Deven Parekh on the State of Startup Investing

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

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Episode Transcript

Speaker 1 (00:00):
Bloomberg Audio Studios, Podcasts, radio News. This is Masters in
Business with Barry Ritholts on Bloomberg Radio.

Speaker 2 (00:17):
This week on the podcast, I have an extra special guest.
What can I say about Devin PreK, Managing director and
Insight Partners, major venture capital slash private equity shop that
has had just countless, countless exits. He was an early
investor in Twitter, Buddy Media, Eves men Apras, Insights, Website,

(00:40):
Pros Turnton. They focus on software, which is much broader
and more varied than you might imagine. They are global
in their footprint of where they put money to work,
and they're not just early stage investors. They do a rounds,
B rounds. They will help provide liquidity for a company

(01:02):
that's looking for a partial exit, as well as strategic
investments and m and a sort of from a private
equity shop. I think Insight Partners is unique because they
have a foot in both venture and pe worlds. I
thought this conversation was fascinating and I think you will
also with no further ado my discussion with Insight Partners.

Speaker 3 (01:26):
Devin correct, thanks for having me.

Speaker 2 (01:29):
So let's start out way back when you get a
bachelor's and economics from Wharton. What was your original career plan?

Speaker 3 (01:37):
Not business?

Speaker 2 (01:38):
Not business.

Speaker 3 (01:39):
I actually in high school was a total science nerd. Know,
competed in Westinghouse and oh really what area? Biochemistry? Microbiology?
Actually one first place in microbiology the International Science Fair.
So my path was kind of being a doctor, probably
being an mdphd. I didn't actually start pen in Warden.

(02:01):
I actually started the College of Arts and Sciences. I
started as a biochemistry major. I was doing research at
the medical school my freshman year, and you know, I think,
like at everything in life, there's a lot of fate
and who your roommates are and the people you meet,
and you know, my roommates were all business and I
was the only kind of science person, and I thought, well,

(02:24):
maybe I should take maybe I should take a finance
course or an economics course. So I did freshman year.
Found it really interesting, And after my freshman year, I
decided rather than doing working in science for the summer,
I was going to work on Wall Street for the summer.
And I managed to get a job in Wall Street
between my freshmen and sophomore year, which was unusual at

(02:46):
the time, but but I did. I came back after
that and said, well, maybe I can put these two
interests together. And I was going to do biochemistry and finance.
I was going to do the dual degree, you know,
with a degree in Wharton and a degree in colleg
Now they have pre set programs for all of these things,
but at the time they didn't. But it would involve

(03:06):
taking you know, between six and seven courses every semester
and not not These were not easy classes. These were
like organic chemistry and quantitative finance. And I just thought,
this isn't going to be a great college experience if
I do both. I kind of needed to pick, and
so I ended up picking Wharton. And of course people
are like, well, what was the thought process you went

(03:27):
through when you did that? And the thought process probably
was not. It was I was impatient, and I saw
the route for medical school was I was gonna do
four years in medical school. I was thinking at that
point I also wanted to do research. I thought maybe
I was gonna get a PhD. It just seemed like
a long time in school before I could actually start
my career as opposed to business, I could I could

(03:50):
kind of jump in right away. And I always thought
that at some point in the future, I would somehow
bring these two interests together. I didn't know how that was.

Speaker 2 (03:58):
That was the obvious question because I on the list
of areas you invest I don't see a whole lot
of healthcare or biotech or genomics. But have the Twain
ever met.

Speaker 3 (04:08):
Or they actually have, and they have in two different ways.
We do now have a team at Insight that does
invest in in kind of therapeutics, biotechnology, kind of therapeutics.
We have a team that does it. I'm involved in it,
but I'm not the one doing those deals or leading
those deals. But it's actually probably also manifested a lot
more like philanthropically. I'm on the board of NYU langone.

(04:30):
We're funding a bunch of research there, as well as
a bunch of other, you know, kind of universities. So
philanthropically it's been a big focus of mine, and so
it's been enabled. I've been able to bring bring that
kind of interest back into my life in a way
that's been satisfying.

Speaker 2 (04:47):
Huh really interesting. So from Wharton, how do you end
up on Wall Street? What's your first gig?

Speaker 3 (04:53):
Well? I worked for the summers. I worked at a
small biotshop after my freshman year. After my sophomore year
work a credit sweets, and after my junior year, I
was actually first Boston at the time. After my junior year,
I worked at DLJ and then I started at blackstam and.

Speaker 2 (05:09):
That was that's quite a laundry list, of it was
a laundry list.

Speaker 3 (05:12):
It was a laundry list. And I started as an
analyst at Blackstone in nineteen ninety one and then had
the opportunity, even kind of before I finished my analyst
program to go to a startup. But it was just
not a tech startup. It was a investment banking startup
that was founded by Jeffrey Barnson and Raymondella, who used

(05:33):
to be the coheads of merchant banking at Merylnch And
so I left Blackstone to go to what was then
a no name and to some degree it's still not
well known firm. And I remember having a conversation with
my dad at the time, who was like, he didn't

(05:54):
really know who Blackstone was, and so when I took
that job, he was like, well, why would you take
Blackstone when you got all these offers from firms he'd
heard of, And I was like, well, I think it's
going to be a really good firm. And then finally
he got comfortable that was a good idea, and I
leave to go to this firm that no one's heard of.
And I said, well, my downside cases, I'll go to
business school. Like it's really not anyway. So I made
that leap and that was a It was a great experience.

(06:18):
They were primarily kind of M and A advisory, but
then over time they were trying to figure out how
to get into the principal business in some way.

Speaker 2 (06:26):
How do you how do you go from M and
A to venture capital?

Speaker 3 (06:29):
So the two co founders of Insight, Jeff Horing and
Jerry Murdoch started they're pre effectively the predecessor to Insight
at Baronsamonela and Baron. Samla was kind of a a
sponsor of these two guys who wanted to do something

(06:50):
in technology. Really early. We were not technology experts. We
didn't the firm didn't know anything about technology. But we
thought we could help them raise capital, or at least
the guys ran the firm thought they could help. But
we didn't really have a lot of competency in software.
I was the closest thing they had to somebody understood technology,
which just means that I used it. And so I
was kind of working with, you know, Jeffrey and jeff

(07:15):
Moring and Jerry Murdoch, and then they kind of came
to the conclusion that they were going to kind of
go do this on their own, that there wasn't really
like the partnership didn't make sense for them, so they
went off. They'd asked for you, was that they uh
ninety five? Yeah, And they asked me at that time
if I was interested in joining, and you know, I

(07:37):
was twenty five and a vice president, and I was like, oh, well,
why would I go join a startup? And now all
of a sudden I lost my startup kind of bug,
and so I didn't. Then I maintained a relationship with them,
and then in nineteen ninety nine, when I was thinking
of leaving parents to go do something on the principal side,
I ended up kind of joining them when they were
raising their first institutional fund.

Speaker 2 (07:56):
So, so what was that process like going from what
was really a startup to going to something that was
barely no longer a startup? Or was that really their
first major rountud?

Speaker 3 (08:08):
No, So they had so they at that point had
raised three funds, they were about to raise their fourth.

Speaker 2 (08:14):
Fund, so somewhat seasons.

