# Deven Parekh on the State of Startup Investing

An episode of [Masters in Business](https://invisiblenetwork.ai/podcast/730188152), 15 Aug 2025, 1 h 07 min.

Audio: https://podtrac.com/pts/redirect.mp3/traffic.omny.fm/d/clips/e73c998e-6e60-432f-8610-ae210140c5b1/4e4cd910-40a1-4619-a5f3-ae2b0012ffff/12bb9aa8-b036-4bca-a3f3-b339013c07b7/audio.mp3?utm_source=Podcast&in_playlist=5873a3cb-298f-40bc-b71f-ae2b0013000d

Barry speaks with Deven Parekh, Managing Director at Insight Partners, a growth equity investment fund based in New York City. Since joining Insight in 2000, he has made more than 140 investments in enterprise software, data, and consumer internet businesses globally. Deven also currently serves as a Board Member for the Council on Foreign Relations, NYU Langone Health, the Carnegie Endowment for International Peace, and the Tisch Multiple Sclerosis Research Center. In this episode, they discuss the every-changing world of venture and private equity. See omnystudio.com/listener for privacy information.

## Transcript

[0:00] Speaker 1: Bloomberg Audio Studios, Podcasts, radio News. This is Masters in
[0:12] Speaker 1: Business with Barry Ritholts on Bloomberg Radio.
[0:17] Speaker 2: This week on the podcast, I have an extra special guest.
[0:20] Speaker 2: What can I say about Devin PreK, Managing director and
[0:23] Speaker 2: Insight Partners, major venture capital slash private equity shop that
[0:30] Speaker 2: has had just countless, countless exits. He was an early
[0:34] Speaker 2: investor in Twitter, Buddy Media, Eves men Apras, Insights, Website,
[0:40] Speaker 2: Pros Turnton. They focus on software, which is much broader
[0:46] Speaker 2: and more varied than you might imagine. They are global
[0:50] Speaker 2: in their footprint of where they put money to work,
[0:53] Speaker 2: and they're not just early stage investors. They do a rounds,
[0:58] Speaker 2: B rounds. They will help provide liquidity for a company
[1:02] Speaker 2: that's looking for a partial exit, as well as strategic
[1:06] Speaker 2: investments and m and a sort of from a private
[1:10] Speaker 2: equity shop. I think Insight Partners is unique because they
[1:14] Speaker 2: have a foot in both venture and pe worlds. I
[1:18] Speaker 2: thought this conversation was fascinating and I think you will
[1:20] Speaker 2: also with no further ado my discussion with Insight Partners.
[1:26] Speaker 3: Devin correct, thanks for having me.
[1:29] Speaker 2: So let's start out way back when you get a
[1:32] Speaker 2: bachelor's and economics from Wharton. What was your original career plan?
[1:37] Speaker 3: Not business?
[1:38] Speaker 2: Not business.
[1:39] Speaker 3: I actually in high school was a total science nerd. Know,
[1:44] Speaker 3: competed in Westinghouse and oh really what area? Biochemistry? Microbiology?
[1:50] Speaker 3: Actually one first place in microbiology the International Science Fair.
[1:53] Speaker 3: So my path was kind of being a doctor, probably
[1:56] Speaker 3: being an mdphd. I didn't actually start pen in Warden.
[2:01] Speaker 3: I actually started the College of Arts and Sciences. I
[2:03] Speaker 3: started as a biochemistry major. I was doing research at
[2:07] Speaker 3: the medical school my freshman year, and you know, I think,
[2:11] Speaker 3: like at everything in life, there's a lot of fate
[2:13] Speaker 3: and who your roommates are and the people you meet,
[2:16] Speaker 3: and you know, my roommates were all business and I
[2:20] Speaker 3: was the only kind of science person, and I thought, well,
[2:24] Speaker 3: maybe I should take maybe I should take a finance
[2:27] Speaker 3: course or an economics course. So I did freshman year.
[2:29] Speaker 3: Found it really interesting, And after my freshman year, I
[2:34] Speaker 3: decided rather than doing working in science for the summer,
[2:38] Speaker 3: I was going to work on Wall Street for the summer.
[2:40] Speaker 3: And I managed to get a job in Wall Street
[2:43] Speaker 3: between my freshmen and sophomore year, which was unusual at
[2:46] Speaker 3: the time, but but I did. I came back after
[2:48] Speaker 3: that and said, well, maybe I can put these two
[2:51] Speaker 3: interests together. And I was going to do biochemistry and finance.
[2:55] Speaker 3: I was going to do the dual degree, you know,
[2:58] Speaker 3: with a degree in Wharton and a degree in colleg
[3:00] Speaker 3: Now they have pre set programs for all of these things,
[3:03] Speaker 3: but at the time they didn't. But it would involve
[3:06] Speaker 3: taking you know, between six and seven courses every semester
[3:10] Speaker 3: and not not These were not easy classes. These were
[3:13] Speaker 3: like organic chemistry and quantitative finance. And I just thought,
[3:16] Speaker 3: this isn't going to be a great college experience if
[3:19] Speaker 3: I do both. I kind of needed to pick, and
[3:22] Speaker 3: so I ended up picking Wharton. And of course people
[3:25] Speaker 3: are like, well, what was the thought process you went
[3:27] Speaker 3: through when you did that? And the thought process probably
[3:30] Speaker 3: was not. It was I was impatient, and I saw
[3:34] Speaker 3: the route for medical school was I was gonna do
[3:37] Speaker 3: four years in medical school. I was thinking at that
[3:39] Speaker 3: point I also wanted to do research. I thought maybe
[3:41] Speaker 3: I was gonna get a PhD. It just seemed like
[3:43] Speaker 3: a long time in school before I could actually start
[3:46] Speaker 3: my career as opposed to business, I could I could
[3:50] Speaker 3: kind of jump in right away. And I always thought
[3:53] Speaker 3: that at some point in the future, I would somehow
[3:55] Speaker 3: bring these two interests together. I didn't know how that was.
[3:58] Speaker 2: That was the obvious question because I on the list
[4:01] Speaker 2: of areas you invest I don't see a whole lot
[4:03] Speaker 2: of healthcare or biotech or genomics. But have the Twain
[4:07] Speaker 2: ever met.
[4:08] Speaker 3: Or they actually have, and they have in two different ways.
[4:11] Speaker 3: We do now have a team at Insight that does
[4:14] Speaker 3: invest in in kind of therapeutics, biotechnology, kind of therapeutics.
[4:19] Speaker 3: We have a team that does it. I'm involved in it,
[4:21] Speaker 3: but I'm not the one doing those deals or leading
[4:23] Speaker 3: those deals. But it's actually probably also manifested a lot
[4:26] Speaker 3: more like philanthropically. I'm on the board of NYU langone.
[4:30] Speaker 3: We're funding a bunch of research there, as well as
[4:32] Speaker 3: a bunch of other, you know, kind of universities. So
[4:35] Speaker 3: philanthropically it's been a big focus of mine, and so
[4:39] Speaker 3: it's been enabled. I've been able to bring bring that
[4:43] Speaker 3: kind of interest back into my life in a way
[4:46] Speaker 3: that's been satisfying.
[4:47] Speaker 2: Huh really interesting. So from Wharton, how do you end
[4:51] Speaker 2: up on Wall Street? What's your first gig?
[4:53] Speaker 3: Well? I worked for the summers. I worked at a
[4:56] Speaker 3: small biotshop after my freshman year. After my sophomore year
[4:59] Speaker 3: work a credit sweets, and after my junior year, I
[5:02] Speaker 3: was actually first Boston at the time. After my junior year,
[5:05] Speaker 3: I worked at DLJ and then I started at blackstam and.
[5:09] Speaker 2: That was that's quite a laundry list, of it was
[5:12] Speaker 2: a laundry list.
[5:12] Speaker 3: It was a laundry list. And I started as an
[5:15] Speaker 3: analyst at Blackstone in nineteen ninety one and then had
[5:19] Speaker 3: the opportunity, even kind of before I finished my analyst
[5:23] Speaker 3: program to go to a startup. But it was just
[5:26] Speaker 3: not a tech startup. It was a investment banking startup
[5:30] Speaker 3: that was founded by Jeffrey Barnson and Raymondella, who used
[5:33] Speaker 3: to be the coheads of merchant banking at Merylnch And
[5:38] Speaker 3: so I left Blackstone to go to what was then
[5:43] Speaker 3: a no name and to some degree it's still not
[5:45] Speaker 3: well known firm. And I remember having a conversation with
[5:51] Speaker 3: my dad at the time, who was like, he didn't
[5:54] Speaker 3: really know who Blackstone was, and so when I took
[5:56] Speaker 3: that job, he was like, well, why would you take
[5:58] Speaker 3: Blackstone when you got all these offers from firms he'd
[5:59] Speaker 3: heard of, And I was like, well, I think it's
[6:01] Speaker 3: going to be a really good firm. And then finally
[6:04] Speaker 3: he got comfortable that was a good idea, and I
[6:05] Speaker 3: leave to go to this firm that no one's heard of.
[6:07] Speaker 3: And I said, well, my downside cases, I'll go to
[6:08] Speaker 3: business school. Like it's really not anyway. So I made
[6:12] Speaker 3: that leap and that was a It was a great experience.
[6:18] Speaker 3: They were primarily kind of M and A advisory, but
[6:20] Speaker 3: then over time they were trying to figure out how
[6:22] Speaker 3: to get into the principal business in some way.
[6:26] Speaker 2: How do you how do you go from M and
[6:27] Speaker 2: A to venture capital?
[6:29] Speaker 3: So the two co founders of Insight, Jeff Horing and
[6:34] Speaker 3: Jerry Murdoch started they're pre effectively the predecessor to Insight
[6:42] Speaker 3: at Baronsamonela and Baron. Samla was kind of a a
[6:47] Speaker 3: sponsor of these two guys who wanted to do something
[6:50] Speaker 3: in technology. Really early. We were not technology experts. We
[6:53] Speaker 3: didn't the firm didn't know anything about technology. But we
[6:55] Speaker 3: thought we could help them raise capital, or at least
[6:58] Speaker 3: the guys ran the firm thought they could help. But
[7:01] Speaker 3: we didn't really have a lot of competency in software.
[7:04] Speaker 3: I was the closest thing they had to somebody understood technology,
[7:07] Speaker 3: which just means that I used it. And so I
[7:10] Speaker 3: was kind of working with, you know, Jeffrey and jeff
[7:15] Speaker 3: Moring and Jerry Murdoch, and then they kind of came
[7:18] Speaker 3: to the conclusion that they were going to kind of
[7:21] Speaker 3: go do this on their own, that there wasn't really
[7:24] Speaker 3: like the partnership didn't make sense for them, so they
[7:27] Speaker 3: went off. They'd asked for you, was that they uh
[7:31] Speaker 3: ninety five? Yeah, And they asked me at that time
[7:34] Speaker 3: if I was interested in joining, and you know, I
[7:37] Speaker 3: was twenty five and a vice president, and I was like, oh, well,
[7:39] Speaker 3: why would I go join a startup? And now all
[7:41] Speaker 3: of a sudden I lost my startup kind of bug,
[7:44] Speaker 3: and so I didn't. Then I maintained a relationship with them,
[7:46] Speaker 3: and then in nineteen ninety nine, when I was thinking
[7:49] Speaker 3: of leaving parents to go do something on the principal side,
[7:52] Speaker 3: I ended up kind of joining them when they were
[7:54] Speaker 3: raising their first institutional fund.
