“If you're great at something, you'll figure it out and you'll adapt your lifestyle to something that you're passionate about.”
Deven Parekh joined Insight Partners in 2000, and has been a Managing Director with the firm since 2002. He also manages the firm’s largest investment team, doing deals across the spectrum of venture, growth, and later-stage leveraged transactions.
Heading into the pandemic, investment from Insight Partners was expected to slow down, but that ultimately was not the case. Technology investments have proven resilient in the age of COVID as it becomes even more integral in socially-distant environments. Major companies and industries had to compress 6-7 years of e-commerce investment into six months in order to meet the pandemic-induced demand. “I think what people underestimate is how much they touch software in their lives.”
With the continued upward trend of AI and data collection/analysis required, tech sectors like software will see huge growth. Predicting a 15% a year compound as an industry, expect to see category winners grow more than that, resulting in more companies at half a trillion- or trillion-dollar market caps.
LISTEN AND SUBSCRIBE
SPEAKER
Deven Parekh
Managing Director
Insight Partners
MODERATOR
Anthony Scaramucci
Founder & Managing Partner
SkyBridge
EPISODE TRANSCRIPT
John Darsie: (00:08)
Hello, everyone and welcome back to SALT Talks. My name is John Darsie. I'm the managing director of SALT, which is a global thought leadership forum at the intersection of finance, technology, and public policy. SALT Talks are a digital interview series that we launched during this work from home period with leading investors, creators and thinkers. What we're really trying to do during these SALT Talks is replicate the experience that we provide at our global conferences, the SALT Conference. And what we're trying to do at those conferences and on these talks is to provide a window into the mind of subject matter experts, as well as to provide a platform for what we think are big ideas that are shaping the future. And we're very excited today to welcome Deven Parekh to SALT Talks.
John Darsie: (00:52)
Deven joined Insight Partners, which is a leading global private equity and venture capital firm in 2000, and has been a managing director with the firm since 2002. He also manages the firm's largest investment team, doing deals across the spectrum of venture, growth and late stage leveraged transactions. As head of Insight Partners, Deven manages investments in application software, data and consumer internet businesses globally, having actively worked with investments in Europe, Israel, China, Latin America and Russia. Deven has led 68 deals at Insight, deploying 4.3 billion in capital to date, with 38 exits averaging gross multiple returns of 2.6 times.
John Darsie: (01:38)
Deven sits currently on 16 portfolio company board of directors and advises many other CEOs more informally. In addition to his investment work, Deven has been a leader and a vocal advocate for diversity, equity and inclusion. He's been a primary driver of initiatives and thought leadership programs within Insight, promoting female and minority leadership across Insight's portfolio and the larger software and investment ecosystems.
John Darsie: (02:05)
I would also note that Deven has appeared on numerous industry award lists, including the Forbes Midas list several times, the list of Top 100 venture capitalists by CB Insights. And he also won an award from the Venture Capital 100 for his investments in 2014 in Twitter and Chegg. Just a reminder, if you have any questions for Deven during today's SALT Talk, you can enter them in the Q&A box at the bottom of your screen on Zoom. And hosting today's talk is Anthony Scaramucci, the Founder and Managing Partner of SkyBridge Capital, which is a global alternative investment firm. Anthony is also the chairman of SALT. And with that I'll turn it over to Anthony for the interview.
Anthony Scaramucci: (02:44)
John, thank you for wearing your sports jacket today. Deven, of course you don't have to wear one but I came with the suit and tie. Does everybody know that? Now I may be wearing the suit and tie from the waist up. But we'll leave that up the Zoom and the pandemic. Deven, tell us something about your career that we couldn't learn on Wikipedia?
Deven Parekh: (03:06)
The thing I would tell you is I don't ever expected to be sitting here talking to you talking about technology.
Anthony Scaramucci: (03:12)
Oh, man. Well, of course not. I mean and by the way, we're still trying to figure out why you accepted the invitation. But we can ask your psychiatrist that later. I mean, but tell us something. Why did you go in this direction?
Deven Parekh: (03:23)
Well, I actually started out, I started out in college studying biochemistry, and I had a full intention of being a doctor, probably doing an M.D. Ph.D. and going to research. I mean, that was kind of my plan. And I think at the end of the day, I'm sitting here talking to you because I was impatient. I ended up with a bunch of roommates who were economics majors or Wharton majors. I figured one was going to be a 12 year path to starting my career, one was going to be a lot shorter path to starting my career. So I ended up transferring to Wharton out of the College of Arts and Sciences and ended up going to business. And I started my career at Blackstone and went from there to a merchant banking boutique called Berenson and my company and then joined Insight in 2000.