Speaker 3 (08:16):
It was primarily at that point that very few institutional investors,
so their fourth fund fund for was going to be
their first institutional fund, and so was. The firm is
very small from a number of people standpoints, about ten people,
you know, today we're four and fifty people, so it's
a much larger firm today, but it was I think

(08:37):
the harder part of the transition is, you know, it's
very different being an advisor. I wanted this transition, but
it's very different being an advisor whose goal it is
to kind of get a deal done to being a principal,
where your goal is not just to get a deal done,
was to make sure it's a good deal. And that's
a that's a that's a shift, that's a shift of mentality.

(08:59):
You know, you it's not like an on off switch
for that. But really, the way I looked at it
is I was and the firm that I left very
generously offered me the opportunity to take a pool of
capital that they had and invest in technology is kind
of as a way to maybe get me to consider
staying there. And I said, No, it wasn't really an
economic decision. What I said was, I'm not really qualified

(09:21):
to do that at that point in time, h and
that I'm one of the reasons I'm making this shift
is to actually learn how to do something.

Speaker 2 (09:30):
What was that learning curve like? Because I remember the
nineteen nineties in the late eighties, and it seemed like
a ton of people just jumping into the venture worlds
regardless of their credentials or academic qualifications.

Speaker 3 (09:47):
Well, and I think in I joined at late ninety nine,
two thousand, you remember that time. Sure, in some ways
it was a great time. In some ways it was
a terrible time. I think in retrospect it ended up
being a very good time for the the following reason. Economically,
it was not a great decision for years because you know,
I think I told my wife when I took the job.

(10:09):
You know, she was we just bought an apartment and
she was pregnant with her first kid, and I said,
don't worry. I know I'm making less cash, but I'm
gonna have all this equity, and like that equity was
like five years I hadn't really she was like, I'm
not sure, it doesn't not sure. I feel like this
was the right trade. But so you get there in
ninety nine and the deal pace is frenetic, and so

(10:31):
you think like, oh, I'm learning so much. I'm getting
all these deals done. I also got put on a
ton of boards, you know, of companies, and the first
thing I figured out was, well, a lot of these
companies didn't really have a business model without raising a
lot more capital. It wasn't just us, it was just
that was that was that time. It was a land grad,
it was a lane grad in the early days, and

(10:52):
the market corrected very quickly, I think four or five
months after I got there, and we look back. I mean,
those were really really hard years. But I actually think
this way to learn the most. You know, it's easy
to be it's easy to be a cheerleader when things
are great. It's a lot harder to have to kind
of dig into a business, including businesses that aren't going

(11:13):
to make it, and try to get to the best
possible outcomes. So from a learning standpoint, you know, and
I think this is sometimes the things I tell my
kids is like the worst time sometimes are the ones
we're going to learn the most. And there's always going
to be you're going to get to the other side.
It might not be the side exactly the way you
wanted it, but there's no way you're going to look

(11:33):
back and say you didn't get something out of that expert.

Speaker 2 (11:35):
It's so funny you say that. I started on a
trading desk. And one of the things you figure out
pretty early is you learn much more from your losers
than you do from your winners. Same thing in venture,
same thing in venture.

Speaker 3 (11:47):
I think it's the same thing in life. Oh really, yeah,
I think it's true in lots of things.

Speaker 2 (11:51):
It's stumbles and fails are more than it.

Speaker 3 (11:55):
Could be jobs, it could be relationships, it could be
you know, even like you're you're like you know, right,
if you think about the world today, where your world today,
where there's a tendency for parents and I'll include myself
in this to be too involved, right, Oh, my son
got to be because he had a bad teacher. Like well, like,
guess what, we all have bad teachers and bad bosses

(12:16):
and bad roommates. And but you learn to adapt. And
I think sometimes you have to go through those things
and I think you learn from them. Right, bad relationships,
I think you learn something from So I think you
have to. If you take the mindset that you can
learn something in good times, you can learn something in
bad times. I'd argue you probably learn more in the
bad times. I think that's a it's a valuable mindset

(12:37):
to try to have. It's hard to have it when
you're in the bad time. You know.

Speaker 2 (12:41):
You mentioned the role of serendipity earlier. Michael Mobison likes
to point out part of the reasons we may not
learn much from the good times is it's very hard
to distinguish between Hey, is this working out because I'm skillful,
or is this working out because I just got lucky.

Speaker 3 (12:57):
Rising tide lifts all boats.

Speaker 2 (12:58):
Yeah, that's right, and.

Speaker 3 (12:59):
You don't know whether you're you're you know, you're on
a yacht or a boat with a hole. Uh and so,
but they all rise.

Speaker 2 (13:06):
At least them, right.

Speaker 3 (13:08):
Yeah.

Speaker 2 (13:08):
So you mentioned you're on a ton of boards US
International develop Development Finance Corp, Council of Foreign Relations, Carnegie
Endowment for International Peace, and Yu Lang Gon. What's the
attraction to all these boards?

Speaker 3 (13:23):
Well, those are the things I do, you know, outside
of the office. You know, I think I've always had
a belief that if you're successful, you kind of owe
it to give back. So that's one. Two is intellectual interest, right,
Like the things that I'm involved in are things I've
always been really interested in, and even in some of

(13:46):
these even in some of the I talked about how
I ended up going to Warden because of like who
my roommates were. Another story was when I was in
college that for my freshman year I went to go
right for the newspaper, the Daily Pennsylvania. It's a pretty
well known college newspaper, and my roommate at the time
went to go a volunteer for College Democrats. This is

(14:07):
my first semester of freshman year. Second semester freshman year,
I asked my roommate to come check out the DP,
the newspaper, and he came. He asked me to do
the same. And senior year, I was president of College
Democrats and he was editor in chief of the newspaper.
Neither would have happened without us kind of having totally

(14:27):
different interests. And he's now in journalism, right, So you know,
I just think that that there's a lot of these things,
and so those interests that interest policy related things as
interests I've had ever since college and kind of over time,
I've been able to engage in those things in a
more meaningful way.

Speaker 2 (14:46):
Coming up, we continue our conversation with Devin Perek, Managing
director of Insight Partners, discussing how the firm developed its expertise.
I'm Barry Rittaults. You're listening to Masters in Business on
Bloomberg Radio. I'm Barry Redults. You're listening to Masters in
Business on Bloomberg Radio. My special guest today is Devin Prrect,

(15:08):
Managing director at Inside Partners, where he helped oversee over
one hundred and forty investments, several of which many of
which have had exits. So let's start chatting about Inside
Partners approach a little bit. You guys do everything from
software investing to AI. How do you differ from other

(15:29):
venture capitalists in the space.

Speaker 3 (15:31):
So I think the approach that we take is we're
really software investors, but we're stage agnostic. And what does
that mean?

Speaker 2 (15:37):
Meaning not just seed angel.

Speaker 3 (15:40):
So probably the only stage that we don't really play
is seed in pre seed. We're really but we will
do everything from a Series A all the way to
a buyout. We have the capability to go across the continuum,
and I think that's important both ways, right, like if
you're a if you're a buyout investor. As an example,

(16:00):
particularly in a firm in a field like technology which
is changing quickly, not knowing what's going on at the
early stage what could be coming this disruptive is kind
of a risky way to be investing in more mature companies,
particularly in an AI world where that transformation is happening
a lot faster. And the flip side, you know, I
think on the early state side, understanding what does it

(16:24):
take for a company to actually be public, what does
it take for a company to actually be able to
raise the b's and c's and D rounds, and what
are the key metrics to make and having the network
and ecosystem to be able to help companies do that.
It's helpful to have your mid stage and growth stage
business too. So I think the ability for us to
be able to invest across that continuum really makes us
pretty unique relative to most other software investors out there.

