Jeff Horing - Building Insight Partners - [Invest Like the Best, EP.440]

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1:12 Hello and welcome, everyone. I'm Patrick O'Shaughnessy and this is Invest Like the Best. This show is an open ended exploration of markets, ideas, stories, and strategies that will help you better invest both your time and your money. If you enjoy these conversations and want to go deeper, check out Colossus Review, our quarterly publication with in-depth profiles of the people shaping business and investing. You can find Colossus Review along with all of our podcasts at joincolosis.com. Patrick O'Shaughnessy is the CEO of Positive Sum. All opinions expressed by Patrick and podcast guests are solely their own opinions and do not reflect the opinion of Positive Some.

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3:26 You can request a demo at ridgeline.ai. Mm. Um My guest today is Jeff Horing. Jeff co-founded and leads Insight Partners and has been the managing director since 1995. This is one of Jeff's first public conversations about building one of the world's most successful technology investment firms with over a hundred billion dollars of assets under management.

3:51 Jeff reveals the mechanics behind Insight's legendary sourcing machine. It's sixty to eighty people systematically calling companies worldwide. He explains their contrarian one fund strategy that deploys twelve billion dollars across everything from ten million dollar growth deals to billion dollar buyouts. And why he thinks this creates unmatched competitive advantages. We discussed their remarkable talent, diaspora. AI representing a TAM accelerator, an Insights 5 ingredients framework for perfect investments. Please enjoy this great conversation with Jeff Horing.

4:22 I thought it would be fun to begin with a weird but interesting question for our past conversations, which is If you could go back in time. And think about the original Softbank Vision Fund, which was a hundred billion dollars. Huge fun. Of course, everyone was talking about it. Who knows what will end up happening with it, the story is still not fully written.

4:40 But if you could go back in time and you were fully personally in charge of deploying that hundred billion dollar fund. How would you have approached That problem. It's a lot of money to put out the door in a couple of years. How would you have done it personally? First of all

4:53 It was an eye opener to me when it happened and We had A small strategy that I always envision could be a big strategy, but maybe to Go backwards and say what are the best

5:04 private equity venture deals of all time. This is a cheat answer, it's not the real answer, but In my own. View probably the most cleanest. best example of return is probably VMware.

5:15 Technically EMC was the private equity buyer. There's about six hundred fifty million dollars. And sold it for sixty billion. So that's a Sixty billion dollar gain plus or minus. You could argue Instagram Billion to probably a trillion.

5:29 YouTube is probably a billion to a trillion. Interesting. If you look at some of the M and A that strategic Companies have made With some synergy that probably delivered Portion of that game, but I would argue.

5:40 A lot of that was gonna happen independent. PayPal, another good example. Almost no real Ebay. Effect that drove that.

5:49 We had done a bunch of what we call venture buyouts and some were growth buyouts. And these could have been hundred million dollar investments. I've taken control of smaller software companies where we made Five, six sometimes more times our money. I just always had in my head I would love to be competing.

6:04 With Microsoft. Or Palo Alto or eBay. for a deal because then the entrepreneur was like, Wow, I could have my cake I need it too.

6:12 I can sell to Jeff for a billion dollars my next Instagram. Um Still retain massive ownership, maybe even get reloaded on the options. I'm not A hundred percent sensitive on those sometimes in that kind of a deal.

6:23 And we've done that. And we've had some bigger deals where we bought companies for about a billion dollars and There were smaller growth standards, so they were not what you would consider to be classic buyouts where you have cash flows and Debt and all sorts of other things. underpinning it, it was really the markets and the growth and the entrepreneurs that you're betting on. And I thought if I had a a hundred million dollars, that's what I would do.

6:42 'Cause I think you could really differentiate yourself. Tremendously from the pack. Interestingly, Massa did one deal like that. Four times his money on a really big check.

6:52 Maybe more. I haven't tracked the stock lately. Pushing it to late stage growth I thought was a much harder Strategy both. For companies to consume that capital. valuations that you needed to pay to get into those deals to justify that capital.

7:04 Though obviously he made that Return in Alibaba, you made that return in I guess Yahoo is probably more my example, Yahoo Japan. Have worry about. Control of something and

7:13 Turned it into a massive win. So That was A dream I've always had. People often ask how does one scale? our industry and certainly if you look at those types of outcomes you'd be like, Well, I guess there's a chance you could do it. Could we compete?

7:25 For those deals I don't know. But it certainly on paper pencils out. Obviously Insight has raised some of the largest funds in our industry, ten plus billion, twenty billion. What size would you set a fund, a hundred billion or some other number If you wanted to do today in twenty twenty five the thing you just described.

7:42 How big would it have to get so that you were actually competitive? Today's tougher. This was probably two thousand sixteen. When the Vision Fund came around. The concept of liquidity

7:53 billion dollar exits as a massive victory for the venture. To get benchmark or Sequoia to sell something for a billion dollars. Probably doesn't get their heart rate up today. So the likelihood that they would do those deals again today, knowing what the world looks like and what the upside can be for these types of assets.

8:07 It's pretty small. It's just a little bit more. Harder because the scale. Has changed, but We look for these.

8:13 Sub a billion is really the sweet spot that we could consider But to find hyper growth. Sherhold is going to exit. It's still tricky. Most of the deals getting done under that are getting bought for really strategic reasons where the

8:26 Financials can't even be imagined. And model that right Palo Alto pays five hundred one dollars for Thirty guys in Israel, that's a different game that we can't really compete with. So if you were to size

8:36 A fun today. for the best possible risk adjusted return where like fun size dictates the strategy. Where do you think you would size it? I think we're pretty close. What's your marginal one?

8:49 We're about twelve billion. We're deploying Three. Plus billion a year. in invested capital across

8:56 a range of strategies, but we definitely don't feel capital constrained. to the opportunity set. I think if we were to And I don't think this is part of our strategy lean in on some of these Big late stage growth rounds you could envision a bigger fun. Certainly others have raised money.

9:11 specific to target that type of deal flow, but that's not really the Better version of Advision fund where you're buying into open AI or anthropic and big

9:21 Late stage prices. We don't lose sleep over That not being our core strategy. What do you make of this? You were an investor in the big data bricks round and anthropic more recently.

9:31 What do you make of the late stage private markets today? It it's gotten so interesting and Crazy relative to when you started Insight. You've had a bunch of folks on this podcast I've heard who've talked about the changing Private public market. Dynamics and

9:44 Databricks install private company at this scale is sort of unheard of. You could argue OpenAI is still a young company. Relatively speaking to the timing of its revenues, but For reasons that Maybe represent just a shifting of capital.

9:57 Companies are staying private longer and Doing Basically IPU plus plus plus rounds. In the private markets. We look at

10:05 These like we look at Anything else? Through a lens of What's the forecast? What's the likely exit value and what's the return on that capital?

10:12 Once in a very rare while you see something at size that prices in a way that you feel like you can make Risk adjusted venture like returns. Maybe a a fun thing before we get into insights strategy specifically is to talk about your day and your life as an investor. What's interesting and unusual about you, there's basically nothing available about you on the internet. You don't give interviews like this. You seem to just be a heads down investor.

10:35 You could have long ago retired. My sense from talking to some people on your team and talking to you is that you're working about as hard as you've ever done it. What does a given week look like for you? Starts with some internal meetings. Investment committee.

10:49 People's new deals. Partners meeting to spend time together and sinks this First aid back kind of. They

10:56 In this case, but that would be a typical Monday. Big portion of my day is gonna be Dedicated to prospects? And I make a point, as do most of my senior partners, to P

11:06 Spending as much time as possible. Hearing the stories, whether it's In person or by Zoom. Of new companies, then there'll be a fair amount of portfolio calls. So I probably had three calls so far today on Portfolio companies hopefully more strategic.

11:20 In nature than just What's your latest quarter? And then some internal meetings on how we're scaling the firm and using AI to do diligence and all sorts of fun things like that. So it's

11:30 Blend of where I think I can contribute what I try to do. No one's perfect to spend as little time as possible on things I'm not good at. Which there's a pretty long list. So Those are areas where I think I can have them. Meaningful impact.

11:41 And also enjoy it. So it's a lot of fun for me to do that. What would you say is the skill on the prospect side evaluating a founder, a business, whatever? that you've most improved at over the entirety of insights. Existence. So you today versus you in ninety five, ninety six.

11:57 I'll say team broadly,'cause some of us are much better at this Than I am. Our analysis of what numbers matter has changed a lot. I remember Six years ago at an L P meeting

12:09 Telling LPs we think we're at eleventh grade. Math on software. The industry's probably at seventh grade math on software. I think we're getting closer to college. It's still amazing what we continue to learn about metrics that really

12:22 are the best predictors for future outcomes, which is really the Dream especially in growth investing, you haven't almost enough data. To start to predict. And we've also gotten better, I think, at Understanding.

12:34 Qualitative. Issues in it. The never ending. Journey on management. Every year you learn something new and

12:40 Both the good and bad ways. People are always complicated, but you definitely get better at it. As you get. More experienced at it. Can you teach us some of that college level math on understanding software businesses?

12:51 Five years ago, one of my companies was going public and the rage on Wall Street was net retention. Just picking a random one. I was already at My eleventh grade math. So I'm like, this is one of the least informative numbers I could think of. And yet that was the only number that Wall Street asked. I said the only number that really

13:08 Well two numbers really matter. GDR which is gross retention which is How sticky is your customer base? How resilient is that? And more importantly How much of that bucket do you have to fill every year? There are very few companies with

13:20 Loish. Software w low would be eighties. Oh, eat his gross retention. that are in the top twenty market cap. businesses you could probably count on

13:29 Three fingers. companies with that statistic and the problem is that you get big And let's say you're losing twenty percent of your business every year. out of billion dollars of revenue, that's two hundred million dollars of Business that you have to go find just to fill.

13:41 The bucket. And then you of course want to grow thirty, forty, fifty percent on top of that. So those become daunting numbers that usually reflect itself. Um Your average. Cost of acquisition.

13:51 Take your net new bookings divided by the spend that you had to get to that. And there's numbers. Tanky. move together because you just have to keep filling more of the bucket with sales reps. Just to stay even.

