The Sales Test This Norwest Partner Gives Founders Before He’ll Invest

Sean Jacobsohn worked at HR software startups long before he began investing in them. He held senior roles at WageWorks and Cornerstone OnDemand as both companies grew from single-digit millions in revenue to tens of millions, and he also worked at Upwork. All three of which went public. He later became a venture partner at Emergence Capital before joining Norwest in 2014.

As a partner at Menlo Park, California-based venture firm Norwest, Jacobsohn focuses on enterprise software, drawing on his background in finance, sales and business development. His 15 active portfolio companies range from pre-revenue startups to businesses generating more than $300 million in revenue. Much of his portfolio falls within finance and HR software, although he also invests in supply chain and construction technology — often in companies building finance applications for those industries.

The common thread, he explained, is a focus on next-generation business applications taking on entrenched providers that have struggled to keep up. Jacobsohn has found particularly fertile ground in finance, where companies already have software budgets and many categories remain dominated by aging systems.

Norwest, founded in 1961, manages $15.5 billion and is investing out of its 17th fund, a $3 billion vehicle raised in 2024. Over time, the global venture and growth equity firm has backed more than 700 companies in sectors spanning enterprise, consumer and healthcare.

In an interview with Crunchbase News, Jacobsohn discusses where he still sees openings in the crowded market for finance software, how far companies should trust AI with accounting work, why HR startups may be better off attacking the secondary products of large platforms, and why he tests a CEO’s sales ability before investing.

The interview has been edited for clarity and brevity.

Crunchbase News: The office of the CFO is an area where you’ve invested fairly extensively. Why is there still so much room for startups when finance software is already such a crowded market? Where is the opportunity right now?

Jacobsohn: I’m focused a lot on companies that are disrupting legacy players, and there are a lot of legacy players in the office of the CFO. We had more than 500 companies on our Office of the CFO market map, and probably three-quarters of those are legacy players.

What’s interesting about finance is that the CFO approves all software purchases across the organization, but CFOs also buy software for themselves. There’s actually one less layer of approval when they’re buying their own software, so it is a little easier to replace it when they’re the direct buyer.

I’ve found a lot of opportunities in both finance software that sells to every industry and software focused on specific industries. I’ve invested in a lot of horizontal applications, and so far the vertical solutions have been in construction and manufacturing. We’ve also invested in the healthcare space, but that’s not my area of focus. I’m also looking at companies in transportation and logistics.

Are there specific finance workflows that still strike you as surprisingly manual and therefore more ripe for disruption?

Jacobsohn: I actually think most workflows have been automated, but some are being automated by legacy solutions. Some could still be on-premise. Some could be companies making the transition from on-premise to the cloud that are still very legacy. You might even call them SaaS 1.0, because a company can be considered legacy and be only five to 10 years old now that a lot of the new generation is AI-native.

Every company wants to buy AI-native products these days. Some legacy companies have done a better job of reinventing themselves, and others are having more difficulty. Since most everything has been automated by someone, I’m focused on new-generation disruptors of legacy solutions.

What are some of the areas you think are ripe for disruption?

Jacobsohn: I have a portfolio company in some of these categories, and not in others.

One area where I do not have a company is ERP. I think there’s an opportunity to disrupt NetSuite, Sage and maybe even SAP and Workday as you move upmarket. Those companies have been around for a very long time. I’m seeing more disruption downmarket, and some of these companies will eventually move upmarket.

I think sales tax is another category with some ancient legacy players where there’s an opportunity to disrupt them. Treasury management also has some very old legacy players. Another area I’ve invested in is procurement.

Finance is particularly sensitive when it comes to accuracy and audits. Is that affecting how much work companies will actually hand over to AI agents, especially in accounting?

Jacobsohn: We think about this a lot. Finance people are risk-averse, and they need consistent answers. There’s some concern that there could be errors with AI, and there are.

It’s important to infuse AI into your finance products, but you have to be careful about what you’re giving AI to do. You don’t want AI doing calculations because it is not good at math. There are certain workflows it can handle where it doesn’t produce precise numbers. But when you need precision, accuracy and calculations, you can’t rely on AI for that.