(16:47):
The second thing is, you know the way we source,
the more firms are doing it now, which is you know,
we have over sixty people full time. That's all they
do is deal sourcing, and you know, think of it
as our outbound sales team, but it's a really smart
outpound sales team that are people who, when their success,
will end up being partners at Insight. And what we're
able to do is have tremendous market intelligence books. We're

(17:10):
talking to anywhere from twenty to thirty thousand companies a year, right,
obviously investing in a much more set of those. And
then the third thing is is are kind of a
value ad approach, right, because all investors like to say
they add value, it's hard to do. Very early on
in two thousand, created what we call Insight on Site.

(17:31):
And the reason it's called Insight on site is because
those team members are meant to be on site at
the company as opposed to in our office. Right, So
think of McKenzie or Baying. If you walk into the office,
you won't see a lot of those people in the
office because if they're doing their job, they're actually at
their clients. And our case, our clients are portfolio companies.
And what we've done is if you think about every

(17:53):
functional area of a software organization, whether that be sales, marketing, product,
customer introduction, strategy, and now a transformation, we have a
team for each one of those areas, and we have
a team for each one of those areas that's also
stage focused, right, So we have a team that works
with early stage companies, we have a team that works
with mid stage companies, we have a team that worked

(18:13):
with more mature companies, because the recruiting needs for a
company with five hundred million dollars revenue are very different
than the recruiting needs for a company with five million
dollars revenue. And that team is over one hundred and
twenty five people that's focused on really making sure that
the companies they're getting the benefit of not just anything
we know, best in class, thinking outside the firm, best

(18:36):
in class within the portfolio, and that those three things
together is really I think what allows us to have
a very successful strategy.

Speaker 2 (18:46):
Huh. Really interesting. I was trying to conceptualize how Insight
is sort of a venture fund, sort of a pe shop.
Your explanation really explains why those titles and those descriptors
really only just describe part of what the thing is doing.

Speaker 3 (19:06):
And I think things just overall, things are blurring, you
know in this world, Like you know, one of the
areas that we're very active in right now is something
that we call venture buyouts. And you'd say, well, okay,
like that seems like that's both and to some degree
it is. And what is it really, Well, what's the
biggest issue you hear right now in private equity? If
you were an interview at LP, they say, well, I'm

(19:27):
not getting enough money back, I don't have enough DPI
and so I'm over allocated. That's probably the number one
complaint that institutional investors have. Well, if you look in venture,
there's just a massive amount of funding of companies and
company creation and funding over the last so you have
thousands of companies out there. Many of them have not
reached a scale where they're ready to go public or

(19:48):
have a strategic really be focused on them right They
just don't have the scale yet. And what we're able
to do in those situations is find the ones that
are interesting companies, and we go to the shareholders and say, well,
buy seventy percent of the company. We will buy one
hundred percent of the company. You can either choose to
roll some of your investment if you think there's upside,
if not, we'll give you. We'll give you a return

(20:08):
whatever it is. And then we were able to take
control of these companies. What happens in a lot of
these venture companies is they have very diffuse cap tables. Right,
you have seven six, five different people, five different opinions.
It's actually hard for the CEO to get alignment with
their board on what the strategy should be. We can
create that alignment. So maybe he really want to he

(20:28):
or she wanted to execute an M and A strategy,
but only half the investors were willing to put up
more capital. We're able to in that case clean up
the cap table and then make whatever changes in strategy, team,
whatever it might be, that are necessary with a totally
aligned board. That's a strategy that touches both. It touches
some element to venture and it touches some element of
private equity.

Speaker 2 (20:50):
Two of the people you work with, Ryan Ankle and
Richard Wells. As I'm doing my prep for this, anywhere
I searched for where as a service I seem to
come across Ryan Hinkel's name, tell us what it's like
working with those guys and working with the other founders

(21:10):
the two co founders, yeah, and others.

Speaker 3 (21:12):
So you know, Mike Triplett and Jeff Lieberman, and we
have so many people who've kind of contributed to the
success of the firm. You know, Ryan actually joined Insight
as a summer intern right out of college, now on
the investment committee. Richard Wells joined us out of Harvard
Business School after a successful career TCD and some other firms,

(21:37):
and has been a huge driver of returns that some
great deals that have exited just this year. I think
that one of the things that we're most proud about
at Insight, and this is also I think very different
than a lot of firms out there, is that if
you look at the top four partners, the top six partners,
top eight partners, the vast majority of this people all
grew up with an Insight and we've really created a culture.

(22:00):
If you join Insight as an analyst, you can make
it to the top. And that's very different than a
lot of firms out there, and I think that's created
a very positive entrepreneurial culture where we give people a
lot of autonomy, We give people a lot of ability
to find new areas to invest in, and magic happens.

Speaker 2 (22:25):
So let's talk a little bit about that magic. You've
made over one hundred and forty investments in various companies.
I'm assuming that you're doing this as part of a group,
as part of an investment committee. How does that work
if everybody has a slightly different expertise or focus. Take
us through the process of what companies get funded? How

(22:46):
does that process go?

Speaker 3 (22:48):
Yeah, and look, first of all, that's the beauty of
I think our model too, which is why we might
all have slightly different focuses or areas. We're all just
investing in software. If you contrast that to firms where
somebody the biotech partner and someone as a software partner,
and someone is the industrial partner, that's much much harder
because you really don't have any sense of each other's businesses. Here,

(23:11):
the key metrics are common across all these things. There
might be some technical understanding around infrastructure, product or what
might be happening in a particular vertical that a partner
might have, but the key metrics are the same. And
so our process is that every deal, no matter how
small or how big, goes through the same investment committee process.
We meet once a week, kind of common like a

(23:33):
lot of other firms out there, and the team, whoever
the team is, presents the deal to the ICEE. We
debate it, we ask questions, we ask for follow up information,
and out of that either comes this is something we
want to pursue, we don't want to pursue. We only
want to pursue, but only at kind of this valuation.
And then the team then goes out and kind of

(23:55):
executes on that. And then if say we sign a
term sheet, they'll come back with a more detailed diligence
package that go through all the typical diligence things you'd assume.
That gets reviewed and discussed again. Sometimes there's follow up
questions that come out of that. Sometimes there's not has
to get through that second approval process, and then if
it gets through that approval process, then we would then fund.

(24:18):
But before anything even gets there, we have a number
of teams, their staff with these sourcing analysts, associates and
mid level people that really do the hard work before
something even gets the investment committe. So Ryan and Richard
both run a team, and you know, they each have
their slightly different focuses, but they each run a team

(24:39):
and they're meeting with their team on an even more
ongoing basis to kind of prioritize the deals that we
want to they want to pursue, and then if it
gets through their own team, then they would bring it
to the overall investment committee.

Speaker 2 (24:52):
So I've heard some venture capitalists talk about valuation almost
as if it doesn't matter, which as the public market skuy,
I kind of shudder when I hear it. I think
it was Mark and Dreesen who once said, all right,
we were early state investors in Facebook. Had the valuation
been double, it practically wouldn't have affected our returns. My

(25:15):
immediate answer was, well, they would have been half if
the initial investment was double, but you know, one hundred
x point taken. How do you think about valuations, especially
when you're looking at early stage a ORB rounds, where
it kind of feels like total addressable market growth projections
I don't want to say fabricated, but they're squishy best estimates.