[7:56] Speaker 2: So, so what was that process like going from what
[7:59] Speaker 2: was really a startup to going to something that was
[8:04] Speaker 2: barely no longer a startup? Or was that really their
[8:07] Speaker 2: first major rountud?
[8:08] Speaker 3: No, So they had so they at that point had
[8:10] Speaker 3: raised three funds, they were about to raise their fourth.
[8:14] Speaker 2: Fund, so somewhat seasons.
[8:16] Speaker 3: It was primarily at that point that very few institutional investors,
[8:20] Speaker 3: so their fourth fund fund for was going to be
[8:22] Speaker 3: their first institutional fund, and so was. The firm is
[8:27] Speaker 3: very small from a number of people standpoints, about ten people,
[8:31] Speaker 3: you know, today we're four and fifty people, so it's
[8:33] Speaker 3: a much larger firm today, but it was I think
[8:37] Speaker 3: the harder part of the transition is, you know, it's
[8:40] Speaker 3: very different being an advisor. I wanted this transition, but
[8:44] Speaker 3: it's very different being an advisor whose goal it is
[8:47] Speaker 3: to kind of get a deal done to being a principal,
[8:50] Speaker 3: where your goal is not just to get a deal done,
[8:51] Speaker 3: was to make sure it's a good deal. And that's
[8:54] Speaker 3: a that's a that's a shift, that's a shift of mentality.
[8:59] Speaker 3: You know, you it's not like an on off switch
[9:01] Speaker 3: for that. But really, the way I looked at it
[9:04] Speaker 3: is I was and the firm that I left very
[9:08] Speaker 3: generously offered me the opportunity to take a pool of
[9:12] Speaker 3: capital that they had and invest in technology is kind
[9:14] Speaker 3: of as a way to maybe get me to consider
[9:15] Speaker 3: staying there. And I said, No, it wasn't really an
[9:18] Speaker 3: economic decision. What I said was, I'm not really qualified
[9:21] Speaker 3: to do that at that point in time, h and
[9:23] Speaker 3: that I'm one of the reasons I'm making this shift
[9:27] Speaker 3: is to actually learn how to do something.
[9:30] Speaker 2: What was that learning curve like? Because I remember the
[9:35] Speaker 2: nineteen nineties in the late eighties, and it seemed like
[9:40] Speaker 2: a ton of people just jumping into the venture worlds
[9:43] Speaker 2: regardless of their credentials or academic qualifications.
[9:47] Speaker 3: Well, and I think in I joined at late ninety nine,
[9:51] Speaker 3: two thousand, you remember that time. Sure, in some ways
[9:54] Speaker 3: it was a great time. In some ways it was
[9:56] Speaker 3: a terrible time. I think in retrospect it ended up
[9:58] Speaker 3: being a very good time for the the following reason. Economically,
[10:02] Speaker 3: it was not a great decision for years because you know,
[10:07] Speaker 3: I think I told my wife when I took the job.
[10:09] Speaker 3: You know, she was we just bought an apartment and
[10:12] Speaker 3: she was pregnant with her first kid, and I said,
[10:14] Speaker 3: don't worry. I know I'm making less cash, but I'm
[10:16] Speaker 3: gonna have all this equity, and like that equity was
[10:19] Speaker 3: like five years I hadn't really she was like, I'm
[10:21] Speaker 3: not sure, it doesn't not sure. I feel like this
[10:24] Speaker 3: was the right trade. But so you get there in
[10:27] Speaker 3: ninety nine and the deal pace is frenetic, and so
[10:31] Speaker 3: you think like, oh, I'm learning so much. I'm getting
[10:33] Speaker 3: all these deals done. I also got put on a
[10:37] Speaker 3: ton of boards, you know, of companies, and the first
[10:40] Speaker 3: thing I figured out was, well, a lot of these
[10:42] Speaker 3: companies didn't really have a business model without raising a
[10:45] Speaker 3: lot more capital. It wasn't just us, it was just
[10:47] Speaker 3: that was that was that time. It was a land grad,
[10:49] Speaker 3: it was a lane grad in the early days, and
[10:52] Speaker 3: the market corrected very quickly, I think four or five
[10:55] Speaker 3: months after I got there, and we look back. I mean,
[10:57] Speaker 3: those were really really hard years. But I actually think
[11:01] Speaker 3: this way to learn the most. You know, it's easy
[11:04] Speaker 3: to be it's easy to be a cheerleader when things
[11:07] Speaker 3: are great. It's a lot harder to have to kind
[11:10] Speaker 3: of dig into a business, including businesses that aren't going
[11:13] Speaker 3: to make it, and try to get to the best
[11:14] Speaker 3: possible outcomes. So from a learning standpoint, you know, and
[11:18] Speaker 3: I think this is sometimes the things I tell my
[11:20] Speaker 3: kids is like the worst time sometimes are the ones
[11:24] Speaker 3: we're going to learn the most. And there's always going
[11:26] Speaker 3: to be you're going to get to the other side.
[11:29] Speaker 3: It might not be the side exactly the way you
[11:31] Speaker 3: wanted it, but there's no way you're going to look
[11:33] Speaker 3: back and say you didn't get something out of that expert.
[11:35] Speaker 2: It's so funny you say that. I started on a
[11:37] Speaker 2: trading desk. And one of the things you figure out
[11:39] Speaker 2: pretty early is you learn much more from your losers
[11:43] Speaker 2: than you do from your winners. Same thing in venture,
[11:46] Speaker 2: same thing in venture.
[11:47] Speaker 3: I think it's the same thing in life. Oh really, yeah,
[11:50] Speaker 3: I think it's true in lots of things.
[11:51] Speaker 2: It's stumbles and fails are more than it.
[11:55] Speaker 3: Could be jobs, it could be relationships, it could be
[11:59] Speaker 3: you know, even like you're you're like you know, right,
[12:03] Speaker 3: if you think about the world today, where your world today,
[12:06] Speaker 3: where there's a tendency for parents and I'll include myself
[12:08] Speaker 3: in this to be too involved, right, Oh, my son
[12:11] Speaker 3: got to be because he had a bad teacher. Like well, like,
[12:14] Speaker 3: guess what, we all have bad teachers and bad bosses
[12:16] Speaker 3: and bad roommates. And but you learn to adapt. And
[12:21] Speaker 3: I think sometimes you have to go through those things
[12:23] Speaker 3: and I think you learn from them. Right, bad relationships,
[12:25] Speaker 3: I think you learn something from So I think you
[12:27] Speaker 3: have to. If you take the mindset that you can
[12:30] Speaker 3: learn something in good times, you can learn something in
[12:32] Speaker 3: bad times. I'd argue you probably learn more in the
[12:34] Speaker 3: bad times. I think that's a it's a valuable mindset
[12:37] Speaker 3: to try to have. It's hard to have it when
[12:39] Speaker 3: you're in the bad time. You know.
[12:41] Speaker 2: You mentioned the role of serendipity earlier. Michael Mobison likes
[12:45] Speaker 2: to point out part of the reasons we may not
[12:48] Speaker 2: learn much from the good times is it's very hard
[12:52] Speaker 2: to distinguish between Hey, is this working out because I'm skillful,
[12:55] Speaker 2: or is this working out because I just got lucky.
[12:57] Speaker 3: Rising tide lifts all boats.
[12:58] Speaker 2: Yeah, that's right, and.
[12:59] Speaker 3: You don't know whether you're you're you know, you're on
[13:01] Speaker 3: a yacht or a boat with a hole. Uh and so,
[13:04] Speaker 3: but they all rise.
[13:06] Speaker 2: At least them, right.
[13:08] Speaker 3: Yeah.
[13:08] Speaker 2: So you mentioned you're on a ton of boards US
[13:11] Speaker 2: International develop Development Finance Corp, Council of Foreign Relations, Carnegie
[13:17] Speaker 2: Endowment for International Peace, and Yu Lang Gon. What's the
[13:21] Speaker 2: attraction to all these boards?
[13:23] Speaker 3: Well, those are the things I do, you know, outside
[13:26] Speaker 3: of the office. You know, I think I've always had
[13:28] Speaker 3: a belief that if you're successful, you kind of owe
[13:34] Speaker 3: it to give back. So that's one. Two is intellectual interest, right,
[13:40] Speaker 3: Like the things that I'm involved in are things I've
[13:43] Speaker 3: always been really interested in, and even in some of
[13:46] Speaker 3: these even in some of the I talked about how
[13:50] Speaker 3: I ended up going to Warden because of like who
[13:52] Speaker 3: my roommates were. Another story was when I was in
[13:55] Speaker 3: college that for my freshman year I went to go
[13:58] Speaker 3: right for the newspaper, the Daily Pennsylvania. It's a pretty
[14:00] Speaker 3: well known college newspaper, and my roommate at the time
[14:04] Speaker 3: went to go a volunteer for College Democrats. This is
[14:07] Speaker 3: my first semester of freshman year. Second semester freshman year,
[14:11] Speaker 3: I asked my roommate to come check out the DP,
[14:15] Speaker 3: the newspaper, and he came. He asked me to do
[14:19] Speaker 3: the same. And senior year, I was president of College
[14:21] Speaker 3: Democrats and he was editor in chief of the newspaper.
[14:24] Speaker 3: Neither would have happened without us kind of having totally
[14:27] Speaker 3: different interests. And he's now in journalism, right, So you know,
[14:32] Speaker 3: I just think that that there's a lot of these things,
[14:34] Speaker 3: and so those interests that interest policy related things as
[14:38] Speaker 3: interests I've had ever since college and kind of over time,
[14:43] Speaker 3: I've been able to engage in those things in a
[14:45] Speaker 3: more meaningful way.
[14:46] Speaker 2: Coming up, we continue our conversation with Devin Perek, Managing
[14:50] Speaker 2: director of Insight Partners, discussing how the firm developed its expertise.
[14:56] Speaker 2: I'm Barry Rittaults. You're listening to Masters in Business on
[15:00] Speaker 2: Bloomberg Radio. I'm Barry Redults. You're listening to Masters in
[15:03] Speaker 2: Business on Bloomberg Radio. My special guest today is Devin Prrect,
[15:08] Speaker 2: Managing director at Inside Partners, where he helped oversee over
[15:11] Speaker 2: one hundred and forty investments, several of which many of
[15:16] Speaker 2: which have had exits. So let's start chatting about Inside
[15:20] Speaker 2: Partners approach a little bit. You guys do everything from
[15:24] Speaker 2: software investing to AI. How do you differ from other
[15:29] Speaker 2: venture capitalists in the space.
[15:31] Speaker 3: So I think the approach that we take is we're
[15:34] Speaker 3: really software investors, but we're stage agnostic. And what does
[15:37] Speaker 3: that mean?
[15:37] Speaker 2: Meaning not just seed angel.
[15:40] Speaker 3: So probably the only stage that we don't really play
[15:43] Speaker 3: is seed in pre seed. We're really but we will
[15:47] Speaker 3: do everything from a Series A all the way to
[15:50] Speaker 3: a buyout. We have the capability to go across the continuum,
[15:54] Speaker 3: and I think that's important both ways, right, like if
[15:56] Speaker 3: you're a if you're a buyout investor. As an example,
[16:00] Speaker 3: particularly in a firm in a field like technology which
[16:03] Speaker 3: is changing quickly, not knowing what's going on at the
[16:06] Speaker 3: early stage what could be coming this disruptive is kind
[16:10] Speaker 3: of a risky way to be investing in more mature companies,
[16:12] Speaker 3: particularly in an AI world where that transformation is happening
[16:16] Speaker 3: a lot faster. And the flip side, you know, I
[16:20] Speaker 3: think on the early state side, understanding what does it
[16:24] Speaker 3: take for a company to actually be public, what does
[16:26] Speaker 3: it take for a company to actually be able to
[16:28] Speaker 3: raise the b's and c's and D rounds, and what
[16:29] Speaker 3: are the key metrics to make and having the network
[16:32] Speaker 3: and ecosystem to be able to help companies do that.