Anthony Scaramucci: (04:15)
So we find our way though, right? I mean, that's more or less we're making a plan and then things happen to us so we go in different directions, but you strike me as somebody that really loves what you're doing. And so we have a lot of young people that join these SALT Talks. And so what would you say to them about your personal odyssey to getting to where your passion is, and what would your advice be to them?
Deven Parekh: (04:39)
Well, I'll start by just giving the advice I give my own kids. I've got a 17 year old and a 20 year old and my simple advice to them is find something that doesn't feel like work. And if it doesn't feel like work, you'll probably be great at it. And they obviously have the question of what are the careers where I can make enough money and my answer to that is if you're great at something, you'll figure it out and you'll adapt your lifestyle to something that you're passionate about. So that one to me is the most important.
Deven Parekh: (05:09)
But then the second really is I think you have to, well you have to have a plan. Understand that plans are adaptable. And when opportunities come across your path that maybe don't fit within the plan, but that are compelling, that kind of call you, go for it. And you can always course correct. And as I go back and look at my career, those were the things, the ones where I kind of jumped on something that wasn't part of the plan. That really worked out well.
Anthony Scaramucci: (05:41)
So you have an interesting model. I mean, the Insight Partners, it sort of looks this way to me, and I'm sure you'll agree with me, it looks like it's a hybrid between private equity and venture capital. And it seems like it's a blended structure. Can you tell us how that works, what the benefits are of that and how you guys decided to go in that direction?
Deven Parekh: (06:02)
Yes. So if you look at when Insight was founded back in 1995, our strategy was really focusing on at the time, these terms that we use today like scale up didn't really exist. We called it then was expansion stage software. So what do we mean by that? What we meant was, companies, they weren't just ideas. There was a product, there was an entrepreneur. And most importantly, there were customers, and expansion stage capital was to take that kind of fundamental product, so there's some product market fit that existed. And the capital is really going to kind of then expand the company through investment, sales, marketing, potentially acquisitions.
Deven Parekh: (06:43)
And so you're taking kind of base technology risk off the table. You're taking some level of adoption risk off the table, because you already had customers. And you're really taking primarily kind of execution risk. Now back in 1995, when Insight was founded, there were not lots of profitable software companies. There were a few but not many. And so most of the capital kind of went in to, as I said, make incremental investments in the business.
Deven Parekh: (07:10)
But fast forward to 2020 and we'll go more into this later. But software is an incredibly powerful model with very high margins. And so what we basically said is that, once we decided that all we were going to do is software as a firm, we basically said we wanted to be able to serve the full continuum, from kind of the early growth company, all the way to really mature profitable companies. And so we've kind of taken our approach where we have a sourcing team of close to 50 people that are basically looking for the best software companies globally, proactively reaching out to them. We have an investment team that kind of finds the best companies. And our approach is to go to them and say, "Listen, we don't care whether you want to sell 10% of the company, you want to sell 90% of the company, or you want to sell something, you want to have something in between. You're a great business, we love your market, you've got a great team, we want to find a way to work together.", not have an approach that we only do control deals or only do minority deals, we want to be in great companies.
Deven Parekh: (08:14)
And then lastly, we have a 70 person operating group that kind of is really able to work with companies, not to run them because our model is not to go in and we want to back great entrepreneurs. What that operating team really does is share best practices, because what we view ourselves as good at is pattern recognition. What works over here, how do we apply it over there? And that team's role is really to play that. We can go into any one of those in more detail. But that's really the approach we're taking.
Anthony Scaramucci: (08:45)
And it's working out amazingly. But now we're dealing with a COVID-19 pandemic. And so has this changed anything about the business Deven, from your perspective? Has your investment philosophy changed, the deployment of capital? What's different today in the post COVID-19 portal?
Deven Parekh: (09:05)
Well, like all of us, we walked out of the office one day in March and haven't really been back since. And I think if you had asked us at the end of March, I spoke to our LPs at the beginning of April, I told them that they should expect significant pressure on valuations. They should probably expect significant decline in our investment pace and that we didn't really have a lot more visibility to be able to offer but given that we're likely going to see the largest economic contraction since the Great Depression, it was hard to assume that it was going to be anything but challenging conditions for the next nine months. And here we sit in November, and that's really not the way it played out. Tech has been extraordinarily resilient. We've done 27 deals since COVID. We've deployed as much capital this year as we deployed last year, and so everything about what's happened, and we can talk about why that is, but anything, everything about what I would have predicted at the end of March hasn't really played out that way.
