Episode 77: Hilary Gosher of Insight Partners on Operational Excellence from Sourcing to Exit

Episode Transcript  

 Shiv: Alright, Hilary, welcome to the show. How's it going?

Hilary: Thank you. Pleased to meet you again and thanks for having me on the show.

Shiv: Yeah. Excited to have you on. Obviously Insight is one of the most well-known private equity firms out there. So why don't we start with your role at Insight and then we'll take it from there.

Hilary: Sure. So at Insight, I lead a third of the firm's employees, the group that we call Insight Onsite. It's the group that really works on site with our portfolio companies, helping them scale and grow. I moved here from South Africa. And so I kind of swapped the big five, the big five animals for the big five of New York, of rats and traffic and rent prices and bagels and things like that. And I joined Insight. Really I was lucky to join Insight, which was a very high growth investing firm, but more importantly, we were investing in a very high growth industry, which was the software industry.

Shiv: Yeah, and talk about this Onsite team a little bit more because it's one of the rare things about Insight and it's one of the reasons why I was so excited to have you on and for the audience to learn from is that most private equity firms don't have that many operating partners or folks that are helping on the value creation side the way Insight does. So how is that team structured and what's your mandate and how involved do you get with your portfolio companies?

Hilary: Yeah, so right from the get-go, Insight had a philosophy that as investors we need to provide more than just capital. And when we think about more than capital, we think about how do we provide expertise and how do we find access? And by access, I mean access to our networks, access to enterprise buyers, access to federal buyers, access to talent. And then on the expertise side, we've always right from the get-go, think, done something very different than other PE venture firms is that we have 120 people at this point really just maximizing the reach and scale that we have because we have a very large portfolio company. A set of companies, we support about 500 portfolio companies today. And as a result, we need a very scalable approach as to how do we meet the needs of those companies. And so we've got about 120 FTEs. And that really is a unique differentiator right from the beginning. Insight made sure that those were FTEs, not 1099s, not a set of consultants, but a set of captive, dedicated experts who are available to work with our companies, sharing best practices, making sure that we had the right playbooks, and making sure that we were alongside for the journey.

Shiv: Yeah, that's really different from the operational model of a lot of private equity firms, right? You mentioned 120 FTEs. That's a lot of, I guess, overhead in quotation marks that a lot of PE firms look at as that would be coming out of their management fee or how they're kind of running the firm. So how does Insight look at that investment? Obviously, it's helping drive enterprise value for the companies that you're investing in. But how does that work operationally for the firm?

Hilary: Yeah, look, I think that having a dedicated group of folks helps across the entire investing value chain. So as you know, when we think about investing, you've got to source the deals, you've got to select and win those deals, you've got to scale, and then you've got to exit. At each of those four main steps, the Onsite team is deeply engaged. So on the sourcing and winning side, while we've got one of our sourcing engine, our sourcing engine is one of inside secret sauce, we have more than 80 people who source every day talking to all the software companies in the industry. That sourcing engine really has a couple of benefits. On the one hand, it's sourcing for our own investing around the series A through late stage. On the other hand, it's sourcing a lot of M&A opportunities for our later stage buyout deals. And then as that team is sourcing, they bring in the Onsite experts in order to sell our value. So a lot of the reasons we win deals is that we're able to provide real advice for those entrepreneurs even before the founders choose us or decide to invest with us. It's not unusual that on any day our pricing expert, our sales expert, our talent team is finding candidates because that's the most pressing need of a founder. They need to hire a CMO, they need to level up their salesperson. So there's a lot that we do on the front end around sourcing. On the selecting side, we get deeply engaged. The Onsite team and the deal team are jointly staffed on any investment as we look to do due diligence. And of course, there's no one more qualified to do a sales pipeline review to really dive deep on the R&D and is there a defensible position? What is the technology? Is this something we want to lean into than the actual operators themselves? So there's a deep connection on the diligence side. And then once we've met the entrepreneurs or the founders during due diligence, there's a natural overflow where they want to pull the resources once we are invested with them. And that's where we really help scale the businesses. And then we also get very deeply engaged on the exit side. And so going back to your question around why does Insight think that it's worth having this group of FTEs, well, one, there is no difference between our skill set and their skill set in terms of how the portfolio companies perceive it. While there's a very different orientation, the deal team is orientated towards finding a deal, sourcing the right investment, we're orientated towards helping an investment scale and grow. And that's a fantastic compliment. And it also aligns incentives. When folks are FTEs, everybody gets carry on the fund. Everybody is 100% aligned with making the funds do well, making the companies do well.