14:02 So I think that was an example of one. Another time years ago. I thought a lot about calling ourselves the second derivative because so much more is learned. Couple guys had this right at Facebook. The billion dollar kind of guys that came in there.

14:15 But the Change in new business. is way more important. The change of the change. Um

14:21 growing a hundred percent year over year my net new bookings. That second derivative is really powerful where you see a lot of companies with almost zero change. And the new business that they had each year. Off a small number, that could still look like a really big growth rate. Sometimes as much as a hundred percent or

14:34 Seventy five percent. But you can copyright that. number if it's flat. And that happens a lot, for example, on vertical software. We quickly saturate. The number of decisions made in a given

14:45 Yeah. And all of a sudden Model out five years with a flat New booking's number and your exit. Growth rate's gonna be a lot different.

14:53 And What Google was able to do, which was compounded a hundred percent for fifteen years. One of the things I think is so interesting about Insight is the ability to price different numbers that It's not just That you're buying.

15:05 Ninety five plus percent gross retention and accelerating top lines or something like that. You'll buy companies that don't have those metrics. We keep learning. That You sometimes get fooled into the trap of value. And it

15:18 is not a great way to make money in my estimation. And people do it. And people are really good at it. I'm not gonna Say it's not doable, but Buying cheap in technology. It's not a long list of Really rich people who've done that.

15:29 As compared to the people who've just bought The dream. There's a very long list of people who've made lots of money on the dream. We will not do a low gross retention business today unless we really are confident we could change it.

15:40 We think that metric is really the fundamental driver of all exit values. And ultimately large companies. Yeah. Obviously make exceptions if we think.

15:50 We can fix things or we think Maybe there's a good story as to why it was not enough sales capacity, this that. At least half my partners would tell you. Th they prefer not to compromise on any of those metrics. Their view is if you look back in time.

16:03 Nine out of ten times those metrics have been the driving metrics. For our success. If I think about gross retention as one avenue of math to go down and that's algebra one, what's algebra two? If you kept pressing on gross retention as an example of how you then keep digging into the business. How does it work?

16:19 Zoom out. Simplest math is L T V divided by Gack. That's all you're trying to understand is I invest in money Assume R and D gets somewhat normalized to levels that are industry standard. That's really what you're trying to tease out.

16:30 GDR is a great predictor on L TV. The less I lose of a customer, the longer it lasts. The present value of that cash flow stream is higher. CAC is the other big variable on that. What you're trying to figure out is the market pull for that. How

16:43 Quickly yeah. Am I accelerating that number? If I added 10 million of new business this year, can I add twenty million next year? And forty million. The year after. And the smaller the company gets, the harder it is to tease out.

16:54 Whether you're just rapidly Walking into a Finite market. And you saturate that decision making in that market? Or is it Deep enough that you could imagine growing.

17:04 For multiple years. Wiz which is obviously one of our Favorite stories and great. Team and Ba ba.

17:11 They've been able to double or more of their net new bookings each year. Six years. Just when you do that math, if you start

17:19 Ten and Start doubling that for five years. That's a really big number of new business added each year. Which keeps your growth rate if you literally double it every year you would have a hundred percent growth rate. Add infinite item.

17:29 What qualitative questions do you like to ask on the back end of the quantitative investigations? So let's say you've got a company that has great gross retention. How do you then continue to separate it? So you have to do qualitative, especially as you get earlier, because a lot of these numbers are still Forming and False precision, I think, could get you in trouble.

17:48 I'm a big fan of the value problem. When I think about investing, I want to hear the entrepreneur explain How they're generating Real value for the customer. I look at

17:58 What makes for the perfect investment? I have thought about the five ingredients to me if perfect investments. So value prop is critical and that usually Could and should translate to selling price. And then I distill that and say, Well Imagine you're going after the

18:12 Hospital market we look at. En Chantic AI company in that market. And if Epic cells. Ten million dollars a year. On average in the hospital market.

18:20 And you're selling half a million dollars a year. And the markets are twenty times your size on average selling price. Pretty hard to imagine that you're gonna be as big as Epic. You can frame it and say Best case I'm probably one twentieth. This Epic is a dominant player.

18:33 Rare that anyone gets more market share than they do in a given sector. Best case is I'm probably one twentieth the size of Epic. That's kind of a good framing of Tam in my mind, as opposed to the how many customers are there, can I multiply by this and This sort of top down approach is riddled with Errors in thought. Whereas if you look at

18:50 What's my selling price? How does it compare? So you wanna see that average selling price. And then compare it to companies that are targeting the same number of Customer universe. And that gives you at least a ballpark. You obviously want to look at the landscape of competitors and say, Well, what market share am I realistically gonna have?

19:06 The hidden data point for me, especially for early companies I've been pushing on. And this is where AI is a pretty neat. Ideas. What's the time to value?

19:15 So when you think of a customer making a decision Installing SAP. Versus Using open AI. One is I literally point my

19:23 Cursor to a web page and I'm Getting value immediately. And the other could be a three year Very expensive journey. to change my organization to get it up and live and productive.

19:34 S C V has massive value to that customer base, but It's a very long time to implement and that's gonna inherently slow down. Realistically how fast you can grow both. Your own ability. To succeed with those customers, but also just the decision making.

19:46 Around those complex decisions. Obviously Phenomenal CEOs. Are we The dream.

19:53 I listen to the podcast, I'm like, wow, people are really a lot smarter than I am'cause I sometimes write that story after the fact. I certainly have plenty of phenomenal CEOs that were rejected by a lot of other Firms. So it's not always obvious.

20:05 And then a phenomenal tech team that goes with it. This is a world. In the last ten years were product. really drives outcomes and you've had folks on your Show that talk about

20:15 Happiness and product. Satisfaction, things of that nature. Those five things. Do you list them once more just so I make sure I have them? It's

20:22 Big R O I, big A S P, time to value CEO and tech. And management team that goes behind that tech. That's my five. I think where's my PVN of When they've checked all five. Maybe Monday had a

20:34 Bunch of that too. But to get the time to value and the ASP. Is really rare. Does it stand a reason that you think for an SAP type company where The benefit of that long install process is very sticky typically on the other side of it.

20:46 That the right time to invest in those companies after they've gotten their install base, that's the better risk adjusted entry point. I think for those companies fifteen customers that are referenceable is sort of a magic number for inflicting on growth. So the challenge with those companies is They're very hard to sell those products.

21:02 It's a lot of missionary selling early on. So you can't really scale your sales organization until you have a certain number of referenceable customers. that you could lean on and if every sales guy is pointing to the same Reference site. Yeah.

21:16 Customer gets a little annoyed after a while. So you're constrained by that. Around fifteen. Not only do you know the product is really Pretty solid.

21:23 But you also have an ability to start to think about Supply constraints the scaling not. Demand constraints to scaling. Maybe you can walk through the one fun strategy that you've chosen to pursue at Insight, which is really interesting. I'm especially interested in how

21:38 In a fund that's twelve billion dollars. It's worth your time to look at. a ten million dollar investment or something like this. That tension is fascinating to me and the one fund strategy is fascinating to me. I know you've strong beliefs about it. Describe why it is this way and trade offs. I was lucky enough to get my first job and it was a lot of luck and

21:56 Somebody who believed in me that hired me. At Warburg Pincus, which So founded in nineteen sixty eight. Maybe the world was a different world, but Developed a one fund strategy.

22:05 There is included stage. and industry. Stage agnostic, industry agnostic. Some of that was mapping to LP.

22:13 Demand for the biggest of LPs back then, the pension plans. But There's Two things I think that's If you taught finance in classic portfolio theory

22:22 You would be scratching your head and thinking, Gee, why isn't Everybody doing this. One is risk management. One of the really interesting things about Division font.

22:30 Was there a bill to write a two hundred million dollar check that was inconsequential to the return of the fund? Obviously you could Abuse that and Take risk that maybe aren't sensible risks, but it was Fascinating me.

22:40 Most of us Really sweat out those big checks. We're really pretty risk averse. We want to make sure the downside is absolutely locked in. Probably the two X case is really Visible.

22:49 There's very few firms out there. Vision Fund was probably the one exception. They could look at that and say, I could think of that divide by a hundred. As a two million dollar check in a billion dollar fund where we all could easily Say oh of course I'm not gonna get

23:03 Like a flyer. So there's a little bit of risk management and you can do it with check size. So you can look at stages slightly differently. And the second advantage a single fund has, in my view, is All my peers would sort of admit that the best bet on the table is the double down bet.

23:18 Black check. We all know that. You've got an eleven against a five. You double town. Not only do they give you the good odds, but you have way more information.

23:26 than you had before you got the hand belt. We're not all perfect. Sometimes we fall in love with our Babies. But If you went back in time and looked at our double down checks.

23:34 They were our best checks. We took a five million dollar position to a billion dollar position. We never would have seen the billion dollar. Position. Without getting a relationship with management.

23:44 With a five million dollar position. And some of our biggest exits from Monday and Cno A bunch have started with under twenty five million dollar bets that have come up to two hundred million dollars over time. We just see secondary opportunities, we see follow on opportunities. If you zoom out, you're like

23:59 Isn't that the most rational way to do it? Why would you do anything else? And I know there's some phenomenal firms I've heard on other podcasts. I have a ton of respect for and they Intentionally want to give that bet away. And then obviously the more common approach now is I'll have a separate

24:13 pool of capital for that bit. But that has Because sometimes Yeah.

24:18 charter of that fund, the pitch to the LPs is a little more nuanced than you find yourself In Tweener Bet and I'm sure you could talk to a bunch of early investors that have growth funds that aren't always at their best deals and you're like, Well, how'd that happen? Yeah, sometimes they Find a way to do it and it's great. But a lot of times

24:34 Because the deals get bit up a little earlier than they expect. Doesn't really fit what you would consider to be a typical Pitch to a growth fund. But it's clearly not an early stage pet anymore. Check size is too big for a noise stage pet.

24:45 What do I do with it? We don't have to think about any of those conflicts. We certainly don't have to think about conflicts between the two funds, which Can be managed, but it's not. Zero. Am I bailing the company out? Am I really supporting it?

24:56 How that all looks optically could get. Funny over time. What are the biggest downsides of doing it this way? What annoyances does it introduce? Biggest is you lose a little bit of discipline from third party pricing.