[16:34] Speaker 3: It's helpful to have your mid stage and growth stage
[16:38] Speaker 3: business too. So I think the ability for us to
[16:40] Speaker 3: be able to invest across that continuum really makes us
[16:43] Speaker 3: pretty unique relative to most other software investors out there.
[16:47] Speaker 3: The second thing is, you know the way we source,
[16:50] Speaker 3: the more firms are doing it now, which is you know,
[16:51] Speaker 3: we have over sixty people full time. That's all they
[16:54] Speaker 3: do is deal sourcing, and you know, think of it
[16:57] Speaker 3: as our outbound sales team, but it's a really smart
[17:00] Speaker 3: outpound sales team that are people who, when their success,
[17:02] Speaker 3: will end up being partners at Insight. And what we're
[17:07] Speaker 3: able to do is have tremendous market intelligence books. We're
[17:10] Speaker 3: talking to anywhere from twenty to thirty thousand companies a year, right,
[17:14] Speaker 3: obviously investing in a much more set of those. And
[17:17] Speaker 3: then the third thing is is are kind of a
[17:19] Speaker 3: value ad approach, right, because all investors like to say
[17:22] Speaker 3: they add value, it's hard to do. Very early on
[17:27] Speaker 3: in two thousand, created what we call Insight on Site.
[17:31] Speaker 3: And the reason it's called Insight on site is because
[17:34] Speaker 3: those team members are meant to be on site at
[17:37] Speaker 3: the company as opposed to in our office. Right, So
[17:40] Speaker 3: think of McKenzie or Baying. If you walk into the office,
[17:43] Speaker 3: you won't see a lot of those people in the
[17:44] Speaker 3: office because if they're doing their job, they're actually at
[17:46] Speaker 3: their clients. And our case, our clients are portfolio companies.
[17:50] Speaker 3: And what we've done is if you think about every
[17:53] Speaker 3: functional area of a software organization, whether that be sales, marketing, product,
[17:57] Speaker 3: customer introduction, strategy, and now a transformation, we have a
[18:01] Speaker 3: team for each one of those areas, and we have
[18:05] Speaker 3: a team for each one of those areas that's also
[18:07] Speaker 3: stage focused, right, So we have a team that works
[18:09] Speaker 3: with early stage companies, we have a team that works
[18:11] Speaker 3: with mid stage companies, we have a team that worked
[18:13] Speaker 3: with more mature companies, because the recruiting needs for a
[18:16] Speaker 3: company with five hundred million dollars revenue are very different
[18:18] Speaker 3: than the recruiting needs for a company with five million
[18:20] Speaker 3: dollars revenue. And that team is over one hundred and
[18:23] Speaker 3: twenty five people that's focused on really making sure that
[18:28] Speaker 3: the companies they're getting the benefit of not just anything
[18:32] Speaker 3: we know, best in class, thinking outside the firm, best
[18:36] Speaker 3: in class within the portfolio, and that those three things
[18:41] Speaker 3: together is really I think what allows us to have
[18:44] Speaker 3: a very successful strategy.
[18:46] Speaker 2: Huh. Really interesting. I was trying to conceptualize how Insight
[18:51] Speaker 2: is sort of a venture fund, sort of a pe shop.
[18:55] Speaker 2: Your explanation really explains why those titles and those descriptors
[19:03] Speaker 2: really only just describe part of what the thing is doing.
[19:06] Speaker 3: And I think things just overall, things are blurring, you
[19:09] Speaker 3: know in this world, Like you know, one of the
[19:10] Speaker 3: areas that we're very active in right now is something
[19:14] Speaker 3: that we call venture buyouts. And you'd say, well, okay,
[19:17] Speaker 3: like that seems like that's both and to some degree
[19:19] Speaker 3: it is. And what is it really, Well, what's the
[19:22] Speaker 3: biggest issue you hear right now in private equity? If
[19:25] Speaker 3: you were an interview at LP, they say, well, I'm
[19:27] Speaker 3: not getting enough money back, I don't have enough DPI
[19:29] Speaker 3: and so I'm over allocated. That's probably the number one
[19:32] Speaker 3: complaint that institutional investors have. Well, if you look in venture,
[19:35] Speaker 3: there's just a massive amount of funding of companies and
[19:39] Speaker 3: company creation and funding over the last so you have
[19:41] Speaker 3: thousands of companies out there. Many of them have not
[19:44] Speaker 3: reached a scale where they're ready to go public or
[19:48] Speaker 3: have a strategic really be focused on them right They
[19:50] Speaker 3: just don't have the scale yet. And what we're able
[19:53] Speaker 3: to do in those situations is find the ones that
[19:55] Speaker 3: are interesting companies, and we go to the shareholders and say, well,
[20:00] Speaker 3: buy seventy percent of the company. We will buy one
[20:01] Speaker 3: hundred percent of the company. You can either choose to
[20:03] Speaker 3: roll some of your investment if you think there's upside,
[20:05] Speaker 3: if not, we'll give you. We'll give you a return
[20:08] Speaker 3: whatever it is. And then we were able to take
[20:11] Speaker 3: control of these companies. What happens in a lot of
[20:14] Speaker 3: these venture companies is they have very diffuse cap tables. Right,
[20:17] Speaker 3: you have seven six, five different people, five different opinions.
[20:20] Speaker 3: It's actually hard for the CEO to get alignment with
[20:23] Speaker 3: their board on what the strategy should be. We can
[20:25] Speaker 3: create that alignment. So maybe he really want to he
[20:28] Speaker 3: or she wanted to execute an M and A strategy,
[20:30] Speaker 3: but only half the investors were willing to put up
[20:32] Speaker 3: more capital. We're able to in that case clean up
[20:35] Speaker 3: the cap table and then make whatever changes in strategy, team,
[20:39] Speaker 3: whatever it might be, that are necessary with a totally
[20:42] Speaker 3: aligned board. That's a strategy that touches both. It touches
[20:45] Speaker 3: some element to venture and it touches some element of
[20:48] Speaker 3: private equity.
[20:50] Speaker 2: Two of the people you work with, Ryan Ankle and
[20:53] Speaker 2: Richard Wells. As I'm doing my prep for this, anywhere
[20:58] Speaker 2: I searched for where as a service I seem to
[21:01] Speaker 2: come across Ryan Hinkel's name, tell us what it's like
[21:05] Speaker 2: working with those guys and working with the other founders
[21:10] Speaker 2: the two co founders, yeah, and others.
[21:12] Speaker 3: So you know, Mike Triplett and Jeff Lieberman, and we
[21:15] Speaker 3: have so many people who've kind of contributed to the
[21:18] Speaker 3: success of the firm. You know, Ryan actually joined Insight
[21:24] Speaker 3: as a summer intern right out of college, now on
[21:27] Speaker 3: the investment committee. Richard Wells joined us out of Harvard
[21:31] Speaker 3: Business School after a successful career TCD and some other firms,
[21:37] Speaker 3: and has been a huge driver of returns that some
[21:39] Speaker 3: great deals that have exited just this year. I think
[21:42] Speaker 3: that one of the things that we're most proud about
[21:45] Speaker 3: at Insight, and this is also I think very different
[21:47] Speaker 3: than a lot of firms out there, is that if
[21:50] Speaker 3: you look at the top four partners, the top six partners,
[21:54] Speaker 3: top eight partners, the vast majority of this people all
[21:56] Speaker 3: grew up with an Insight and we've really created a culture.
[22:00] Speaker 3: If you join Insight as an analyst, you can make
[22:03] Speaker 3: it to the top. And that's very different than a
[22:07] Speaker 3: lot of firms out there, and I think that's created
[22:12] Speaker 3: a very positive entrepreneurial culture where we give people a
[22:16] Speaker 3: lot of autonomy, We give people a lot of ability
[22:18] Speaker 3: to find new areas to invest in, and magic happens.
[22:25] Speaker 2: So let's talk a little bit about that magic. You've
[22:28] Speaker 2: made over one hundred and forty investments in various companies.
[22:31] Speaker 2: I'm assuming that you're doing this as part of a group,
[22:34] Speaker 2: as part of an investment committee. How does that work
[22:38] Speaker 2: if everybody has a slightly different expertise or focus. Take
[22:43] Speaker 2: us through the process of what companies get funded? How
[22:46] Speaker 2: does that process go?
[22:48] Speaker 3: Yeah, and look, first of all, that's the beauty of
[22:50] Speaker 3: I think our model too, which is why we might
[22:52] Speaker 3: all have slightly different focuses or areas. We're all just
[22:56] Speaker 3: investing in software. If you contrast that to firms where
[22:59] Speaker 3: somebody the biotech partner and someone as a software partner,
[23:02] Speaker 3: and someone is the industrial partner, that's much much harder
[23:06] Speaker 3: because you really don't have any sense of each other's businesses. Here,
[23:11] Speaker 3: the key metrics are common across all these things. There
[23:14] Speaker 3: might be some technical understanding around infrastructure, product or what
[23:17] Speaker 3: might be happening in a particular vertical that a partner
[23:20] Speaker 3: might have, but the key metrics are the same. And
[23:22] Speaker 3: so our process is that every deal, no matter how
[23:25] Speaker 3: small or how big, goes through the same investment committee process.
[23:30] Speaker 3: We meet once a week, kind of common like a
[23:33] Speaker 3: lot of other firms out there, and the team, whoever
[23:36] Speaker 3: the team is, presents the deal to the ICEE. We
[23:41] Speaker 3: debate it, we ask questions, we ask for follow up information,
[23:45] Speaker 3: and out of that either comes this is something we
[23:47] Speaker 3: want to pursue, we don't want to pursue. We only
[23:50] Speaker 3: want to pursue, but only at kind of this valuation.
[23:53] Speaker 3: And then the team then goes out and kind of
[23:55] Speaker 3: executes on that. And then if say we sign a
[23:57] Speaker 3: term sheet, they'll come back with a more detailed diligence
[24:02] Speaker 3: package that go through all the typical diligence things you'd assume.
[24:07] Speaker 3: That gets reviewed and discussed again. Sometimes there's follow up
[24:10] Speaker 3: questions that come out of that. Sometimes there's not has
[24:12] Speaker 3: to get through that second approval process, and then if
[24:15] Speaker 3: it gets through that approval process, then we would then fund.
[24:18] Speaker 3: But before anything even gets there, we have a number
[24:22] Speaker 3: of teams, their staff with these sourcing analysts, associates and
[24:27] Speaker 3: mid level people that really do the hard work before
[24:30] Speaker 3: something even gets the investment committe. So Ryan and Richard
[24:33] Speaker 3: both run a team, and you know, they each have
[24:36] Speaker 3: their slightly different focuses, but they each run a team
[24:39] Speaker 3: and they're meeting with their team on an even more
[24:41] Speaker 3: ongoing basis to kind of prioritize the deals that we
[24:45] Speaker 3: want to they want to pursue, and then if it
[24:48] Speaker 3: gets through their own team, then they would bring it
[24:50] Speaker 3: to the overall investment committee.