Anthony Scaramucci: (10:19)
So tell us about that, because I think that's another big point about life and adapting, and things are happening that you don't expect. Certainly none of us thought that we would be in a global pandemic, perhaps you did. I thought it was unlikely that someday we might have a pandemic, but I didn't think it was going to be imminent and it came upon us, in my opinion very quickly, caused all of us to make some adaptations to our business. Obviously, I would love to be doing this with you in a live event, a live SALT event, which hopefully someday we'll be able to... exactly, so hopefully, someday we'll be able to do that. So go through that thought process, go through the machinations, the adapt and pivot and also then explain how you identify that in good leaders in the companies that you're investing.
Deven Parekh: (11:05)
Look, I start by saying this, some of the pre-COVID just a general comment, and we'll talk about COVID. But I think what people underestimate is the impact how much they touch software in their lives. So you use your iPhone as your alarm clock, that's software. You get up and you ask your Alexa the weather, that's software. You get into your car and you put something in a navigation system, that's software. The average car today has 10,000 more lines of code than a Boeing 737 software code. You go to the bank to get money out of the ATM machine, that's software. You show up at the office and do your thing. This is pre-COVID. That's software. You come home and you watch something on Netflix, the recommendation engine, that's AI software. I can keep going. But the point is that the amount of consumption that's driven by software, it just continues to go up.
Deven Parekh: (12:02)
Now let's talk about COVID. So what happened in COVID? And I'll use two industries as examples. So banking. About 50% of consumers used online banking pre-COVID. Within a month of COVID, 73% were using online banking and of those 73%, 75% said, the ones who are first time users said they would continue to use it post-COVID. Grocery 30% of people used online grocery pre-COVID. 63%, by the way, I'm surprised it's not even higher, but 60% use online grocery post-COVID. And again, 75% of those people said that they were going to continue to do that.
Deven Parekh: (12:47)
So what does that mean? Well, what it means is well, if you were to use a New York example, which won't be relevant to others maybe outside of New York, FreshDirect, well you already had an online platform and you were good at doing online delivery. But what's really happened and what's driven so much incremental spend is, if you are Walmart, you took probably four or five years of e-commerce investment and compressed it into like six months, five months, four months, because you now realized that your primary channel was probably going to be online, not the store.
Deven Parekh: (13:29)
If you were a bank, Anthony was not going to a branch anymore. And so really what happened is it wasn't the Etrades of the world that needed to make that change, because they already had online channels. But all the incumbents had to fundamentally, they're all thinking about online, they're all thinking about having a great experience, but they realized it was from being part of their experience to becoming the primary experience.
Deven Parekh: (13:55)
And what does all that require? It requires a massive investment in software. So who was the beneficiary of that were these enterprise software companies who basically were providing the tech platforms required for these companies do that. And then the last example I'll use, obviously just collaboration and communication. So we did walk out of the office in March, I am stunned at how seamless it's been. We can talk about what maybe some of the things that aren't happening, but it's been remarkably seamless, because of things like Zoom. Zoom's and ow worth $150 billion. We were joking about Zoom earlier. I'd rather be Zoom than GE for that reason, and wiser-
Anthony Scaramucci: (14:34)
Just for our listeners and viewers out there, John Darsie compared me to GE, and he told Deven that he was Zoom. I just want to make sure everybody understands that that's going to be something I'll be talking about with my therapist.
John Darsie: (14:47)
I can confirm that.
Anthony Scaramucci: (14:49)
Yeah, that was a brutal example. Deven, it's phenomenal what you're saying. I got two follow up questions. So you said everything's seamless, a few things are missing. What are the few things in your mind that are missing?
Deven Parekh: (15:05)
Well, I'll just use Insight as the example. I already gave you the stats. We're getting the deals done, right? But first of all, we're now investing significant amount of capital without having met people in person. Now you say, "Well, how important is that?" Well, the honest answer is, I can't tell you for a couple years how important it was. Maybe it's a false negative or false positive to think you have to meet people. But in the work context, we've onboarded, I think 20 or 25 employees since COVID. I've never met any of them in person. I've interviewed some of them on Zoom, but I've never met any of them in person.
Deven Parekh: (15:42)
The bigger challenge for them is going to be mentoring. So if you're a junior person at an organization, what used to happen, we're having a negotiation on a deal. I'd say, "Hey, John. I want you to jump in my office and listen in on the call." That's not happening anymore because everything is structured. So either somebody's invited to a Zoom meeting or they're not invited to a Zoom meeting. So you are losing, I think that collaboration, the mentoring of the junior folks, and then I think, look, not meeting people works fine when things are going great. But I think whether it's in business and politics or whatever it might be, personal relationships matter a lot. And when you have a problem, you need that reservoir of goodwill to get to that problem.