25:07 It goes both ways. So sometimes we preempt deals and we think we get great deals. I'd say more often than not, that's the belief that we have is we make it easy for the founder The pitch to the founder is You're done. If you want us, you got us for life. If you want to go out to Find another. Partner, that's okay too.

25:22 We've got our position. We're not gonna be upset with that, but We're also here to support you. The entire journey. Up till two thousand seventeen, eighteen that was really common. The world got really competitive starting in eighteen and

25:33 A lot of those follow on checks. We couldn't get them at the values that we felt. Third party pricing. For their own reasons and we're gonna support that.

25:42 The downside is you could We'll leave your own. Yeah, so you can get a little sloppy with Two million dollar kick save checks. I want a bridge to a cell. I want to do this, that.

25:51 I could argue that goes both ways. Plenty of those have actually worked out where we have bridge to a sale. We have Recap the company and Gotten some of her original money back. Could certainly see how you could be chasing. Good money after bad if you're not careful.

26:04 And what about from the LP's perspective? The one fund strategy, is that a feature to them? Is it a bug? Does it depend on the LP? We don't fit into a bucket. My whole life I've never fit into a clean bucket and that's probably the most glaring one. How do you think about that? I'm like, Well It doesn't feel like that at all when you're on the inside.

26:21 It just feels like a Well oiled. process, but from the outside we look like an N of one. You go back in time to firms that scaled over the years, they almost always scaled on check size. One of the reasons insight exists today is literally because some of the

26:35 best firms in the world at the time we started it. We're moving up market and putting in rules of we do fifty million dollar checks, we do a hundred million dollar checks for the reason 'Cause are the checks that will probably move the needle. Yeah, obviously.

26:47 Sequoia and Benchmark and others will tell you they've written plenty of five million dollar checks. That have been Breathtaking and outcome. I can see the logic as you get.

26:55 They do it. That that's a temptation to kinda put that. Constraint in place. DNA just Didn't want that anyway, so some of this was not a little bit more.

27:04 Fully thought out. in the way I've described it, but it in fact holds really well to time. And some of it was just our DNA was so driven off of sourcing. And the history of Insight was based on some experiences where I found some small deals that didn't fit with a bigger firm. And I was like, I don't want to be that guy. I don't want capital to dictate my strategy.

27:21 It turns out it doesn't have to. You could Yeah. Invest it in finding your way to backing up the truck for bigger ownership. And then as the world changed.

27:30 It's increasingly hard to come in late. So now I would argue that There's some really good firms that have been around for as long as we have that Or the Preeminent late stage fonts.

27:40 Like us, look at some of these later rounds, we're like, That's a pretty tough spreadsheet. There are other ways to deploy that capital that seem Better risk reward. Adjusted.

27:49 There's some that are great, but most I'd say the spreadsheets start to look like Two To three X. You could do Much lower risk buyouts or

27:58 Venture buyouts or other types of deals with the same return curve with a lot more upside. And ability to control your destiny in a better way. It's become a bit of a necessity too to get on the balance sheet. By getting in a little bit earlier.

28:10 You mentioned sourcing in the early days of insight, so much path dependency to all these stories. If you ask people that study this industry to say something about insight, I think the first thing they'll say is something about your sourcing strategy. Now would be a great time to just hear what it is and how it evolved. And maybe that'll be a good jumping off point into investing firms that Have strategies or not.

28:30 As businesses. So let's start with sourcing. When I wrote Tremendously different than today.

28:37 I was leaving Warburg. I love software. Wanted to just do software and was really interested in doing smaller deals than That firm was set up to do at the time. Nobody would hire me.

28:48 Then software was tiny. Yeah, IBM and Microsoft. Just to put a setting in the world, SAP was sort of this main frame guy coming along, Oracle was probably the coolest. Cat in town in terms of Open systems. Client server compute.

29:00 But it was a really, really Small market. You can count on one hand. T. Fifty software companies number

29:07 Fifty was like ten million. It was tiny. But I loved it. I thought it was a big growth. Bucket. I thought specialization had a real edge. We were

29:16 Disadvantaged by being in New York. I guess I could have moved but I had family and Other reasons why I like New York a lot. Trying to compete on the West Coast terms made no sense to me. So one picking an area of specialization where the model was still

29:29 Pretty new to people. And it was pretty different than the hardware companies before it that were really more Typical. Venture investing. And the DNA of a sales guy of software back then an Oracle's DNA.

29:39 That was a really different DNA. And what most folks were used to. So we thoughtalization was absolutely critical. to understanding an industry really well. And we picked software in hindsight, it was probably the best bet I've ever made. It wasn't'cause I saw the vision.

29:53 So that was the start of it all. In like the early nineties, I was still a Warburg. I went to a conference and Kevin Landry, who was at the time the Founder and Managing partner at T Sociates was presenting to a large crowd and he was walking through his playbook

30:09 It was like the classic Vince Lombardi story. Here it is. I don't really care. Do it what you will. Good luck was this comment. And I'm twenty six years old. I'm like, all right. That's pretty cool.

30:20 He's ripping out help wanted ads from the New York Times magazine that you're reading. He's calling these companies up and it turned out back then It was a really opaque market. Very few companies were out there raising capital in any professional way. Entrepreneurs are really receptive to just being called up and saying, Hey, I think you've got something cool.

30:38 Would you be interested in Talking to me. Started a Warburg, I sourced a bunch of deals that way. Which was pretty unusual for what was largely a Shape the tree partner model.

30:48 Um Realize I could find deals. All day long like this, and especially software lent itself to being outside Silicon Valley, especially applications. If you're building banking software, do you want to be in Silicon Valley or New York City?

31:00 You're building Pharma applications. Do you want to be in New Jersey or do you want to be in Silicon Valley and I can go down the list of industries that really made sense to be much closer to your customers. Which themselves had clusters around. The US and even in Europe.

31:12 Most software companies back then started as consulting projects that got bootstrapped. to some degree to a product. So you can actually find these things. Well after their incubation. phase and start up phase, which again was very counter

31:24 to the West Coast model. I hear Landry speak, I start doing what he's doing. This is working. I could do this and we start insight at a partner. was a consultant to Warburg. We started up We just start sourcing deals.

31:36 Cold calling everybody. We found a bunch of deals before we had a fund and then we scrapped together a sixteen million dollar blind pool of capital from Some high net worth. Focus and In that

31:46 Thesis was Focus Sourcing and then The focus was gonna give you both an ability source better because you knew where to look.

31:54 You knew what magazines to read, you knew what trade shows to go to, all that lent itself to the same. But it also gave you a chance to think about it. How do I add more value? Two.

32:03 The companies I invest in and we were the lead investor in almost everything we did. These were kind of bootstrap businesses that didn't have partners. And I wanted to be helpful. to the founders and most of the founders were technical by background and didn't really have That Oracle sales DNA that was really the cutting edge of what

32:18 B to B software was back then. We started to build some network of people who knew how to do that and ultimately brought some of those folks in house and one of my first hires as a partner was somebody who's president of one of my companies who's one of the best sales guys I'd ever met. That was the thesis.

32:33 Focus. Sourcing. Value add. By being the best at what we could be. And obviously the world's changed a lot since then, but those core ingredients

32:41 are still a hundred percent inside. So if you think about the sourc inside of Insight and chunk it up into chapters back into the mid nineties through to today. What are the major chapters? How is it about chapter one is me and my partner then. Chapter two is I hired

32:57 Three associates. One out of summit. Like Triplet, which was a big Decision and I mean

33:02 Concrete. I've been there done. At the best of the best? My partner Jeff Lieberman and one other partner. And so they started doing it too. And

33:10 Mike was for him it was second nature'cause he'd been doing it this whole career which wasn't very long at a time, it was probably twenty five. That kind of elevated us in We were basically investors doing it ourselves and then

33:22 You made it. Decision in nineteen ninety nine. We hired a Young man out of Dartmouth, which is where Mike went to school. And he became our first official analyst. We decided to go right after the undergrad.

33:33 Kids,'cause we realise it's a really hard job. And If you've actually been working at Goldman Sachs or McKinsey, you kinda get spoiled. And you don't want to go back to picking up a phone and calling somebody up without any context. It's a lot of effort. And that became the first

33:46 Two chapters really. We then started to operationalize what That young man was doing. And we started having classes and then we started going down to best schools to recruit and then we started to have training programs and we started to really

33:59 Institutionalize that entire process and that's Last twenty years. other than technology. the hiring and profiling of what we do hasn't changed. Tremendously the class sizes.

34:09 Generally speaking, they've gotten bigger. As the market's grown, but we're just trying to cover Everything. So whatever that Takes in terms of human. Resources.

34:18 The next chapter for us it's been for the last five years is just technology really make an impact. Um Who you focus on. There's a lot of firms like ours, I think, that are trying to do that.

34:29 I think the human in the loop. Still matters. That's our belief. Entrepreneurs aren't. Just gonna react to the first email they get from you, so the fact that you think

34:37 X Y Z companies super hot doesn't mean they're gonna return your phone call. I'll have analysts give you stories of twenty five Phone calls uh Couple FedExes and then landing on somebody's Street corner.

34:49 Begging to take a meeting. It's hard sometimes to get the attention of somebody who's successful. Especially in today's world where there's probably fifty more firms reaching out to that individual. We've shifted from a world where

35:01 Capital was a little bit more in Power was it? Perfect in even the nineties, it was already shifting, but Clearly the entrepreneur has got lots of choice.

35:09 And we're very sensitized to that choice and really want to make sure that We meet that. So if I came in today and saw the current setup. Could you describe it in as much detail as possible? How many people are there?

35:20 How are they given their assignment? Are they just given free reign? Do they have a coverage universe? Give me the detail of the actual platform today. My management style, which is Not very good. But can it be very effective for the right people is to throw you in the water?

