SaaS Moats And Key Factors, With Industry Veteran Justen Stepka (Podcast)

Summary

• We continue to follow the software as a service sector and the impact of the work from home world, but this time with an outside perspective.
• Justen Stepka, a tech investor/founder/longtime product management, joined us to talk about his positions in Slack and Atlassian and what makes the companies stand out.
• He also shares his views on the work from home environment we're in and its potential knock-on effects, as well as what he's seeing in private markets.

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by Daniel Shvartsman

Last week's Razor's Edge episode on the SaaS (software as a service) sector and the differences between Slack (WORK) and Zoom (ZM) got a good deal of attention, a sign of investors' interest in this rally. With both companies set to report earnings next week, along with Akram Razor's much discussed Pager Duty (PD), we wanted to add another perspective to the mix.

Justen Stepka joins us on this special episode. Stepka founded Authentisoft, a single sign-on provider that Atlassian (TEAM) bought out in 2006. He went on to work there for eight years, Docker for another four, and then launch a private equity firm, Enterprise Fund, along with another Atlassian veteran. So he has an interesting front-row perspective on the sector and some of these names, even as he's crossed back over to the investing side of the spectrum. And given his portfolio is currently concentrated in WORK, TEAM, and Amazon (AMZN), we thought it would be good to hear from him.

Beyond the specifics of these companies, we get into what he prioritizes in picking companies, Okta's (OKTA) in the single sign-on vertical, what the private market looks like, and the second or third-level effects of the current work from home environment. We hope you enjoy it, as I think it came out well. Click play above to listen and watch out for a transcript on Monday.

Topics Covered

• 2:30 minute mark - The importance of R&D in retention
• 6:00 - Product stickiness vs. ease of use
• 11:30 - Evaluating R&D as a competitive edge
• 15:00 - The importance of dogfooding
• 18:00 - Okta's position
• 23:30 - How can a software company really be on sale in this market?
• 28:45 - ServiceNow's position
• 30:00 - What's next in the industry, where is Justen watching, and what does the private market look like?
• 36:30 - The change in perspective from being an insider to an outside investor
• 41:00 - Work from Home and its broader effects
• 52:00 - Commercial real estate

Disclosure: I am/we are long THO, ALSK, GOOG. I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it. I have no business relationship with any company whose stock is mentioned in this article.

Additional disclosure: Daniel Shvartsman is long GOOG, THO, and ALSK.
Akram's Razor is long TWTR, PD, FB, WORK, and TWLO.
Justen Stepka is long TEAM, AMZN, and WORK.
Nothing on this podcast should be taken as investment advice.
A transcript will be posted early next week.