Mark Roberge, Stage 2 Capital | theCUBE + NYSE: Capital Series

Palo Alto studio connection Silicon Valley and Wall Street. I'm John F co here with Dave Volante my co-host. Welcome back to the Cube studio here at the New York Stock Exchange. I'm Jim Allen, co-host of NYC Wired. We connect Silicon Valley to Wall Street. Today we're talking all things captain investment. And joining me now for a conversation on exactly that is Mark Rober, co-founder of Stage 2 Capital. Welcome Mark. >> Thanks J. >> So Stage 2 Capital, interesting thesis, interesting investment VC fund. Break it down for us. Give us the 101. >> Yeah, it's uh it's been a blessed experience. It's been about 9 years now. I never intended to go into venture capital. Um I uh certainly benefited from it as an entrepreneur but I was approached by a gentleman at Bessemer who felt like there was a massive need for great counsel to these young founders around the go to market the sales the marketing side that wasn't happening in the boardroom and the vision was to assemble all of our investors our LPs as the best sales marketing customer success leaders in tech and mobilize that network to help these founders in the early stages of their own journey. Uh so there's a number of ways that we deploy that. We've been at it for 9 years across four funds, probably about uh over a 100 companies under management and uh we've been excited about the journey so far. I want to get into the types of companies you're investing in, the bets you're making. But first, in terms of what's unique about stage two capsule from the perspective of professional support and investment into these port codes, >> we had a f on recently a founder who talked about choosing between who he was going to take funding from, right? And he mentioned that Sam Olman had actually considered investing in his fund and said, "You will get 15 minutes with me once a quarter." >> What's your response to that? And how do you think about that from the perspective of what you're building and what's unique? >> No. Amazing. I mean, the best founders out there, it's certainly a founder um favorable for market today and the best founders should be thinking about building out their cap table not just for the money, but for the value and I totally agree with that Sam Alman perspective is like if you're that founder and you feel like Sam would be hugely useful and he probably will if you're doing anything AI, you should take that money. And so that's why we win a lot of our deals is it's you're probably going to need to acquire customers through your journey. And we've assembled the best firm to be able to do that. We have the sales and marketing leadership from OpenAI and Anthropic and GitHub and uh Snowflake and Datab Bricks and um HubSpot and Salesforce and all you know. So no matter what you're selling and who you're selling to, we've got folks with decade of experience who've gone through that. Um, we mobilize them through a number of ways. We've set up over 400 advisory engagements between our LPs and our portfolio company. We do a handful of workshops on very specific gotom market challenges from pricing to distribution to account-based marketing with individual portfolio companies every single month. And so just make sure you've got smart capital around your cap table and make sure it's diversified across every element you need including go to market. If you were advising that founder, 15 minutes is a pretty short space of time, right? Like you could babble for 15 minutes quite easily. >> What do you think that time is best spent? Like what advice would you give to folks who have this opportunity to talk to experts in the industry, highly connected individuals to how do you spend the time? >> It's it's tricky with Sam. That's what you're going to get. And he's so ingrained in like the frontier that you can leverage that. Um but in most cases that won't work. Uh we joke amongst my peers that oftentimes folks will be like we can't get sales to work. Can you spend 30 minutes with that company? It's just not going to happen. In that situation, uh outside of the SAM example, we highly recommend pre-ereads. Uh because actually these busy executives don't mind. They'd actually probably prefer spending 10 minutes the evening before skimming through a couple pages of material to familiarize yourself with your context so they can dive right into the value ad. Um, and to be honest with you, realistically, you're probably better off trying to find folks who can do sort of an hour a week for some sequence to really work through the diagnosis and the fixing issues for or the the evolution of strategy issues to understand your context. That's the reality of advisement. With Sam, I would really just like truly understand where he's been spending his time lately on the frontier and how that overlaps with the key tensions or opportunities within the organization and come come in with some pointed questions with a little bit of context to leverage that 15 minutes. >> Talk to me about the sorts of companies and investments you're making and stage 2 caption is making. I mean, it's been an interesting year for SAS. Your career started I I believe in the SAS space. I know you're at HubSpot Zero there, correct? >> Yeah. So, I was the fourth employee at HubSpot in founding CRO, took them through the uh from zero to IPO over 9 years. Correct. >> And if you think about how that SAS journey has evolved and what's been happening, you know, in 2026 in terms of the narrative around the SAS apocalypse and all of those things, how does it frame what you invest in? Like are you all in on AI? Give us some thoughts on where you see the money flowing and the moes maintaining. Yeah, I mean um there's a lot of dimensions to that particular question. Um and it's actually evolved uh over every two or three