Anthony Scaramucci: (16:27)
I will say I agree with that. We lost business during the pandemic. And I'm absolutely confident had we been able to have face to face meetings with those various people, and some of the stuff got lost in translation. And some of it got lost in the haze of what was going on in the early part of the pandemic. But listen, I own that and we move on, we learn to adapt and pivot. But if I had the opportunity to meet with people face to face, I think it would have been a better outcome for both parties. I think when you're in a misinformation situation in a crisis, you can create a lose-lose if you're not careful. So it's always always caution, and offering up more communication to each other.
Anthony Scaramucci: (17:07)
You're a big thinker, you're a great executer, you built an incredibly successful business, congratulations on all that. But you are also a super big thinker and a visionary. And I know you've looked at this before so I have to ask this question. If you look at the top 10 companies in the United States, GE is a good example, in 2000, that would have been a top 10 company in the United States. And then a decade later, it's slipping. And two decades later, it's no longer a top 10 company. And lo and behold, we have other top 10 companies. There are a few private companies right now that could be those types of moonshots over the next 10 years. What do you think those companies are? What sectors of the economy? Where is the puck going in the world of tech and in your space?
Deven Parekh: (17:56)
Look, I think that there's, I would say, it would almost be impossible for us to predict which ones it will be. That being said, I think if you think about, data and age, if you think about AI, and I'll come back to your question, but if you think about AI, which I think is going to be an incredibly important, will continue to importantly trend. Data is kind of the oil of AI, right? So without data, you can't really do. I mean, you train AI using data. And so companies understand that. And they're kind of capturing kind of more and more data. And I think that the analytical platforms to help analyze that data are incredibly important. A good example of that might be Snowflake, that just went public recently. We're not investors in that, I will just disclose.
Deven Parekh: (18:47)
And so I think that the power of compounding is incredibly important. And I was reminded of that the other day. So if you compound a business at 20% a year for 20 years, it's 39x, right? Now, if you look at two actual examples, ServiceNow compounded for the last 10 years at 50%. Shopify compounded at the last 10 years at 80%. And so when you think about these companies today, like the Amazons, and the Facebooks and the Alibabas, that are anywhere from 500, Microsoft $500 billion to $1.5 trillion market caps. And again, five years ago, if we were doing this interview, and you said, "Oh, there's maybe three or four of these companies that would be north of $1 trillion market cap." I think most people would say there's no way that's happening.
Deven Parekh: (19:40)
I think what everybody underpriced is the power of compounding. And it's not so much the power of compounding because you can learn that in pretty basic finance. It's the durability of that compounding. And I think that what everybody, including investors like us, didn't necessarily believe that these businesses could compound for as long as they have. So you could have made 62 times your money in the public markets just buying Salesforce at the IPO and not selling. Very few people did. Because along the way, you would have read research reports that said it's massively overvalued. It's massively overvalued. It's a short. And really only one thing happened. It just kept rolling.
Deven Parekh: (20:21)
And so what I see and I'm not answering your direct question by giving you the names, but what I see is that you've got so many sub sectors in tech, and particularly in software, where you can see these categories compound, total category compound at 15% a year. Now you'll have winners, they'll compound even north of that. So I think if you go out 10 or 15 years, you're going to see a lot more companies with market caps that are $500 billion and $1 trillion in the space. Tech's already 28% of total market cap. And by the way, that dirty little secret in the market, the market's great, the market's great. The reality is software's up 33%, financials are down 21%, real estate's down 5%. The S&P is up 3%, 3.5%, but this 28% has really driven a lot of the market.
Anthony Scaramucci: (21:13)
So I mean, you bring up a really good question, because how do you see through that? How do you see through that fog? Research reports, valuation? How do you teach an investor your own clients, yourself, your team, to stay disciplined and stay in something? Look at the returns you would have had if you just bought Amazon as an example from the IPO. What do you say to people regarding that?
Deven Parekh: (21:42)
We've made, but number one question we get from both existing LPs and prospective LPs is are valuations stretched? We've been getting the same question for five years. By the way, it's not always easy to answer that question. Because anytime you look at something, and you look at it, and you say, "Well, it's the most expensive it's been in 10 years.", the easy answer's to say, "Therefore, it must be overvalued." But that isn't necessarily true if it continues to compound for 15% for the next 10 years. The question is figuring out how. We've made plenty of mistakes over time of distributing stocks too early, selling companies too early. I think what we try to spend most of our time on today, and I would far from claim that we've perfected it. We probably make more mistakes on this than almost anything else is really trying to figure out sustainable growth. Not okay, did it grow 100% this year? But what can it grow at for 10 years? What can it grow at for 15 years?