[24:52] Speaker 2: So I've heard some venture capitalists talk about valuation almost
[24:57] Speaker 2: as if it doesn't matter, which as the public market skuy,
[25:02] Speaker 2: I kind of shudder when I hear it. I think
[25:04] Speaker 2: it was Mark and Dreesen who once said, all right,
[25:06] Speaker 2: we were early state investors in Facebook. Had the valuation
[25:10] Speaker 2: been double, it practically wouldn't have affected our returns. My
[25:15] Speaker 2: immediate answer was, well, they would have been half if
[25:18] Speaker 2: the initial investment was double, but you know, one hundred
[25:22] Speaker 2: x point taken. How do you think about valuations, especially
[25:27] Speaker 2: when you're looking at early stage a ORB rounds, where
[25:31] Speaker 2: it kind of feels like total addressable market growth projections
[25:35] Speaker 2: I don't want to say fabricated, but they're squishy best estimates.
[25:40] Speaker 3: They're guesses. Yeah, okay, I mean look, but in this
[25:44] Speaker 3: early stage deal like it's a guess. I think the
[25:47] Speaker 3: person who wrote a checking Palenteer didn't know that Palenteer
[25:49] Speaker 3: was going to become what Palenteer became. But they saw
[25:52] Speaker 3: an entrepreneur with a vision with a potentially large market
[25:56] Speaker 3: and decided to make the bet that this person could
[25:58] Speaker 3: execute and turn it into that larger market. Right. Look,
[26:01] Speaker 3: I'm not gonna say that valuation doesn't matter, but I
[26:04] Speaker 3: think what you can say is that we have to.
[26:09] Speaker 3: It's a line that one of my partners uses that
[26:12] Speaker 3: we don't overpay companies just miss their numbers, which is
[26:15] Speaker 3: just I mean, it's said in jest, but really the
[26:18] Speaker 3: point is that generally, not always, but generally, the price
[26:22] Speaker 3: we paid if the company hit the numbers that we
[26:25] Speaker 3: thought they were going to hit, even if the price
[26:27] Speaker 3: seemed high on current revenue, this feels reasonable. So you
[26:33] Speaker 3: know companies that even recently AI companies that seemed expensive
[26:37] Speaker 3: six months ago don't look so expensive six months later,
[26:40] Speaker 3: just based on kind of how their run rate revenue
[26:42] Speaker 3: has changed. So the way we think about this is
[26:45] Speaker 3: we do care about valuation. We lose deals on valuation,
[26:49] Speaker 3: but that doesn't mean the deals that we win aren't
[26:51] Speaker 3: high absolute valuations. It's just how much conviction do we
[26:55] Speaker 3: have in the growth? Right, And this why these markets
[27:00] Speaker 3: are not efficient. You can have very high conviction on
[27:05] Speaker 3: XYZ company's growth, and I can have low conviction, and
[27:08] Speaker 3: one of us will likely be right. And if I
[27:11] Speaker 3: was right, and did it good for me? And if
[27:14] Speaker 3: I was writing, didn't do it? It just depends on
[27:17] Speaker 3: how you write. So I think the way we think
[27:19] Speaker 3: about it is we're all of these deals today. Certainly
[27:25] Speaker 3: AI deals on a multiple revenue basis are going to
[27:27] Speaker 3: feel expensive. Of course, you have to look at growth adjustment.
[27:31] Speaker 3: So even as a public market investor, you'd say that
[27:33] Speaker 3: a company that's growing at ten percent is going to
[27:36] Speaker 3: have a different valuation than a company that was going
[27:38] Speaker 3: to grow with thirty percent. Now, how do you even
[27:41] Speaker 3: start thinking about a company that's growing at one hundred percent? Right?
[27:44] Speaker 3: It's hard to think about and it's not hard to
[27:46] Speaker 3: think about it for a year. But if something you
[27:48] Speaker 3: can grow one hundred percent for three years and then
[27:50] Speaker 3: even if it de accelerates and compounds off three years
[27:53] Speaker 3: of one hundred percent growth, that's a pretty high multiple
[27:56] Speaker 3: that you can pay. So the way we really think
[27:59] Speaker 3: and talk about it is not valuation doesn't matter, but
[28:02] Speaker 3: we think about it in terms of if you're paying
[28:04] Speaker 3: a high multiple, then your conviction needs to be high
[28:08] Speaker 3: on the growth rate. Now, yeah, always gonna be right, right,
[28:10] Speaker 3: and that's part of the business. We just have to
[28:12] Speaker 3: be right enough.
[28:15] Speaker 2: And you mentioned software. The first thing that comes to
[28:19] Speaker 2: mind is Silicon Valley, San Francisco, the West Coast. Insight
[28:23] Speaker 2: Partners is New York City based. I know you have
[28:26] Speaker 2: offices around the world. Is there an advantage or disadvantage
[28:31] Speaker 2: to being based here in New York?
[28:33] Speaker 3: We think there's an advantage now, but maybe it's you know,
[28:35] Speaker 3: maybe we're just convincing ourselves that because we live here.
[28:38] Speaker 3: But you know, I think that not being in I mean,
[28:42] Speaker 3: I can tell you what the disadvantages are, but I
[28:44] Speaker 3: think the advantage is not being in the bubble. Like
[28:46] Speaker 3: we're not all having breakfast at Bucks and talking about
[28:49] Speaker 3: the same twenty deals. Now, maybe that's bad if those
[28:53] Speaker 3: twenty deals or the deals you have to be in,
[28:55] Speaker 3: but there's a tendency to have everybody kind of want
[28:58] Speaker 3: to do the same thing, and I think not being
[29:00] Speaker 3: in that every day, let's you step back more and
[29:05] Speaker 3: decide what you want to do as opposed to what
[29:07] Speaker 3: everybody else is doing. You know, I think there's a
[29:10] Speaker 3: disadvantage to, like, the strategic buyers are all out there,
[29:13] Speaker 3: you know, we're not in the same flow of those
[29:15] Speaker 3: companies sometimes as people might be seeing those people all
[29:18] Speaker 3: the time. But on balance, I think we've done okay
[29:22] Speaker 3: and we've managed to sell to a bunch of strategics
[29:24] Speaker 3: and so I don't think it's hurt us to be here.
[29:28] Speaker 2: And I mentioned you have offices around the world. You literally,
[29:32] Speaker 2: you know, it's not just New York, Silicon Valley, London,
[29:35] Speaker 2: you guys are.
[29:36] Speaker 3: Well, really it's really for presents. It's New York, it's
[29:41] Speaker 3: San Francisco, it's London, it's Israel. Those are really the
[29:44] Speaker 3: four places.
[29:45] Speaker 2: So how does being global help the firm? What do
[29:48] Speaker 2: you learn from having that sort of global perspective.
[29:51] Speaker 3: Well, I think we're pretty disciplined about how we've grown
[29:56] Speaker 3: and I'd be surprised if you see us have you know,
[30:00] Speaker 3: a lot more offices in five years. If you look
[30:03] Speaker 3: at take Israel with Jeff Morring really drove that strategy
[30:07] Speaker 3: for us to get into Israel. I think I might
[30:10] Speaker 3: get the numbers wrong slightly, but I think we had
[30:14] Speaker 3: sixty or seventy companies in the portfolio before we put
[30:16] Speaker 3: the first person on the ground, and at that point
[30:20] Speaker 3: there were six firms that had you know, five to
[30:23] Speaker 3: ten people there that had portfolios of five or ten, right,
[30:26] Speaker 3: Because I think the thing that we want to avoid
[30:28] Speaker 3: is if you put somebody on the ground before you
[30:31] Speaker 3: have a portfolio, then they need to rationalize their existence
[30:33] Speaker 3: by creating a portfolio. And maybe that's a good idea,
[30:36] Speaker 3: but maybe it's a horrible idea. And the bar by
[30:39] Speaker 3: having the bar that if you want to do a
[30:41] Speaker 3: deal in Israel or you want to do a deal
[30:43] Speaker 3: in India, you act to have to get out of
[30:44] Speaker 3: a plane and go ten thousand miles or fly you know,
[30:48] Speaker 3: twelve hours ought to be a really good deal. You
[30:49] Speaker 3: got to be really excited about, right, And so it
[30:51] Speaker 3: creates a natural like, no, I like this deal on
[30:54] Speaker 3: Long Island better, Okay, Well you spoke with your you know,
[30:58] Speaker 3: you spoke with and it probably should have a little
[31:01] Speaker 3: bit of a better return in order if it's that
[31:03] Speaker 3: far away, right. And so we've kind of weighted in
[31:07] Speaker 3: these places to have really conviction that that's going to
[31:11] Speaker 3: be a market because we have a lot of companies
[31:13] Speaker 3: in that market before we add presence there. So there's
[31:16] Speaker 3: plenty of places in the world where we have companies,
[31:19] Speaker 3: more companies than funds that are in that local market.
[31:23] Speaker 2: Really interesting coming up, we continue our conversation with Devin Perek,
[31:28] Speaker 2: managing director at Inside Partners, discussing the state of startup
[31:34] Speaker 2: investing today. I'm Barry Retults. You're listening to Masters in
[31:38] Speaker 2: Business on Bloomberg Radio. I'm Bury Results. You're listening to
[31:42] Speaker 2: Masters in Business on Bloomberg Radio. My extra special guest
[31:46] Speaker 2: this week is Devin Perrek, managing director at Inside Partners.
[31:50] Speaker 2: The firm runs over ninety billion dollars in venture capital
[31:55] Speaker 2: and various stages of private equity. So you guys have
[31:59] Speaker 2: a reputation for being software investors. Why have you focused
[32:04] Speaker 2: on that one space? And how many different sub sectors
[32:09] Speaker 2: are included under software?
[32:12] Speaker 3: O Look software, We've been doing software since nineteen ninety five,
[32:16] Speaker 3: and if you look since nineteen ninety five to today,
[32:20] Speaker 3: I think it. I might be wrong about this, and
[32:22] Speaker 3: maybe there's one other category for which this is true,
[32:25] Speaker 3: but I don't think since nineteen ninety five there's been
[32:27] Speaker 3: a single year where the software industry declined in aggregate revenue.
[32:32] Speaker 3: Through every recession, through every cycle, and as a percentage
[32:37] Speaker 3: of GDP, it just continues to increase. The software component
[32:41] Speaker 3: continues to increase. So you know, I think if you'd
[32:43] Speaker 3: asked a bunch of US ten years ago, we maybe thought,
[32:45] Speaker 3: oh maybe we're going to cap out on software, We're
[32:48] Speaker 3: going to have to go do something else. That really
[32:50] Speaker 3: hasn't been a problem. I don't foresee it being a problem.
[32:53] Speaker 3: So it's a massive industry who's had great growth, but
[32:57] Speaker 3: the projected growth over the next ten years is very strong.
[33:00] Speaker 3: So I think that we don't need a new category
[33:04] Speaker 3: to go after. We like this category. This category has
[33:07] Speaker 3: got amongst the highest growth rate of any category out there,
[33:11] Speaker 3: and it's really well downside protected too. If you were
[33:14] Speaker 3: to talk, if you had a lender on, they would
[33:16] Speaker 3: tell you that software is are lowest loss ratio.