years. You know, part of you you have to be set up for the value you want to create, but you also have to be aware of the macro around you to understand where you have conviction against the consensus. So the the forever for us has been uh in the B2B application layer for the most part. Uh we like to be a hund00 million fund because you can you have the option to generate a 10 20 50x return potentially if you really crush it that a multi-billion dollar fund just mathematically can't return and we believe that's the point of our asset class and venture is to provide that riskreward. So we like that fund size and because you're in that fund size you really can't do like heavy capex businesses in the physical infrastructure layer and furthermore we've built our network from the companies I mentioned which largely play in the B2B software arena so that's been a forever for us and we do everything a lot of people think we only do go to market that's only about 10% of our investments we'll do every single uh category um you know from cyber to infrastructure a lot of vertical uh AI I and yes this year uh as of late it's every software company has an AI component and we're heavily vetted in that direction I would say you know over the years you know we went into co and we felt like it was an overheated market turns out that it was so we focus at that time of not believing the hype and making sure that we were investing through a recession lens which we didn't go into a full recession but it was definitely a correction in the tech community and then more recently With AI, you have to be really aware of mo and durability. We think that's probably a theme right now is the market is heavily rewarded revenue growth at all cost. And there's not a lot of diligence being done on the lifetime value of the install base. How many of these implementations are experimentation and not in production? We're still still seeing strong evidence that there there's a lot of experimentation. And the other piece is the durability, the moat, the barrier to entry. That's all terms to say the same thing, which is will this last the long term or could someone swap you in and out for a better model or better app fairly quickly. And we think a lot of the players today lack that and we invest heavily through that lens. I'll give you a couple examples of hypotheses that we've been investing in that check those boxes. Um, the first one is in vertical AI software in end markets that are mature and perhaps tech lagards. >> Um, if I'm a tech company with a fairly sophisticated CIO or CTO suite, I could probably pull off a build versus buy on my tech stack. meaning I'm not I'm going to replace my sales tech, finance tech, HR tech, product development tech with a general foundational model on tops on top of say a data bricks. Um, but if you are a mid-market bank, regional bank, or if you are um a hospital, or if you are a mid-market construction company, they just don't have the technical talent around them to be able to like do a a build. And there's an opportunity for specialist vendors to become the entire tech operating system for those end markets. Some of those end markets haven't been big enough to justify a $5 billion outcome for venture. But um in the last generation of vertical software, even like say a toast, which is a massive winner in the restaurant scene, you walk into a restaurant on toast, that's not all the tech they have. They have other tech running. And because AI has accelerated the product development cycles and because AI benefits with a singular brain, there's an opportunity for the future vertical AI softwares to be the entire operating system for these businesses. So they can capture the entire tech spend making the ACV per customer much larger and expanding that market. The other nice thing about that is I just don't see claude going after those markets. There's two the more regulatory unique requirements there are for those end markets and the more they cap out at say five or 10 billion dollars which is a massive returner for us but doesn't move the needle for the tier one VCs or you know anthropic >> I don't know if you followed the kind of media speculation this week that there was a comment that Anthropic might be the world's only private company 101 15 years from now right it was like you know couple outlets were running it as a headline apparently somebody very very senior Anthropic said But you know there certainly seems to be this belief that anthropic is owning the enterprise and I want to use that to go back to a comment you made around these vertical application layer bets right so >> we don't hear a lot we have a lot of founders come on this show that are again building in the vertical space right we hear vertically integrated horizontally aligned that tends to be the line because it gives you a level of flex if you want to transfer >> but what I want to ask you is we don't hear a lot about selling into midcap small cap app SMB selling into we hear about selling to JP Morgan not a suite of credit unions right that tends to be like the bigger bet is that enterprise bet and you would assume that if you're competing in the enterprise space there's going to be far more likely competition from an anthropic or an open AI or a Gemini than there is going to be in again that lagard right that laggered layer and there h there is a lot of money to be made in that industry how do you think about that like when you have co companies pitching to you are you looking at how they're profiling audience and buyers like is that a big Totally. >> Yeah. So, break it down for me a bit because you're the first person to actually say no there's midcap money too, right? Like >> Oh, yeah. I mean, and again, for for our outcomes where we don't need a trillion dollar outcome, we if we if we get to a five