“Downside analysis is very useful. What’s the worst that could happen? The opportunity cost of losing or paying too much.”

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David Blumberg walks through his career explaining how early interest in government work ultimately led him to venture capital. Blumberg recounts a childhood experience that helped shape his approach to venture investing, employing downside analysis, and stresses the importance of collaboration. He discusses his investments in the Israeli tech scene and the country’s improving relations with the Arab world.

David is the founder and managing partner of Blumberg Capital, an early-stage venture capital firm that partners with visionary entrepreneurs from Seed stage through their growth journey. The firm was among the first investors in industry leaders including Addepar, Braze, Credorax, DoubleVerify, Fundbox, HootSuite, Katapult, Nutanix, Trulioo and Yotpo. David is based in Miami with team members across San Francisco, Tel Aviv, Miami and New York.

Prior to founding Blumberg Capital in 1991, David managed international investments with the Bronfman Family Office, Adler & Co, APAX Partners and at T. Rowe Price. He also launched business development for Check Point Software Technologies.

SPEAKER

David Blumberg

Founder & Managing Partner

Blumberg Capital

FULL BIO

MODERATOR

CHAPTERS

0:00 – Intro & background

8:22 – Move to Miami and optimal policies

16:08 – Identifying venture capital trends

21:12 – Childhood and downside analysis

24:24 – Missed investment opportunities

28:50 – Collaboration

32:42 – Israeli tech scene and national service

40:20 – Abraham Accords

43:01 – Blumberg Capital 5-year plan

TRANSCRIPT

Rev.com

Joe Eletto: (00:08)
Hello everyone, and welcome back to Salt Talks. My name is Joe Eletto and I'm the Director of Operations for Salt, which is a global thought leadership and networking forum. Salt Talks is a series of digital interviews with the world's foremost investors, creators and thinkers. And just as they do at our global Salt events, which we were thrilled to resume this past September in New York. We aim to both empower big important ideas and provide our audience a window into the minds of subject matter experts. We are thrilled today to welcome David J. Blumberg to Salt Talks. David is the Founder and Managing Partner of Blumberg Capital, an early stage venture capital firm that partners with visionary entrepreneurs, from seed stage through their growth journey. The firm is among the first investors and industry leaders including Addepar, Braze, DoubleVerify, Funbox, Hootsuite, Catapult, Trulioo and Yotpo. David is based in Miami with team members across San Francisco, Tel Aviv, Miami and New York.

Joe Eletto: (01:09)
Prior to founding Blumberg capital in 1991, David managed international investments with the Bronfman Family office, Alder & Company, Apex Partners, and at T. Rowe Price. He also launched business development for Checkpoint Software Technologies. David earned an AB in Government, cum laude from Harvard College and an MBA from Stanford Graduate School of Business. He speaks French and is proficient in Hebrew and Spanish. Hosting today's Salt Talk is Anthony Scaramucci, the Founder and Managing Partner of SkyBridge, as well as the chairman of Salt. Now I'll turn over to Adam for the interview.

Anthony Scaramucci: (01:45)
David, thanks so much for joining us. I want to start with your personal life.

David J Blumberg: (01:49)
Sure.

Anthony Scaramucci: (01:50)
And your Odyssey to start Blumberg Capital in 1991. Give me the whole thing and then you got to take me, before you and your narrative, you got to take me through the move from Silicon Valley to Miami. But go ahead. And thank you for joining us.

David J Blumberg: (02:07)
Thank you Anthony, so nice to see you again and really appreciate this opportunity. So I grew up in a nice middle-class, loving family in Fresno, California. I went off to Harvard for college. I thought at the time, I wanted to work in government and I studied international relations, economics. I was very active in a lot of different campus organizations. But I was a middle-class kid and I took some scholarships, and I took some grant, sorry, loans. But I needed to work to put myself through. So I got involved with Harvard Student Agencies, and ended up starting one agency called Harvard Distribution Services that still runs to this day. So that was fun experience because I learned the joy of serving customers. And it's a really wonderful feeling, where you get this holistic, virtuous cycle of finding an employee, providing a service, getting paid, delivering value, and then it scales and develops. So that was a very positive experience. Washington, I didn't have quite as positive experiences. It was very sexy and exciting, and you're close to power. But I found a lot of it less fulfilling.

David J Blumberg: (03:17)
There was a lot of other agendas, lobbyists, special interests for getting their way, the general public seemed to be left at the last in line. So I decided that instead of going to law school, going into the foreign service or going into government, that I'd become an entrepreneur. I was very lucky to attend a conference, I think in my senior year that talked about the future, they had some futurists and they were talking about... There's two futures. There's the computer software future and there's the biotech future. And I said, "Oh, I can't do organic chemistry now, I've got to go to software computer." So I oriented myself that way. And I was always very curious about the future, I'm a curious person, I like people. So, meeting entrepreneurs and building long term relationships has been sort of the key, I think success factor in my life. I think it's very congruent with the venture capital career needs. And so that's what I did. I was very fortunate to work right after college at T. Rowe Price.

