Jacobsohn’s journey to venture capital is rooted in deep operational experience within the HR software industry, a sector he helped shape long before becoming an investor. He held pivotal senior roles at WageWorks and Cornerstone OnDemand, where he witnessed firsthand and contributed to their growth from nascent stages to multi-million dollar revenue powerhouses. His tenure at these companies, alongside Upwork, culminated in all three successfully going public – a testament to his understanding of scalable business models and market dynamics. This rich background in finance, sales, and business development across various high-growth tech companies provided an invaluable foundation. He transitioned to venture capital as a venture partner at Emergence Capital before joining Norwest Venture Partners in 2014, a global venture and growth equity firm founded in 1961 that now manages an impressive $15.5 billion across its funds, including its recently raised $3 billion 17th fund in 2024.

As a partner at Menlo Park, California-based Norwest, Jacobsohn’s investment focus primarily lies in enterprise software. His active portfolio currently spans 15 companies, ranging from early-stage, pre-revenue startups to more mature businesses generating over $300 million in annual revenue. While a significant portion of his investments gravitates towards finance and HR software, his keen eye for disruption also extends to supply chain and construction technology, often targeting companies developing specialized finance applications within these industries. The unifying theme across his diverse portfolio is a commitment to backing "next-generation business applications" designed to challenge and ultimately displace entrenched, often aging, legacy providers that have struggled to innovate and keep pace with modern demands.

In a recent interview with Crunchbase News, Jacobsohn elaborated on his strategic outlook, particularly on where he identifies ripe opportunities in the crowded finance software market, the cautious role of AI in accounting, and how HR startups can effectively carve out market share. Crucially, he revealed his distinctive pre-investment sales test for founders, a practice that underscores his belief in the paramount importance of sales acumen for entrepreneurial success.

The Enduring Opportunity in the Office of the CFO

Despite the perceived saturation of the finance software market, Jacobsohn sees abundant opportunities for disruption within the "office of the CFO." He explains, "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." His internal market map alone identified over 500 companies in this space, with approximately three-quarters being legacy solutions. The unique advantage here, he notes, is that CFOs are direct buyers of their own software, often bypassing an additional layer of approval compared to other departmental purchases. This direct relationship can streamline the adoption of innovative solutions.

Jacobsohn’s investments span both horizontal applications – those applicable across various industries – and vertical solutions tailored for specific sectors. He has found success with vertical plays in construction and manufacturing, and is actively exploring opportunities in transportation and logistics, all areas where finance applications can be deeply embedded.

He clarifies that the disruption isn’t necessarily about automating previously manual workflows, as "most workflows have been automated, but some are being automated by legacy solutions." The real opportunity lies in replacing outdated systems, whether they are on-premise, early-generation cloud solutions (SaaS 1.0), or simply not "AI-native." In today’s market, the demand for AI-native products is pervasive, creating a clear differentiator for new entrants against incumbents that struggle to reinvent themselves.

Specific areas he views as ripe for disruption include:

• ERP (Enterprise Resource Planning): While not currently holding an ERP portfolio company, Jacobsohn believes there’s significant potential to challenge long-standing players like NetSuite and Sage, particularly starting downmarket and gradually moving up.
• Sales Tax: This category is plagued by "ancient legacy players," presenting a clear opening for modern, efficient solutions.
• Treasury Management: Another area characterized by "very old legacy players" that are ripe for modernization.
• Procurement: A sector where Jacobsohn has already invested, recognizing the need for next-generation tools.

Navigating AI’s Role in Sensitive Finance Workflows

The integration of AI into finance software presents a delicate balance, given the industry’s stringent requirements for accuracy, precision, and auditability. Finance professionals are inherently risk-averse, demanding consistent and verifiable answers. Jacobsohn acknowledges this concern: "There’s some concern that there could be errors with AI, and there are."

He advises a cautious and strategic approach to AI implementation. While infusing AI into finance products is essential for competitive advantage, careful consideration must be given to what tasks AI is assigned. "You don’t want AI doing calculations because it is not good at math," he asserts. For tasks requiring absolute precision, accuracy, and complex calculations, reliance on AI can be risky. Instead, AI excels in workflows where it doesn’t need to produce precise numerical outputs, such as data extraction, categorization, anomaly detection, or predictive insights that inform human decisions rather than replace them entirely. The goal is to augment, not fully automate, critical financial processes where even minor errors can have significant consequences.

