Artificial intelligence Startups Venture

Sapphire Ventures On Its Billion-Dollar Commitment To AI 

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Editor’s note: This is part of a series in which we interview active investors in artificial intelligence. Previous interviews were with investors at General Catalyst, Bessemer Venture Partners, Accel, Insight Partners, Index Ventures, Sequoia Capital, Section 32 and M12

“A new era of computing and investing is coming,” predicts Jai Das, president and partner at Sapphire Ventures and a longtime venture investor. Das compares OpenAI’s ChatGPT debut in late 2022 to the “browser moment” when an entirely new tech platform was launched with Netscape Navigator in 1994.

We’ve now had four or five eras of artificial intelligence, Das said. This latest is undoubtedly the generative AI era.

Jai Das, president and partner at Sapphire Ventures

As an enterprise software-focused firm it has deployed $2.4 billion across 60 companies in AI over the past decade and commits $1 billion more to the sector.

Sapphire has invested in companies that were part of earlier generations of AI and have adapted to this one. That includes now-public analytics provider Alteryx, business intelligence platform ThoughtSpot, employee productivity platform Moveworks, and conversation platform

More recently, Sapphire invested in Weights & Biases, an MLOps company for managing foundation models.

AI’s early innings

“We are just in the first innings of what generative AI can do,” Das said.

He predicts that a significant impact of AI will be work-related, saving people from drudgery.

He also expects that with the 2024 presidential election, security will be a huge area of focus in AI.

Generative AI is a platform that all of Sapphire’s portfolio companies will leverage, said Das.

As Das notes, it took time for the mobile revolution to eventually lead to the creation of companies like Uber three to four years after the launch of the iPhone. “You had to have a mobile device both for the drivers and for the customers to make that happen,” he said.

Considering valuations

Sapphire Ventures has been careful about participating in deals with frothy valuations in this sector. For a firm that seeks to get a 3x return on an investment, the need to be disciplined is important for fund returns.

“If you make 10 really expensive deals, and one takes off and does really well, to your LPs it might not be a great return, because even that one deal might not return all the other mistakes,” he said.

To entrepreneurs it “might seem like you’ve done a great job, because people only remember the good ones,” he said.

AI is here to stay

Das joined SAP Ventures in 2006. The fund spun off from its corporate owner as a venture capital firm in 2011, becoming Sapphire Ventures.

It has raised six funds since and likes to invest at Series B with companies showing around $9 million to $12 million ARR up to $50 million to $60 million ARR. Initial checks range from $35 million to $40 million all the way up to $60 million to $100 million. The fund invests in the U.S. and Europe and to some extent India and Israel as well.

Its core fund invests solely in enterprise software. It has a separate division that invests in early-stage funds as a limited partner and it launched a distinct fund in 2019 to invest in sports tech.

“Generative AI is not going to end tomorrow. This is a 10-year journey we are all on.  So there’s going to be lots of opportunities to invest in really great companies that will become even bigger over time,” Das said.

The firm is also an investor in Verbit for AI-generated transcriptions from voice to text, and DataRobot an AI development platform for companies.

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