David J Blumberg: (04:17)
I'd been accepted to business school at Stanford already. And I wanted two years to earn my way and learn something about the real world. So T. Rowe Price was terrific, because it's a long term buy side, mutual fund group, very, very respected. And they really taught me about learning, and to understand a large new sector. So whether it was early days of telecommunications after the breakup of AT&T, or it was certain new trends in the semiconductor industry or the dawn of the software industry, which is really incipient in those days. Would go to conferences, early conferences that were getting the thought leaders at that time. The big companies were represented and there were a lot of emerging companies in this period. T. Rowe Price, remember, is a buyer of IPOs often. So I would go to the conference to find out which companies were going to become IPO, have a thought piece ready on that new sector, and then tell them, "These three out of the top 10 are the ones we should be buying." And that would help me advise the portfolio managers.

David J Blumberg: (05:17)
So it's great training. I started building a network also of folks that I could rely on later in life for due diligence. And so that was a terrific twin thing. The skill sets of analyzing companies for long term success and growth. And how do you figure that out by relying on your network of friends and in the industry?

Anthony Scaramucci: (05:34)
All right. So, you had this fabulous-

David J Blumberg: (05:37)
Now, I have two [crosstalk 00:05:37]. Sorry. I'll just do two more bits. And that is after business school, I went to work for a fellow who became a mentor, Fred Adler. He's an amazing venture capitalist back in the day, and he was one of the top probably five or a handful of VCs in the time. And he was the only one who had any interest in working in Israel. Israel at that time was much more socialist, it was more very incipient, they didn't have a big industry there. A lot of very skilled technical people. So I saw that as an opportunity and I think I've always been lucky, when the crowd is running one way I look say, "What are they running away from, maybe there's opportunity over there?"So I'm a kind of a contrarian in a sense. So when people were afraid of Israel in the stock market, I said, 'Well, that is probably... With all the risks, the wars, the inflation, the issues are probably already priced into those stocks.

David J Blumberg: (06:23)
And so if we're trying to find good companies underlying it, there may be getting a discount for the country, which may be improving and over time they will increase in value. And that turned out to be true, of course. So Fred Adler was a fantastic mentor, got venture capital and the Israel network and network for Alan Patricof, another great patriarch in the industry. He was at Apex and then founded it and then started his own company, Gray Croft and started another company now that's focusing on gerontology venture. And then I had the chance and privilege to work for Charles Bronfman family office called Claridge, up in Montreal. So I had a little bit of international exposure all the time, I speak different languages. And I always like the tech side of it, and in 1991 came back to San Francisco instead and started Blumberg Capital.

Anthony Scaramucci: (07:10)
Well, it's an amazing career. Two things that stick out to me is Harvard Student Agencies. You remember the, Let's Go travel books. I'm sure that you were involved with that. I took one of those books to Europe with me, it was Let's Go Europe. I stayed in all those youth hostels and ate all that junk food on my way through Europe. And then you mentioned Fred Adler. And so Fred had an office at Fulbright & Jaworski.

David J Blumberg: (07:35)
Correct.

Anthony Scaramucci: (07:35)
And of course, he was a Harvard Law School guy, and he was tight with Tea Leoni's dad, Anthony Pantaleoni. I don't know if you remember Anthony.

David J Blumberg: (07:44)
Of course.

Anthony Scaramucci: (07:44)
But I used to hang out with him because I was four floors above them when I started my first business. So I used to sit in Fred's office and brainstorm with him. A very gifted man. Wicked, smart, tough. He was a tough-

David J Blumberg: (07:58)
Very tough, very tough.

Anthony Scaramucci: (08:02)
... SOB. But he got life, he got the essence of it and he had a great sense of humor. Why Miami? And by the way we've had Mayor Francis, Mayor Francis Suarez on Salt Talks with us. He's obviously a brilliant guy, and I think he has the brightest of political futures. But why did you go to Miami from Silicon Valley?

David J Blumberg: (08:22)
I think that the lesson for us during the COVID lockdowns was that I didn't need to be chained down to my desk. None of us do. And we really can work from anywhere. We're very, very fortunate in this digital economy. In fact, of course we understand, have empathy for the tragedy of the COVID illness. I separate that from the lockdowns. The illness, the pandemic, is a huge human tragedy globally. And again, great empathy. However, every dark cloud has a silver lining and the silver lining that we found in our portfolio, specifically Blumberg Capital and I'm sure a lot of other folks in the digital industries. Found that it really is another acronym, not only COVID, coronavirus identified in 2019, COVID-19. But also a catalyst of innovation... Sorry. A virtualization, innovation and decentralization, C-O-V-I-D. So, that catalyst effort, we saw it in surveys that we do with Blumberg Capital on FinTech, that the adoption and the readiness of consumers to use FinTech solutions rather than go into a physical bank branch route jumped 50%, from about 47% to 67%.