35:33 And just say swim. We have a much better training program right now. So thankfully I've some of the folks that have come through the sourcing program that are still with me. Have been able to institutionalize some of the Lessons to get people up the curve quickly, but within a few months you've learned what you can learn from the system. You're learning from your peers, but at the end of the day

35:51 No one tells you go call. X Y Z. You have to kinda sort this out yourself. You hear, you listen, maybe you're partner that you work with is giving you some advice on industries that they're intrigued by? But it's a lot of

36:02 trial by error and learning and different folks pick it up in different ways. Different folks are Better suited for that than Other jobs. It's

36:10 Pretty much a Self starter. Highly Personalized initiative. Yeah, going we've probably

36:17 inaggregate sixty plus people. Depending on you count sixty to eighty people that are still Heavily engaged. The process has gotten a little bit more sophisticated'cause founders also want to meet with more senior folks. We have

36:28 Mid level folks that could help. direct managing coach. So we have a lot more support for these folks to be really good and they're getting daily Coaching from the folks who've been there and done. Almost

36:38 All the partners at Insight, but one or two at the Investment committee level. Started off in that program. We have Largely.

36:45 Cultivate our own teams. Over the years. We also have a very big practice. Of McKinsey like brains that are there to help the portfolio. So they come in also fairly young.

36:56 Maybe two years at McKinsey and then join Insight. And that's another career path for people to get to know investing, but To know it through the operational side. But it's a fantastic

37:06 Town pool. One of the core differentiators of insight. Yeah. We have the best youngest talent. By far in the world.

37:13 I would Absolutely put us against anybody. On talent and We have sixteen or eighteen funds. that it were started by insight alum. I've got thirty plus partners at other firms today that were insight alums.

37:25 It sort of reflects the fact that we are Building a good model for people to learn how to invest. It may not be the only model. But it's certainly a good model and people Around

37:35 The industry obviously respect it. I'm gonna keep dwelling on it'cause I'm so interested by it. That's a lot of funds to have started out of a single place. So that's really cool. Coaching tree like in football or something. I use the Bill Parcell's. Yeah, the Bill Parcell's coaching tree. Those sixty people today, how do they relate to one another?

37:50 And what's the incentive structure? Am I incentive to compete directly with them? And if there's a good deal Do I have my own lane? You've got lanes and we've got Technology to claim the I mean it's probably a lot like

38:01 If you were in a good software company and you looked at the PDRs and that software company and looked at the sales folks and you thought, All right, who gets what territory? And we're not gonna give people territory in the same way. But we're gonna give people a chance to claim a deal. And then it sits on their pipe and it has certain rules around how long it could stay in that pipe until it's acted on. Up for grabs again. You get the ocean, you could call whatever you want. Once it's on somebody's pipe, it's their deal and

38:26 We tried Really hard to encourage. Collegiality, so if somebody's looking at a deal that's not getting followed on on somebody's pipe. Please pass it and We'll work together on it and we tend to overcompensate.

38:36 For cooperation. Obviously people like their own track records. It's hard to take type A people and make'em. Full players on that, but I think we do a pretty good job of that. In general you're gonna Step on toes. I think other firms are more

38:49 Delineated by Pocket. You go after infrastructure, you go after AI. And I think what we found was

38:56 A lot of misses that way. It could be just a partner's predilection to doing a certain type of deal and so this other Kind of deal. It's just as good. But it's technically. Mm.

39:05 One partner's bucket. Doesn't get acted on. We try to create a little bit more openness. But the partners at the senior level know. If somebody finds a cyber deal as a

39:15 Please share it with one of us. What's the point of Getting educated and we're all comp the same. This is one for all for one to make the firm successful. And we try to direct the deals to where the

39:27 Both gonna get one and Focused on. Is the person incented to just get a deal to a certain stage or get a deal that get done? Is it just like a salesperson? They're sort of paid to the equivalent of a commission or something like that. Take a pin.

39:40 Very good. Salaries and bonus on that. At this age. The money's not the driver. The golden carrot is so big.

39:47 Whether it's at our farm or somewhere else, and being a successful investor. Everyone has a slightly different Take on this, but By and large, the real motivation is they want to be successful and win and have a good deal. You don't want to be pushing a partner to do a bad deal and

40:01 Have to put that on your resume for the rest of your life. Just because you got it. Couple of thousand dollars of Deal bonus for the twenty three year olds that are

40:07 Making the call. At what stage does it get handed from them to some other part of the business, some other person, some other diligence process? Presumably they're not the ones doing the underwriting. First we have Now about eight teams. Which were basically I C members who've been with me

40:21 Most cases twenty plus years. Six of us together for at least twenty five years. A few ten years. And that's kind of the Pods that we would say these are the

40:30 Senior people. Within that there might be some other investor And these? Some principals and VPs and so it bubbles up. Starts with maybe a V P or Senior associate working with that.

40:40 Analysts that Source the deal and then recognizing all the key signals to what might be an exciting company. It's not Tricky as you might think, and maybe the early stuff is, but Most of what we do is pretty

40:50 Clear when something looks interesting. And then it just keeps bubbling up. And then eventually it'll I'll wait to the I C member on that team and say time to meet the company and Let's get you on a plane. And sometimes we can't get into the company without that meeting. So we know all the external data points. Point to heart.

41:06 We see that. We're like okay. That founder does not Have an interest in taking a call. From somebody. Or junior.

41:13 Those two people have a lot of influence at my firm, so They run my schedule, for sure. But That's a hard to crack and

41:20 Jump on planes and I've been This year to Estonia, Sweden. I think you told me your calendar is dictated by twenty four year olds. Totally. They set it up. Today every meeting was Set up by the house.

41:30 Which is fine. The partners that work in other firms, the nice thing they have is that They're Calendar gets Fill up.

41:36 By doing deals so they can't do more deals. It's sort of a nice regulator to deal flow. Sometimes could catch us a little bit because it's so much of what we've done that we've Systematized. That it's relatively Easy for us to get

41:48 My time set up, which is great. But it also means that it can go on forever. I can't say I'm too busy. These guys are out there hustling, I want to make sure that they get

41:57 The attention they deserve. They're working so hard. What makes a great source of What distinguishes the very best of them from like the merely good? It's got a lot of classic sales skills, which is hunger Winning.

42:10 Probably lack of self awareness. You'll make a phall to anybody and not care. Ability to handle rejection. Well. But combined with

42:18 A lot of content. The really good ones are gonna get really deep. And those conversations they have with the founders are shocking. Mid two thousands then.

42:27 The company was in New York, so I just Pop it over to Be the CO and First question out of the C's mouth is Where's the analyst?

42:35 Oh you just got me, sorry. She's still in the office. So they get really Connected. The letters you will see us get from founders Um

42:44 the relationship that the analysts have built, the trust that they've built with these founders. And the work they do to generate real value for those founders before we invest. It's remarkable. If you think about salesmanship. And the ability to do sourc well.

42:58 If I were to pull people, you've talked to so many founders, some would say bad things about insight. What would they say? Would they say, It's annoying how much they call me or they're trying to Pull information out of me that I don't want to give. One could be we definitely Get turned off by that. Model.

43:13 I think it's Unjust, but It is what it is. Some people have to do it. A view they only want to talk to the top.

43:19 These are good kids that are really working hard and they're gonna get you to the top. Obviously rejection's really tough too. By talking to so many people we're obviously rejected a lot. And we tried to be really thoughtful about it. And usually what we're trying to do intentionally is not.

43:33 Reject but postpone because Life changes, people's business get better and Sometimes things are just not right for us then. The last thing you want to do is Damage a relationship with a founder.

43:43 In addition to the sourcing, which we talked about in the one fund concept, another distinguishing feature of insight. Is how you've made Sequential Typically small to begin bets in new deal types. If you look today, a huge chunk of your assets are

43:57 What I would call like private equity style deals, not venture rounds, not Growth rounds. Traditional sometimes. Big private equity rounds. How did something like that start? What have you learned about

44:08 that sizing for New types of deals'cause This is really important. Go back in time, nineties. Software wasn't big enough. To think about.

44:16 buyouts, even unlevered buyouts. It just didn't exist as an industry. There was also a Pretty strong belief. Broadly in Venture capital. That giving cash to a founder was

44:28 A four letter word. You never do that. That was rule number one. And I bet if you Talk to. Some of the best of the best. And ask them what they were like in the nineties.

44:37 Secondary Sales the founders were just Not acceptable. TA summit were breaking that model a little bit in the nineties. When we dug into software, we

44:45 pretty quickly realized if you built a good software company Assume that the risk there was that the founder got Demotivated. That was the reason you didn't want to give him cash. Now he could afford a house, he's not gonna work so hard.

44:56 And we just felt like if we break it, we can own it and we can manage it. We just got a lot more confidence as we did more of these Yeah. If for whatever reason it didn't work out with the founder, they decided to retire, whatever it was. We're okay. Running this.

45:09 We could find a new CEO. Obviously that's a big part of all venture capital jobs is Keeping management. where you want and not everything works out with the original Team.

45:19 We saw two deals. Yeah. The owners. Or Not typical shareholders. One was uh

45:26 Former founder that Full team. And we bought the company from him or we bought his shares. We're like, Well, we don't Have to demotivate him, we don't even want him.

45:34 involved in the business and then the other was owned by a large insurance company. Which is now called Vertifort. That was the first buyout. I'm aware of. There's probably a few others that were not done by

45:44 Private equity firms but It was certainly one of the earliest buyouts in private equity in two thousand ninety nine. We just started to see the other side of software as it got bigger. When they start generating cash flow, which So

45:55 Mid two thousands, very few. got to that scale where you actually saw the profits and the cash flow coming in. That particular buyout was interesting. We were high fiving with two times leverage from uh Crazy hedge fund that Believe in us.

46:07 That was considered a highly leverage software asset. Today Verdefor probably has nine times leverage. Very different world. But that was the beginning of software buyouts and we made a series of bets through the mid Two thousands. And then we also started looking at

46:20 Taking control of really high growth companies. We had a company that was in Australia and the founders were ready to go surfing and We had a CEO in our pocket that was ready to take over and we're like We'll take that risk. It's five million dollar business, but We think we can

46:34 Transition to the New management team and we had the tech team sticking around. And the more confidence we got that we could own control of something and not risk Like entrepreneurial.

46:43 DNA that went into it. Or it was past that. The more we started looking at. Those types of deals.

46:50 It's been a Fantastic. Sector Frost. We've made

46:57 thirty, forty percent growers or tweeners. They're not growing fast enough for a minority investor to get super excited except at a very big Discount. And they're not. Big enough Tams for strategics to go jumping up and down saying I need to own this asset. So what happens to it?