Deven Parekh: (22:48)
And that's what we spend a lot of time on and we look at who are the incumbents in that space. What does their product quality look like? How much disruption can happen? But in my view, the best markets aren't disruptor markets. The best markets are where you're creating a new market. That being said, it's also the hardest. It's the hardest thing to figure out. So I always like to use examples of companies who are not investors but I'll use Uber as a great example. When we looked at Uber, we had a chance to invest in one of the early rounds. Still very expensive, we passed and we pass for a very simple reason. We did an analysis that said the size of the New York and San Francisco cab market, what is it?
Deven Parekh: (23:28)
And we did a calculation, and they were looking for a valuation that was like six times the size of the market. I said, "Well, this is two cities, we're going to pay six times a market. How can you ever make money on this investment?" Except we missed something really, really fundamental, which is that when you change the way people consume that service, and you put it on their phone in San Francisco where cab service had been historically very, very bad, you totally change the demand curve.
Deven Parekh: (23:55)
So now, the size of the markets today in those two markets is 10 or 12 times what it was when we looked at that investment. We missed that. We looked at existing market and said we're just going to take existing market and move it to us, as opposed to this massive new market that can get created the we can own a significant portion of. So what we try to do and we make lots of mistakes, that being a great one, great example of one rather, is try to really be thoughtful about how a market might evolve over time. I don't know if that answers your question.
Anthony Scaramucci: (24:30)
I think it's an amazing message. Because you're basically saying, look, we're going to make mistakes, we'll miss things. But if we stay in our bandwidth and in our discipline, we're going to hit the target more often than not, and that's basically the lesson.
Deven Parekh: (24:41)
What I say is, "Guys, we're going to make mistakes. Let's try not to make the same mistake twice." Let's make new mistakes. And I think it's important to make mistakes. Just try to avoid them the second time.
Anthony Scaramucci: (24:54)
I'm going to shift gears because the irrepressible John Darsie is going to come on. We've got tons of audience participation and we want to allow the audience to engage with you as well. I want to shift gears into one of the big facts of our time that we're living in, something I'm always worried about and I'm sure that you're thinking about and I'd like to get your great mind on this topic. We watch a city like New York suffer higher homelessness, people defecating on the street. We see what's going on in San Francisco, and some of the other great cities of the United States. And I'm wondering what your thoughts are about that. And I'm wondering about what seems to be happening more than ever before is a separation between the haves and have nots. What are your thoughts on that? And what do you think we can do?
Deven Parekh: (25:47)
Well, we're probably veering away from tech. I think that look, I agree with you. I think that if you want to see the impact of wealth concentration, people should go back and read about the French Revolution, it doesn't really end well if you're sitting at the top of the heap. So how do we change that? I think that the challenge we have as a country and I don't even think this is a political comment one way or the other, is we're way too short term oriented. And if we're going to change the game on what you're talking about, it's going to start first with educational opportunity.
Deven Parekh: (26:24)
That's how you change the game. And we have to make sure that we are giving, look, I view myself as incredibly lucky. I got access to great education. My family was able to afford that great education, I didn't have to work during college. I could spend all my time studying, put myself into this career. My dad was an immigrant, and I was very lucky. There's thousands of people out there that are just as smart, if not smarter, who just didn't get that same set of opportunities. And so for me, it's long term investment in kind of education is really the long term antidote. Obviously, there's things you can do around tax policy to change things in the short term. I don't know that they change the long term game. And so there's certainly changes in tax policy.
Anthony Scaramucci: (27:15)
Give me one example, and then we'll turn it over to John. What's an example of tax policy?
Deven Parekh: (27:20)
Oh look, I mean the ones that people are talking about. Certainly one, the simple one is an increase in ordinary income tax rates, the other would be elimination of the capital gains tax rate. And that's one which is very controversial. But one could make an argument that, and I'm a beneficiary of that capital gains tax rate. The flip side is, if you think about this, you could say, "Well, one is a tax on labor. Why is a tax on labor so much different than the tax on capital?" And if you wanted to change wealth concentration over time, you would bring those rates closer together. I mean that's a very rational economic argument. Obviously, there are lots of people on the other side of that. There's pros and cons from a policy standpoint, but that's certainly one policy prescription, if you were trying to address the issue you're talking about.
Anthony Scaramucci: (28:18)
One last question. Deven, if you could be anything other than what you are right now in this lifetime, what would it be? And I'll tell you this, I would want to be the starting first baseman for the Mets. And so that was never going to happen to me due to my size and skill and my athleticism. I'm stuck here at SkyBridge. But what would it be?