David J Blumberg: (09:31)
So quite a big jump in consumer behavior. In telemedicine, along with some deregulation, the Trump administration did and the just the need for this new kind of interaction. We found that the number of visits that were done by telemedicine increased 38 times in 2020 prior. I just saw on LinkedIn that the number of requests for "work from anywhere" jobs is increased by something like 357% over the last year. So these are signs of this virtualization and decentralization. And I think that will also lead to more innovation. Because we're not tied down to the old constraints. We're freeing ourselves in a way. And so Miami beckoned, it beckons because it's a wonderful place to live, it's a tropical paradise and people are very welcoming here. A lot of people have moved from other places so they know what it's like to be new. So we feel very welcomed as a family. There are great schools, restaurants, sports, all their activities. And then it's an emerging new tech hub.

David J Blumberg: (10:34)
I remember, going back that when we first started Blumberg Capital, we decided to stay in San Francisco, in the city. Because that's where the young entrepreneurs were. A lot of people wanted to be down at Sand Hill Road. I felt that was more, that were older folks were and bigger companies and semiconductor, more hardware oriented. And so we want to stay in the city. Now, most venture capital firms want to be in the city. And now I think there's a new move and that move has been decentralized, spread out to new hubs, where costs are lower or people can be a little bit freer, and we start to see the results there. We have two portfolio companies that have already moved here in Blumberg Capital V. And there seems to be quite a bit of deal flow. And we can do deals anywhere. If we're based in Miami, we can still do deals in New York and San Francisco and Texas and Tennessee. Distance is less important I think, than ever before.

Anthony Scaramucci: (11:29)
Listen, I agree with everything that you just said. I guess the thing I'm most curious about it, and because you have a governmental background. Policies matter, right? And I tell my friends this, you are partners with the government whether you like it or not. Here in New York, I happen to be a minority partner in my own life because my majority partners are guys like Bill de Blasio and now it's Kathy Hochul, used to be Andrew Cuomo. They take more than half my income away from me. And so tell us about policies, governmental policies in your decision making to move to Miami?

David J Blumberg: (12:11)
Well, I think there's a wonderful saying from the 1960s, I think it's particularly well applied to government and that is, "Less is more." So I tend to think that things should be done, various change should be done very slowly or incrementally. It should be a high premium on stability, and on harmonization of regulations across a broad area. So for example, when we see things that are very discordant between jurisdictions right next to one another, that can cause a great deal of dislocation and difficult for businesses that wish to expand nearby. So again, I tend to favor the light touch on regulation, the light touch on taxation. I think that that tends to favor social mobility and helping people at the lower end of society move up more rapidly. Choice is very important so I really think it's important that the government tries to let people have the most possible choice without harming other people in what they do. So that's a little about basic philosophy.

David J Blumberg: (13:14)
And I think that I would say that my experience here are experiences of family and businesses, is that Florida is very well governed. It has suffered far less of the negative effects of lockdowns than most other states. And we hope that it continues and maybe this will spread further afield.

Anthony Scaramucci: (13:32)
All right. Well, listen, I admire him. I probably don't... I'm not as in love with the scientists quiet frankly. I don't like giving my editorial opinions on these Salt Talks. But I think I know Ron, a very long time. He's a very smart guy. You can get people vaccinated and speak positively about the vaccine as a leader, I think that that's a requirement actually. I understand the issue with the lockdowns, but I do think people should be vaccinated. And it's a public safety issue, just like it is in the schools. But anyway, that's my 30 seconds there.

David J Blumberg: (14:07)
Yes. And I-

Anthony Scaramucci: (14:08)
You were early-

David J Blumberg: (14:09)
... I'm not really addressing that issue or any specific personalities. I'll just give the trends that I've seen. Florida schools decades ago, were quite low rated public schools. And now they've marched upwards steadily over multiple administrations, probably of different parties. I don't know the details. But they're now I think, third by some Newsweek or some other reporting. So that's a very important thing. I find just physically the infrastructure here is quite strong. The highways are clean and clear and few potholes. The homelessness problem has been dealt with here, very well in South Florida. I haven't visited all parts of the state. And so they're problems that every society has every community, but it did seem to be dealt with better here than any place that I was used to [crosstalk 00:14:57].