Speaker 3 (25:40):
They're guesses. Yeah, okay, I mean look, but in this
early stage deal like it's a guess. I think the
person who wrote a checking Palenteer didn't know that Palenteer
was going to become what Palenteer became. But they saw
an entrepreneur with a vision with a potentially large market
and decided to make the bet that this person could
execute and turn it into that larger market. Right. Look,

(26:01):
I'm not gonna say that valuation doesn't matter, but I
think what you can say is that we have to.
It's a line that one of my partners uses that
we don't overpay companies just miss their numbers, which is
just I mean, it's said in jest, but really the
point is that generally, not always, but generally, the price

(26:22):
we paid if the company hit the numbers that we
thought they were going to hit, even if the price
seemed high on current revenue, this feels reasonable. So you
know companies that even recently AI companies that seemed expensive
six months ago don't look so expensive six months later,
just based on kind of how their run rate revenue

(26:42):
has changed. So the way we think about this is
we do care about valuation. We lose deals on valuation,
but that doesn't mean the deals that we win aren't
high absolute valuations. It's just how much conviction do we
have in the growth? Right, And this why these markets
are not efficient. You can have very high conviction on

(27:05):
XYZ company's growth, and I can have low conviction, and
one of us will likely be right. And if I
was right, and did it good for me? And if
I was writing, didn't do it? It just depends on
how you write. So I think the way we think
about it is we're all of these deals today. Certainly

(27:25):
AI deals on a multiple revenue basis are going to
feel expensive. Of course, you have to look at growth adjustment.
So even as a public market investor, you'd say that
a company that's growing at ten percent is going to
have a different valuation than a company that was going
to grow with thirty percent. Now, how do you even
start thinking about a company that's growing at one hundred percent? Right?
It's hard to think about and it's not hard to

(27:46):
think about it for a year. But if something you
can grow one hundred percent for three years and then
even if it de accelerates and compounds off three years
of one hundred percent growth, that's a pretty high multiple
that you can pay. So the way we really think
and talk about it is not valuation doesn't matter, but
we think about it in terms of if you're paying
a high multiple, then your conviction needs to be high

(28:08):
on the growth rate. Now, yeah, always gonna be right, right,
and that's part of the business. We just have to
be right enough.

Speaker 2 (28:15):
And you mentioned software. The first thing that comes to
mind is Silicon Valley, San Francisco, the West Coast. Insight
Partners is New York City based. I know you have
offices around the world. Is there an advantage or disadvantage
to being based here in New York?

Speaker 3 (28:33):
We think there's an advantage now, but maybe it's you know,
maybe we're just convincing ourselves that because we live here.
But you know, I think that not being in I mean,
I can tell you what the disadvantages are, but I
think the advantage is not being in the bubble. Like
we're not all having breakfast at Bucks and talking about
the same twenty deals. Now, maybe that's bad if those

(28:53):
twenty deals or the deals you have to be in,
but there's a tendency to have everybody kind of want
to do the same thing, and I think not being
in that every day, let's you step back more and
decide what you want to do as opposed to what
everybody else is doing. You know, I think there's a
disadvantage to, like, the strategic buyers are all out there,
you know, we're not in the same flow of those

(29:15):
companies sometimes as people might be seeing those people all
the time. But on balance, I think we've done okay
and we've managed to sell to a bunch of strategics
and so I don't think it's hurt us to be here.

Speaker 2 (29:28):
And I mentioned you have offices around the world. You literally,
you know, it's not just New York, Silicon Valley, London,
you guys are.

Speaker 3 (29:36):
Well, really it's really for presents. It's New York, it's
San Francisco, it's London, it's Israel. Those are really the
four places.

Speaker 2 (29:45):
So how does being global help the firm? What do
you learn from having that sort of global perspective.

Speaker 3 (29:51):
Well, I think we're pretty disciplined about how we've grown
and I'd be surprised if you see us have you know,
a lot more offices in five years. If you look
at take Israel with Jeff Morring really drove that strategy
for us to get into Israel. I think I might
get the numbers wrong slightly, but I think we had

(30:14):
sixty or seventy companies in the portfolio before we put
the first person on the ground, and at that point
there were six firms that had you know, five to
ten people there that had portfolios of five or ten, right,
Because I think the thing that we want to avoid
is if you put somebody on the ground before you
have a portfolio, then they need to rationalize their existence
by creating a portfolio. And maybe that's a good idea,

(30:36):
but maybe it's a horrible idea. And the bar by
having the bar that if you want to do a
deal in Israel or you want to do a deal
in India, you act to have to get out of
a plane and go ten thousand miles or fly you know,
twelve hours ought to be a really good deal. You
got to be really excited about, right, And so it
creates a natural like, no, I like this deal on
Long Island better, Okay, Well you spoke with your you know,

(30:58):
you spoke with and it probably should have a little
bit of a better return in order if it's that
far away, right. And so we've kind of weighted in
these places to have really conviction that that's going to
be a market because we have a lot of companies
in that market before we add presence there. So there's
plenty of places in the world where we have companies,

(31:19):
more companies than funds that are in that local market.

Speaker 2 (31:23):
Really interesting coming up, we continue our conversation with Devin Perek,
managing director at Inside Partners, discussing the state of startup
investing today. I'm Barry Retults. You're listening to Masters in
Business on Bloomberg Radio. I'm Bury Results. You're listening to
Masters in Business on Bloomberg Radio. My extra special guest

(31:46):
this week is Devin Perrek, managing director at Inside Partners.
The firm runs over ninety billion dollars in venture capital
and various stages of private equity. So you guys have
a reputation for being software investors. Why have you focused
on that one space? And how many different sub sectors

(32:09):
are included under software?

Speaker 3 (32:12):
O Look software, We've been doing software since nineteen ninety five,
and if you look since nineteen ninety five to today,
I think it. I might be wrong about this, and
maybe there's one other category for which this is true,
but I don't think since nineteen ninety five there's been
a single year where the software industry declined in aggregate revenue.

(32:32):
Through every recession, through every cycle, and as a percentage
of GDP, it just continues to increase. The software component
continues to increase. So you know, I think if you'd
asked a bunch of US ten years ago, we maybe thought,
oh maybe we're going to cap out on software, We're
going to have to go do something else. That really
hasn't been a problem. I don't foresee it being a problem.

(32:53):
So it's a massive industry who's had great growth, but
the projected growth over the next ten years is very strong.
So I think that we don't need a new category
to go after. We like this category. This category has
got amongst the highest growth rate of any category out there,
and it's really well downside protected too. If you were

(33:14):
to talk, if you had a lender on, they would
tell you that software is are lowest loss ratio.

Speaker 2 (33:19):
What catches your attention first when you're looking at either
a startup in software or a reasonably developed company. Is
it the founders, Is it the technology? Is it a
combination of both?