[33:19] Speaker 2: What catches your attention first when you're looking at either
[33:22] Speaker 2: a startup in software or a reasonably developed company. Is
[33:28] Speaker 2: it the founders, Is it the technology? Is it a
[33:31] Speaker 2: combination of both?
[33:32] Speaker 3: Well, I think it depends on stage. Like you know,
[33:33] Speaker 3: I think in an early in an early stage company,
[33:36] Speaker 3: you know, founder and tech is really really important, right
[33:40] Speaker 3: and market Now, as you said earlier, you're making a
[33:44] Speaker 3: guess sometimes on a market at a very very early
[33:47] Speaker 3: at a series A stage. Now you're hopefully making an
[33:49] Speaker 3: educated guess based on lots of pattern recognition of companies
[33:53] Speaker 3: based on lots of data, and how big that market
[33:56] Speaker 3: is is measured in different ways. But it's a common
[33:59] Speaker 3: mistake to underestimated market, right. I mean, when we look back,
[34:02] Speaker 3: it's a little bit more of a consumer example. But
[34:04] Speaker 3: when we look back, I remember looking at Uber and
[34:07] Speaker 3: we convinced ourselves, how could you ever pay evaluation that's
[34:10] Speaker 3: higher than the total TAM, right, And the total TAM
[34:13] Speaker 3: was New York and San Francisco of black cars. Well,
[34:16] Speaker 3: it turns out that's not really the total TAM of
[34:18] Speaker 3: Uber today. I forget about food delivery and groceries. I
[34:21] Speaker 3: was just talking about cars. Yeah, it's just because they
[34:24] Speaker 3: went to uber X, and uber X totally changed the TAM.
[34:27] Speaker 3: So I think tams are not static, right, And I
[34:30] Speaker 3: think that's a very very hard thing to recognize that. Okay,
[34:34] Speaker 3: maybe they're going after a small problem today, but that
[34:37] Speaker 3: might be the trojan horse to get into it bigger
[34:39] Speaker 3: and bigger markets over time. Right. And that's where intuition
[34:44] Speaker 3: and pattern recognition and kind of seeing what a great
[34:46] Speaker 3: founder is, which is why I look early stage, I
[34:48] Speaker 3: think is much harder than growth stage or buyouts, where
[34:53] Speaker 3: you have lots of data and financial metrics that you
[34:55] Speaker 3: can kind of rely on.
[34:57] Speaker 2: I love the idea of the trojan horse. Somewhere along
[35:00] Speaker 2: in the lines, someone said you could practically ignore the
[35:04] Speaker 2: seed stage or early stage business model because there's always
[35:08] Speaker 2: going to be a pivot. The trojan horse are the founders?
[35:12] Speaker 2: How accurate is that that point of view?
[35:14] Speaker 3: Well, I mean I think it, like in everything, when
[35:18] Speaker 3: people make statements like that, they tend to focus on
[35:20] Speaker 3: the winners, right, so they'll look at XYZ company that
[35:23] Speaker 3: pivoted and say, oh, look, everybody can pivot. Well, everybody
[35:28] Speaker 3: doesn't pivot. And you do have a huge, very high
[35:30] Speaker 3: loss ratio at seed, early stage, and even series A,
[35:35] Speaker 3: and the strategy is different. Right, you have a power
[35:37] Speaker 3: law in series A. You have a paral law in seed,
[35:39] Speaker 3: and you have a para law even in buyout. It's
[35:41] Speaker 3: just a different power law. In buyout. You can basically
[35:45] Speaker 3: your power law is not a lot of losses. It's
[35:47] Speaker 3: you can have some one x's or one point five x's,
[35:50] Speaker 3: but you probably need a couple of four x or
[35:51] Speaker 3: five x's. In seed you probably need one hundred x
[35:56] Speaker 3: and you have a very high loss In Series A
[35:58] Speaker 3: you need a bunch of ten or fift twenty x's,
[36:00] Speaker 3: but you can still have losses. So depending on what stage,
[36:04] Speaker 3: there's this view that like parallel only applies to venture,
[36:07] Speaker 3: really applies to all stages. Is just what a loss is.
[36:11] Speaker 3: What a loss is is defined differently, right, A loss
[36:13] Speaker 3: in a buyout might be just a one x or
[36:15] Speaker 3: a point eight x. You can't really have a lot
[36:17] Speaker 3: of zero's in buyout, right, So I think the parallelaw
[36:23] Speaker 3: continuum is true across all these markets.
[36:26] Speaker 2: So AI is obviously a really big sector today. What
[36:30] Speaker 2: other sectors excite you the most or how much does
[36:35] Speaker 2: AI fit into just looking out there as game changing technologies.
[36:40] Speaker 3: Well, look, I think every firm, whether they're a venture
[36:43] Speaker 3: firm a buyout fund, doesn't really matter what type of
[36:47] Speaker 3: investing people are doing. I think it would be a
[36:49] Speaker 3: usual mistake to ignore AI. Right, even if you're not
[36:53] Speaker 3: investing quote unquote in an AI company, you better be
[36:56] Speaker 3: thinking about how AI is going to affect your business
[36:58] Speaker 3: model or how can it improve your business model? And
[37:01] Speaker 3: those who don't, even people in services businesses, like if
[37:04] Speaker 3: you're running law firm today, you're running an accounting firm today,
[37:07] Speaker 3: you really need to think about how is AI going
[37:10] Speaker 3: to affect my business. So of course in our case,
[37:14] Speaker 3: in our more mature companies, a lot of what we're
[37:16] Speaker 3: thinking about is how do we accelerate growth and revenue
[37:19] Speaker 3: through new AI products and how do we reduce cost
[37:21] Speaker 3: and increased margin through applying AI technology. In the companies
[37:26] Speaker 3: or earlier in mid stage companies are often AI native.
[37:29] Speaker 3: They're actually going after a new market, a legal vertical
[37:32] Speaker 3: or construction vertical with kind of a new AI focused product.
[37:35] Speaker 3: I mean, I think what's true is that every company
[37:37] Speaker 3: to some degree is an AI company. It doesn't mean
[37:40] Speaker 3: that they're nott Ai in their name, but every board
[37:44] Speaker 3: meeting that we go to at Insight, we're talking about AI.
[37:48] Speaker 3: And the irony is even the board meetings. I go
[37:51] Speaker 3: to an nyline own, we're talking about AI board meetings.
[37:55] Speaker 3: I go to a CFR, we're talking about AI. Because
[37:58] Speaker 3: if you're a medical if you're hospital today, you're thinking
[38:01] Speaker 3: about how do I have a better experience for my patient,
[38:05] Speaker 3: how do I think about increasing throughput? The average weight
[38:08] Speaker 3: for a neurologist today across the countries eight to nine
[38:11] Speaker 3: months to get an appointment. I imagine you're suffering from
[38:15] Speaker 3: like a real problem, and the doctor says, well, I'll
[38:18] Speaker 3: see you you know next year. Right, that's the average. Now,
[38:22] Speaker 3: what if we can kind of get AI to be
[38:24] Speaker 3: able to help assess these problems earlier, and all of
[38:27] Speaker 3: a sudden you take the data from the best institutions
[38:31] Speaker 3: and you make that available in an AI application. So
[38:34] Speaker 3: now people in Appalachia have access to the same level
[38:38] Speaker 3: of care as people who have the benefit of being
[38:41] Speaker 3: able to be near Mount Nyu link on our Mount Sinai. Right.
[38:44] Speaker 3: And so I'm going broader in my answer to your question,
[38:49] Speaker 3: which is I think AI is now affecting everything we do,
[38:54] Speaker 3: and so I think everything every company that we invest in,
[38:56] Speaker 3: we're talking about what's the impact or And then the
[39:00] Speaker 3: other thing we talked about is, like the other big
[39:04] Speaker 3: debate in kind of AI land is what will get
[39:08] Speaker 3: owned by the llms and what we'll get owned by
[39:11] Speaker 3: the application providers? Right? How much of this how much
[39:15] Speaker 3: of the value will accrue to the models they open
[39:18] Speaker 3: a eyes and anthropics, and how much of the value
[39:20] Speaker 3: will accrue to the applications. I don't think anybody can
[39:24] Speaker 3: answer that question. We don't know.
[39:26] Speaker 2: So I remember in the late nineties when the dot
[39:31] Speaker 2: com was just exploding, it kind of felt like a
[39:35] Speaker 2: handful of companies were sucking all the oxygen down the
[39:40] Speaker 2: room from everybody else. Is AI doing that? Like I
[39:43] Speaker 2: would imagine things like cybersecurity and fintech and other software
[39:48] Speaker 2: driven startups. Are they starving for capital or is there
[39:54] Speaker 2: just so much money out there that even AI can't
[39:57] Speaker 2: suck all the money?
[39:59] Speaker 3: There's a you know, there's a tremendous amount of capital
[40:03] Speaker 3: out there, and there are lots of companies outside of
[40:06] Speaker 3: the ones that everybody knows that are growing really really quickly,
[40:11] Speaker 3: often serving a vertical market. I mean, what's still true
[40:15] Speaker 3: is that if you have an application that is serving
[40:18] Speaker 3: a market where there's a lot of domain expertise or
[40:21] Speaker 3: data required, you still have a moat. And so I
[40:26] Speaker 3: think this, you know, because one of the big debates is, oh,
[40:29] Speaker 3: does AI mean that the software companies are going to
[40:32] Speaker 3: be dead? We don't believe that. What we do believe
[40:35] Speaker 3: is you have a very generic application that doesn't have
[40:38] Speaker 3: any vertical domain expertise, doesn't have any data mote, then
[40:42] Speaker 3: I think you're a significantly higher risk. But I think
[40:45] Speaker 3: there's lots of examples. We're seeing them, we're investing in them,
[40:48] Speaker 3: in specific healthcare applications and legal applications, construction industry where
[40:54] Speaker 3: you have companies that have true business process vertical expertise
[40:57] Speaker 3: couple with data modes.
[41:00] Speaker 2: Other spaces have you excited besides AI, which is obviously
[41:03] Speaker 2: going to have a giant, giant impact, what other areas
[41:07] Speaker 2: are really interesting?
[41:08] Speaker 3: I think, you know, cyber continues to be really important area.
[41:13] Speaker 3: And one could argue and we're just we have I
[41:15] Speaker 3: don't know if we might just be announcing it. So
[41:17] Speaker 3: I don't know whether we're now s yep, we're you know,
[41:19] Speaker 3: investing in something that's kind of related AI related security,
[41:22] Speaker 3: and so all every time you have these big new
[41:25] Speaker 3: platform shifts, you have infrastructure around that platform platform shift.
[41:32] Speaker 3: That's important, right, And so I think we're seeing a
[41:35] Speaker 3: lot of next generation infrastructure investments, cyber investments. There's a
[41:40] Speaker 3: lot of markets that we're seeing and I think what's
[41:42] Speaker 3: happening right now is if i'd answer this question, you know,
[41:46] Speaker 3: a year ago, I said, well, we're doing vertical applications,
[41:49] Speaker 3: we're doing these types of horizontal applications, and now it's
[41:52] Speaker 3: all getting bucketed into AI because it has an AI angle.
[41:56] Speaker 3: But there are subcategories you know, within within AI, there's
[42:01] Speaker 3: not like just one AI company out there. There's obviously
[42:06] Speaker 3: lots of companies, and it's just becoming that AI is
[42:08] Speaker 3: becoming almost like an operating system that all of these
[42:12] Speaker 3: new vertical applications are being built on.
