Story
Veeva: the first multi-billion-dollar bet on vertical SaaS
Zak Kukoff explains that a decade ago nobody thought vertical SaaS was investable; the conventional wisdom was to go horizontal. Veeva, a Salesforce-for-pharma, was the first multi-billion-dollar vertical SaaS hit, going straight from Series A to IPO with Emergence as the only institutional Series A lead.
“And Veeva was the first multi-billion-dollar hit in vertical SaaS. It was kind of Salesforce, but just for pharmaceutical companies. And they've done phenomenally well. We were the only institutional investor who led their Series A, and they went straight from Series A to IPO. So a huge, huge outcome there.”
Take
Most businesses shouldn't raise venture capital
Kukoff argues venture capital signs you up for a specific high-risk, high-reward growth trajectory with unbounded upside but easy path to zero. If your goal is a comfortable retirement number, you're likelier to hit it by building a small business sustainably than by chasing a venture outcome.
“most businesses probably shouldn't raise venture capital. Doesn't mean you shouldn't raise outside capital at all, but like, when you raise venture capital, there's a very specific growth trajectory you are signing up for. And the challenge is that can have a— it's unbounded upside, right? Like, there's a huge opportunity if you do that well, And if you don't do that well, it can go to zero really easily. So it's a high-risk, high-reward sort of life to be in.”
Steal thisBefore raising venture, define your actual retirement number; if it's reachable, grow a small business slowly instead.
Fact
80% of workers are deskless, but only 1% of VC funds them
Kukoff frames Emergence's 'deskless workforce' thesis: 80% of workers don't sit behind a desk every day (nurses, doctors, teachers, factory workers), yet only 1% of venture funding goes to companies selling to that category because VCs invest in what they viscerally understand.
“you think about the fact that 80% of workers don't work behind a desk every day, and that doesn't mean they're all blue collar, but it means they might be like a nurse, they might be a doctor, might be a teacher, don't have desks, right? There's a huge segment, particularly in enterprise or in, um, B2B SaaS, a huge segment of folks who fall into that category. And right now 1% of venture funding goes to companies that sell to that category.”
Take
Boring beats sexy: TechCrunch hype invites competition
Kukoff makes the case for boring businesses: the more press and TechCrunch attention you get, the more competitors fight for your market. Staying under the radar, like Veeva, lets you dominate a huge market quietly.
“And by the way, boring is good. The more like sexy, big, like press and TechCrunch stuff you get, the more competition you have for that slice of your market. If you are boring, under the radar, like Veeva, great example, right? No one knows who they are. Multibillion-dollar company that only raised one round of funding in a huge, like, big whale hunting market.”
Steal thisPick a boring, under-the-radar market so you face less hype-driven competition.
Idea
Passion economy: build boring software for the SMB long tail of pros
Kukoff pitches extending the creator passion-economy playbook to professional services: solo consultants, tiny law firms, small accounting shops. They're great at their craft but bad at invoicing, document generation and admin. Roll up 5-6 boring features, pick a vertical, and sell aggressively into the SMB long tail.
“And think about the fact they're probably very good at running their specific business. They're probably great at being a local doctor, a local accountant, a local lawyer, but they're not great at all the stuff around running the business, like collecting invoices on time, you know, having docs and sending out documents in a secure way, generating documents you use 30 times a month. And I think there's an opportunity to build a pretty low capital, capital-efficient business that just rolls up like 5 or 6 features around these and then picks a vertical and just sells aggressively into this SMB long tail with them.”
Steal thisBundle invoicing and document generation for one professional-services vertical and sell hard into the SMB long tail.
Fact
Bottoms-up is sexy, but whales pay for billion-dollar companies
Kukoff pushes back on the bottoms-up adoption trend, pointing to public S-1s from Zoom, PagerDuty and Slack where revenue is wildly concentrated, in some cases around 5 customers driving roughly 30% of revenue. Bottoms-up works early, but big whales are needed for a billion-dollar outcome.
“Look at Zoom, which we're in. Look at PagerDuty. Look at Slack. And look at where their revenue comes from. I think it's like Slack, like 5 of their— or maybe it's another one, but like in many cases, 5 of their customers have like 30% of their revenue. It's super, super concentrated in just a few huge customers. And so the bottoms-up motion can— it actually can work in early days and it works for a little bit, but when you get big enough that you have a billion-dollar outcome, you need big whales to actually pay for the whole company.”
Number
$25K ACV is where a sales team starts to pay off
Kukoff says Emergence wants its companies at a minimum $25K ACV (annual contract value); that's roughly where you begin to see real leverage from adding a sales team. Below that, breaking even on sales gets tough.
$25K
Minimum ACV for a sales team · USD/year
“And generally, like the companies we work with, we wanna see them at a minimum, like $25K ACV. That's like, if you're having, if you have $25K accounts, like that's $25,000 a month. Accounts rather, that's where— A year? Yeah, a year. That's where you start to see some real leverage from putting on a sales team.”
Take
AI's bigger opportunity is augmenting people, not replacing them
Kukoff's AI thesis (via portfolio co Guru): there's money in AI that replaces jobs, but a larger opportunity in augmenting workers. AI can learn what your best salesperson does differently from your 30th-best and teach the rest to act like the top one.
“We think there's a bigger opportunity, much larger in not replacing people, but augmenting them to do their job better. Better. So for example, think for a minute, if you have a tool that could write sales emails for you, right? Maybe it does a pretty good job, maybe it's not perfect, but AI is— there's a long way to go before we get to true AI.”
Steal thisBuild AI that captures what your top performer does and trains the middle of the team to copy it.