or$10 billion outcome, I mean, we're going to be a top decile, you know, fund just the way we've set up our fund math. So that allows us to fly below the competitive pressures of some of the tier one $5 billion funds as well as where OpenAI and Anthropic are trying to compete. >> Um you know they they already have gone into to coding. Uh they've already gone into like a lot of product development and design. They might go into go to market. They've gone into healthcare and the bigger systems pretty aggressively. I just don't see them going into mid-market you know construction and banking etc. Now, your question too, Gemma, is like um do you go after the big accounts out of the gate or do you start with SMB? >> Over a 20-year cycle, if I fast forwarded 10 or 20 years, I felt like most founders incorrectly went for the big enterprise out of the gate, thinking that if they closed them, the rest of the market would follow. they completely underestimated how long it takes to close an enterprise account and all the requirements around socks compliance and HIPPA compliance or whatever. And so typically the advice was to start in the SMB to get some fast learning cycles, build up a brand, make sure the product works and over once you hit 10 million, 20 million now you can go to the enterprise and that creates a really durable revenue cycle for you. Um there's arguments that that's not fully true these days. Harvey is a classic example. That's a vertical soft AI company in the legal space and they made a great name for themselves by just building some of the getting some of the big law firms up you know upfront literally camping out with four deployed engineers which is an important concept today's not only deploy the software but more importantly move through the change management >> the change management if I had a B if I choose between an A+ product and a B minus change management services program in my versus an A+ change management program and a B minus product. I think in a lot of industries, the latter wins today cuz it's not just about having an awesome AI product. It's getting that 20-year veteran to actually adopt it. And that's something that Harvey did well is they deployed in there with a big brand and the rest of folks followed. So, there's like there are some contextual decisions there as to do you start with big and and catch direct to the market or do you start SMB mid-market and move up. >> It's an interesting example though, right? Because you have Magic 10, their budgets are huge from a technical spend perspective. Top 100 probably still very sizable. Like Harvey's licensing is very expensive, right? It's a big upfront line on your P&L that's new, right? Like and I know it's replacing associates. People say maybe it is, maybe it's not. I mean, I'm sure it's like securing, you know, budgets and other parts of the business to cross into it. But it's still an interesting dilemma because there's a whole plethora of law firms out there that again probably won't be able to afford Harvey or integrate Harvey into their P&L in the next 5 years. Right. >> All right. So, you are building on the second hypothesis that we're really early on and exploring, but I don't know if stage two can exploit it. I hope we can, but I do think this will unfold over the next few years, which is I think this is the best time in the history of tech to be a fast follower, a copycat. M >> because of the point that you said >> um >> we have seen the some of the highest valuation multiples from a PS ratio you know the valuation to the topline revenue in early stage like preipo tech in the history of tech because of a speculation that we're entering like such a historic time with this AI movement. perhaps it will pan out and I've made some arguments that it will and I've also seen a lot of arguments that it won't and um to your point like these these first movers have to sustain a fairly high ACV with their customers to grow into these massive valuations and the combination of rapid product development cycles and this high valuation what I call ACV jail where you can't reduce price if I were two MIT CS ratios right uh undergrads right now. I would literally just pick a category and copy the product and sell it for 70% off. You can make a lot of money if you study the um archives of a company um out in Europe, Rocket Internet that was based in uh Germany. They ran this fast follower copycat model in the beginning of the century as uh companies in the US took off into the internet and they just copied it for the European market and made billions. I think that opportunity exists today and over time we'll set it onto a much lower cost for all of this software for the end customer which is really the promise of AI but it can't be delivered with these high valuations. >> I love someone who takes a bold position Mark. So I I love that. So back to these opportunities these pitches that are coming across your desk right we've also heard a lot in the VC space around AR. Does that actually mean anything anymore? you know how these metrics are changing >> what you know 10 years ago these rounds were very very like seed rounds were small right now they're like we had folk on yesterday their seed round was 40 million like that's huge >> that's that's actually cheap these days >> but 10 years ago is >> you know insane right so things are changing so fast what are you truly measuring and looking for though like what metrics are not changing in your mind as you consider investing in some of these early stage companies >> yeah sure So, I just came out with my second book in February called The Science of Scaling, which helps companies understand when and how fast they can scale. Half the entrepreneurs I meet scale too early and too slow. Half the entrepreneurs I meet to scale too uh sorry, too early, too fast