[42:14] Speaker 2: I haven't heard you mentioned crypto. Is that a space
[42:17] Speaker 2: you guys explore or is that too specific?
[42:20] Speaker 3: We put in the past tense we explored and you know, decided, well,
[42:26] Speaker 3: one we didn't do that well with it. And two
[42:30] Speaker 3: the fundamental problem that like we've seen in it is
[42:36] Speaker 3: that when these companies were come in, we met with
[42:38] Speaker 3: hundreds of companies in crypto. When these companies would come
[42:41] Speaker 3: in and you'd say, okay, like tell me what it
[42:43] Speaker 3: is about your application that makes it better than if
[42:47] Speaker 3: it were just in a relational database, like a very
[42:50] Speaker 3: simple question. You'd kind of get back like all kinds
[42:53] Speaker 3: of technical answers and white papers, and I'm like, right,
[42:55] Speaker 3: but like, just as a user, what problem does this
[42:59] Speaker 3: solve that I can then I can't solve it right Generally,
[43:03] Speaker 3: we didn't just get a really good answer. Now I
[43:06] Speaker 3: don't wanna I don't want to say that there's not
[43:09] Speaker 3: gonna be any crypto applications that are going to be successful.
[43:12] Speaker 3: I'm sure there will be. I mean, obviously, if you
[43:14] Speaker 3: talk to COO Visa, you talk to the CEO MasterCard,
[43:17] Speaker 3: they'll talk to about stable coins and the impact stable
[43:19] Speaker 3: coins could have. Obviously an administration that's very pro crypto,
[43:23] Speaker 3: pro crypto regulatory, so I think you're gonna see money
[43:26] Speaker 3: being made in that category. We just I mean, I
[43:30] Speaker 3: guess we're used to trying to find applications where we see,
[43:33] Speaker 3: here's a clear business use, here's a clear payment for
[43:37] Speaker 3: that business use, and here's how they can scale. We
[43:40] Speaker 3: haven't really been able to decrypt that in crypto, but
[43:45] Speaker 3: I'm sure there are others out there who understand that better,
[43:49] Speaker 3: and I'm sure there'll be some winners, but we've just
[43:50] Speaker 3: chosen to not focus on it.
[43:52] Speaker 2: So let's talk about some winners. I see a run
[43:55] Speaker 2: of exits that Insight Partners is associated with. You're an
[44:00] Speaker 2: early investor in Twitter, which iPod, Buddy Media acquired by
[44:05] Speaker 2: Salesforce Investment, sold to Nasdaq, Ali Baba, JD dot Com,
[44:10] Speaker 2: Duck Creek, Appress, The list goes on and on. Tell
[44:14] Speaker 2: us about some of these exits. You guys really have
[44:18] Speaker 2: put together quite an impressive list.
[44:21] Speaker 3: Well, well, I'd rather talk about our exits from this year.
[44:24] Speaker 2: Okay, so keep it current.
[44:26] Speaker 3: Yeah, which, you know, so my partner Jeff horn letter
[44:29] Speaker 3: investment in Whiz, which sold to you know, Google, Well,
[44:33] Speaker 3: I should say I signed a definitive agreement to sell
[44:35] Speaker 3: to Google hasn't closed yet for thirty two billion dollars.
[44:40] Speaker 3: The largest venture backed acquisition by a strategic My partner
[44:45] Speaker 3: Richard Wells led an investment in a company called Central Reach,
[44:51] Speaker 3: which does software for autism clinics, and sold that for
[44:54] Speaker 3: just under two billion dollars to Roper Industries. And then
[44:57] Speaker 3: my partner Jeff Lieberman letter deal called dot Maddox, which
[45:01] Speaker 3: we sold the siemens for just over five billion dollars.
[45:05] Speaker 3: And you know, the interesting thing about both. The interesting
[45:08] Speaker 3: thing about those deals is one's a traditional or least,
[45:11] Speaker 3: so we did Whiz as a series I think B,
[45:15] Speaker 3: and then kind of continue to participate along the way. Both,
[45:19] Speaker 3: you know, Central Reach and Dotmatics were venture biots, but
[45:27] Speaker 3: the multiples on money were like venture multiples of money really, right,
[45:31] Speaker 3: So venture returns with buyout dollar deployment, it's a good combination. Yeah,
[45:36] Speaker 3: and so, and I think we've got We've got more
[45:38] Speaker 3: coming over the course of this year, so I think
[45:41] Speaker 3: we've had a really strong year. One of the things
[45:43] Speaker 3: that I think contributed to that is I think historically
[45:47] Speaker 3: we were not great on liquidity, and by that I
[45:52] Speaker 3: mean not that we didn't have good companies. We just
[45:54] Speaker 3: didn't focus a lot on liquidity. And as big LPs
[45:57] Speaker 3: and our funds, we're generally the gp is top. I
[46:00] Speaker 3: were close to Tide as the largest investor in the fund,
[46:02] Speaker 3: so we're pretty aligned with our investors. We kind of
[46:06] Speaker 3: were focused on multiple money and that's so focused on IRR.
[46:09] Speaker 3: I mean, within reason, we're focused on ir but it
[46:11] Speaker 3: wasn't what we and I think over the last ten
[46:14] Speaker 3: years fifteen years, you've seen a massive transition and the
[46:16] Speaker 3: institutional p base of a shift from WAKE to IRR.
[46:21] Speaker 2: So I want to stay there because it's kind of fascinating.
[46:24] Speaker 2: I had no idea because I don't play all that
[46:27] Speaker 2: much in the venture space or the private equity space,
[46:30] Speaker 2: that Hey, we have long standing liabilities that we eventually
[46:34] Speaker 2: want to meet and even though we knew this was
[46:37] Speaker 2: locked up for depending on the fund five seven, nine years,
[46:40] Speaker 2: we'd like to see some exits sooner than later. When
[46:43] Speaker 2: did this start happening? And what do you think is
[46:46] Speaker 2: driving this?
[46:47] Speaker 3: Well, I mean it's probably been happening for years, but
[46:49] Speaker 3: it's accelerated in the.
[46:50] Speaker 2: Last post pandemic.
[46:52] Speaker 3: Yeah, post two three years and we had the correction
[46:55] Speaker 3: and people felt over allocated and twenty one had this
[46:58] Speaker 3: huge peak investing and so now there's this big bubble
[47:02] Speaker 3: of investing but not enough liquidity coming back relative to
[47:04] Speaker 3: the deployment. In the last two to three years, it's
[47:07] Speaker 3: accelerated and so we you know, we we took that feedback. Seriously,
[47:13] Speaker 3: I don't think we're the only ones who got that feedback.
[47:15] Speaker 3: But we actually put a liquidity committee together. It's from
[47:19] Speaker 3: people across the firm, both both our financial function, our
[47:23] Speaker 3: investment team or operating team, and we now have quarterly
[47:27] Speaker 3: liquidity meetings where we target companies for liquidity. We kind
[47:30] Speaker 3: of talk about what the IR is from here and
[47:33] Speaker 3: I think the and that was set set up about
[47:35] Speaker 3: eighteen months ago. But I think a result of that
[47:39] Speaker 3: is you know, I don't want to say it's a
[47:41] Speaker 3: direct result because you can't press a button, but a
[47:44] Speaker 3: focus on it, everyone talking about it, everybody feeling like
[47:47] Speaker 3: they have accountability to that process. I think it's led
[47:50] Speaker 3: to a lot more liquidity over the last So I
[47:52] Speaker 3: think we've gotten an ROI on really putting focus against
[47:56] Speaker 3: it really and I think you know, our LPs gave
[47:59] Speaker 3: us feedback on it. You know, I think we look,
[48:02] Speaker 3: we thought about it. We said, yeah, it's fair feedback.
[48:05] Speaker 3: Let's make a change, let's make an adjustment.
[48:07] Speaker 2: So so you mentioned the boom in twenty one and
[48:09] Speaker 2: then the pullback in twenty two. You start in the
[48:13] Speaker 2: mid nineties, You've lived through numerous boom and bus cycles.
[48:17] Speaker 2: What what's your big takeaway from from those experiences.
[48:21] Speaker 3: Well, I think when you're living in the depth of it,
[48:25] Speaker 3: it feels like it's never going to end, and it
[48:28] Speaker 3: always ends and this too shell pass, this too shall pass. Uh,
[48:32] Speaker 3: And I think that's it's a hard it's a hard
[48:35] Speaker 3: lesson because it's listen, the thing that's still the hardest
[48:38] Speaker 3: to do is, you know Warren Buffett's investment. Everybody's scared,
[48:43] Speaker 3: and you you get yourself ready and you've got your
[48:46] Speaker 3: you know, I'm going to put move X dollars to
[48:48] Speaker 3: the Vanguard Index fund and then you don't do it.
[48:51] Speaker 3: Why because you don't think it's ever going to pass, right,
[48:53] Speaker 3: because if you thought you were going to pass, of
[48:54] Speaker 3: course you do it. And human psychology is really really
[48:59] Speaker 3: hard to change. And I'm including myself in that definition.
[49:02] Speaker 2: It's so difficult to fight the crowd when everybody's running
[49:06] Speaker 2: for the exit. You have to be built a certain way.
[49:09] Speaker 3: I still remember when the market two thousand and eight,
[49:11] Speaker 3: the market was, you know, the really crashing, and I
[49:15] Speaker 3: remember having a conversation with somebody who know the market,
[49:19] Speaker 3: is really well well known person. He said, yeah, gee,
[49:22] Speaker 3: can't roll their commercial paper right, And I was like,
[49:24] Speaker 3: holy crap.
[49:25] Speaker 2: I was after Aig and Lehman and I remember.
[49:28] Speaker 3: Eight and I remember it was like a Friday and
[49:31] Speaker 3: it was a long week, and I call my wife
[49:33] Speaker 3: and I'm like, you know, honey, let's just like go
[49:35] Speaker 3: out for dinner. And she was like, let's stay in
[49:36] Speaker 3: and were having these like five minutes back and forth.
[49:38] Speaker 3: I'm like, like, why are we talking about this? And
[49:41] Speaker 3: she was like, well, I thought maybe she'd save some money.
[49:43] Speaker 3: I'm like, it's not that bad, Like we could go
[49:45] Speaker 3: back to dinner.
[49:46] Speaker 2: Well. But Ben Bernanke, former Chairman of the Federal Reserve,
[49:51] Speaker 2: famously sent his wife out to the ATM to get
[49:54] Speaker 2: cash in case the system went bad, if he was terrified.
[49:59] Speaker 2: It just showed you human nature is we're always going
[50:03] Speaker 2: to be.
[50:03] Speaker 3: I think that the thing. So I don't know that
[50:06] Speaker 3: you could ever teach people to like go move money.
[50:08] Speaker 3: But I think the hard part is really besides maybe
[50:13] Speaker 3: not making as much money as you could make, the
[50:15] Speaker 3: heart part is just feeling like it's never gonna end right.
[50:18] Speaker 3: And now, having been through this as many times as
[50:20] Speaker 3: you know I have and my partners have, you know,
[50:23] Speaker 3: I think it's easier to recognize that no, there's there's
[50:27] Speaker 3: light at the end of the tunnel.
[50:29] Speaker 2: Makes perfect sense. Let me throw you a curveball question
[50:32] Speaker 2: before we jump to our favorite questions. So we talked
[50:36] Speaker 2: about AI, and we've talked about cycles. What do you
[50:40] Speaker 2: think investors in this space, either technology, your startup or
[50:45] Speaker 2: M and A or ventures are not really talking about
[50:48] Speaker 2: or thinking about, but perhaps should be what what's the
[50:51] Speaker 2: most important topic asset geography policy that's getting overlooked, but
[50:58] Speaker 2: shouldn't I think people.
