesn't this disempower the employee, whereby skills and knowledge are all captured by the software. Third, just how good is AI? Can it discern between humour and serious comment, irony, sarcasm? Does it have knowledge of the environmental amd historical context of certain human behaviours? For example, a relationship of 10 years will have very different dynamics to one established 5 minutes ago. Can it distinguish between personalities, different levels of ethical self-control? Can it correctly identify the purpose of a smile? Politeness of not? Whether silence is shyness or arrogance? Can it capture the differences in 7 billion human minds? Are the algorithms really that good? Perhaps one day.
    • DA
      Dina A.
      13 November 2020 @ 06:50
      I found this documentary about AI quite interesting AlphaGO: https://www.youtube.com/watch?v=WXuK6gekU1Y It's easy to watch even for those without a technical background. The real potency of AI is not its original programming but its ability to improve itself by learning from its mistakes at a pace much faster than humans.
  • CB
    Chris B.
    11 November 2020 @ 23:27
    Fascinating including the idea of augmented coaching - I plan to check out Chorus.ai as I am interested in how much of the complete selling skill set they are addressing.
  • IM
    Indranath M.
    11 November 2020 @ 14:00
    In my experience of working on legacy modernization in payments space, resistance to change is a big , big hurdle. Part of it is the kind of usability transitions that Gordon talks about - from Form Based S/W to AI/ML enabled Augmentation - takes a lot of effort. That effort has opportunity cost which often times is large, depending on execution. This angle was not addressed. Purely as a tech piece, as some commentators mentioned, this is a few years late. Spunk, Cloudflare, Snowflake, Datadog, Twilio and many more SaaS players are already here for quite some time now. That said, what an awesome interview. Raoul at his best extracting the insights. Love it!!
  • ML
    Marc L.
    11 November 2020 @ 12:19
    What an amazing personality and fascinating thinker Mr Gordon Ritter is. I will need to watch this conversation several times, in order to try to catch up with his many levels of vision and thinking. And wouldn't it be wonderful if Mr Ritter would himself conduct a series of interviews on RV, with the people that he wants viewers to meet in their conversations about these topics? Wouldn't that plant great seeds of understanding?
    • ML
      Marc L.
      11 November 2020 @ 12:32
      And also, in this interview Raoul Pal is at his very, very best to extract insights from his interviewee, that directly feed into the dynamics of RV as an "evolving AI macro-financial insight network" (in my own limited words). Absolutely brilliant, in my opinion.
    • ML
      Marc L.
      11 November 2020 @ 12:48
      In short; I would very much like to see RV continue on this true journey of AI coaching networks!
  • RS
    Robert S.
    11 November 2020 @ 11:08
    Very interesting.
  • MO
    Master O.
    10 November 2020 @ 09:48
    This was really fascinating. I work as a High Performance Computing Systems Engineer in a university. I am involved in setting up computing systems for researchers for AI and machine learning. For people who want to invest in stocks this is what I can tell you. AI and machine learning requires heaps and heaps of data as input for processing therefore it requires crazy and crazy amount of CPUs, memory and storage. I am therefore invested in Micron Technology and Pure Storage. Would welcome any additional suggestions. Gordon also mentioned pay attention to each company's data set and how they are utilizing AI. Companies who can harvest quality data sets before their competitors have a such a big first mover advantage and it becomes a powerful moat. One of the companies that I was studying was crowd strike, and when I made the decision to invest that stock was already 4x up! Ouch I missed it :)
    • LS
      L S.
      10 November 2020 @ 17:29
      This is the reason why the silly "radiologists will be out of a job" mantra (by business types who don't know what they are talking about) is so stupid for anyone of this generation.
    • tc
      thomas c.
      11 November 2020 @ 10:48
      AMD with Xilinx in the data center. Nvidia with ARM at the edge. Both positioned for AI processing power. Best for stocks in this area is Beth Kindig. RV should get her on with a good tech interviewer. She really nails it. RV should have done this interview years ago when TWLO was $30, Service Now $110, Zendesk and Workday and many others were getting started.