47:10 I might Suspicion is there are tens of thousands of those now. They're good companies. They shouldn't belong somewhere. There's a lot more folks like us now willing to take those bets. So it's not quite the same market it was a decade ago.

47:22 I said this to my L Ps. Stage is not a strategy to me. You could argue. Seed investing is a Very different.

47:28 Skill set generally. It's not like we're incompetent to look at something quite that early. We're not nearly as good as a lot of the guys out there and we don't have Quite the same deal flow. And biops requires a certain transactional skill set. Pretty

47:40 Straightforward to hire for. It's not. Like it hasn't been done before. Not only in software, but in tons of other industries. There's plenty of skills to do it. Then everything else is just a spreadsheet. sits in between and you're just trying to as accurately as possible put that spreadsheet together.

47:53 Risk adjust it and then Put a price against it and say what's it gonna be worth? It's a very big range. Of strategy. That sits in that middle and

48:02 That was a view that we had. Why Constrains. Up until two thousand seventeen, late stage preap growth was a really Cool. Market.

48:11 Multiples were expanding, companies were growing really fast, typically longer. And faster than you expect, and you could actually make four or five times your money. on those pre IPO rounds, even more if you did the consumer internet stuff. And then it started getting Really competitive. Hedge funds came in, sovereign wealth came in and

48:26 As I mentioned earlier, some of those rounds are now getting Model at two to three X. Lot of things have to go right. So we said, Well, we see it all. We can model them all.

48:35 Why can't we just But risk against that. model and try and find the markets that are the most attractive. The market recently corrected in twenty one. There wasn't a lot of things that you wanted to touch in growth.

48:45 A lot of the companies that raised a ton of money that he needed, but the ones that needed it you didn't necessarily want to invest in. But then this whole middle got neglected again. We're like Lean back in on the middle where you've got these thirty percent growers that look really nice, cash flows are good and Yeah.

48:59 Salmon farms and roller coaster ride software and things that nobody's really putting a lot of mind to and we did a bunch of those Deals back in Twenty three, twenty four. Now AI is probably re energizing.

49:10 Some of the growth stuff. I like the idea of Being able to move around. The market's based on where we think the most value is. They change a lot based on capital flows.

49:20 If you look at like the last fund or two. And you had to break that twelve billion or so. down into deal types between traditional earlier stage. Venture buyout. What does it look like?

49:30 early stage is like ten percent. Growth. It's probably thirty percent. Growth buyout, which is like this what we call venture buyout. It's probably another thirty Forty percent and then LBOs are probably twenty percent.

49:42 The biomarket. Look great. when interest rates were zero and multiples were expanding and you went from fifteen times cash flow to twenty times cash flow and That was a pretty interesting time to be Leaning in.

49:53 It's a little trickier today, but more entrance. Prices are Pretty good. Rates are higher. Multiples aren't quite as clear. Growth rates are coming down a lot for big Cap software.

50:03 That's not a fixed number and we don't want it to be a fixed number. It's a guideline. We're never gonna get Super early as a big number. Wait. Feel like

50:10 One, those get to be much bigger checks that could start at ten percent and grow to twenty percent. If we get back to an environment where we could be the lead investor in the next round. And then a lot of the venture biotech MA is a huge part of the strategy. So if you look at leverage for winning in a venture buy, you've got thirty percent baked in growth.

50:28 Maybe some operational improvements and then inorganic growth rates. That can consolidate. And Give you tail outcomes. If you think about what you want returns wise for these funds, how do you even triangulate it given all these different deal types?

50:43 How do you articulate it to your own? I think the biots were willing to take Five points lower than Everything else. Everything else is Blended. Pretty close to the same. Thirty percent is kind of a

50:54 Gross number that we target. We probably missed a little bit more on the Early stuff then. Venture bio are hit rates just super high? It's a lower risk profile, so it's

51:04 A market that's Yeah, yeah. Better? And very few competitors. And it plays perfectly to our sourcing engine.

51:10 'Cause how do you find these companies that are Selling salmon software to the salmon industry. Source. That's People jumping on planes and calling up companies in Norway.

51:20 It's not mainstream. They're not showing up at conferences. They're not showing up on Venture capital lists of Hot companies to back or Things of that nature. If I look at some of the deals you mentioned with talked about data breaks, you mentioned Monday.

51:33 Enthropic came out in the news recently that you were an investor in this big round. That sounds more like very traditional Venture growth style investing. We loved everything we saw, including Team.

51:45 Monday. It's an interesting company, but not The most obvious funded company was probably five million in size when we backed it. And see no other public one I'm involved with. It was four or five million in size when we got there. So some of them just grow and have dams to support those exits, but

52:00 It's tempting to always go for the shiny objects and we fight a lot internally about How do you become part of the generational companies? I'm curious to hear the anthropic story specifically just since it's so extremely recent, such an exciting company. That's a little bit more driven from our public strategy, just to be clear, so it's not In the core fund?

52:17 That's a good example of one where had I heard the story Two years ago, I would have had a much more positive view earlier. This is a classic case. Darst. It's phenomenal see you.

52:27 Has a very, very thoughtful articulate. view of his business and the second you hear like Okay, there is a mode. Or there might be a moat, and obviously the number is in the last Four months there are incredible.

52:39 It interflected with coding and When you sort of think about how he's invested around that, that's not Accidental. That was intentional. And Probably defensible.

52:48 It's a pretty Interesting. Yeah, to make. What do you make of those sixteen or eighteen funds that have emerged from Insight.

52:55 One way of thinking about it is why it's incredible lot of talent that's been able to be independently successful. Another way is Why didn't you try to keep them there? What are the size of this coin? Do and One of the biggest ones that came out.

53:06 I bent over backwards to see if we could find a role, but in the end His entrepreneurial Drive overwhelmed. What we could possibly do without breaking the system. So sometimes we just can't break our model and If you're that good and can raise that kind of money on your own, I can't replicate that economics for you.

53:21 It's just not doable. One plus one equals three in that case, and we couldn't have raised the billion dollars that he was able to raise. Just on his track record? It's just Inevitable. But I think it's

53:32 Healthy for us and Eighty percent of them we still have a really good relationship with these firms. We talk to'em all the time. We do deals together. McKinsey. It set a great precedent out there of what could be Done if you

53:42 Embrace that network and don't Take it as a negative, but take it as a positive. Obviously having partners at other firms I think is great for us to C deals and there's still a lot of Camaraderie.

53:52 Never goes away,'cause you're in that pit. Working Ten hour days. In a pretty tough environment.

53:59 We try to make it fun too, but they really connect with each other and Some of the best friends, I think. in the world that probably come out of that. And why do you think you've been able to graduate so many people? This is the Bill Parcell's question.

54:10 This is Might. Favorite question for C level executives. It's the same question. Who are your best proteges and where are they now?

54:18 I have one good friend of mine who's retired now, but He's got. twelve CEOs of some of the biggest best companies ever. Some of that was timing, right? It was days of Oracle and Oracle DNA was just awesome, but some of it was him. So we obviously built a

54:31 Great hiring system. Spotted talent really well. and then cultivated that talent really well. Then had a system. Of thinking in approaching in this case software, but in our case

54:40 Investing. That's really valuable. The training you get at twenty three at Insight is like No other job. in the industry'cause all you're seeing is

54:50 At bats. You're seeing more pitches than any other firm out there. You're twenty three years old. Your brain is a sponge. It's just looking at all those pitches. And you start seeing your own patterns. Inevitably you're gonna become a pretty good investor. It's not the same as

55:05 The product driven Strategies that other venture funds have. And we are a big pattern. Recognition. Business

55:12 Investing is pattern recognition. Everyone can draw their own Graphs out of those patterns, but That's fundamentally the Court.

55:19 Thesis You could be the smartest guy in the world. But if you don't see the patterns or if you don't see the deals. Your track record's not gonna be that good. The culture of just how important sourcing is. To being a successful investor.

55:31 We just drill into people at a very young age. That sticks with them. in their later life and I think it makes them look good. to the peers that they have that didn't have that culture.

55:40 If we're building like a Madden player that has Points and different attributes. And you were to give Your self scoring on C pick and win. And maybe support as well.

55:50 But are especially interested in see pick and win. It sounds like C sourcing. You give yourself A crazy high score. We see every pitch.

55:58 Picking in the middle is Awesome. Our picking on the edges is okay. When you see something that's Got a little bit of an edge to it on the source. Where the numbers are pretty tight.

56:07 And evaluation is not West Coast. Crazy. We're really good. And we're really good at winning too. So if you really think about what I do for a living, it's you gotta win deals, you gotta pick'em and you gotta make'em work. That's it. On the picking, we're really good in that middle zone, especially some of my partners.

56:22 that can parse the numbers, look at the trends, and figure out how to get that spreadsheet as accurate as possible. At the edges. It inherently gets harder. We have some disadvantages on early relative to California. The whisper is so strong here, you gotta lean in. So there's that whisper deal flow.

56:37 And trends that we won't see. And on the buyout side. There's some equally great investors. That's Game of

56:44 Combination of Discipline. Focus and operational execution. And there's some great firms out there. So I think We do a very good job on that. What?

56:53 Really, really good in our sweet spot. We still could use our sourcing to our advantage. On the early stuff, but we have to use the sourcing to get us that edge. If you just Wind us up against the best of the best.

57:03 And well. Those guys are awesome. I'm not saying we're gonna be Able to Connect the dots that they connect'cause they're just using different dots to make it What I'd call intangibles work. Sounds like the winning is quite successful in your sweet spot as well.

57:15 How do you do that? What are the keys to successfully closing a deal in that sweet spot? First and foremost. Showing up. Hard. Getting on planes. Invited or uninvited, showing up to people's stores and asking them to have a conversation.

57:29 We started with Gee, we know software really well. We can introduce you to five friends who can help you out, run your sales force, run your marketing organization to hundred and thirty people. F Super smart McKinsey folks that could do any analytical thinking that you might need to The best of the best sales process folks to marketing process to HR process. We bought

57:48 Pretty expensive. Large interest in Riviera Partners, which is the largest Tech recruiting firm for CTO and CPO talent.