[51:00] Speaker 3: Still as much as we talk about it, I don't
[51:02] Speaker 3: think people. I think people still underpriced what happens if
[51:05] Speaker 3: there's a real cyber risk. We think about cyber as, oh,
[51:09] Speaker 3: my city bank account got hacked. We think about cyber
[51:12] Speaker 3: as you know, I got a phishing email work. By
[51:14] Speaker 3: the way, all those things are bad and bad things
[51:16] Speaker 3: can happen out of them, and you know, everyone has
[51:18] Speaker 3: probably dealt with some version.
[51:19] Speaker 2: I mean, I'm more concerned about someone taking control of
[51:22] Speaker 2: the electrical grid.
[51:24] Speaker 3: I think we still I mean, I think I don't
[51:26] Speaker 3: want to make it sound like the government doesn't think
[51:28] Speaker 3: about it. I think they do, but I think it's
[51:30] Speaker 3: just people. I don't think we realize like the level
[51:35] Speaker 3: of risk if physical infrastructure were kind of taken over,
[51:39] Speaker 3: and there have been examples of it.
[51:41] Speaker 2: Happened, like physical infrastructure like the electrical grid is something
[51:44] Speaker 2: most specific water.
[51:46] Speaker 3: Water purification plants, electrical plants, I mean, hospital systems going down.
[51:52] Speaker 2: Right, Well, we've seen we've seen in a lot of
[51:53] Speaker 2: ransomware with that.
[51:55] Speaker 3: We've seen that in individual institutions, right, We've not seen
[51:59] Speaker 3: it system systemically, right, And you know, that's a that's
[52:04] Speaker 3: a pretty that's a that's a pretty pretty terrified that's
[52:07] Speaker 3: a pretty terrifying risk. Now I'm not saying I mean,
[52:10] Speaker 3: I'm answering your question as to something that I worry
[52:12] Speaker 3: about that maybe we don't worry about enough. I'm not
[52:15] Speaker 3: necessarily sure. It's like, I'm not how to price that
[52:17] Speaker 3: into the market. It's not really a market answer. It's
[52:20] Speaker 3: just something that I think, like it's it's an asymmetric risk.
[52:25] Speaker 2: No, that's the right. So I'm not looking for a
[52:27] Speaker 2: market you know, asymmetrical dollar. Bet You're raising an issue
[52:32] Speaker 2: that perhaps we're not paying enough attention to.
[52:34] Speaker 3: I think, as the average the average investor of the
[52:37] Speaker 3: average person, I don't think I think that risk is
[52:40] Speaker 3: way bigger than we think it is.
[52:42] Speaker 1: Huh.
[52:42] Speaker 3: And if you talk to people in government, they would
[52:43] Speaker 3: probably they would agree with that.
[52:45] Speaker 2: All right, so we only have a certain amount of time.
[52:47] Speaker 2: Let's let's jump to our favorite questions we ask all
[52:50] Speaker 2: of our guests, starting with who were your mentors who
[52:53] Speaker 2: helped shape your career?
[52:56] Speaker 3: Well, you know, I think to a few different mentors.
[52:59] Speaker 3: I I was in elementary school a pretty indifferent student,
[53:03] Speaker 3: to the point where, you know, I had Indian parents
[53:06] Speaker 3: who are like, you're supposed to have good grades, and
[53:09] Speaker 3: you know, I didn't have bad grades, but like, I
[53:11] Speaker 3: was kind of an indifferent student, didn't really focus a
[53:13] Speaker 3: lot on school. I had a teacher in third grade
[53:15] Speaker 3: who said you shouldn't spend more than thirty or forty
[53:17] Speaker 3: five minutes on your homework. I'd go home, look at
[53:19] Speaker 3: the clock, forty five minutes, close my book. And then
[53:22] Speaker 3: I had a teacher in sixth grade, mister Brown. I'll
[53:26] Speaker 3: never forget mister Brown, who, for whatever reason, and I
[53:30] Speaker 3: still can't tell you why, saw some potential, you know,
[53:34] Speaker 3: saw something in me that maybe other people didn't see,
[53:37] Speaker 3: and all of a sudden, I went from like a
[53:39] Speaker 3: indifferent student to like a straight a student. And it
[53:42] Speaker 3: was that year he took interest in me. He would say, hey, look,
[53:45] Speaker 3: you're really good, right, you should focus more on these things.
[53:47] Speaker 3: And so for me sixth grade, mister Brown very transformational
[53:52] Speaker 3: mentor in a way, because he made me believe that
[53:55] Speaker 3: I had something that I didn't really think I had.
[54:01] Speaker 3: And then my dad gave me three important things that
[54:05] Speaker 3: he told me was one of them. Is kind of funny.
[54:08] Speaker 3: He's like, you really need to learn how to You
[54:11] Speaker 3: need to be able to speak well, you need to
[54:13] Speaker 3: be able to read well. And he's like, if you're
[54:15] Speaker 3: living in this country, you should know how to play
[54:17] Speaker 3: a sport, right, and so he The way he tried
[54:20] Speaker 3: to implement those is he maybe take a speed reading
[54:24] Speaker 3: class in elementary school.
[54:26] Speaker 2: Was that useful? I speed read, you do no loss
[54:30] Speaker 2: of comprehension.
[54:31] Speaker 3: No loss of comprehension. He maybe take a public speaking
[54:34] Speaker 3: class with college students when I was at high school
[54:37] Speaker 3: and I was so scared of public speaking. I never
[54:40] Speaker 3: could imagine then that i'd be doing a you know,
[54:43] Speaker 3: a podcast. And he didn't. He didn't succeed on sports,
[54:47] Speaker 3: but his idea was he was like, you know, you
[54:51] Speaker 3: should you should learn how to play golf, you know,
[54:52] Speaker 3: like that'd be a good thing to know. And living
[54:55] Speaker 3: state school, Well, I I play golf horrifically. But the
[55:02] Speaker 3: but in high school you could join the golf team.
[55:04] Speaker 3: It was a no cut team. That doesn't mean you
[55:06] Speaker 3: were going to.
[55:06] Speaker 2: Get to play but varsity letter.
[55:08] Speaker 3: But you got to you got to learn. And I
[55:11] Speaker 3: just said, now I'm not doing that. So I got.
[55:13] Speaker 3: I got two out of the three. But I think
[55:16] Speaker 3: those two out of the three have been really really important.
[55:19] Speaker 3: I know that a very very positive impact on my life.
[55:23] Speaker 3: And of course along the way, there've been lots of
[55:24] Speaker 3: people at all the places I've worked that have been
[55:27] Speaker 3: mentors as well.
[55:28] Speaker 2: Huh, very very interesting. Coming up, we continue our conversation
[55:32] Speaker 2: with Devin Perek, Managing director at Inside Partners. I'm Barry Dults.
[55:38] Speaker 2: You're listening to Masters in Business on Bloomberg Radio. I'm
[55:42] Speaker 2: Bury Redults. You're listening to Masters in Business on Bloomberg Radio.
[55:46] Speaker 2: My extra special guest this week is Devin Perrek, Managing
[55:50] Speaker 2: director at Inside Partners. Let's talk about what's keeping you
[55:56] Speaker 2: entertained these days. What are you watching or listening, streaming
[55:59] Speaker 2: podcast anything along.
[56:00] Speaker 3: Those This week could do it a whole We could
[56:03] Speaker 3: do a podcast on the podcast. But my wife and
[56:06] Speaker 3: I just finished watching Friends and Neighbors with John so Good.
[56:09] Speaker 3: I thought it was great. I really enjoy that's just
[56:12] Speaker 3: pure kind of entertainment. On the podcast side, you know,
[56:16] Speaker 3: I just like I speed read. I can only listen
[56:18] Speaker 3: to podcasts if I speed listen. So I listened to
[56:20] Speaker 3: all of these at two point four acts, which drives
[56:23] Speaker 3: my wife bananas because I'll get in the car and
[56:26] Speaker 3: you know, I'm listening to something. It goes to the
[56:28] Speaker 3: you know, the Apple thing, and She's like, we turned
[56:31] Speaker 3: this off. But you know, there's a bunch interestingly in reading.
[56:37] Speaker 3: I tend not to read a lot of business ebooks,
[56:39] Speaker 3: but in podcasts I do listen to that. So but
[56:42] Speaker 3: the ones I listened to I listened to Acquired, I
[56:44] Speaker 3: listened to Business Breakdowns. I listened to Nikolai Tangens where
[56:48] Speaker 3: he interviews the CEOs. I listened to invest Like the Best.
[56:52] Speaker 3: I listened to You. I listened to Lex Friedman, and
[56:56] Speaker 3: then I'm at the ft.
[56:59] Speaker 2: Uh.
[56:59] Speaker 3: Well, let's Freeman's got his own He's a affiliate with
[57:03] Speaker 3: MIT in some way. He's had his own podcast. He
[57:05] Speaker 3: gets really really interesting people to come on. I'm involved
[57:09] Speaker 3: in Carnegie and CFR, so they both have a podcast.
[57:12] Speaker 3: One's called Grant Tamasha, which is on India, which is
[57:14] Speaker 3: just a policy area I'm interested in. Why it Matters
[57:16] Speaker 3: is CFR's podcast. So I've got a driving to the
[57:20] Speaker 3: Hampton's easy because it I can. I have hours and
[57:23] Speaker 3: hours of kind of content really interesting.
[57:27] Speaker 2: Let's talk about books. Are what are some of your favorites?
[57:30] Speaker 2: What are you reading currently? Well?
[57:31] Speaker 3: I read a lot, and you know, I think two
[57:35] Speaker 3: books that I just gave both my one kid just
[57:39] Speaker 3: graduated from college and one is two years out of college,
[57:42] Speaker 3: three years out of college. I gave both of them.
[57:44] Speaker 3: I don't know if they've both read both, but I
[57:46] Speaker 3: gave them both books to read. One is Psychology of
[57:49] Speaker 3: Money by Morgan House. Sure, I thought that was a
[57:52] Speaker 3: great book. I wish I read that when I was
[57:54] Speaker 3: twenty one, but I still felt like it was valuable.
[57:58] Speaker 3: The other is called Five Types of Health by ce
[58:00] Speaker 3: Heel Bloom. Sure, I thought that was a great book.
[58:03] Speaker 3: And those are more I would put those as entertainment,
[58:07] Speaker 3: but I found those if you read those books and
[58:10] Speaker 3: you kind of try to apply them to life. I
[58:12] Speaker 3: thought both of those were really useful then. And then
[58:16] Speaker 3: a lot of what I read is around topics that
[58:20] Speaker 3: like are around our philanthropy. Right. So you know one
[58:24] Speaker 3: book I read, which is this is not an upper
[58:27] Speaker 3: It's a book called Anatomy of an Epidemic by Robert Whitaker,
[58:31] Speaker 3: which is about the use of psychiatric drugs in this country.
[58:36] Speaker 3: And this is not an uplifting book. Of course, there's
[58:39] Speaker 3: an epidemic of anxiety and depressed.
[58:41] Speaker 2: To say anything about American healthcare or psychology.