Deven Parekh: (28:37)
I remember when my son was in sixth or seventh grade, he told me he decided he was going to go to Georgia Tech. And I said, "Well, why are you going to go to Georgia Tech?" And the baseball player that he loved, who was a Yankee player at the time and got to Georgia Tech. I said, "Caden, the odds of you being the first Indian baseball player are pretty low. I'm not going to pick sports." And look, I actually truly have and still have a passion for science. So I think if I weren't doing, I want to do something I love and I love what I do. But I also think I could have loved being a doctor. And I think if it was not this, it would be medicine.
Anthony Scaramucci: (29:17)
I think it's a very honest answer. And again, I think it's another refreshment for the younger people that are listening. Pick something you really love. The first job that I had, unfortunately, was in real estate investment banking. I was terrible at it. I got fired from it. See, John Kelly wasn't the first person to fire me. I was fired before that. And the reason I was fired was I stunk at the job. Had I just gone into something that I really liked, I would have been able to have succeeded from the get go. And so it's just a learning lesson for people. I'm going to turn it over to Darsie, who's about to be fired because he called me GE. But we'll let you enjoy him for the next 15 minutes as he asks you these questions.
Deven Parekh: (29:57)
Great. Thanks, Anthony.
John Darsie: (29:58)
Deven, it's a pleasure to have you on. There's a concept that you speak and write about a lot called the scale up phase for a tech company. I want to talk a little bit more about that. Basically, your thesis is that we call companies startups for way too long. And there's actually a key phase that comes after that startup phase. Could you tell us more about that scale up concept and what the implications of that are? And also, is there a role for governments to play in supporting those scale ups as well?
Deven Parekh: (30:29)
Yeah, so let's hit the first part. So we talked earlier about kind of the stages that we invest at. And when I think about a startup, and I think startup, as you rightly pointed out, there are companies, I mean, you'll read a Wall Street Journal article about a company with $150 million of revenue. It's a Silicon Valley startup. That's really not a Silicon Valley startup. What we think about when we think about scale up is that you really feel good that product market fit has been established.
Deven Parekh: (30:57)
So what do I mean by that? If I talk to 10 customers, they say, "I buy this product for this reason, and it works for this reason really, really well." And do you use it for this? Maybe not. Do you use it for that? Maybe not. But for this thing, I really like it, and I'm going to probably buy more of it. So you've really established product market fit. Now there are companies, including companies that I have investment in that have revenues, but they don't really have product market fit. What does that mean? I call five customers, I get five different answers of why they bought the product. That's fine, because you got some revenue, but it doesn't really scale up. which goes to what your point? Why doesn't it scale up?
Deven Parekh: (31:33)
Well, if you have five different reasons you bought a company, what exactly is a marketing strategy for the business? How do you actually figure out what customers to target? And what's the right skill set for the people to go do that marketing and that selling? Just use sales and marketing as an example. So in a true scale up company, you've got product market fit. Generally, you've got a management team. The management team might not be fully formed to take it to the next level. And really, the investment at that point is figuring out how to make it scalable, which is why you're saying scale up. And so what does that typically mean? Well, it means how do you really figure out taking, how do you increase sales at the same or better unit cost? If I bring it down to the crux, I'm oversimplifying to keep the answer short. How do you do that? And that's one of the reasons we have the onsite team, which is run by my partner, Hilary Gosher, is to really have a true understanding of each functional area of a scale up organization, what are the best practices? And that's why our entire organization is built to really focus on companies that are at that phase.
John Darsie: (32:51)
So we have a lot of participants on these SALT Talks at our SALT conferences. We've also hosted SALT conferences internationally, in Singapore, in Tokyo, in Abu Dhabi. And we've been blown away by the emergence of entrepreneurialism and technology ecosystems outside the United States. India is another great example. We have a lot of Indian constituents that come to our international conferences as well. What are trends that we're seeing in terms of foreign or international venture capital that U.S. investors may not be aware of?
Deven Parekh: (33:24)
Just to make sure I understand the question, do you mean as it relates to U.S. firms investing internationally? Or do you mean in terms of international firms investing in the U.S.? I just want to make sure I get that.
John Darsie: (33:33)
I'm talking about U.S. investors or investors from around the world investing in local tech ecosystems around the world. So for example, you're having to see a company like Google sort of wave the white flag in India and invest in Reliance Industries, because of sort of a tech nationalism or digital decolonization, and you're seeing tech ecosystem springing up in different areas of the world? Is that something that you guys are observing or how are you investing based on the globalization of tech?