Strategizing Disruption in HR Tech

The HR tech market, particularly core categories like payroll, benefits, and workforce management, poses a formidable challenge for disruption due to high switching costs and the robust distribution networks of incumbents like Workday, ADP, SAP, UKG, and Dayforce. Jacobsohn concedes, "I think it would be very hard to disrupt the core products of Workday, ADP, SAP, UKG and Dayforce."

His strategy for HR tech startups focuses on attacking the "secondary products" of these large platforms – areas where the category isn’t the incumbent’s core business, and therefore receives less strategic focus and R&D investment. While these suite players possess excellent distribution, "often, the best distribution wins, not necessarily the best product." This creates an opening for specialist providers with superior, cloud-native, and AI-driven solutions.

He cites two examples from his portfolio:

• Legion Technologies: In workforce management, Legion competes against products from companies like UKG, which originated as an on-premise solution before transitioning to the cloud. Legion’s advantage lies in its cloud-native, AI-powered approach, allowing it to outperform legacy offerings in the market.
• Elevate: In the benefits space, Elevate is ironically disrupting Jacobsohn’s former employer, WageWorks, a legacy player. Benefits, while a significant market, is not the core business of the major HR suite providers. This allows a specialist like Elevate to thrive by offering a more focused and advanced solution.

This approach highlights the importance of identifying large enough markets that are "not putting much effort behind the product because they can only focus on so many things at once."

AI’s Dual Impact on Building Durable Software Companies

Jacobsohn sees AI as a double-edged sword for building durable software companies. On one hand, it’s undeniably making it easier to build innovative solutions. "We’re going from products that store data and automate some workflows to really smart solutions that understand, predict and execute work for you," he explains. AI empowers employees to focus on higher-value tasks by automating routine work through intelligent agents, fundamentally changing job roles and increasing efficiency.

On the other hand, the ease of building with AI also raises concerns about faster copying and increased competition. Jacobsohn differentiates here:

• Simple horizontal workflows for small businesses: These might indeed face rapid competition and be easier for many to build internally or for numerous startups to enter.
• Complex solutions for mid-market or enterprise: These require deep domain expertise, often have a vertical focus, and are inherently harder to build and maintain. For such solutions, Jacobsohn observes less competition from internal development teams or a multitude of startups, making them more durable.

Investment Strategy and Exit Realities

Norwest’s investment philosophy, particularly Jacobsohn’s, remains unswayed by the fluctuating IPO market. With primary entry points at seed and Series A, and opportunistic later-stage investments, their focus is on long-term potential. "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," he states. While he aims to invest in companies that could go public if they execute flawlessly, he remains realistic that most companies are acquired before reaching IPO status.

He views acquisitions as a "very good outcome," especially for early-stage investors. Entering early means that even an acquisition for less than $1 billion can yield excellent returns for Norwest and the founders, aligning with the budget realities of most corporate buyers. This contrasts with late-stage investments at valuations already exceeding $1 billion, where the pool of potential acquirers significantly shrinks.

The Foundational "Sales Test"

Perhaps Jacobsohn’s most distinctive and revealing belief is his insistence on a founder’s sales ability. "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," he emphasizes. He argues that a CEO’s role is inherently a sales role – selling to customers, partners, investors, and employees.

Before making an investment, Jacobsohn puts founders through a rigorous, practical "sales test." He arranges numerous sales calls and actively participates, observing the CEO’s ability to articulate their vision, address objections, and generate interest. This hands-on assessment is a crucial indicator of a company’s potential. "To me, that’s a big way of assessing the potential of a company," he states.

He doesn’t shy away from passing on founders who fail this test. "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." This direct, empirical approach to evaluating sales skills highlights his conviction that even the most innovative product won’t succeed without a founder who can effectively sell it.

The Failure Museum: Learning from What Didn’t Work

Beyond his investment strategies, Jacobsohn is also the curator of a unique online "Failure Museum," a collection of over 1,500 items from failed companies and products. This extensive archive serves as a personal research project to understand the myriad reasons why ventures falter. Far from being a somber reflection, the museum evokes optimism. "People are eager to share their successes and their failures," he notes. The overarching lesson gleaned from this study is that "failure can be a springboard to success," encouraging entrepreneurs to embrace risk and learn from setbacks rather than fearing them.

Sean Jacobsohn’s approach to venture capital is a compelling blend of deep operational expertise, strategic market analysis, and a pragmatic understanding of what truly drives startup success. His unique "sales test" for founders is not just an idiosyncratic preference but a core tenet, reflecting a profound belief that an entrepreneur’s ability to sell is as critical as their product vision or technical prowess. It’s this holistic perspective that continues to guide his investments at Norwest, identifying the next generation of enterprise software disruptors.