versus too late and too slow. And it's because they don't have the same quantitative approach to their scale and understand the durability and readiness to scale. And by the way, I'm donating all the proceeds to mental health, just so so folks know. It's a it's a really important cause to me. Um but so at our stage we don't really have like a ton of revenue revenue and customers to evaluate. So we look at leading indicators of customer attention. This LIR concept is what we you know a lot of folks like set an initial northstar of their business on revenue growth but like great sales teams can sell ice to Eskimos and Eskimos don't need ice. That's like the classic like historic example. And so we really set the northstar around value creation. The salesunnel doesn't end at the signed contract and the wired money. The salesunnel ends when you've delivered the value you've promised your customers. And there's ways to make that super instrumental and programmatic. That's a key measure today. And I think even if you're valued over a couple billion dollars, take a hard look at that measurement for yourself. And yeah, we're looking a lot more at, you know, a combination of ARR and net dollar retention. you know, TVPI, which is like a sum of the valuations of your companies, is like almost worthless these days because we're not sure how healthy these valuations are. There's such a variance between how private markets are valuing companies today and how public markets are valuing. The judging jury is when some of these companies need to go public to deliver money back to their companies. And I don't know I don't know if public markets are going to be as bullish in some of these native native AI companies or whether they're going to see some durability risks that we're seeing as well. >> So before we finish I want to talk about another string to your bow and that is that you are also a professor at Harvard Business School. >> Yes. >> You lecture on a number of programs. Maybe you can break it down for us. But I'm interested in your thoughts on this next generation of young enthusiastic business mind founder. You know, it seems as though there's a lot of trepidation out there in the market, especially in tech, around what it will take to or what a computer software engineer will look like 10 years from now, whether these investments are worth it. We hear a lot about, you mentioned mental health as a cause close to your heart, people, you know, feeling a whole lot of ambiguity, the generation that is kind of like a little bit lost in space in the world of 2026. What are you seeing and hearing? Like what gives you hope and Yeah. Okay. and worry I guess about this nextgen. >> I teach an entrepreneurial sales class there which is very popular. I also teach a field trip class to Silicon Valley in January where we get closed doors with all these amazing people out there and 50 students. It's amazing how my students point out to me um the misbalance of how much capital, talent and time is going into building AI and not um helping society come along. And that's very worrisome. I think a lot of folks in tech whether you're on the operational side or investment side those with a a good moral compass are doing a lot of thinking about that and I am as well it would be a whole another episode if you want to go there and more of a philosophical one but bottom line and that's part of the reason for the proceeds to mental health is we who are in the AI uh epicenter we need to make sure we like internalize that of how much are we going into building and how much are we investing in helping society come along and do our little things um for the MBAs in particular. Over a 15-year horizon, we've seen a massive shift from going into banking and consulting to going into entrepreneurship and tech and and founders, which is really exciting. I happen to think they're probably one of the um best talent pools and overlooked talent pools right now. Um specifically in tech, uh like the computer science departments, they've been hurt a little bit more recently. And um for example, when I see a software company today, um 10 years ago they they used to spend maybe 10 to 20% of the time figuring out what to build and 80 to 90% building because it's just what was necessary to build really strong code that's flipped sub substantially the best businesses who are AI enabled in their tech community or tech departments they can build code so rapidly they're spending a large portion of their time figuring out what to build and MBAs are are very well suited to do that especially those with a with a with a tech background So, um, those are some of the themes that I'm seeing in the, uh, in the Harvard and general AMBA community. >> Well, Mark, before you go, where can folks find your book? >> Yeah, it's on Amazon, Science of Scaling by Mark. 100% of the proceeds are donated to mental health. Um, just for two quick reasons. One, um, it's a big part of my life. I've been a caregiver. I've also been a patient and a lot of people can't bravely say that publicly because of the stigma associated with it still. So, I'm blessed to be able to have the resume to be able to say that bravely. And secondarily, everything I talked about with where where society's going. Um, this is going to be a massive shift for society as was fire and electricity and the internet. And each each one of those um we evolved to a better species, but it came with scars. If we don't adjust, we'll have massive scars here and everyone needs to do their little thing. This is my little thing right now. >> Well, Mark, you're certainly a fantastic role model. Thank you so much for joining us on the Cube and NYC Wired. >> Thanks, Gemma. I'm Jim Allen here at the Cube Studio at the New York Stock Exchange with NYC Wired. This is our capture series. Thanks for watching.