Shiv: Yeah, that's a really great insight because a lot of people think about operating teams as being post-closed almost, but you're bringing them almost earlier in the value chain and helping you source and actually win deals against competitors who, quite frankly, may not have the same types of resources. And that ends up being a differentiator for you.

Hilary: Yeah, I think that's right. I think that everybody has, quote unquote, in VC, platform team, in private equity, resources or a capabilities team. But I don't think anybody has the breadth and scope that we have specifically with respect to our scale. And there's a benefit to scale because one of the benefits of scale is that our reach goes really far. And if I think about the two components of what we bring, the first is expertise, the second is access. So if I think first about the expertise, we have partnered with the direct reports of the CEO. And so we have a center of excellence that provides all the expertise, the next-gen developments, the best practices, the standards, the benchmarks to do with each of the CEO's direct reports, marketing, sales, business development, strategy, finance, et cetera. And then the deal team partners with the CEO. And so we have this very symbiotic relationship where we've got direct insights and working directly with the CEO, and then we're working directly with the CEO's leadership team. And that's on the expertise side. And then if you sort of switch over to the access side, as a result of having a scaled portfolio and deep reach because of the scale of the Onsite team, you know, we have a lot of access to buyers. We have a dedicated team that just thinks about how do we put our portfolio companies in front of buyers, both to get feedback when they're early stage around their product market fit, but also to find actual buyers to drive revenue. And we cultivate relationships with more than 2,000 global enterprise companies through our enterprise team. Likewise, we have deep relationships with the federal government because many of our companies, the cybersecurity companies, but many of the dual use companies, they have a large market opportunity in the federal market. So that's sort of, let me bring you buyers. There's also, let me bring you candidates and talent. You know, we're very well aware that, you know, the talent that got a company from zero to 20 or 20 to 50 may not be the talent that gets you 50 to 100 or 100 plus million. And so we're constantly thinking about how do we optimize the right talent? How do we find that right talent? How do we cultivate talent in the network so that as companies scale and grow, we can make sure that, I think Jim Collins said it best, it was a long time ago, but he said get the right people on the bus. And I think we spent a lot of time doing that.

Shiv: The right people in the right seats. Yeah, that's great. I guess my question to that would be why aren't other firms doing this? And I guess the counterfactual that I've seen is that PE firms will have these operating partners and they are bringing in advisors earlier in the process, but they'll bring them once they, let's say they are in an exclusivity period and they wanted to run diligence, they'll bring on contractors or advisors per deal, but then the advisor leaves after the deal closes or after they built the value creation map, we do a ton of this work ourselves. And so I guess my question is, why aren't other firms doing this? Or what have you figured out in your role at Insight that change is kind of how you approach things that gives you that advantage that maybe other firms haven't kind of figured out, even if they are large private equity firms and do have the type of skill that you might have?

Hilary: Yeah, it's a great question. I think the first reason is that for Insight, stage is not a strategy. Software is the strategy. And that ends up being a big differentiator. If we were investing in truck stops and manufacturing and retail, it would be very difficult to have a standing team because that standing team would need such a diverse skill set. But because we're investing exclusively in software, we see the same problems arrive over and over. We can get the same set of experts who are dealing almost any expert can deal with any one of our portfolio companies. And so you get a lot of economies of scale by the fact that our focus is exclusively software. So that's number one. I think secondly, you know, folks have been reluctant to want to spend the money. In our opinion, that's short sighted. You know, there's nothing like the alignment between our team, you know, the set of value add resources and the deal team around driving systematic and standard approaches, making sure that