57:57 Which is Really interesting acid. Especially in the AI age where talent is everything. We've put a lot of emphasis on talent. We've got fifteen people that do nothing but

58:05 We've with Fortune five hundred companies. If you're a CEO First and foremost, give me revenue if you're a small company. That's number one ask. Number two askably.

58:14 Give me people. We've really surrounded those two functions with Resources that we think could be. Competitive and we've helped. Jump start companies where we've gotten the first

58:23 Ten million revenue. It's a big impact. In the journey of some of these companies in terms of Getting him started. We really push hard to bring that. program to be as big as it can be.

58:34 And constantly innovating on that. It's all about Wing and so it's a combination of Personal connections. Showing up and caring about the entrepreneur's problems.

58:43 They have choice. We know they have choice. Winners were just here for the ride. We've talked before, you and I about The

58:51 strategy of investing firms and how Even though all these firms are investing in companies that they hope have a great vision and strategy and roadmap and all this kind of thing that Investing firms tend to have that to a lesser extent. Either no strategy or Not big institutionalized tragedy. I would say the majority struck me as

59:11 Our strategies were really good investors. Which is true probably for some of these guys. Like they probably are really good investors. And they kind of tweak that into What might sound like a strategy, especially to some LPs, but I think if you really press what I just said, there's only four things we do. We find deals, we win deals.

59:26 We select deals and we make'em work. And then you Put that layer on how do you do that better than everybody else? Put selection aside'cause that's the hardest. Institutionalize.

59:36 How many firms really can articulate and there's lots of ways to do it. Mark Andreessen was on here. He has an absolutely great strategy. different than us and we could never do what he does. But he's thinking about it every day. And he's using his marketing engine. I think he was just recently quoted as basically I'm a marketing firm with an investment arm.

59:53 I wanted to be a software company with an investment arm. That was kind of my pitch. Ten years ago to L P That's how I thought of myself. people could think of us as we know so much about software, they could outsource a lot of that know how. And then we have an investment arm to monetize that.

1:00:07 There's lots of ways to skin the cat. We've just taken one approach. Some firms obviously can Do it. Just five. Your presence of being. First.

1:00:15 And they've made great investments over. Other firms might pick different Industries. Some firms have done it in buyout space where they've just

1:00:23 Use capital combined with expertise to just Be able to clean in faster and harder? There's lots of ways to create moat, but Most of us. Back our way into this.

1:00:33 Life. I started when I was very young, but I think a lot come to this after they've had other careers and other things. And this is sort of a nice fun thing to do, and absolutely is. Putting rigor around that and operationalizing it.

1:00:46 We hired one of my good friends years ago as a Chief Opering Officer of Insight D Subsequently started his own firm, but He was a mechanical engineer at McKinsey. Who spent time at Putnam and

1:00:57 Lehmann. He woke up every day and it was like How do I make that pencil do it? Something without a human touching it. That's how his brain worked. And mine Works in a very similar way.

1:01:06 From it. More strategic side. But it's sort of systematizing. What tasks we do that we could have others do better. And then how do I create mood?

1:01:14 To the extent that it's possible'cause capital is not a huge mode. It was with the Vision Fund. That was like awesome strategy. I was outraised everybody in a way that I could do deals that no one else could do. Warburg Pink has had that for a while too when I first joined. They were significantly larger than almost anyone else out there.

1:01:30 But That's increasingly difficult. I think Toma Bravo could do that today with her Scale it. In the bioworld. Capital's tougher though.

1:01:37 So you just need to think about Those four. disciplines and say, Well how am I gonna be way better? Some guys do it by Appearing on podcasts and Getting their thought out and their

1:01:46 vision and excite the founding community. How smart they are about. An industry, that's a perfectly legit way to get deals. Others. Have

1:01:54 cultivated networks in different ways and winning could be I'm just gonna get on the plane and do it. An individual partner that Works my tail off and It's not very leverageable, but it's certainly a good strategy.

1:02:05 How do you institutionalize systematize that? Mm. Operationalize it is not easy. We found also scale was a real Opportunity.

1:02:13 And I'd Mark Henderson talk about this too. Every industry But ours was considered to be better. As they got bigger.

1:02:21 This type of investing, tech investing was like no we want you to be a cottage industry where Smartest partners do all the work. I remember very distinctly Sitting down with one of my partners in two thousand

1:02:33 Fifteen. I'm like why do LPs have this allergic reaction? to the word scale because again, everywhere else it seems good. I Look at those four. Buckets of what we do. I'm like Clearly sourcing.

1:02:46 Is better with scale, like Can see everything. Might have to de be how you pick, but Great that you get every pitch. You could certainly see how winning.

1:02:54 Can get better with scale. I've got more resources. I could support every round that you need. Can be your one stop shop. And then obviously on the operational side, that's the biggest impact. Scale could have,'cause now I could really hire the best and the brightest. On my team.

1:03:08 Yeah can support your business in whatever way. You need. And then selecting It was kind of a

1:03:13 Bit of a hard one for us to wrestle around. A decade ago, most firms that scaled scaled in a few dimensions that were understandably scary for an investor. One was I'll do bigger deals. Smaller deals. Like maybe they're Price differently, maybe the competitive landscape's different.

1:03:29 There's a lot of reasons why just writing a bigger check. Often won't yield. Better returns. So scaling by check size was not necessarily a clear direction in my view of how to do.

1:03:40 Scale. Some might scale with geography. We tried that. Oh, was that painful? Or

1:03:45 Ninety percent in New York City. By headcount and probably a hundred percent by investment. Commitments. Certainly I see is all in New York. It's really hard to export judgment.

1:03:55 We had a European that raised the European fund and it was the worst of all timing. It was two thousand and I was ready to pull my hair out. It was so hard. to create consistent thinking and judgment that you could say, Okay, that judgment

1:04:08 Reflects the same judgment. That we've built over the Five, ten years before that at Insight. But geographic scaling is a really common strategy for a lot of folks, but I could see why LPs would be nervous about that.

1:04:20 And then lastly, people scale by doing something that they weren't doing before. I'm a great software investor. Now I'm going to do healthcare. I'm gonna do Financial services or No I'm gonna do.

1:04:28 Credit or Something. Maybe that's outside my core competency and Blackstone others have done that really successfully. But

1:04:35 You could argue it's not easy. Maybe. Blackstone. Did a great job of it, but Two other firms.

1:04:41 didn't get those top quartile funds in the areas that they didn't have a lot of experience in trying to scale. And certainly there's plenty of Examples. First. But something. in a different asset class and struggle to make it work.

1:04:53 We kinda said, Well, we don't need to do any of those things. Software's just growing. We're barely scratching the surface. on what we do already. Why can't we just do more

1:05:03 Of good deals. In the category we love and know. If we Put aside all those other

1:05:10 Just chase bigger deals because they're bigger. We'll do a bigger deal because the world's gotten bigger. That's fine. Data bricks If you just divide everything by ten, looks like a great Class growth deal. There's nothing. unique about it other than it just happens to have more zeros.

1:05:24 In its business model, open AI even more true. If you just turn twelve billion into twelve million, you're like, Wow, this is a fast growing company. Why wouldn't I jump at writing a ten million dollar check? So some of this was just A world that's just gotten Tremendously bigger. to when we first started, where that would be a good reason to write a bigger check.

1:05:41 But if we sort of just said We're gonna keep the same underwriting. Criteria. In the same market. And just grow with the market. Market's getting bigger.

1:05:48 Which means there's more good deals out there. We're really good at winning them and finding them. Why shouldn't we? Consider them. Why should we just stick to some smaller Strategy or artificially

1:05:58 Constrain what we do. If Understandable. You want to keep a bar high and we've definitely over the years sometimes Fuck that up and And Caught up in the moment, if you will.

1:06:08 We looked at scale. In that lens and we're like this is Win win win. We were in the right position to do it because We were organizationally already aligned on sourcing, we were already aligned on management.

1:06:20 The investing side and the selection side. And that was the part that we Definitely. The start. We hire young kid.

1:06:29 Because Less Young becomes principal and ultimately junior partner. They were on their own and we kind of had a little bit of partners around, writing deals. We bring it to the investment committee and we debate the deals, which is Pretty typical, I'd say, of a lot of

1:06:43 Senior partners, young partners, but Usually they're kind of all doing their own Tennis match. Everybody goes out. Plays tennis. Compare scores and

1:06:50 We won the match or we won the Tournament. We were trying to be more like a soccer team, but Wait.

1:06:57 Young partner. has a deal, comes to me and it's like mom and dad. I'm a little busy. You're only hearing one third of what's coming out of my mouth. I pitch him to deal, he nods his head.

1:07:07 We do the deal. Steal blows up. Jeff doesn't want to spend time on it because I didn't really take ownership of it and all of a sudden young partner's now stuck with uh Deal that's in trouble.

1:07:16 And we're like, This isn't working. We need to Think about How you get the most experience. On the judgment.

1:07:22 As well as the other parts of the operation that were more obvious. And so we Said, Well look, there's some of us who've been here at the time it was six of us. For twenty years. We've all built track records. We've all been through Multiple cycles.

1:07:33 We have enough time in the day to meet Every company that a team of people that would work with us. Including young partners. Sources we don't do that many deals a year.

1:07:43 Except for twenty twenty one, but It wasn't an insurmountable number. It wasn't like I needed to spend twenty hours Instincts.

1:07:54 My instincts may be more on call the intangible. excitement around the deal. Other partners are really good at the financial side. We keep tweaking that a little bit, but that was fundamentally a breakthrough in how we can try and scale judgment. Without breaking. the model and saying let's just have pods of very experienced partners

1:08:11 Managing and working with other partners. Both operating partners and young Hungry deal partners. And combine that. DNA into a more cohesive

1:08:20 Team approach and then make sure that An investment committee member owns every single deal. And if somebody leaves, it's on me. If somebody screws up, it's on me. And there's no hiding it. One thing you hear a lot is

1:08:32 Even in firms where there's Your level of systematic. Setup and rigor. That it's really important that the leading investors be able to just throw everything out and sometimes make a deal or do a deal based mostly on the intangibles.

1:08:46 out of the spreadsheet. Can you talk about your experience with that and how you think? About That type of deal. We can mobilize.

1:08:54 Fifteen people. From my McKinsey Breens to my Sales ops team, your marketing ops team. Dive in.