Speaker 3 (33:32):
Well, I think it depends on stage. Like you know,
I think in an early in an early stage company,
you know, founder and tech is really really important, right
and market Now, as you said earlier, you're making a
guess sometimes on a market at a very very early
at a series A stage. Now you're hopefully making an
educated guess based on lots of pattern recognition of companies

(33:53):
based on lots of data, and how big that market
is is measured in different ways. But it's a common
mistake to underestimated market, right. I mean, when we look back,
it's a little bit more of a consumer example. But
when we look back, I remember looking at Uber and
we convinced ourselves, how could you ever pay evaluation that's
higher than the total TAM, right, And the total TAM
was New York and San Francisco of black cars. Well,

(34:16):
it turns out that's not really the total TAM of
Uber today. I forget about food delivery and groceries. I
was just talking about cars. Yeah, it's just because they
went to uber X, and uber X totally changed the TAM.
So I think tams are not static, right, And I
think that's a very very hard thing to recognize that. Okay,
maybe they're going after a small problem today, but that

(34:37):
might be the trojan horse to get into it bigger
and bigger markets over time. Right. And that's where intuition
and pattern recognition and kind of seeing what a great
founder is, which is why I look early stage, I
think is much harder than growth stage or buyouts, where
you have lots of data and financial metrics that you
can kind of rely on.

Speaker 2 (34:57):
I love the idea of the trojan horse. Somewhere along
in the lines, someone said you could practically ignore the
seed stage or early stage business model because there's always
going to be a pivot. The trojan horse are the founders?
How accurate is that that point of view?

Speaker 3 (35:14):
Well, I mean I think it, like in everything, when
people make statements like that, they tend to focus on
the winners, right, so they'll look at XYZ company that
pivoted and say, oh, look, everybody can pivot. Well, everybody
doesn't pivot. And you do have a huge, very high
loss ratio at seed, early stage, and even series A,

(35:35):
and the strategy is different. Right, you have a power
law in series A. You have a paral law in seed,
and you have a para law even in buyout. It's
just a different power law. In buyout. You can basically
your power law is not a lot of losses. It's
you can have some one x's or one point five x's,
but you probably need a couple of four x or
five x's. In seed you probably need one hundred x

(35:56):
and you have a very high loss In Series A
you need a bunch of ten or fift twenty x's,
but you can still have losses. So depending on what stage,
there's this view that like parallel only applies to venture,
really applies to all stages. Is just what a loss is.
What a loss is is defined differently, right, A loss
in a buyout might be just a one x or
a point eight x. You can't really have a lot

(36:17):
of zero's in buyout, right, So I think the parallelaw
continuum is true across all these markets.

Speaker 2 (36:26):
So AI is obviously a really big sector today. What
other sectors excite you the most or how much does
AI fit into just looking out there as game changing technologies.

Speaker 3 (36:40):
Well, look, I think every firm, whether they're a venture
firm a buyout fund, doesn't really matter what type of
investing people are doing. I think it would be a
usual mistake to ignore AI. Right, even if you're not
investing quote unquote in an AI company, you better be
thinking about how AI is going to affect your business
model or how can it improve your business model? And

(37:01):
those who don't, even people in services businesses, like if
you're running law firm today, you're running an accounting firm today,
you really need to think about how is AI going
to affect my business. So of course in our case,
in our more mature companies, a lot of what we're
thinking about is how do we accelerate growth and revenue
through new AI products and how do we reduce cost

(37:21):
and increased margin through applying AI technology. In the companies
or earlier in mid stage companies are often AI native.
They're actually going after a new market, a legal vertical
or construction vertical with kind of a new AI focused product.
I mean, I think what's true is that every company
to some degree is an AI company. It doesn't mean
that they're nott Ai in their name, but every board

(37:44):
meeting that we go to at Insight, we're talking about AI.
And the irony is even the board meetings. I go
to an nyline own, we're talking about AI board meetings.
I go to a CFR, we're talking about AI. Because
if you're a medical if you're hospital today, you're thinking
about how do I have a better experience for my patient,

(38:05):
how do I think about increasing throughput? The average weight
for a neurologist today across the countries eight to nine
months to get an appointment. I imagine you're suffering from
like a real problem, and the doctor says, well, I'll
see you you know next year. Right, that's the average. Now,
what if we can kind of get AI to be
able to help assess these problems earlier, and all of

(38:27):
a sudden you take the data from the best institutions
and you make that available in an AI application. So
now people in Appalachia have access to the same level
of care as people who have the benefit of being
able to be near Mount Nyu link on our Mount Sinai. Right.
And so I'm going broader in my answer to your question,

(38:49):
which is I think AI is now affecting everything we do,
and so I think everything every company that we invest in,
we're talking about what's the impact or And then the
other thing we talked about is, like the other big
debate in kind of AI land is what will get
owned by the llms and what we'll get owned by

(39:11):
the application providers? Right? How much of this how much
of the value will accrue to the models they open
a eyes and anthropics, and how much of the value
will accrue to the applications. I don't think anybody can
answer that question. We don't know.

Speaker 2 (39:26):
So I remember in the late nineties when the dot
com was just exploding, it kind of felt like a
handful of companies were sucking all the oxygen down the
room from everybody else. Is AI doing that? Like I
would imagine things like cybersecurity and fintech and other software

(39:48):
driven startups. Are they starving for capital or is there
just so much money out there that even AI can't
suck all the money?

Speaker 3 (39:59):
There's a you know, there's a tremendous amount of capital
out there, and there are lots of companies outside of
the ones that everybody knows that are growing really really quickly,
often serving a vertical market. I mean, what's still true
is that if you have an application that is serving
a market where there's a lot of domain expertise or

(40:21):
data required, you still have a moat. And so I
think this, you know, because one of the big debates is, oh,
does AI mean that the software companies are going to
be dead? We don't believe that. What we do believe
is you have a very generic application that doesn't have
any vertical domain expertise, doesn't have any data mote, then

(40:42):
I think you're a significantly higher risk. But I think
there's lots of examples. We're seeing them, we're investing in them,
in specific healthcare applications and legal applications, construction industry where
you have companies that have true business process vertical expertise
couple with data modes.

Speaker 2 (41:00):
Other spaces have you excited besides AI, which is obviously
going to have a giant, giant impact, what other areas
are really interesting?

Speaker 3 (41:08):
I think, you know, cyber continues to be really important area.
And one could argue and we're just we have I
don't know if we might just be announcing it. So
I don't know whether we're now s yep, we're you know,
investing in something that's kind of related AI related security,
and so all every time you have these big new
platform shifts, you have infrastructure around that platform platform shift.

(41:32):
That's important, right, And so I think we're seeing a
lot of next generation infrastructure investments, cyber investments. There's a
lot of markets that we're seeing and I think what's
happening right now is if i'd answer this question, you know,
a year ago, I said, well, we're doing vertical applications,
we're doing these types of horizontal applications, and now it's
all getting bucketed into AI because it has an AI angle.

(41:56):
But there are subcategories you know, within within AI, there's
not like just one AI company out there. There's obviously
lots of companies, and it's just becoming that AI is
becoming almost like an operating system that all of these
new vertical applications are being built on.

Speaker 2 (42:14):
I haven't heard you mentioned crypto. Is that a space
you guys explore or is that too specific?