Anthony Scaramucci: (14:56)
Well, certainly in Miami, I mean, France has done a great job. Listen, I'm close to Jeb, the seeds for what you're seeing right now were laid in the 1990s. And Jeb will be forever known as the education Governor. He put all of that stuff in place. And so as you and I both know, things get personalized that are situational. If you put a 25 year plan in place to improve education in 1995, and the results are starting to cook in the year 2020 or 2021, you get that sort of an outcome. But I want to go back to something that you said earlier, because you're a trend seer, David. Ultimately, when I look at your career and I see your style of investing, there's some intuition, there's some blend of research. You are at the inception of a lot of early stage tech investing with your peer group. Why? What was it that you saw, what is the ingredients that enabled you to see things before others saw them?

David J Blumberg: (16:07)
Well, sometimes I think being an outsider is useful. We see it that the minority cultures can really understand the majority and also have their own particular cultural heritage from being a minority. So the overseas Chinese are famous for this. The Armenians, the ethnic groups that have been in diaspora, the Jews, of which I'm one. I have that. Also, I happen to be gay. I think I was the first out gay founder of a venture capital firm. So having these different abilities to context switch and see the minority perspective and the majority perspective or the inside outside, is useful. These minorities often are not part of the old boy network. And so you need to find a way. And I think it was famous that the big banks didn't hire a lot of minorities and so the minorities are principally Jews and so I'm an Irish founded investment banks, which had higher margins in the traditional banks and often have gone on to great success. So I sort of see that as trying to look around. If everyone's looking here, look a little bit over there. And that has been helpful.

David J Blumberg: (17:15)
So another point was, I was very much interested in software. I knew how hardware was very capital intensive. And the early days of venture capital, when I was getting involved with Fred Adler, there were a lot of deals that were hardware oriented. Or they were restaurant chains to take a completely other side of things. Both were very capital intensive. And starting with a small fund, Blumberg Capital when it started, now we're quite larger but we looked for deals that were very capital efficient. And the nice thing about capital efficiency is it lead you to software. And software has a few characteristics that are really tremendous and have improved over time. One is it is high margins, two is repeatable. Three, it builds intellectual property and sustainability of a moat of data for defense. So those are very positive things. And then we have to go into the whole cloud infrastructure and the lack of big capital equipment that you need to buy to start up.

David J Blumberg: (18:10)
That change, which happened around the turn of the decade to 2000 period, really made it much, much more capital efficient for entrepreneurs to start, and for early stage venture funds to fund them with modest amounts of capital. So those were partly why I think we've done well. Going to things early, give you one more example. We try and go to early conferences of new industries. For example, when Twitter had started, I went to the first Twitter conference. And at that first Twitter conference, the speaker said, "David, please speak on a topic of your choice." I said, "Well, I'm not a Twitter expert. I'm a venture capitalist. I'm a generalist, but I'm good at intuiting and finding great entrepreneurs. So let me walk around the trade show floor..." And these little booths. They were nothing big. They were little tables. And I went to 30 different tables picked five, and I had those entrepreneurs present on stage as my talk. And then I moderated Q&A from the audience.

David J Blumberg: (19:06)
The reason I moderated Q&A from the audience in a very self serving way, is because I thought the audience is probably the smartest group of people around Twitter, in that ecosystem that exists. I didn't know that much, but they knew a lot. So I was listening to their questions and I helped figure out which of the comms we wanted to back. One of them we backed was called Hootsuite, which had zero revenue at the time and has gone on to do I think today they're doing something probably over 200 million in revenue. So it's kind of exciting to find those little early diamonds in the rough and that's what we love to do.

Anthony Scaramucci: (19:37)
I think you're saying something interesting that I want to expound upon. That you are because, of the sort of immigrant or outsiders story or the fact that... Let's face it. You and I are basically the Land of the Misfit Toys. I'm the Jim in the box. When I was at Goldman, I'll never forget one of the guys there. He was like, "Hey, man, we don't make people partner like you." I don't know exactly what it meant but I sort of got what it meant. I said, "Okay, that's fine." I went out and started my own business. Which is probably the best thing that ever happened to me. And I have so many friends that have told me that story. There's a very famous woman that we interviewed. And she said that the law firm, she was there and it was 1968. The woman was brilliant. First in her class, law review, etc. The guy leaned over and said, "Now, we're not comfortable with women being partners here." And so she left and now she's a billionaire.

Anthony Scaramucci: (20:38)
But the point being, there is something to the outsideness that allows you to see things, and so I guess the question I have though is, you got to be able to see it, David, but then you also have to have the killer instinct to pounce on it. And you've done that as well. And so I want you to talk a little bit about that. Where does the fearlessness come from? Where does the lock and load, put the investment in the crosshairs and fire the bullet through the chamber?