1:09:01 And really try and uncover as much as we can in that very short time window that we have. Once in a while I probably am the only one who Those what I call concept deals. Yeah.

1:09:11 A big price. Even I'm not doing that right now. I'll do a little bit of those on the smaller side. where I feel like a unique team with unique technology and there's not a lot of numbers to support it, but that's gonna be a Allocated.

1:09:22 Part of the portfolio that's gonna be very small. That's more risk managed again by check size. And we have that benefit. So when we start seeing something that Maybe our spidey senses are And we're like this could be something special. Maybe

1:09:33 We can Use check size to manage it more intelligently. But it's really not a big part of the portfolio. It's not What our DNA is we started with growth. Not saying we're only in growth, but

1:09:44 We try to put some Metrics around most of what we do. One of the spillover effects of twenty twenty one is all these companies that got funded with tremendous amounts of capital that don't really have to die because they had so much money put into them. Maybe they're starting.

1:09:58 One of the weird things is that market prices haven't really caught up to the reality of the underlying businesses. And I'm curious for your perspective on what things are generally worth in terms of like a simple multiple Everyone kinda thinks in ten times multiple or something for a software business. But I think these things are often worth way, way less.

1:10:15 By the way you could see this with the secondary market. It's a little hidden secret. Go look at how some things trade in the secondary market. If when you were at seventy cents on the dollar, your marks aren't on us. We look at GDR.

1:10:25 Right. Those are the two things we're gonna look at in valuations and that could be A really disappointing three or four times revenues. For a lot of companies that were backed. in that time frame where they're not growing fast and they have low GDR.

1:10:39 What would those numbers be? If you're to pay three times for something What GDR and growth rate does that imply? That might be Low single digit growth and eighty percent GDR.

1:10:48 So if you go into the public markets and look at those companies. They're disasters. Fewer even public today. It was a category that Really fast.

1:10:56 A lot of those went public and Ultimately the market's caught up to the unit economics. Long term this is cash flow. We have a company

1:11:05 The has a mid eighties GDR, but it's CAC is three months, which is a very low number in the world of Get.

1:11:13 So you can make a thirty percent margin business. If it's an infinitely sized market. With a relatively low CAC. This is an exception to everything I'm about to say, but if you're in a more normalized enterprise world you're gonna have twelve months.

1:11:25 Which means it's One year. Up front to get that. And if they Only last for four years.

1:11:32 You can kinda do the math and say, Well, that's present valued Worth maybe. Two and a half times. Dollar invested, plus I've got R and D.

1:11:40 Cost have you got support, G and A. You're not gonna make a lot of money. So those companies tend to be in the ten percent. Maybe, maybe squeak out twenty percent margin. Versus a hundred percent GDR company will have fifty, sixty percent marches.

1:11:51 If you just thought of multiples of cash flow translating to multiples of revenue, that's gonna give you a big Delta. So if I'm willing to pay fifteen times cash flow for a given growth rate. That twenty percent margin business is three times revenues. A fifty percent margin business is

1:12:05 Seven half times review. I think the market's more or less eventually will look into that. Financial model. And

1:12:12 They're just super efficient in other ways. So you could still have Some of those metrics that I just described being a little bit off. But still get yourself the ultimate you're trying to get the cash flow margin. That's that's all that matters is Multiples of cash flow and then predictability of that cash flow in a recession, how good do you feel? In whatever existential risk.

1:12:29 Somebody could Coming in your Model and disrupt it. So those are just the framework that I think most public investors in Late stage.

1:12:36 Why out guys are thinking. How resilient is that cash flow? Are you Running a core banking system. For a bunch of banks, that's not getting ripped out in a recession. You don't really care about a recession. What's the growth rate of that?

1:12:48 Cash flow. And then What's a reasonable multiple based on that? And some of that'll be interest rate sensitive. And then obviously you have a different world once you start to get to hundred percent growth rates, of which there are very few public company. But that's when you start to see

1:13:01 Wonky multiples. You just can't model those out in your exits. The rare earth. Kind of numbers. One of the things that I'm curious about the temptation around.

1:13:11 Given how the markets evolve. is the Andrels of the world. non software technology companies. Quite big, quite quickly.

1:13:20 And consumer too for us. If you look at the biggest exits Of the last generation they were Internet. And mobile apps.

1:13:28 And we did not really Lean in on that because it was sort of outside our Understanding and mandate it also Really favored the West Coast. Yeah, we looked at Uber at a really attractive round.

1:13:39 We fought like hell as a partnership over it and we finally Bath. Obviously huge mistake. It was a great outcome. Managed to get Twitter over the line. Before.

1:13:48 Basketball took over, but We've just gotten comfortable that our misses are so high in those categories over the years that we're like Whatever. We can't be everybody to everything and we can't do it all. It's obviously.

1:13:59 hard'cause you sometimes have to benchmark yourself against folks who do have exposure to the markets that might be the better markets. But Sticking to what we know well and Enterprise software. And flavors of that.

1:14:10 It's Both massive an opportunity and the returns be incredibly consistent. When you think about the God knows how many first meetings that you've done with founders across the last thirty years or so. How would you describe the method that you use to run those personally? different investors on your team will do it differently. But I'm especially curious about your method.

1:14:29 I've developed I'd call a similar line of Start which is I love Origin stories. Always in your mind. Why'd you choose to solve this problem?

1:14:38 What were you doing before that made you think about this problem? And then I love to get to the value problem. I just love hearing how you're making somebody's life different and better. And why customers are gonna be excited about buying your solution.

1:14:50 I'm probably the least focused On Drilling in on the numbers. I mean I like to hear the top line numbers, but Entrepreneur is probably aren't always the most Forthright about what they give you. Like they give you throw a little more happy years on those usually.

1:15:02 Which is where diligence can Corroborate or not. But those are the Stories I wanna hear is What makes you tick?

1:15:08 And What's this passion that you have about what problem and why? Those really range a lot. And response. Like you hear enough people pitch and you're like, that one really resonates.

1:15:19 Elevator pitch, I got it. Some you need to Double click, double click, double click. You know I was on the call today with one that I was like Think I hear you but

1:15:27 I'm not quite getting That mood. I'm not quite getting Uh long term. direction of where you're gonna be. Doesn't mean it wasn't there, but yeah, it's a forty five minute call. You're not gonna

1:15:38 Now exactly. Sometimes the numbers. Tell you way more than The story you need to always Take a look when you see numbers that are exceptional.

1:15:46 When you have the group of partners that you have at the top. that you said have been with you twenty five years, sometimes ten years, just the newbies on the team at the senior level. What do you attribute that? What is your management style with those people? How do you relate to them? What would they say about you? I am pretty Forgiving.

1:16:02 On mistakes. Some of my partners would say too forgiving, but I Try to see inputs. I have a thing that we instituted insight. Changed a little bit from the vision, but I call it the X factor.

1:16:14 Type A Employees they always want to know where their careers are going and Always ask me these tough questions. How do you give somebody Valuable career advice in what we do because the outputs are so long.

1:16:24 Coming. And there's so much luck. Let's not kid ourselves. There's a lot of luck in what we do. And I Start with

1:16:31 Well if I took you out. What would have happened. With a deal of open source. Wouldn't We would won the deal.

1:16:38 What we've decided to do the deal. How much of Those decisions did you play? In that process. Next is the removal of you.

1:16:46 Are you adding X to that? equation. It's not easy to review somebody that has great inputs, but the outputs are long and coming and One of my best partners had a really slow start.

1:16:57 Made a lot of mistakes, but I saw his inputs were great, I thought Way he was thinking about things was great and he was like a sponge. To get better and now he's probably the best investor in the firm. People learn, people get better. It's a marathon. Obviously at some point.

1:17:11 The marathon ends, but That's generally how I Try to approach it. My style is similar to what we do with the analysts, is really to give people An environment.

1:17:19 Where they could be creative. Take risk. Probably the thing that I Still do the Best for the

1:17:25 firm at large is there's two different approaches, I think, to a senior partner at a firm. One is the one that's constantly holding you back. Um Scaring you.

1:17:35 To take a risk. The other one's shoving you over the cliff. And giving me the confidence. It's okay. I'm with you.

1:17:42 I've got your back if it doesn't work out. I think I'm definitely in the latter camp. My goal is I call it the touch push. You're at the one yard line, you've got one little thing nagging you about the deal. It's okay.

1:17:53 You've thought about it well. The risk reward is good. It may not work out. It's not your career on the line if it doesn't. If you look at Generational Firms.

1:18:01 Risk appetite is probably the biggest challenge. Once in a while they get out. Wacky. successful investor who just re energizes the firm's risk tolerance. And it goes back up again.

1:18:12 More often than not. It gets consumed by This is a great business if you don't Get fired, you're gonna be pretty successful. The impetus to really

1:18:22 Stick your neck out. Um The spectrum is really low. People. Especially

1:18:28 Mm. They don't. Organizations. I hope they make mistakes. My biggest frustration with one of my partners who left.

1:18:35 Was the things he didn't do. Why didn't we do that, deal? You always said Five reasons not to do it. He was very conservative and to the point where we

1:18:42 Missed a bunch of really good things. You need the balance. I've got a lot of partners who are Holding people back from the cliff. It's a good

1:18:49 Yin Yang of Some folks that are gonna make you feel really Scared to stick your neck out. But then hopefully especially my senior partners knowing I've got their back. Always. I am never gonna get upset with somebody if they took a calculator risk that didn't go well.

1:19:03 I'm curious how you think about something seismic like AI, both in terms of how it will affect the companies that you already own stakes in. Or own outright. as a disruptive force, how you use it yourself. To make insight work better. Investment opportunities do it create like an anthropic.

1:19:18 There's a lot going on with this nuclear bomb that's gone off in a good way. How do you process it? I remember like a bunch of years ago, even before The chat GPT Ah moment. And I'm not

1:19:27 Technology. Wizard in the firm by any stretch, but We were already doing vision deals. And I could see language was next. I was like imagine if you can automate

1:19:36 Vision and language. And The workforce there's a lot of jobs for That's Pretty much what you do.

1:19:43 I started talking about it at some of the L P meetings. And then we were doing the vision stuff, which was not in any way Exploding. Like A language has exploded.