You can call on a resource at any time. You know, what also happens when you're saying to a portfolio company, here's a set of consultants to work with, their reluctance to use those consultants because often the PE firms are billing that cost back to them. And therefore you've got this like natural disincentive to want to use those consultants, whereas we find no barriers to entry. So the demand on the services is exceptionally high. And that's the way we want it because the more we engage, the more we can influence. And especially this works in the minority deals. Now, I understand that if you're a venture capital firm, you may not have the platform and the scale to be able to do this, but by virtue of being both VC and PE, we do have the scale platform to be able to provide those kind of standing resources to make sure that the minority deals pull the resources towards them versus a push. Whereas in private equity, it's mostly a push, and it's mostly a push where you might have one person on the deal team or someone on the resources team project managing, but they're project managing a series of external consultants as opposed to really deeply engaged in understanding what the problems are and working hand in hand over the lifecycle of the deal.

Shiv: Yeah, talk a little bit more about that, the venture capital and private equity side and how that kind of helps.

Hilary: Yeah, you know, on the first hand, it gives us scale and it gives us, you know, so actually, if we think about how we support the companies at scale, we have segmented the team into early experts, growth experts, late stage experts. The early and growth experts are really, you know, on the early side, we really understand what a company needs in its early stage, kind of as it becomes a scale up, moving out of the startup phase. And in that early scale up phase, what the teams are really looking for is how do I instrument my business for success? How do I make sure that I'm looking at the right KPIs? How do I upgrade my team from the initial founder led team to a more professional organization? And they're looking for buyer introductions because the most important thing is grow my revenue. So that's like the early stage support. As you get into growth, you're really looking at how do I build repeatable processes? How do I scale a go-to-market engine? How do I make sure that I'm building and I'm laying the foundations for long-term success, especially processes and systems? And so we spend a lot of time there. And then when you think about the late stage, which often ends up being buyouts, so we have more of a controlled transaction, there we run more of a traditional playbook that lots of private equity companies run. They would maybe call it a 180-day plan. We call it a flight plan a little bit because of our inside motto of scale up, take off with the birds, the notion of taking flight. And we do put in place a flight plan between the Onsite, that's agreed to between the Onsite team, the leadership team and the board. And we hold ourselves mutually accountable to accomplishing that, whether that is upgrading systems infrastructure so that we can make sure that we have a strong data architecture, whether that is thinking through how do we do M&A, a lot of the strategy that we deploy is the same strategy that other private equity firms deploy in our buy and builds, our platform companies, we use our sourcing engine to find M&A transactions. We've done over the last two years, more than 50 M&A deals on behalf of our portfolio companies, working hand in hand with them. And then we have a deep expertise around how do we do post-merger integration to make sure that we get the synergies, both revenue and cost synergies. So, you know, I think there's definitely a benefit to the scale. And as a result of having that scale and having the flexibility to kind of graduated company from an early company to a growth company, from a growth company to a late company. The companies are availing themselves of the different expertise that we bring along the way, the different benchmarks and the broad network.

Shiv: Yeah, I think that's lot of great insight, especially as you're looking at across different stages, you can pass along insights from companies that are later stage to the earlier stage. there's a lot of economies of scale there. I want to come back to one thing that you mentioned is on the push versus pull, can you expand on that a little bit more? Kind of how your approach is a little bit different compared to other PE firms that you said are focused more on these push avenues to kind of scale these companies?