David J Blumberg: (21:13)
That's a great question. I'm going to tell just a personal story that says me a bit about personality but I think it goes to the point. I remember as a young teenager, I couldn't have been more than 14. I went to some kind of a youth group event where the kids from Fresno were I was from, were supposed to go to meet this big conclave in the Bay Area. And I was the only one who went. So I didn't know anybody at this thing. There are like 300 kids and me didn't know anyone. So we had them kind of big assembly. And they all were starting to socialize. And I said to myself, "Okay. Now, I don't know anybody here, I can have two choices. I have a choice of just sitting here by myself and not meeting anybody, or go out and put on my hand and say, Hi, I'm David from Fresno, who are you?" And what is the worst thing that can happen? I did this downside analysis, what's the worst thing that's going to happen? Okay. They're going to turn away, "I don't want to talk to you." They're not going to hit me.

David J Blumberg: (22:00)
But whatever it was, I could deal with that downside. So I decided to become, force myself to sort of become an extrovert. And same by happening, by doing downside analysis you can say, "Gee, can we miss this deal? Or if we pay a little bit more, or if we change the terms a little bit and we get it, are we going to be happier?" So that downside analysis is very useful. What's the worst? Is the opportunity cost of losing? Or is it making a mistake that you're paying too much or making a quixotic decision? We try to do things very much as a group, we operate sort of by consensus. And that's been very helpful. Not does it be unanimous and it's rare that things are unanimous. It's good to have a little bit of competitive tension in a firm I think, and certainly in ours. Again, I think people often are ambitious. I'm ambitious, my teams are ambitious. And the entrepreneurs we back are ambitious. So when you meet somebody like that, it's very inspiring. And you've sort of feel that you want to be part of that journey.

David J Blumberg: (23:01)
So that's what an equity investor, minority investor. We're not trying to be control investors, we're always minority investors. So we have to be friendly and approachable and amenable to them, and show that we can add value beyond our capital because it's often competitive. So we win by showing that we can deliver value, we're not going to try and micromanage and screw things up. And that's worked out pretty well. We have I think, today, at least eight unicorns that were all acorns when we found them. They were all zero revenue and now they're all worth over a billion dollars as private companies or some of them have gone public. So, pretty exciting to watch that journey and be part of it.

Anthony Scaramucci: (23:38)
I love it. Tell me about one that got away. Okay. And I'll briefly add that I had the opportunity to put $500,000 into a company called Uber. I don't know if you ever heard of that company. And it was at a $25 million valuation. So of course, if I had done that, if I had been smart enough to do that. My background for the Salt Talk would be a Caribbean island somewhere and I'd be drinking a pina colada. But I missed it because I looked at the guy and say, "Well, do I want to put my daughter in some black unmarked car and some unknown driver is going to be driving my daughter around Manhattan?" And I was like, there's no way I'm doing that. And of course, that's probably the largest bill I have on my American Express. Now, as my daughter driving around on these Uber. So I missed it. Tell me about one you missed.

David J Blumberg: (24:25)
There are a few in the anti portfolio. Probably one that taught me some important lessons is Palantir, which was something early. I was very friendly with the CEO and some of the founders and Peter Thiel was inviting us to co-invest with him., and he couldn't really find the appropriate VCs in the valley at the time. And he said, "You guys know security and so on." And my experience historically, and our team's experience working with government had not been great. They were slow customers, typically they were quixotic, they were political decisions. And so that the whole main orientation of selling to the government we thought, that's quite tough for a startup. So we said, "Well gee, I mean, this technology is probably equally good, maybe even broader applications in the financial sector and we know that really well. So if we could sell to hedge funds as well, investment banks and commercial banks, we think that'd be an easier road in." And they politely said, "No, we are going to focus first on government, we will get to the other later."

David J Blumberg: (25:23)
In fact, I'm sure they said that they would get to the other later but they had to go first in government. The part of the problem was that some of the diligence that we probably would have wanted to do was probably classified. We couldn't really talk to some of the government accounts that they were working with, in the three letter agencies. So we passed on it and of course, I'm a shareholder now and I'm very grateful. I got in later while I was still private. But that's been a fantastic company. And it does show persistence, it takes this long term drive because company's not profitable for a while. It's been getting better and better and growing in every way. And the value of its data moat is growing, it's improving. So that's the taking the risk part. You need to jump in once in a while, and sometimes go out of your comfort zone. So I have this comfort zone bias against government contracts and customers, and that was probably short sighted.

Anthony Scaramucci: (26:17)
But I think you're saying something that I want our young listeners to listen to. You can get something wrong and have the neuroplasticity to correct yourself and to dive in, even if it's at a higher price. Because there's a confirmation signal that it's going to do quite well. And so therefore, you take your ego and your emotion out of things and plow forward. Is that a fair assessment?