In Norwest’s recent HR tech market map, you mentioned that categories including payroll, benefits and workforce management can be difficult to disrupt because of the time and expense associated with switching. If a startup wants to take business from Workday or ADP, how can it make switching more enticing?

Jacobsohn: I think it would be very hard to disrupt the core products of Workday, ADP, SAP, UKG and Dayforce. But it’s easier to disrupt some of their secondary products, where the category isn’t their core business. Those companies have really good distribution. Often, the best distribution wins, not necessarily the best product.

Workforce management is a category I’ve invested in through Legion [Technologies]. UKG has a product in the space, but it started as an on-premise company and moved to the cloud. We’ve been a cloud-native AI player, and we’ve done well against it in the market.

Another company I invested in that complements these players is Elevate, which is in the benefits space. What’s interesting to me is that I worked at WageWorks, a legacy player in the space. Elevate is disrupting my old employer. Benefits isn’t the core business of the suite players I mentioned, but it’s a big enough market where a specialist can do well.

That’s how I look at it: What are some big markets where suite players aren’t putting much effort behind the product because they can only focus on so many things at once?

Is AI making it easier or harder to build a durable software company? Features and products can be built faster, but they can also be copied faster.

Jacobsohn: I do think it’s making it easier to build companies. We’re going from products that store data and automate some workflows to really smart solutions that understand, predict and execute work for you. It’s changing employees’ jobs. Employees can focus on higher-value work and automate some of their tasks with agents that can work really quickly.

As for whether anyone can vibe-code something, I think if you’re building a simple horizontal workflow for small businesses that isn’t very complex, it could be easy to build the product yourself, or it could lead to a lot of competition.

If you’re building something complex for the midmarket or enterprise, something that needs deep domain expertise or something vertical in nature, any of those areas would be really hard for a lot of people to build internally or for too many startups to compete in. Those solutions would also be really hard to maintain. I’m not seeing much competition from people wanting to build internally at my portfolio companies that are focused upmarket, where you need deep domain expertise.

The IPO market has improved, but it certainly isn’t where it was. How does the current exit environment affect what you’re willing to fund today, if at all?

Jacobsohn: It doesn’t impact our interest in funding. Our primary entry point is seed and Series A. I’ve done some Series B and C deals, so we can be opportunistic at the later stage.

We’re focused on backing entrepreneurs with deep domain expertise who are going after big markets with legacy players ripe for disruption, and we don’t worry about the exit environment. At some point, the IPO market will open up more, and maybe that will help us in the future. But more companies get acquired than go public.

I do want to invest in a company that, if it executes well, someday has the option to go public. But I’m realistic that most companies get acquired before that can happen.

How do you feel about an acquisition as an outcome?

Jacobsohn: You have to support your entrepreneurs and what’s in their company’s best interest. M&A can be a very good outcome, especially since we come in so early. If a company is acquired for less than $1 billion, it still could be a great outcome for us and the company.

The challenge is entering late, at a valuation above $1 billion. Not many companies will acquire another company for billions of dollars. We like to come in early so that if a company sells for less than $1 billion, which is where most buyers have budgets, it can be a really good outcome.

Is there a fundamental belief you have about funding or building startups that you think other investors might disagree with?

Jacobsohn: Something that’s different about me from most VCs is that I come from a sales background, and I think the CEOs I back need to be good at sales.

Just about every CEO I back comes from a product and engineering background, but that’s not enough. You need to be good at selling. You need to sell to customers, partners, investors and employees. Before I invest, I’ll go on a lot of sales calls I set up with the CEO to see how good they are at selling.

To me, that’s a big way of assessing the potential of a company.

Have you ever passed on a CEO or startup because you felt the founder didn’t have strong sales skills?

Jacobsohn: Yes. When I go on sales calls and people aren’t interested in a second meeting, and that’s a consistent theme, it often leads me to walk away.

Tell me about your Failure Museum. What are some of the biggest findings you’ve learned in building out the Failure Museum?

Jacobsohn: I have built a Failure Museum that includes more than 1,500 items from failed companies and products. I have them all on my website, where I study why they failed.

People are eager to share their successes and their failures. The museum evokes more optimism than one might think. People shouldn’t be afraid to take risks. Failure can be a springboard to success.

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