Deven Parekh: (34:00)
Yes, let me separate the two things. There's the strategics, who put the flag up because they have to, because you have to have a relationship with the local government. And there's certain countries like India and China where there's just a reason why you have to do that. So that's one category. But let me address, that's not really our category. So let me address the other category. Look, the world on tech has really gotten flat, to use somebody else's title, and it used to be that we saw great entrepreneurs, we'd see great companies, but we didn't necessarily always have, we didn't always have the quality of management that we would find here. And people will be like, "Oh, it's Silicon Valley, the best management's in Silicon Valley."
Deven Parekh: (34:42)
We're increasingly finding great management everywhere in the world. And then the other interesting thing is, where do you find great tech? Well, you can find great tech anywhere. So we've got, I think now, a couple billion dollars invested in Israel, and Israel has probably become one of our most active geographies. There's fantastic tech talent in Israel. It used to be people are only around areas like security. But now it's across lots of different areas but we've invested in a lot in Israel. We've invested in Australia. We've invested in pretty much around the world.
Deven Parekh: (35:15)
The areas, the two markets we've probably been less active in, though recently, we've done a bunch of investments in China, have been India and China. And this is for a very simple reason. They have a very robust local venture capital ecosystem. So if the deals getting to Deven, there's probably 47 people who said no already. And I don't have the local network in those countries to kind of talk to the temp, like in the U.S., if I get a company come in the door, there's probably 10 people I can call to make an assessment. I don't really have that same network in those places. But I think that that's going to continue to happen. Berlin's another, Germany, we have lots of investments in Germany. We're very, very active in Europe. And the market is getting more competitive, in that it used to be that one of the benefits for us was we're willing to kind of go anywhere. The problem is so is everybody else now. So we run into a lot of the same competition no matter where we go.
John Darsie: (36:12)
So Anthony asked a question earlier about income inequality and ways that you would solve it. And I want to sort of ask that question through a different lens, focusing on tech and data. And there's that existential question about whether technology is going to be our doom or be our savior. And so the technology has obviously maybe displaced some jobs, and it's changed our society and harmed labor in certain ways. But there's also plenty of ways how tech and data can help solve those problems as well. How do we ensure that tech and data are a force for good? And how can they also be part of sort of this push for social inclusion, economic inclusion factors as well?
Deven Parekh: (36:52)
Well look, I think when you think about tech and data and you think about kind of public policy, the interesting contrast would be the U.S. and China. So if you do any reading on AI, what you would find is that a lot of AI applications are more advanced in China. But why? Well, one, they have a lot more people and two, the people's comfort with their data being, maybe it's not comfort, but their willingness to let their data be shared, it's not optional. And we have a much higher standard of what we believe for privacy as a society. And that's not a value judgment, pro or negative to China or the U.S. But what it does do, it allows a country to build a comparative advantage in certain areas. So if you wanted to build self driving cars, China probably has more data than we do. They've actually built cities with entire parts of the city. They're structured for self driving cars, so they can collect kind of more data.
Deven Parekh: (37:57)
I think there's lots of social implications around self driving, there are safety implications. But when you get to things like privacy, and you get to security applications, so can I walk you through a building and take a picture of my face, identify who I am, and take action based on that, or people are aware that in China that they have these effectively social scores for every citizen. And these are things that obviously would not be acceptable in the U.S.
Deven Parekh: (38:26)
I think in any one of these constructs, data can be used in a positive way. So most people would say that if we could and the interesting thing about self driving cars, just to use that example for a second is that it's when a self driving car kills a person, like it happened in Arizona with Uber, seven, five or six states shut down self driving car testing. And yet, that same day, probably 20 or 30 people were killed by a drunk driver. And you would probably 80% reduce that with self driving cars.
Deven Parekh: (38:59)
So the interesting thing with all these from a policy standpoint, or if you remember when the two Boeing flights because of software flaw, which is horrible, crashed, and you had hundreds of lives lost. There was an outcry that was disproportionate relative to what happens when the same thing happens because of pilot error. And so there is a societal acceptance that needs to happen around these things, which is really, really complicated. And certain societies are going to do it by fiat. China, this is what we're doing, and others are going to progress over time. It just takes time for societies to kind of get used to these changes.
John Darsie: (39:46)
So you're no stranger to public service. You served on the board of OPIC, which is the Overseas Private Investment Corporation for those who aren't familiar. You're on the advisory board of the U.S. Export Import Bank, which is somewhere where China has sort of leapfrogged the United States in terms of how they use these types of organizations to drive investment. And you are also on the FCC Advisory Council. So if you can wave a magic wand from a policy perspective or a regulatory solution to drive more investment into the types of companies that can improve quality of life in the United States or other elements of our society, what would that policy solution be?