David J Blumberg: (26:41)
Excellent point. Yes, correct. Very correct. And so, we should always be learning, missed a few other deals. There's another one called Delivery Hero, which is a very successful company from Germany. It's a now multinational in the food delivery business. We didn't have as much experience again in the consumer side, internet businesses. Most of our businesses at Blumberg Capital are B2B. And it's very easy to... For not very, but they're easier for us to analyze because we have an outstanding CIO council, a chief information officer counsel. About 140 folks, West Coast and East Coast get together about eight times a year, present portfolio companies or companies we're considering investing in. And these folks give responses and feedback. Often it's a question of, will this solve a real pain point that we the Fortune 5000 have? And what kind of ROI can we get? How does it integrate with the rest of our IT infrastructure? And so that answer has been clear and relatively easier with B2B projects. B2C projects you really have to understand the consumer sentiment and the trends and the modes. And that's been less of our forte.

David J Blumberg: (27:50)
So we missed this Delivery Hero. I think we thought it was too expensive at the time, maybe 16 million pre-money valuations, I don't know. Series A or something. And now it's of course, worth many billions. And they're great entrepreneurs. And that's the thing. Often really, once you bet on the best entrepreneurs. That's probably one of the key lessons. Not only best entrepreneurs, best entrepreneurs solving very hard problems in large markets. You take those three factors, that generally is a winning recipe.

Anthony Scaramucci: (28:21)
Yeah. I think it's well said. And staying at things you're... I mean, you have this phenomenal reputation but when people talk about you, the word that comes up is collaboration. That you've been able to work with others, you've been able to work with other VCs, you collaborate with your entrepreneurs on the businesses that they're starting. And again, we have a lot of young listeners that tune into these things. What is it about your personality that's enabled you to be the great collaborator that you are?

David J Blumberg: (28:58)
Wow. I'm so glad that that's my reputation. I didn't know that but it's nice to hear. So whoever you heard it from, it's great. Thank you.

Anthony Scaramucci: (29:06)
No, I hear that from everybody. Not to flatter you. I mean, that is one of the hallmarks of... We all have our different skill sets but I think one of your great success points is that. People view you as somebody that's user friendly, they can go to you for advice or they can get you to team up with others. To quote my kindergarten teacher, "You play nicely in the sandbox."

David J Blumberg: (29:28)
Well, that's great. And first of all, I want to quickly distribute this to my whole team. Blumberg Capital we're almost 25 people, everybody is a little bit different. But I think that whole spirit of collaboration preveins and the perfuses throughout the whole team. That's really our DNA as a group. So it's not just about me. Number two, I think we do it out of necessity and out of joy. It's a combination. It's good for the muscle, and it's fun to play the game. As a minority investor, you can't try and dominate. You can't try and impose your will. You have to build a coalition, you have to build a coalition of the willing. Sometimes it's the entrepreneurs and other investors, sometimes it's a wider group including partners and other stakeholders. But that's generally the way to win and to move things faster. That's another thing that we found through the CIO Council. Often the large companies are relatively difficult to penetrate. It's hard to get in that first door. So if we have a relationship and help open up those doors for people, that serves a lot.

David J Blumberg: (30:36)
I'll give it back to an example with Nutanix. A company that we were the first investor, they're going to virtualize storage, we brought it to our CIO Council. We knew already, we sort of had a prepared mind. Because the CIO Council for years had been telling us that storage costs were going up exponentially, and they couldn't keep pace. No. None of their bosses, the CEOs of these companies wanted to let them spend an exponential on digital storage. So they had to find a lower cost curve to jump on to, and it needed new technology. So the guys at Nutanix that figure that out and they had seen previous relevant technology at Google and at Oracle, came together, we back them and so on. And we brought it to our CIO Council, we said, "Folks, we're looking for beta sites." Beta site is the first test before you really are ready to go into market.

David J Blumberg: (31:22)
And several of the hands went up saying, "Look, this is a big problem for us. You have credibility because you guys are coming through Blumberg Capitals. Teamwork, we've seen this stuff before, you're high quality, come from good backgrounds. We're going to try it." And one of those is a huge law firm that I'm sure you've worked with Anthony, in your background many times. And just before the IPO of Nutanix, the CEO of Nutanix called me and he said, "David, I want to just thank you and Blumberg Capital because that law firm was our first customer through you guys is now wall to wall Nutanix." And they've taken out the competitors, they were completely going with their solution for hyper converged infrastructure. And that was a great feeling. So we like to collaborate. So I'm glad that reputation precedes us. And it pays off. I must say that you can really go a lot farther, when you leverage the skill sets of a team rather than just what you've got inside.

Anthony Scaramucci: (32:20)
[inaudible 00:32:20], I think it's a great story. I want to switch to the Israeli Defense Forces. You have a team of Israeli Defense Forces leaders. And some of your recent exits were Israeli born. Examples being things like DoubleVerify, and Insights.