  • MD
    Matt D.
    11 November 2020 @ 03:07
    Great interview Raoul - thanks Gordon. Fascinating. Brilliant how it was explained that humans are the tweak-factor, algos can only optimise, and learn from us. I like the ideas discussed, but at the same time would have to wait and try them out - thinking that people have different personalities, ways of receiving and communicating information. At the momo I find most machine/AI interaction annoying, not helpful. When its wrong it is plain stupid sort of thing. It could have some dangerous uses too - look at the evolution of FB, Google and Twitter say (censoring free speech). There's a lot in the interview to think about. Great questions, great guest. Cheers.
  • tc
    thomas c.
    10 November 2020 @ 23:52
    I was on RV to do something on this sector back in the days of Think Tank. Finally Raoul got it it. Well better late than never.
  • RL
    Ryan L.
    10 November 2020 @ 23:29
    more tech interviews please! some of these people have great insight into future possibilities.
  • LS
    Lewis S.
    10 November 2020 @ 23:23
    That one point about UBI was a bit disappointing.
  • JG
    Jason G.
    10 November 2020 @ 21:45
    A SIDE NOTE: imagine if every time the AI learned something from a user, and then shared it to others, that user would receive a micropayment of some kind... Perhaps via some sort of value layer underpinned by block chain - which could even be platform independent? Would this then encourage users of these systems to try new things and develop their skills in the hope of monetary reward? The platforms with the most ingenuitive users would also become the most valuable? The possibilities are endless! :)
  • JG
    Jason G.
    10 November 2020 @ 21:38
    A fantastic interview, thank you gents. My 25 years experience in the I.T industry meant I was smiling at some of the statements made here. For instance, there is an incredible amount of work required to develop this new technology to the level of usability Gordon is talking about. That said, I am inspired by Gordon's passion towards leveraging technology to augment humans, rather than replace us. If there's one things machines can't do, it's innovate...
  • WS
    William S.
    10 November 2020 @ 21:05
    Excellent discussion and interaction.
  • CP
    Christopher P.
    10 November 2020 @ 18:43
    Capitalism does not have the capability to self regulate us from destruction. AI is taking over the world. Robots will soon train people to help robots be better. This will happen faster and faster until the robots become self-aware and improve themselves.
  • LL
    Ludovico L.
    10 November 2020 @ 16:40
    Great interview. A couple of companies we advise have also invested in these sort of AIs, ML and BigData companies that are able to sort and utilise data in various sectors and settings. Some of them do unstructured data which I think is more the goldmine of investment opps as it allows to dive back deep into past data as well as dealing with new data which can be sorted more easily. I guess the grandfather of these data collection/harvesting is Palantir....
  • MJ
    Marc J.
    10 November 2020 @ 16:37
    Hmm. He did't mention people's resistance to change. I can imagine Raoul's mother (or my mother) reading a computer screen that says "well done, you did well" and thinking 'oh fuck off you stupid thing, how do I turn you off?"
  • DJ
    Dan J.
    10 November 2020 @ 12:59
    fantastic interview
  • JM
    Jason M.
    10 November 2020 @ 12:40
    Excellent! Private markets need more coverage.
    • JM
      Jason M.
      10 November 2020 @ 12:46
      enough about the USD.. we get the picture..
  • DO
    DIOGO O.
    10 November 2020 @ 12:03
    SUPERB INTERVIEW!!
  • JV
    Jerry V.
    10 November 2020 @ 09:26
    I don't always comment - but this interview was brilliant. Insights that will fuel thought and create a context in which to view future investment idea's. I thank you Gordon & Raoul - Pura Vida
  • AL
    Aaron L.
    10 November 2020 @ 09:09
    Don’t harvest us too much Raoul!!! 😂 and you didn’t ask him about btc? and saas for crypto? 🤔