Hilary: Yeah, look, a lot of this comes from the fact that we started as a venture investor and an investor who invested minority transactions is always going to be able to influence but not force. And so there's a natural inclination to want to work with the partner, work with the entrepreneur, work with the founder, partner together, be shoulder to shoulder, literally on site together, helping problem solve and helping think through the best ways to scale. You know, on the private equity side, because the orientation has been around, well, we have majority ownership, we're going to force you to do things. And that has never really been Insight’s philosophy. And so naturally we provide, we bring to the control transactions, the same mentality, the same cultural orientation around partnership and pool. And what we really believe is that, you know, if folks get access or see what those resources are capable of supporting them with during the diligence process, once they become a portfolio company, they're naturally going to want to pull it. And that's really what we see. We also realize that, you know, different founders have different desires to interact. And so, while there is the actual consulting, the one-on-one engagement, the deep dive kind of flight plans, equally what we have is an on-demand resource learning library. We call it Scale Up Academy. Every executive who is part of Insight's portfolio has access to the Scale Up Academy. And in it, we're putting all our latest playbooks, our templates, our best practices. So for example, at the moment, everybody's talking about AI. So all of the AI use cases, the recipes, the AI recipes that we're developing, we're putting those on Scale Up Academy so that folks can self-service. And we do see a lot of engagement around that self-service model. One, it allows us to scale, but also it allows us to ensure that entrepreneurs access the resources as they want to.

Shiv: Mm-hmm. Yeah, I think that's great. think this learning library just sharing the best practices across portfolio companies is a great one and I'm seeing more private equity firms do it but I'm assuming definitely not at the scale that you're doing it where you guys are so coming back to this point about influencing versus not forcing I guess a question would be how do you evangelize that because we come across companies all the time CEOs revenue executives that often feel like what they're doing is right or good enough and they feel like they have a good handle on things. Even from the outside, a board member or an investor feels like there's a lot more room to grow or there's room to add maturity. So how do you go about bridging that gap in a situation where you're seeing that the company definitely needs help or needs to increase its level of sophistication?

Hilary: Yeah, it's a great point. I think there's a couple of ways in which this becomes organic. The first is that as a result of having a 20-person talent team, and that talent team is focused on growth hiring. So in our whole period, people take five years. Over the first five years of our whole period, the average kind of portfolio company goes from 150 people to 600 or 700 people. So there's just a lot of hiring that happens and we have a capability that really supports that kind of growth hiring. Equally, we have the capability, as I mentioned, with our talent team to really support the hiring of CFOs, CROs, CMOs, all the key direct reports. And so once we were engaging on that, hiring, the executive gets to know us because our experts are doing the interviews alongside the deal team. And while we're doing the interviews, we're obviously selling. Why would you want to work at an Insight portfolio company? Why would you want to work at this portfolio company? So even if they're not selected for this company based on various criteria, they would know about Insight and potentially want to work at another company. And it's during that interview process that they get to know our sales center of excellence, our marketing center of excellence. And they realize the kind of expertise and access that they will have if they want to work with it. And so whereas most other firms are really orientated to only working with the CEO, as a result of our reach into the CEO's executive team, both through recruiting, through our selling during the diligence process, immediately once we're invested, those executives are the ones that are really reaching out. So even if the CEO might be reluctant, the heads of marketing, I mean, they're gregarious, they have an orientation to want to learn, they want to know what other marketers are doing, everybody wants to be the best, they want to know what the best practices look like, so they reach out to the marketing center of excellence because there's no stigma, there's no barrier, and so we get this enormous amount of inbound questions that we're fielding, and then that provides the fodder for making sure that we are gathering the next gen best practices from the nodes in the field and bringing them back, centralizing them and then disseminating them.

Shiv: Yeah, that's really, that's great. think one of things that we've seen is that oftentimes there'll be like an operating partner inside of a PE firm and they're almost like project managing the value creation plan, but they're not getting as involved because maybe they're more of a generalist and they don't have specific expertise in sales or marketing or product or pricing, but they're kind of guiding it and saying, okay, these are all the projects we need to work on. And almost kind of like checking tabs on the key stakeholders inside. It almost feels like a reporting structure moreso than a resource that you can kind of rely on and you can kind of be transparent with. So it kind of creates a weird political dynamic at times. Whereas I think kind of what you're describing is more of like a helping dynamic where even the CMO or other folks on the revenue team or the product team can reach out and find resources and connect with folks to, and that kind of pull approach that you're saying where maybe there isn't a project manager that they're reporting into, but they're still making progress in all those respective areas.