David J Blumberg: (32:43)
Yes.

Anthony Scaramucci: (32:44)
What is unique about the Israeli tech scene?

David J Blumberg: (32:46)
Okay. That's a wonderful question. I don't think it's terribly well explained or known. So let me try and do it very quickly. The Israeli military is different from most militaries in the world and in the West, because it's, it's a draft. Everyone goes, boys and girls. They're special forces and the elite intelligence units, which are where a lot of tech is developed. Those folks scan the high schools, and they test the kids and they bring what they, I would go the best and the brightest, into these special units for special training, they invest in them, they give them budgets, they give them projects to work on, they get them bond into small groups that can work together on this project. And then they say something like, "And your grandmother's life depends on it." This is life or death kind of stuff for them. So they get this bonding experience like steel that's tempered in the furnace. It's stronger, it's more resilient afterwards. So when most of us are at college getting drunk and having a wild time and so on. These kids are going through real strength through testing and training.

David J Blumberg: (33:51)
The good ones are rewarded by that and come out of their service with excellent skills, often in this technology realm, software development, hardware, communications, and a wide variety of other skills, and management. And they've also worked together as a team under tough conditions and had to get along and achieve an output even if maybe the pieces weren't all there. So that ability to be an entrepreneur, frankly, in a big organization like the military. That has provided thousands, tens of thousands of alumni into the tech scene in Israel, who are highly qualified, really well trained. And guess what? The startup is at very close approximation analog to that experience. So when they come out, they're bonded into small groups, they've worked on something technical together. Often with the military application, but often it can have a dual use civilian application as well. That's where we've gotten a lot of our best deals. You mentioned, DoubleVerify. That's an exciting one. The founder came to us and basically we heard about it through one of our LPs. And she said, "Would you talk to the gentleman, he's from Israel?" So I got on the phone.

David J Blumberg: (35:04)
And when he told me the problem, this founder's name is Oren Netzer. I almost couldn't believe that this problem existed. What he told me was that the big advertisers, the big brands of the United States and international, didn't really know with certainty where their ads were going on the internet. It turned out when he did the study later, it turned out that 31% of ads were not geographically targeted. They were targeted but their results were 31% of the time out of bounds. They were in the wrong geography. And then there are problems with brand safety, and so on. So I was shocked, because I thought that at the time maybe AOL and Yahoo had solved those kinds of problems. But no, they hadn't. So when DoubleVerify was getting going, we've had their first help build the market, it really didn't exist. And so this team that came from Israel, had this win attitude. They have the technical chops, they have the ability to go to customers, explain it clearly. Very frank, very direct.

David J Blumberg: (36:03)
And sort of say, "You might think you're protected, here's why you're not, here's how we can solve it." And it was a very straightforward, shocking revelations but it worked in enough cases that we got those initial customers. So, I'd say that the Israeli military is a breeding ground for entrepreneurs. It's a breeding ground for technologists, and it's paid off very handsomely. But there's one thing that we do little different. We think that doing it from the United States, which is the largest unified market in the world for high tech, is the best way to do it. There are many great Israeli firms that are based there. Now, what does an entrepreneur want from Israel? They want help actually in the market, not where they are. They don't need help with watching their engineers, they need help with addressing the market out here. So we often will partner with Israeli angels and other venture capital firms, and bring that value add of helping the company expand into the US market, Canada and Europe beyond that.

Anthony Scaramucci: (37:01)
Listen, I think it's fascinating. And it begs the question about our country. Because we've obviously were afraid a little bit, we've got red and blue states, we've got some tribalism and identity politics going on. Do you think that the country is ripe for a national service program? It doesn't necessarily have to be the military, but some type of gap year or gap two years, as you're describing happens in Israel?

David J Blumberg: (37:29)
I tend to want to let people choose their own path. But as a father, as a person, as an individual, I think it's terrific to do a year before you decide, if you decide to go to university to do something of either national service, or work for a year, or do some kind of a project. I think that's terrific. I hesitate about the forced aspect of it but it certainly works in Israel. My friends from France that did it, up until a certain periods and they've gotten rid of it in France. Other countries in Europe used to have it. There is something positive, it can also devolve into just boring, bureaucratic, make work. So don't want it to be that. But if there's motivation and good program, it can be outstanding for any person to get that picture of the real world of serving others, before you go on to say university, where you're really think about yourself and your own learning and so on.