Speaker 3 (42:20):
We put in the past tense we explored and you know, decided, well,
one we didn't do that well with it. And two
the fundamental problem that like we've seen in it is
that when these companies were come in, we met with
hundreds of companies in crypto. When these companies would come

(42:41):
in and you'd say, okay, like tell me what it
is about your application that makes it better than if
it were just in a relational database, like a very
simple question. You'd kind of get back like all kinds
of technical answers and white papers, and I'm like, right,
but like, just as a user, what problem does this
solve that I can then I can't solve it right Generally,

(43:03):
we didn't just get a really good answer. Now I
don't wanna I don't want to say that there's not
gonna be any crypto applications that are going to be successful.
I'm sure there will be. I mean, obviously, if you
talk to COO Visa, you talk to the CEO MasterCard,
they'll talk to about stable coins and the impact stable
coins could have. Obviously an administration that's very pro crypto,

(43:23):
pro crypto regulatory, so I think you're gonna see money
being made in that category. We just I mean, I
guess we're used to trying to find applications where we see,
here's a clear business use, here's a clear payment for
that business use, and here's how they can scale. We
haven't really been able to decrypt that in crypto, but

(43:45):
I'm sure there are others out there who understand that better,
and I'm sure there'll be some winners, but we've just
chosen to not focus on it.

Speaker 2 (43:52):
So let's talk about some winners. I see a run
of exits that Insight Partners is associated with. You're an
early investor in Twitter, which iPod, Buddy Media acquired by
Salesforce Investment, sold to Nasdaq, Ali Baba, JD dot Com,
Duck Creek, Appress, The list goes on and on. Tell

(44:14):
us about some of these exits. You guys really have
put together quite an impressive list.

Speaker 3 (44:21):
Well, well, I'd rather talk about our exits from this year.

Speaker 2 (44:24):
Okay, so keep it current.

Speaker 3 (44:26):
Yeah, which, you know, so my partner Jeff horn letter
investment in Whiz, which sold to you know, Google, Well,
I should say I signed a definitive agreement to sell
to Google hasn't closed yet for thirty two billion dollars.
The largest venture backed acquisition by a strategic My partner
Richard Wells led an investment in a company called Central Reach,

(44:51):
which does software for autism clinics, and sold that for
just under two billion dollars to Roper Industries. And then
my partner Jeff Lieberman letter deal called dot Maddox, which
we sold the siemens for just over five billion dollars.
And you know, the interesting thing about both. The interesting
thing about those deals is one's a traditional or least,

(45:11):
so we did Whiz as a series I think B,
and then kind of continue to participate along the way. Both,
you know, Central Reach and Dotmatics were venture biots, but
the multiples on money were like venture multiples of money really, right,

(45:31):
So venture returns with buyout dollar deployment, it's a good combination. Yeah,
and so, and I think we've got We've got more
coming over the course of this year, so I think
we've had a really strong year. One of the things
that I think contributed to that is I think historically
we were not great on liquidity, and by that I

(45:52):
mean not that we didn't have good companies. We just
didn't focus a lot on liquidity. And as big LPs
and our funds, we're generally the gp is top. I
were close to Tide as the largest investor in the fund,
so we're pretty aligned with our investors. We kind of
were focused on multiple money and that's so focused on IRR.
I mean, within reason, we're focused on ir but it
wasn't what we and I think over the last ten

(46:14):
years fifteen years, you've seen a massive transition and the
institutional p base of a shift from WAKE to IRR.

Speaker 2 (46:21):
So I want to stay there because it's kind of fascinating.
I had no idea because I don't play all that
much in the venture space or the private equity space,
that Hey, we have long standing liabilities that we eventually
want to meet and even though we knew this was
locked up for depending on the fund five seven, nine years,
we'd like to see some exits sooner than later. When

(46:43):
did this start happening? And what do you think is
driving this?

Speaker 3 (46:47):
Well, I mean it's probably been happening for years, but
it's accelerated in the.

Speaker 2 (46:50):
Last post pandemic.

Speaker 3 (46:52):
Yeah, post two three years and we had the correction
and people felt over allocated and twenty one had this
huge peak investing and so now there's this big bubble
of investing but not enough liquidity coming back relative to
the deployment. In the last two to three years, it's
accelerated and so we you know, we we took that feedback. Seriously,

(47:13):
I don't think we're the only ones who got that feedback.
But we actually put a liquidity committee together. It's from
people across the firm, both both our financial function, our
investment team or operating team, and we now have quarterly
liquidity meetings where we target companies for liquidity. We kind
of talk about what the IR is from here and

(47:33):
I think the and that was set set up about
eighteen months ago. But I think a result of that
is you know, I don't want to say it's a
direct result because you can't press a button, but a
focus on it, everyone talking about it, everybody feeling like
they have accountability to that process. I think it's led
to a lot more liquidity over the last So I
think we've gotten an ROI on really putting focus against

(47:56):
it really and I think you know, our LPs gave
us feedback on it. You know, I think we look,
we thought about it. We said, yeah, it's fair feedback.
Let's make a change, let's make an adjustment.

Speaker 2 (48:07):
So so you mentioned the boom in twenty one and
then the pullback in twenty two. You start in the
mid nineties, You've lived through numerous boom and bus cycles.
What what's your big takeaway from from those experiences.

Speaker 3 (48:21):
Well, I think when you're living in the depth of it,
it feels like it's never going to end, and it
always ends and this too shell pass, this too shall pass. Uh,
And I think that's it's a hard it's a hard
lesson because it's listen, the thing that's still the hardest
to do is, you know Warren Buffett's investment. Everybody's scared,

(48:43):
and you you get yourself ready and you've got your
you know, I'm going to put move X dollars to
the Vanguard Index fund and then you don't do it.
Why because you don't think it's ever going to pass, right,
because if you thought you were going to pass, of
course you do it. And human psychology is really really
hard to change. And I'm including myself in that definition.

Speaker 2 (49:02):
It's so difficult to fight the crowd when everybody's running
for the exit. You have to be built a certain way.

Speaker 3 (49:09):
I still remember when the market two thousand and eight,
the market was, you know, the really crashing, and I
remember having a conversation with somebody who know the market,
is really well well known person. He said, yeah, gee,
can't roll their commercial paper right, And I was like,
holy crap.

Speaker 2 (49:25):
I was after Aig and Lehman and I remember.

Speaker 3 (49:28):
Eight and I remember it was like a Friday and
it was a long week, and I call my wife
and I'm like, you know, honey, let's just like go
out for dinner. And she was like, let's stay in
and were having these like five minutes back and forth.
I'm like, like, why are we talking about this? And
she was like, well, I thought maybe she'd save some money.
I'm like, it's not that bad, Like we could go
back to dinner.

Speaker 2 (49:46):
Well. But Ben Bernanke, former Chairman of the Federal Reserve,
famously sent his wife out to the ATM to get
cash in case the system went bad, if he was terrified.
It just showed you human nature is we're always going
to be.

Speaker 3 (50:03):
I think that the thing. So I don't know that
you could ever teach people to like go move money.
But I think the hard part is really besides maybe
not making as much money as you could make, the
heart part is just feeling like it's never gonna end right.
And now, having been through this as many times as
you know I have and my partners have, you know,
I think it's easier to recognize that no, there's there's

(50:27):
light at the end of the tunnel.

Speaker 2 (50:29):
Makes perfect sense. Let me throw you a curveball question
before we jump to our favorite questions. So we talked
about AI, and we've talked about cycles. What do you
think investors in this space, either technology, your startup or
M and A or ventures are not really talking about
or thinking about, but perhaps should be what what's the

(50:51):
most important topic asset geography policy that's getting overlooked, but
shouldn't I think people.

Speaker 3 (51:00):
Still as much as we talk about it, I don't
think people. I think people still underpriced what happens if
there's a real cyber risk. We think about cyber as, oh,
my city bank account got hacked. We think about cyber
as you know, I got a phishing email work. By
the way, all those things are bad and bad things
can happen out of them, and you know, everyone has
probably dealt with some version.

