20VC: Jason Lemkin on Why Founders Do Not Care About Their VCs Anymore, Why Zoom Made Us All Worse Investors, Why 80-90% IRR Should Have Been Warning Signs and the Algolia Journey From Seed to $2.25BN Valuation

Posted on 30th November 2022 by Harry

Jason Lemkin is one of the OGs of SaaS of the last decade. As the Founder of SaaStr, he has inspired more SaaS founders than one can imagine building “The World’s Largest Community for Business Software.” Jason also invests out of the $100M SaaStr Fund and in the past Jason has led rounds into TalkDesk, Pipedrive, Algolia, Gorgias, Salesloft, and many more incredible companies. Prior to founding SaaStr, Jason was the Co-Founder of Echosign, an early e-signature business, funded by Emergence Capital and that was acquired by Adobe for $100M.

In Today’s Episode with Jason Lemkin On Algolia We Discuss:

1.) Meeting the Unicorn: Algolia:

  • How did Jason first come to meet Nicolas (Founder) and Algolia?
  • What specific elements of cold emails make the best attract Jason’s attention? What do they have in them? What are the most common mistakes people make with cold emails?
  • What is the single biggest mistake Jason made when making the deal with Algolia? How did Jason lead their seed round when their round was “oversubscribed”?

2.) Competition and TAM: The Reasons To Say No:

  • Competing with Free: How did Jason analyze the competitive landscape Algolia was facing? How did he gain comfort that they could compete and win against free and open-source?
  • TAM Analysis: The TAM at the time for Algolia was $2M. How did Jason analyze the TAM at the time? How did he get comfortable with such a small TAM?
  • What are the single biggest mistakes investors make when analyzing competition today? What are the biggest mistakes founders make when presenting the competitive landscape?
  • What are the single biggest mistakes investors make when analyzing TAM today? What are the biggest mistakes founders make when presenting the TAM and how it breaks down?

3.) Investing Lessons Transition from CEO to VC:

  • Jason has previously said one of his biggest lessons is “bet on what you know when you go from CEO to VC”? What did he mean by this?
  • How can one keep this operator knowledge and mentality when one is a VC for a long time?
  • What are the biggest pieces of advice that Jason would give to operators becoming investors?
  • What are the biggest mistakes that Jason made in his first 3 investments as a VC? How did he change?

4.) Mastering the World of Venture Today:

  • Why does Jason believe that he has become a worse investor with the rise of “remote investing”?
  • Why does Jason believe he is a worse investor without having a partner in SaaStr Fund?
  • Why does Jason believe that even the best founders do not want hard feedback anymore? Should we as VCs still give it to them? What has Jason learned here?
  • Will we see great LP churn and many LPs leaving the asset class? What will happen to the existing incumbents with massive AUM and reduced performance?

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