Anthony Scaramucci: (38:27)
You'd listen. I hear you. We have that big battle going on about our liberties and our freedom. But having gone to law school and read the Constitution, it's a weird thing our freedom because there's a collectivity to it. As an example, we don't like mandates. But what about a draft mandate after Pearl Harbor? Everyone's subordinated their individual freedom to go protect the freedom. And so there's a weird thing about our freedom. It's conjoin to each other. The same way we can't... And we can't harm each other. We're not free to harm each other. I'm not free to swing my arm and clench my fist and move it into somebody's face or yell fire at a movie theater. So it's an interesting thing where we're going to have to make those decisions shortly about, where we're going in terms of healing ourselves and unifying ourselves. Before I let you go. The Salt Conference, we hosted it in December of 2019 in Abu Dhabi. And we were one of the first, I think we were the first group to have Israeli venture capitalists in Abu Dhabi speaking from a stage.

Anthony Scaramucci: (39:41)
A few months later, the Abraham Accords and by the way you know I was a supporter of Donald Trump's, I then became a critic but I'm an objective person. I think Abraham Accords have been a terrific thing for the whole region. And I've obviously encouraged the Biden administration to think about that. I don't like the binary thing of, "I'm going to reject Trump policy even if it's good policy, just because it's Donald Trump's policy." I think that's nonsensical. Any more than it would be to do the opposite. What's your opinion of the Abraham Accords? And where do you think things will be in the next five years in the Middle East?

David J Blumberg: (40:18)
Okay, great. I love that. Well, you and I often see each other at Davos at various parties, and so on. And some of my friends there from the Arab world talk to me about this years ago. In fact, I vividly remember a dinner during when the Arab Spring was happening. And there were crowds of young people in Cairo, in Tahrir Square. And I was being asked by these Arab leaders to explain social media to them, and so on and so forth. We had really fun discussions. But they were the ones who told me that they needed to have this kind of relationship, that they realized that Israel is frankly more of an ally and that Iran is the great existential threat to the Middle East. That Sunni- Shiite divide is quite tangible and real to them. They're the front line. I mean, Bahrain and Saudi Arabia, they're right there, they've been attacked by Iran in the past. Kuwait, was attacked by Iraq obvious in the past.

David J Blumberg: (41:12)
Those wars are real and visceral. And so I think that the Abraham Accords was a brilliant maneuver that adjusted to reality. There had been a sort of a bipartisan conceptual view for, consensus for years that, "Oh, everything has to lead through a Palestinian and Israeli court first." And I always sort of thought that was wrong, I always felt that the other way in would be a more practical way to lead to the same result. I mean, everyone wants peace in the entire Middle East, and justice and prosperity for all the peoples there. The Israelis, the Palestinians, the Jordanians, the Syrians, the Egyptians. Everyone, that's a goal. So let's make sure that we understand that. And equality of people, republic types of governments, whatever will do well for them, prosperity. But it seemed to me that from the geopolitical point of view, the Abraham Accords was an absolute brilliant stroke, that starts to break down the barriers and show what coexistence and fruitful cooperation can look like. The peace with Jordan and with Egypt had been useful, but probably kind of cold piece.

David J Blumberg: (42:18)
This peace with United Arab Emirates, with Bahrain, with Sudan and with Morocco seem very warm and genuine and sincere. And they're built on fundamental realities of geopolitics, of military cooperation, of economic cooperation, and cultural affinity. So I think it's durable. And I do hope the United States is supportive and builds from strength to strength.

Anthony Scaramucci: (42:47)
Yeah. Well, I think you and I are in agreement with that. My last question. Is five years from now, what is Blumberg Capital?

David J Blumberg: (43:02)
Well, we are going to grow and continue and properly diversify. So we've been very, very strategically focused as only kind of one thing. Very early stage in the geographic focus of North America, Israel, a little bit of Europe. I would think that the team we're building is bigger, it's stronger, it's more diverse, we have more capital under management now and we can do more things. We have a very strong network, both an early stage and with later stage investors. So perhaps we can bridge that. I'm not ready to divulge exactly right now where we're going to go. But I think you'll see us bigger, stronger, broader and a little bit more expanded in our current format.

Anthony Scaramucci: (43:43)
All right. Well, listen David, it's a pleasure always to have you around. You're brilliant person and looking forward to collaborating with you in the future. Okay? That's my goal. I want to spend more time with you and figure out what you're investing in so I can be a part of it with you. Thank you so much for joining us on Salt Talk.

David J Blumberg: (43:59)
I will like nothing more. I will like nothing more.

Anthony Scaramucci: (44:01)
All right. Well, we got to make that happen in the future. But thank you very much for joining us on Salt Talks.

Joe Eletto: (44:08)
Thank you, Anthony and David for joining us. If you'd like to access all of our previous Salt Talks, you can visit our website at salt.org, where we host our previous videos as well as all of our podcast episodes. We're also very active on social including our Twitter account, @SaltConference. And please subscribe to our YouTube channel where you will be the first to know about upcoming Salt Talk releases. But on behalf of the entire Salt team, this is Joe Eletto signing off for today. We look forward to seeing you again soon.