Deven Parekh: (40:26)
I don't know that there is an easy, I mean I've thought a lot about this. I don't know that there's an easy policy prescription. And one of the things, look, I think one of the things you're seeing right now is an increased, going the other way, is probably an increased interest on the part of Washington to regulate the tech industry. And some of that is I think that, and this is a personal opinion, but some of that is the tech industry's fault. I think for too long a time, the tech industry's kind of taken this view of we're out here doing good, kind of saving the world, just kind of leave us alone. You don't need to worry about us. We're making it easy for you to find information and we're doing all these great things.
Deven Parekh: (41:10)
And we took a very arrogant view as an industry, I mean towards government. And we're seeing the backlash of that right now. And I think like every industry, some regulatory oversight can make sense. And then the one that I think, I don't really think it matters who gets elected next week. I think as it relates to, for example social platforms, there's likely going to be more regulatory focus today than there was before.
Deven Parekh: (41:44)
So I don't think, I think the odds of the government putting a policy in that's going to significantly change the rate of adoption or the curve around tech is pretty low. What I go back to though, and to your point is, there's still this massive digital divide, and COVID really, really brought it out.
Deven Parekh: (42:06)
So biggest issue in my home when everybody was home for school is how come we don't have the one gigabyte thing so that we're all streaming faster, right? Well, what happened, where on the other hand, what's happening is you have people who have one laptop at home or one computer at home, and they have two or three kids. And so this digital divide is, which is only going to get exacerbated in the world we're in today, we really need to fix. And there needs to be a massive investment on the part of government, in my view, to fix that, by making broadband available everywhere.
Deven Parekh: (42:48)
It's crazy to me that living in a country that's as rich as ours, that's supposed to be the envy of the world, that we have so many people who don't have availability, the internet access. I mean, I remember when I was on vacation in Africa, I had better data on my phone in Africa and I can tease Anthony, than certainly in the Hamptons.
John Darsie: (43:16)
Yeah, absolutely.
Deven Parekh: (43:17)
And that's true, I say facetiously, but there's a much more fundamental kind of issue. And if I would focus on something right now, I wouldn't focus on the government trying to come up with a regulation or a rule that's going to help the tech industry. I think that's likely not going to work. What they can do is things like this, and making technology available, making broadband accessible, so that everybody can have access to the same tools that everybody on this call has access to, that's powerful, because you know what? Somewhere, there's a kid who should be watching this right now and watching all the SALT Talks and getting educated in all these issues. And they can't. Why? Because they don't have a laptop with a broadband connection. That's a travesty.
John Darsie: (44:03)
Yeah, when people think about infrastructure investment in the United States, they think about fixing roads and making our airport terminals look better and making trains go faster, but really it's the digital infrastructure that's in the biggest need updating. And we had a speaker on SALT Talks about a month or so ago talking about Chattanooga, Tennessee. They had a very smart, forward thinking Chamber of Commerce that said, "You know what? Let's just give ourselves a really fast internet. Let's give ourselves gigabit speed internet and see what happens." And what happened was you had tech companies that flocked to Chattanooga who were able to leverage the speed of the internet and the quality of the tech infrastructure to start building companies and processing data in ways that you couldn't if you didn't have that same type of tech forward approach. But Deven, we're going to leave it there. We're so grateful for your time and grateful for you joining us on SALT Talks. Anthony, you want to have a final word for Deven?
Anthony Scaramucci: (44:56)
No, listen, it's a brilliant conversation and congratulations on an amazing career. I think you left a lot of things for younger people on this call as well as seasoned investors to think about when they're running their portfolios or thinking about investing. Are you raising another fund now, Deven, by any chance or no?
Deven Parekh: (45:17)
We closed our last fund in March.
John Darsie: (45:21)
Good shout out, Anthony.
Anthony Scaramucci: (45:23)
No, I'm saying that for promotion, but I'm a very shy, reserved person. I have a lot of introverted aspects t my personality.
Deven Parekh: (45:33)
I think if you look up shy in the dictionary, there's a picture of you.
Anthony Scaramucci: (45:35)
There is. It's right there next to me and several other luminaries of shyness, but I just say I wanted to bring it up because you're the type of person that's going to make a fortune for people in the future and I wish you great success and thank you for joining us on SALT Talks.
Deven Parekh: (45:52)
Anthony, John. Thanks so much. That was a lot of fun.
John Darsie: (45:53)
Thank you, Deven.