Norwest Partner Jacobsohn on AI, Legacy Disruption

Norwest Venture Partners' Sean Jacobsohn tests a CEO's sales ability before he will invest. The Menlo Park-based investor, who focuses on enterprise software, shared his views on finance and HR tech markets, AI's role, and his investment criteria in an interview.

Jacobsohn, a partner at the firm, use a background in sales and business development from roles at WageWorks, Cornerstone OnDemand, and Upwork. Norwest, founded in 1961, manages $15.5 billion and is currently investing from its 17th fund, a $3 billion vehicle raised in 2024. Jacobsohn's active portfolio of 15 companies ranges from pre-revenue startups to businesses generating over $300 million in revenue.

Focus on Legacy Disruption in Finance

The investor sees persistent opportunity in the crowded finance software market by targeting next-generation applications that displace entrenched providers. He noted that while the 'office of the CFO' market map includes over 500 companies, roughly three-quarters are legacy players. Jacobsohn argues that selling to CFOs can be easier because they approve software purchases for the entire organization and buy for their own departments, creating one less approval layer.

He finds openings in both horizontal finance software and vertical solutions for specific industries like construction and manufacturing. While he is also looking at transportation and logistics, healthcare investments fall outside his personal focus.

AI's Limits and HR Tech Strategy

For integrating artificial intelligence into sensitive finance functions, Jacobsohn advises caution. "Finance people are risk-averse, and they need consistent answers," he said, acknowledging there can be errors with AI. He believes AI should not be tasked with precise calculations but can handle other workflows where exact numbers are not required.

In human resources technology, Jacobsohn suggests startups avoid direct assaults on the core products of giants like Workday, ADP, SAP, UKG, and Dayforce, citing the difficulty and expense of switching. Instead, he recommends targeting secondary products where these suite players invest less effort. He points to his investments in workforce management platform Legion Technologies and benefits specialist Raise as examples of this strategy. Raise, he noted, is disrupting his former employer, WageWorks.

Investment Philosophy and the Sales Test

Jacobsohn's investment thesis centers on backing entrepreneurs with deep domain expertise who are attacking large markets with legacy incumbents. His primary entry points are seed and Series A rounds, though he does opportunistic later-stage deals. The current IPO market does not impact his willingness to fund companies, as he believes more companies ultimately get acquired than go public.

A key part of his diligence is evaluating a founder's sales capabilities. This test stems from his own operational experience. He looks for companies that, if they execute well, could have the option to go public, though he is realistic that acquisition is a more common outcome. The firm's broad sector experience includes backing over 700 companies across enterprise, consumer, and healthcare.

Jacobsohn concluded that while AI makes it easier to build companies, durable competitive advantages are found in complex solutions for the midmarket or enterprise, vertical applications, or areas requiring deep domain expertise, which are harder for competitors to replicate or build internally.