Speaker 2 (51:19):
I mean, I'm more concerned about someone taking control of
the electrical grid.

Speaker 3 (51:24):
I think we still I mean, I think I don't
want to make it sound like the government doesn't think
about it. I think they do, but I think it's
just people. I don't think we realize like the level
of risk if physical infrastructure were kind of taken over,
and there have been examples of it.

Speaker 2 (51:41):
Happened, like physical infrastructure like the electrical grid is something
most specific water.

Speaker 3 (51:46):
Water purification plants, electrical plants, I mean, hospital systems going down.

Speaker 2 (51:52):
Right, Well, we've seen we've seen in a lot of
ransomware with that.

Speaker 3 (51:55):
We've seen that in individual institutions, right, We've not seen
it system systemically, right, And you know, that's a that's
a pretty that's a that's a pretty pretty terrified that's
a pretty terrifying risk. Now I'm not saying I mean,
I'm answering your question as to something that I worry
about that maybe we don't worry about enough. I'm not

(52:15):
necessarily sure. It's like, I'm not how to price that
into the market. It's not really a market answer. It's
just something that I think, like it's it's an asymmetric risk.

Speaker 2 (52:25):
No, that's the right. So I'm not looking for a
market you know, asymmetrical dollar. Bet You're raising an issue
that perhaps we're not paying enough attention to.

Speaker 3 (52:34):
I think, as the average the average investor of the
average person, I don't think I think that risk is
way bigger than we think it is.

Speaker 1 (52:42):
Huh.

Speaker 3 (52:42):
And if you talk to people in government, they would
probably they would agree with that.

Speaker 2 (52:45):
All right, so we only have a certain amount of time.
Let's let's jump to our favorite questions we ask all
of our guests, starting with who were your mentors who
helped shape your career?

Speaker 3 (52:56):
Well, you know, I think to a few different mentors.
I I was in elementary school a pretty indifferent student,
to the point where, you know, I had Indian parents
who are like, you're supposed to have good grades, and
you know, I didn't have bad grades, but like, I
was kind of an indifferent student, didn't really focus a
lot on school. I had a teacher in third grade
who said you shouldn't spend more than thirty or forty

(53:17):
five minutes on your homework. I'd go home, look at
the clock, forty five minutes, close my book. And then
I had a teacher in sixth grade, mister Brown. I'll
never forget mister Brown, who, for whatever reason, and I
still can't tell you why, saw some potential, you know,
saw something in me that maybe other people didn't see,

(53:37):
and all of a sudden, I went from like a
indifferent student to like a straight a student. And it
was that year he took interest in me. He would say, hey, look,
you're really good, right, you should focus more on these things.
And so for me sixth grade, mister Brown very transformational
mentor in a way, because he made me believe that
I had something that I didn't really think I had.

(54:01):
And then my dad gave me three important things that
he told me was one of them. Is kind of funny.
He's like, you really need to learn how to You
need to be able to speak well, you need to
be able to read well. And he's like, if you're
living in this country, you should know how to play
a sport, right, and so he The way he tried
to implement those is he maybe take a speed reading

(54:24):
class in elementary school.

Speaker 2 (54:26):
Was that useful? I speed read, you do no loss
of comprehension.

Speaker 3 (54:31):
No loss of comprehension. He maybe take a public speaking
class with college students when I was at high school
and I was so scared of public speaking. I never
could imagine then that i'd be doing a you know,
a podcast. And he didn't. He didn't succeed on sports,
but his idea was he was like, you know, you
should you should learn how to play golf, you know,

(54:52):
like that'd be a good thing to know. And living
state school, Well, I I play golf horrifically. But the
but in high school you could join the golf team.
It was a no cut team. That doesn't mean you
were going to.

Speaker 2 (55:06):
Get to play but varsity letter.

Speaker 3 (55:08):
But you got to you got to learn. And I
just said, now I'm not doing that. So I got.
I got two out of the three. But I think
those two out of the three have been really really important.
I know that a very very positive impact on my life.
And of course along the way, there've been lots of
people at all the places I've worked that have been
mentors as well.

Speaker 2 (55:28):
Huh, very very interesting. Coming up, we continue our conversation
with Devin Perek, Managing director at Inside Partners. I'm Barry Dults.
You're listening to Masters in Business on Bloomberg Radio. I'm
Bury Redults. You're listening to Masters in Business on Bloomberg Radio.
My extra special guest this week is Devin Perrek, Managing

(55:50):
director at Inside Partners. Let's talk about what's keeping you
entertained these days. What are you watching or listening, streaming
podcast anything along.

Speaker 3 (56:00):
Those This week could do it a whole We could
do a podcast on the podcast. But my wife and
I just finished watching Friends and Neighbors with John so Good.
I thought it was great. I really enjoy that's just
pure kind of entertainment. On the podcast side, you know,
I just like I speed read. I can only listen
to podcasts if I speed listen. So I listened to
all of these at two point four acts, which drives

(56:23):
my wife bananas because I'll get in the car and
you know, I'm listening to something. It goes to the
you know, the Apple thing, and She's like, we turned
this off. But you know, there's a bunch interestingly in reading.
I tend not to read a lot of business ebooks,
but in podcasts I do listen to that. So but
the ones I listened to I listened to Acquired, I

(56:44):
listened to Business Breakdowns. I listened to Nikolai Tangens where
he interviews the CEOs. I listened to invest Like the Best.
I listened to You. I listened to Lex Friedman, and
then I'm at the ft.

Speaker 2 (56:59):
Uh.

Speaker 3 (56:59):
Well, let's Freeman's got his own He's a affiliate with
MIT in some way. He's had his own podcast. He
gets really really interesting people to come on. I'm involved
in Carnegie and CFR, so they both have a podcast.
One's called Grant Tamasha, which is on India, which is
just a policy area I'm interested in. Why it Matters
is CFR's podcast. So I've got a driving to the

(57:20):
Hampton's easy because it I can. I have hours and
hours of kind of content really interesting.

Speaker 2 (57:27):
Let's talk about books. Are what are some of your favorites?
What are you reading currently? Well?

Speaker 3 (57:31):
I read a lot, and you know, I think two
books that I just gave both my one kid just
graduated from college and one is two years out of college,
three years out of college. I gave both of them.
I don't know if they've both read both, but I
gave them both books to read. One is Psychology of
Money by Morgan House. Sure, I thought that was a

(57:52):
great book. I wish I read that when I was
twenty one, but I still felt like it was valuable.
The other is called Five Types of Health by ce
Heel Bloom. Sure, I thought that was a great book.
And those are more I would put those as entertainment,
but I found those if you read those books and
you kind of try to apply them to life. I

(58:12):
thought both of those were really useful then. And then
a lot of what I read is around topics that
like are around our philanthropy. Right. So you know one
book I read, which is this is not an upper
It's a book called Anatomy of an Epidemic by Robert Whitaker,
which is about the use of psychiatric drugs in this country.

(58:36):
And this is not an uplifting book. Of course, there's
an epidemic of anxiety and depressed.

Speaker 2 (58:41):
To say anything about American healthcare or psychology.