[58:45] Speaker 3: But it motivated. It motivated. So one of the areas
[58:48] Speaker 3: that were philanthropically investing in is next generation ways of
[58:53] Speaker 3: dealing with psychiatric conditions, and that book kind of was
[58:57] Speaker 3: the starting point, you know, of that. And then the
[59:00] Speaker 3: really depressing book I'm reading right now is it's a
[59:03] Speaker 3: new book. It's called Nuclear War by Annie Jacobson, and
[59:08] Speaker 3: it's you talked about what are these theories, what are
[59:11] Speaker 3: the scenarios out there that you know we're underpricing, and
[59:15] Speaker 3: you know, I just felt with what happened over the
[59:17] Speaker 3: last two years. You know, I think we all, you know,
[59:21] Speaker 3: we used to have fallout shelters and it would just
[59:23] Speaker 3: like a nuclear war, that's that's done. There's like, there's
[59:25] Speaker 3: no risk of that. And I think the last couple
[59:29] Speaker 3: of years just reminded me that, like, nah, it's not done.
[59:31] Speaker 3: Like now, it's not a high probability maybe, but it's
[59:34] Speaker 3: not done. And what this book does is it actually
[59:38] Speaker 3: starts at time zero, a nuclear bomb drops. What actually happens, right,
[59:42] Speaker 3: what is the defense mechanism that the offensive person uses,
[59:46] Speaker 3: what's the defensive mechanism that the other country uses? What
[59:49] Speaker 3: happens from I mean, and it goes into it in
[59:51] Speaker 3: not very uplifting detail, and it was just a good
[59:54] Speaker 3: reminder that you have this thing out there that still
[59:57] Speaker 3: has the chance to obliterate the world as we know it, right,
[1:00:03] Speaker 3: And it's not a zero percent probability. It's a low probability.
[1:00:06] Speaker 3: But I think it is important to understand tail cases.
[1:00:08] Speaker 2: Yeah, to say, to say that at least.
[1:00:10] Speaker 3: We're ending on a very depressing note, so we might
[1:00:12] Speaker 3: want to start you might want to end on something
[1:00:14] Speaker 3: more more fun.
[1:00:15] Speaker 2: No, it's listen, you know sometimes you mentioned so to
[1:00:20] Speaker 2: make this positive. You mentioned Saheel Bloom. I had him
[1:00:22] Speaker 2: as a guest on the podcast. You mentioned Morgan Housell.
[1:00:25] Speaker 2: I've had him several times. He wrote the forward to
[1:00:28] Speaker 2: my book. Both those guys younger, all their work is
[1:00:33] Speaker 2: much more uplifting, much.
[1:00:37] Speaker 3: Age thing. Yeah I should have I should have. I
[1:00:39] Speaker 3: should have ended with that.
[1:00:40] Speaker 2: But no, it's it's absolutely fine. Listen. Sometimes you gotta,
[1:00:44] Speaker 2: you know, you gotta shake people up and say, hey,
[1:00:46] Speaker 2: this is a real risk, and you know, non zero
[1:00:48] Speaker 2: is a pretty significant risk when the outcome is so catastrophic.
[1:00:53] Speaker 3: Correct.
[1:00:54] Speaker 2: So, final two questions, What sort of advice would you
[1:00:58] Speaker 2: give to a recent college grad interested in a career
[1:01:01] Speaker 2: in either startups, venture capital, or private equity.
[1:01:06] Speaker 3: Yeah, so I think that keep your intellectual curiosity broad
[1:01:11] Speaker 3: And I was just speaking to our summer interns a
[1:01:14] Speaker 3: month ago and somebody asked me, like, what's your advice?
[1:01:17] Speaker 3: And I think the mistake a lot of people make
[1:01:20] Speaker 3: is they decide, Okay, I want to be a venture
[1:01:21] Speaker 3: capitalis so all I'm gonna do is read tech Crunch
[1:01:23] Speaker 3: and listen to tech podcasts. And this just make you
[1:01:26] Speaker 3: a very interesting person. And you know, I've probably had
[1:01:30] Speaker 3: more dinners or one deals because we found a common
[1:01:35] Speaker 3: interest in art or a common interest in Why it
[1:01:37] Speaker 3: doesn't I'm using the things I happen to be interested in,
[1:01:39] Speaker 3: But it doesn't have to be those things, right, And
[1:01:42] Speaker 3: you know, everyone has intellectual interests outside of the thing
[1:01:46] Speaker 3: that they want to do, and I would encourage them
[1:01:49] Speaker 3: to like pursue those and pursue those with passion, because
[1:01:51] Speaker 3: it's going to make you a way more interesting, well
[1:01:53] Speaker 3: rounded person, and don't just be so micro focused on
[1:01:57] Speaker 3: that thing. And I just think it makes you that
[1:02:00] Speaker 3: or investor, makes you a better person, makes you more interesting.
[1:02:03] Speaker 3: So that's one two. In a world where we start
[1:02:06] Speaker 3: getting people to do, you know, varsity soccer when they're three,
[1:02:13] Speaker 3: allow a little serendipity in your life, right, I wouldn't
[1:02:17] Speaker 3: have ended up doing what I was doing if I
[1:02:20] Speaker 3: just followed the plan and you know something's interesting, try
[1:02:24] Speaker 3: it and it turns out you might like it. Now
[1:02:26] Speaker 3: you might not like it and go back to your
[1:02:28] Speaker 3: original plan. But we've forgotten serendipity. It's why I still
[1:02:31] Speaker 3: subscribe to paper newspapers because I'm probably the only person
[1:02:35] Speaker 3: in my building that might still get to paper newspapers,
[1:02:37] Speaker 3: but because they're serendipity. When you're flipping through the newspaper,
[1:02:40] Speaker 3: it's the article that you weren't looking for is where
[1:02:42] Speaker 3: you learn something.
[1:02:43] Speaker 2: Guess don't have that same discovery. And I am very
[1:02:48] Speaker 2: aggressive looking for interesting things.
[1:02:51] Speaker 3: Too, And I think you don't get that.
[1:02:52] Speaker 2: You really don't.
[1:02:53] Speaker 3: Economists is a great example. If you just get the
[1:02:56] Speaker 3: Digital Economist and you just see the article in AI,
[1:02:58] Speaker 3: I'm gonna read that. Guess what, I probably already know that, right,
[1:03:01] Speaker 3: I'm reinforcing dollars that I have. Maybe I learned one
[1:03:03] Speaker 3: tidbit that I didn't know. It's when you open it
[1:03:06] Speaker 3: up and oh, there's this interesting article about nuclear that
[1:03:10] Speaker 3: I don't know anything about, and I read it. Oh wow,
[1:03:12] Speaker 3: this is maybe this is this is a this is
[1:03:13] Speaker 3: a real tail risk. Maybe I should understand this.
[1:03:15] Speaker 2: I will give you the one exception to this is
[1:03:19] Speaker 2: The Times doesn't do this well, but the Wall Street
[1:03:21] Speaker 2: Journal does. So you can go to the digital edition
[1:03:25] Speaker 2: of the WALLSTREETWSJ dot com, but you could also click
[1:03:29] Speaker 2: in today's paper and you get the breakdown by sections.
[1:03:33] Speaker 3: And then you invest, and then you can kind of
[1:03:35] Speaker 3: click and as you scroll.
[1:03:36] Speaker 2: Through it, it's the equivalent of flipping the newspaper page
[1:03:39] Speaker 2: where you get those oh I never would have.
[1:03:41] Speaker 3: People always laugh. I show up on a news I'll
[1:03:43] Speaker 3: show up on a plane and I've got my newspapers
[1:03:46] Speaker 3: and they're like looking at me, like I'm like a Martian,
[1:03:48] Speaker 3: you know, And I'm like, no, there's a reason.
[1:03:50] Speaker 2: No, absolutely. And our final question, what do you know
[1:03:54] Speaker 2: about the world of investing today that would have been
[1:03:57] Speaker 2: helpful to know back in nineteen ninety five when you
[1:04:00] Speaker 2: were first getting started?
[1:04:01] Speaker 3: Well, well, I think a really important one. It applies
[1:04:04] Speaker 3: to investing, but I also think it applies to life
[1:04:07] Speaker 3: is oftentimes people don't trust their instinct because they don't
[1:04:11] Speaker 3: think their instinct is a real thing. They think their
[1:04:14] Speaker 3: instinct the gut. They have these words that people use,
[1:04:17] Speaker 3: but The reality is it's micro slicing a lot of
[1:04:19] Speaker 3: data that you've experienced over your life. Now, maybe at
[1:04:22] Speaker 3: twenty one, your gut's not worth a lot. Okay, it's
[1:04:24] Speaker 3: probably worth a lot in certain things, maybe some human
[1:04:27] Speaker 3: interactions and things like that's probably not worth a lot
[1:04:29] Speaker 3: in investing because you just don't have a database. But
[1:04:31] Speaker 3: even at my age, you don't like you have this
[1:04:34] Speaker 3: inclination to not trust your gut, Like there's something about
[1:04:37] Speaker 3: this deal that just doesn't make sense. But oh, but
[1:04:39] Speaker 3: the revenue looks good and the margins look good, and
[1:04:42] Speaker 3: so I'll just overlook my gut. And I've just generally
[1:04:45] Speaker 3: when I've overlooked my gut, it's not been. It's not been.
[1:04:49] Speaker 3: It's it's not been a good thing.
[1:04:51] Speaker 2: You mentioned pattern recognition earlier. Your intuition improves as.
[1:04:55] Speaker 3: You get more experience, you get more experienced in.
[1:04:57] Speaker 2: Wor now blank is perhaps overstates the case, but there's
[1:05:01] Speaker 2: a lot, but.
[1:05:02] Speaker 3: It's but it's I agree. I've read the book and
[1:05:04] Speaker 3: I think it overstates it. But there's a there's something
[1:05:08] Speaker 3: to start from there, you know, at the core. And
[1:05:11] Speaker 3: then the second one is I think what we talked
[1:05:12] Speaker 3: about earlier at times come. Bad times will invariably come,
[1:05:16] Speaker 3: and good times will invariably follow, and you just have
[1:05:19] Speaker 3: to have confidence that both are going to be there
[1:05:21] Speaker 3: and that you're gonna learn from both.
[1:05:23] Speaker 2: Devin, this has been absolutely fascinating. Thank you for being
[1:05:26] Speaker 2: so generous with your time. We have been speaking with
[1:05:30] Speaker 2: Devin PreK, Managing director at Inside Partners. If you enjoy
[1:05:35] Speaker 2: this conversation, well check out any of the five hundred
[1:05:38] Speaker 2: and fifty we've done over the past eleven years. You
[1:05:42] Speaker 2: can find those at Bloomberg iTunes, Spotify, YouTube, wherever you
[1:05:47] Speaker 2: find your favorite podcast. Be sure to check out my
[1:05:50] Speaker 2: new book, How Not to Invest The Ideas, numbers and
[1:05:55] Speaker 2: behaviors that destroy wealth and how to avoid them How
[1:05:59] Speaker 2: Not to Best wherever you find your favorite books. I
[1:06:02] Speaker 2: would be remiss if I did not thank the Crack
[1:06:05] Speaker 2: team that helps put these conversations together each week. Alexis
[1:06:09] Speaker 2: Noriega is my video engineer. Anna Luke is my producer.
[1:06:14] Speaker 2: Sage Bauman is the head of podcast That Bloomberg. Sean
[1:06:17] Speaker 2: Russo is my researcher. I'm Barry Ridhelts. You've been listening
[1:06:22] Speaker 2: to Masters in Business on Bloomberg Radio.

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