1:19:53 Not sure why. Like never got the buzz. I don't know. But vision just for whatever reason was good, but not Compelling and you can look at MRI companies and Ten years later there are eighty million

1:20:03 I think the biggest one, maybe. What happened to that? I can't explain it. But for some reason the language took off. We looked at other waves and It was pretty easy for us to kinda sit on the sidelines.

1:20:14 Others on your show are Big fans of blockchain. Maybe now it's crypto because the blockchains No one could articulate. Use case and it was Back.

1:20:22 Well I debated this one. People it's twelve years in, come on. There's a whole religion around it. And maybe someday every bank will be on it. Whatever, but it's definitely Way longer than anyone forecasts.

1:20:32 To be Valuable and I certainly had a funny story someone's told me. All the technology guys I love. Well, you think the technology's kinda meh. But the finance aspects of it are really cool.

1:20:41 And all the finance guys are like, The finance aspects of this aren't so great, but the tech looks really cool. I'm like Hm. Nobody was like, this is the best database I've ever seen in my life. Who understood database technology and finance guys are like, this isn't really how the world in finance It's gonna work.

1:20:55 So we've looked at other waves of technology and been a lot more saying what about the potential and Even The self driving car. That was a Big hotspot. A decade ago, that was more vision.

1:21:05 This one. is different. And I don't know if it was The problems it could solve immediately. This certainly the consumer side of this is Mind blowing what you could do as a consumer and

1:21:15 Watching my own family in the last three months. Convert from Google search to Gemini or to Chat GPT and It was a game changer. In so many ways. And

1:21:25 We kinda were Playing around the edges of it. In some ways and then About a year ago we started to see the application of it where we really played the most in The commercial

1:21:35 Landscape. And now you're seeing Phenomenal we would pray it. Twenty five agent AI bets. Yeah. We think could be really profound in the

1:21:42 Commercial markets. We've been noodling on all sorts of impacts it's gonna have to Phenomenal growth engine. It's also Sucking a lot of the air out of it.

1:21:51 traditional software market. So I think the bear case on software Hey, I could just use Claude to write my next SAP or not. Losing any sleep over that. Quite the opposite. Why not?

1:22:02 Because that's not what software ever was. There was never a technology barrier. It was always in business. knowledge barrier. Maybe you could literally have AI look at SAP and plagiarize it and try and build something equivalent. I'm just not worried about that market.

1:22:15 Changing. First of all, we haven't seen any of it in our companies. Cost building software. It's inching down, but it's not. collapsing overnight and I can't explain exactly why. But

1:22:26 The idea that a complex application. is gonna get built just because we have a better productivity tool. We've gone through. generations of productivity tools and software development. This is more profound for sure. For those who are old enough, the 4GL is a pretty profound tool, too.

1:22:41 Because back in the day you you just had a database with a screen. Applications weren't all that complicated and the four GL was meant to Basically make it really easy to build the screens. It was impactful, but it's not.

1:22:50 Radicalized every SAP and all these other companies. Didn't get. Displaced because of it. But it's taking away a lot of Probably

1:22:58 Budget. I think you'll probably be seeing a lot of companies. Feeling the pain of That's not the cool kid on the block to buy. CRM software today. That's just not my priority. I want to automate something else.

1:23:09 So that matters. That's growth rates. There's obvious a few companies that are probably More squarely. challenged by what it can do because they were probably working around documents and Doing image recognition, things like that that

1:23:20 What's your point of existence now? By and large, I don't know Worry about the Usefulness of software so much as Budget being

1:23:28 Moved away from software to AI. And then on the flip side. Which is what we're really focused on is it's a massive TAM accelerator. My course offer's not as sexy.

1:23:37 Now I can Go after a whole set of problems that my customers have. Yeah. I before could never automate. I'm on the board of

1:23:44 Come on. Serum like Vertical applications. Where we're just capturing data. Ninety five percent of the person's day is

1:23:52 generating and getting the data. If I can automate. A big portion of the ninety five percent of the time that you're Getting data into the system. That's hugely valuable.

1:24:01 We've got already half a dozen or more companies really reaccelerating. off of new products that they've launched in very Short time frames. that are creating massive TA expansion for their businesses. And I have no doubt.

1:24:14 the bigger public companies are Working aggressively at the same thing like Microsoft. Microsoft looked at that. Can I build a new PowerPoint with it? Probably. I don't know, maybe, but Can I make PowerPoint?

1:24:24 The existing product way better with a co pilot. Probably can. I think that's way more Interesting or Adobe. How much better is Adobe that has a

1:24:33 Three percent market share of humans. Photoshop And now it could expand it to twenty percent because user interface And learning curve has gone down.

1:24:42 By an order of magnitude. My suspicion this is largely TAM expanding. For the established companies, they will build products. As well. I don't think it's a great

1:24:52 Use of time in most of the Legacy apps to me try to Yeah. Engineer them with a new product. Just more to that market than just

1:25:00 The actual Body of code that Runs your core banking. There's just a lot more going on. I think we're still quite a ways away from even

1:25:07 Getting to the point where the speed to which you could build software is so dramatically better. You said before that you really just like to win and that's maybe like a major driver of all your activity. You have this interesting combination of You seem pretty low key, and yet your activity in the firms is quite intense.

1:25:23 This is kind of an interesting dichotomy. And I'm curious where The drive to win came from. I don't care about beating other people. So much as just

1:25:32 Satisfaction my own success. Good morning. So it's a different kind of drive and I think other people get I have friends who I play golf with like I can't play without betting. They can't have fun. They can't try hard if they don't have

1:25:44 Something on the line. That's how competitive they are, but they're competitive against me. They wanna beat me. That's what drives him. I'm like, I just want to get my own score as low as possible. If you s shoot a sixty five, I High five and you'll buy you a beer, I'll be the happiest guy to give you twenty bucks. I don't really care at all if I

1:25:59 Have a good round. And I think the call for the firm Yes. Maybe modeled after that. I attracted people like that. But I would say the

1:26:06 Majority of us? Um Much more focused on our own success than it is that somebody else isn't At the other end of that successful? That's

1:26:15 What Dorphins for the day. These conversations always go the same direction where ninety eight percent of the conversation is about buying. And almost none of it's about selling. What have you learned about

1:26:27 Selling, selling well, when to sell. Had a good year on that one. We've sold a lot this year, but The easy things are the ones that come naturally. IPU

1:26:36 Knocks on your door. They pull you in yourself. The harder one is when you have to push it. To make it happen. I think at one point ninety nine we had a four X on our ninety nine fund.

1:26:46 in the public markets that we couldn't sell. Who are locked up. Get off the lock up, it was down to a one X. These are quick windows that come and go and you kinda learn and

1:26:55 Some of this was also we put Covid as a piece of it. Which was A combination of the demand shift. And change, you know, some ideas that look great. twenty twenty one virtual conferences looked like a great idea.

1:27:07 It felt like that could really have legs even post COVID. The answer is They had no legs after Covid. Or very little legs. And then some of it was just us.

1:27:16 Decision making probably not what we thought it was. Oh resume. And We had Like everybody else a year of

1:27:22 Remote work. Really, really bad. Never gonna do that again. If you think about the next decade of insight, how do you think it'll change? We're Feeling.

1:27:32 Much more of a rinse and repeat. model I don't think We have Crazy ambitions to Expand the business beyond what we're really good at.

1:27:40 Well absorb. What we think are great deals. But the bar has never been higher and since the summer of twenty two. We've been pretty focused on Making sure that

1:27:49 W Make as much money as possible for LP. I'll call it a little bit more boring. I am At one time.

1:27:55 Firm building ambitions that I still have a little bit of Where we could add assets. Making us the world's best software company. What would make me a

1:28:03 Great partner for my Portfolio. We still have some of that ambition, but it's gonna take a different flavor. Is there anything essential about Insight that you feel like we've missed? There's definitely A lot of positives on our culture that

1:28:15 Don't get seen by entrepreneurs. It's a combination of We don't have to be the loudest voice at the table ever. We wanna be the most Helpful voice at the table and we don't need

1:28:25 Credit for that help. So we want to stand behind the founders who really do a lot of good work. internally that reflects itself in as much as you can do in this industry a really collaborative Teamwork approach and we've got a big firm and there's no doubt you'll always have People stepping on toes, but by and large the ideas.

1:28:41 To really support each other in it. Meaningful way. We talked about Winning, which is a big part of us. We also just never want to give up.

1:28:48 We really, really Wanna Be there to the end. We're lead investors, we're not passive investors. Somebody's gonna be on.

1:28:55 Top of these companies until the end. It's important for us. Even though that's not where you make money. Those are the worst hours of ROI that you can possibly get is taking a deal that's Gone sideways and trying to fix it.

1:29:06 It's really satisfying on the few times that you can actually turn it around and Just feels like it's The right thing to do. Well it's really cool to get. The inside view on this.

1:29:15 It's a firm you hear a lot about because it's so big. You've made so many great investments over the years. It's very hard to figure it out from the outside. So thank you for the two hours. Such a fun time to explore it. When I finish these, I always ask the same traditional closing question. What is the kindest thing that anyone's ever done for you?

1:29:30 Mentoring is Always been Some of it might be. Broadly self interested, but most of that is selfless.

1:29:37 And I've had Two. Examples but my first job at Warburg. The person I work for there Pold me out of a

1:29:43 Hat in terms of resume saw something in me that No one else did I. Think I'd tried it. Getting a job at a hundred firms. And he was the only one who was willing to hire me.

1:29:51 I learned a lot. In that experience as well. But then I think when I started Insight We sort of randomly bumped into My name is Steve Freeman, who is the Just then retired.

1:30:00 See you Goldman Sachs. Think it was a mutual. connection from one of the high net worth guys at Coleman that knew one of my partners. Steve. For reasons I still don't know.

1:30:10 One of the nicest guys I've ever met. And Gave me amazing Council. In the first decade.

1:30:17 Ultimately introduced me to his Cool. CEO Bob Rubin, who also became part of that mentoring. And just with such a nice Access for me who had no one.

1:30:27 Else to talk to. Nice to Air. Issues challenges. And focus so that to me was

1:30:33 Certainly one of the best things that Happen to my career. Jeff, thank you so much for your time. Awesome.

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