Speaker 3 (58:45):
But it motivated. It motivated. So one of the areas
that were philanthropically investing in is next generation ways of
dealing with psychiatric conditions, and that book kind of was
the starting point, you know, of that. And then the
really depressing book I'm reading right now is it's a
new book. It's called Nuclear War by Annie Jacobson, and

(59:08):
it's you talked about what are these theories, what are
the scenarios out there that you know we're underpricing, and
you know, I just felt with what happened over the
last two years. You know, I think we all, you know,
we used to have fallout shelters and it would just
like a nuclear war, that's that's done. There's like, there's
no risk of that. And I think the last couple

(59:29):
of years just reminded me that, like, nah, it's not done.
Like now, it's not a high probability maybe, but it's
not done. And what this book does is it actually
starts at time zero, a nuclear bomb drops. What actually happens, right,
what is the defense mechanism that the offensive person uses,
what's the defensive mechanism that the other country uses? What
happens from I mean, and it goes into it in

(59:51):
not very uplifting detail, and it was just a good
reminder that you have this thing out there that still
has the chance to obliterate the world as we know it, right,
And it's not a zero percent probability. It's a low probability.
But I think it is important to understand tail cases.

Speaker 2 (01:00:08):
Yeah, to say, to say that at least.

Speaker 3 (01:00:10):
We're ending on a very depressing note, so we might
want to start you might want to end on something
more more fun.

Speaker 2 (01:00:15):
No, it's listen, you know sometimes you mentioned so to
make this positive. You mentioned Saheel Bloom. I had him
as a guest on the podcast. You mentioned Morgan Housell.
I've had him several times. He wrote the forward to
my book. Both those guys younger, all their work is
much more uplifting, much.

Speaker 3 (01:00:37):
Age thing. Yeah I should have I should have. I
should have ended with that.

Speaker 2 (01:00:40):
But no, it's it's absolutely fine. Listen. Sometimes you gotta,
you know, you gotta shake people up and say, hey,
this is a real risk, and you know, non zero
is a pretty significant risk when the outcome is so catastrophic.

Speaker 3 (01:00:53):
Correct.

Speaker 2 (01:00:54):
So, final two questions, What sort of advice would you
give to a recent college grad interested in a career
in either startups, venture capital, or private equity.

Speaker 3 (01:01:06):
Yeah, so I think that keep your intellectual curiosity broad
And I was just speaking to our summer interns a
month ago and somebody asked me, like, what's your advice?
And I think the mistake a lot of people make
is they decide, Okay, I want to be a venture
capitalis so all I'm gonna do is read tech Crunch
and listen to tech podcasts. And this just make you

(01:01:26):
a very interesting person. And you know, I've probably had
more dinners or one deals because we found a common
interest in art or a common interest in Why it
doesn't I'm using the things I happen to be interested in,
But it doesn't have to be those things, right, And
you know, everyone has intellectual interests outside of the thing
that they want to do, and I would encourage them

(01:01:49):
to like pursue those and pursue those with passion, because
it's going to make you a way more interesting, well
rounded person, and don't just be so micro focused on
that thing. And I just think it makes you that
or investor, makes you a better person, makes you more interesting.
So that's one two. In a world where we start
getting people to do, you know, varsity soccer when they're three,

(01:02:13):
allow a little serendipity in your life, right, I wouldn't
have ended up doing what I was doing if I
just followed the plan and you know something's interesting, try
it and it turns out you might like it. Now
you might not like it and go back to your
original plan. But we've forgotten serendipity. It's why I still
subscribe to paper newspapers because I'm probably the only person

(01:02:35):
in my building that might still get to paper newspapers,
but because they're serendipity. When you're flipping through the newspaper,
it's the article that you weren't looking for is where
you learn something.

Speaker 2 (01:02:43):
Guess don't have that same discovery. And I am very
aggressive looking for interesting things.

Speaker 3 (01:02:51):
Too, And I think you don't get that.

Speaker 2 (01:02:52):
You really don't.

Speaker 3 (01:02:53):
Economists is a great example. If you just get the
Digital Economist and you just see the article in AI,
I'm gonna read that. Guess what, I probably already know that, right,
I'm reinforcing dollars that I have. Maybe I learned one
tidbit that I didn't know. It's when you open it
up and oh, there's this interesting article about nuclear that
I don't know anything about, and I read it. Oh wow,
this is maybe this is this is a this is
a real tail risk. Maybe I should understand this.

Speaker 2 (01:03:15):
I will give you the one exception to this is
The Times doesn't do this well, but the Wall Street
Journal does. So you can go to the digital edition
of the WALLSTREETWSJ dot com, but you could also click
in today's paper and you get the breakdown by sections.

Speaker 3 (01:03:33):
And then you invest, and then you can kind of
click and as you scroll.

Speaker 2 (01:03:36):
Through it, it's the equivalent of flipping the newspaper page
where you get those oh I never would have.

Speaker 3 (01:03:41):
People always laugh. I show up on a news I'll
show up on a plane and I've got my newspapers
and they're like looking at me, like I'm like a Martian,
you know, And I'm like, no, there's a reason.

Speaker 2 (01:03:50):
No, absolutely. And our final question, what do you know
about the world of investing today that would have been
helpful to know back in nineteen ninety five when you
were first getting started?

Speaker 3 (01:04:01):
Well, well, I think a really important one. It applies
to investing, but I also think it applies to life
is oftentimes people don't trust their instinct because they don't
think their instinct is a real thing. They think their
instinct the gut. They have these words that people use,
but The reality is it's micro slicing a lot of
data that you've experienced over your life. Now, maybe at

(01:04:22):
twenty one, your gut's not worth a lot. Okay, it's
probably worth a lot in certain things, maybe some human
interactions and things like that's probably not worth a lot
in investing because you just don't have a database. But
even at my age, you don't like you have this
inclination to not trust your gut, Like there's something about
this deal that just doesn't make sense. But oh, but
the revenue looks good and the margins look good, and

(01:04:42):
so I'll just overlook my gut. And I've just generally
when I've overlooked my gut, it's not been. It's not been.
It's it's not been a good thing.

Speaker 2 (01:04:51):
You mentioned pattern recognition earlier. Your intuition improves as.

Speaker 3 (01:04:55):
You get more experience, you get more experienced in.

Speaker 2 (01:04:57):
Wor now blank is perhaps overstates the case, but there's
a lot, but.

Speaker 3 (01:05:02):
It's but it's I agree. I've read the book and
I think it overstates it. But there's a there's something
to start from there, you know, at the core. And
then the second one is I think what we talked
about earlier at times come. Bad times will invariably come,
and good times will invariably follow, and you just have
to have confidence that both are going to be there
and that you're gonna learn from both.

Speaker 2 (01:05:23):
Devin, this has been absolutely fascinating. Thank you for being
so generous with your time. We have been speaking with
Devin PreK, Managing director at Inside Partners. If you enjoy
this conversation, well check out any of the five hundred
and fifty we've done over the past eleven years. You
can find those at Bloomberg iTunes, Spotify, YouTube, wherever you

(01:05:47):
find your favorite podcast. Be sure to check out my
new book, How Not to Invest The Ideas, numbers and
behaviors that destroy wealth and how to avoid them How
Not to Best wherever you find your favorite books. I
would be remiss if I did not thank the Crack
team that helps put these conversations together each week. Alexis

(01:06:09):
Noriega is my video engineer. Anna Luke is my producer.
Sage Bauman is the head of podcast That Bloomberg. Sean
Russo is my researcher. I'm Barry Ridhelts. You've been listening
to Masters in Business on Bloomberg Radio.