Hilary: I think that's exactly right. I'll give you a good example. So we see it as our responsibility to make sure that we stay on the cutting edge of all the trends. And so generative search has been something that has emerged among marketers, which is the old Google search of the past, the way that folks were generating leads, that has completely changed in the world of AI. I think you know that the AI is pushing all the paid keywords and the content that companies create further down the fold on websites. so we were one of the first to put out an entire thought piece around what do you do in the age of generative search? How do you make sure that you maintain leads? Our portfolio companies are looking to us to provide them with that best practice. So many of them are running fast, heads down in the trenches, that they're not able to put their head up. And that is why I think we get a lot of outreach or know, requests for support because they're recognizing that, you know, as a result of us sitting at the nexus of this very large diaspora of ex executives, large portfolio companies, a large number of portfolio companies, we're really sitting at the forefront of innovation.

Shiv: Yeah, totally. And I think that that's a great example. We're seeing that too, where a lot of companies are struggling with AI and just generative search and top of funnel pipeline and how they're losing SEO organic traffic and things like that and how they're approaching that. So why don't you touch on just AI in general, because that seems to be a hot button topic. How are you guys using that as an example, helping companies inside your portfolios stay on track or stay on top of all the trends and also transform their companies to capture the value that's either emerging or maybe they're potentially losing in a market that's being transformed by AI.

Hilary: Yeah. So on the one hand, what's exceptionally valuable for our later stage companies is that the venture type work that we do is investing in some of those next gen workflows. So WinAI is a sales automation workflow, an agentic workflow. Bardeen, RelevanceAI, CrewAI, these are all agentic tools that have created workflows to help companies be more effective. We're familiar with those tools because we're invested in them. And therefore, there's a natural understanding of where the market is headed. Whereas I think some of the later stage private equity firms, they are forced to go out and evaluate those tools as part of thinking through solutions. We organically have access to those tools as a result of our investing. So I think that immediately puts us right on the edge of understanding and being fluent in the language of AI. You know, right now, what we're doing is transitioning from this world of playbooks around AI to AI powered workflows, really thinking through the power of agentic. And this is very valuable for the companies that aren't born in the cloud or the companies that aren't born AI native, as it were. This is exceptionally valuable for our more complex buy and build companies where there's a lot of complex workflows. They might have multi-product portfolio, they might have multiple verticals, multiple geographies that they're going after. And there's just so many workflows where agents could be deployed to drive greater efficiency. And we think about it in two ways. The first is how do we drive margin improvement and the second is how do we drive revenue growth. The margin improvement I think is a place where almost all VC firms, private equity firms are thinking about it. These are the obvious areas around hyper-personalized content, replacement or augmentation of SDRs on the sales side, customer success and knowledge management and chat box is an obvious one. All of those things kind of a second nature to us because we both look at the companies who are new in the space and we think about what our companies are actually doing. I think my firms are going to struggle and frankly we ourselves are still figuring it out is thinking through how do you drive five points of growth or 10 points of growth on the revenue side versus just the cost reduction side. Arguably you could say that what used to be in large late stage companies, the rule of 40, it really should be the rule of 50 if you really believe you could add another 10 points of either growth or margin and as a result, really change the outlook and change the profitability and the efficient growth of these companies. And on the revenue side, there's a couple of things. One is just using these agentic workflows on churn management, on customer retention management to make sure that we believe, we're very strong believers in GDR, in gross retention as an indicator of the health of a company, any enterprise software company, really don't want to see GDR anything less than 90% to 92%, obviously in the SMB. And you probably deal with many of those. That's going to be lower. But what do we do to make sure that companies can maintain that GDR really high? And so that's on the part of the revenue growth. The other part of revenue growth is really, how are we embedding AI into the product portfolio that our companies are selling? And so how are we making sure that they can have greater throughput through the adoption of copilots, the agentic testing, the agentic product management, et cetera. But more than that, what new features are they adding? What new products can they build using AI so that they have more to sell back to the customer, or they can get greater share of wallets?

Shiv: Yeah, how much are you incorporating AI and some of this AI powered workflows or how we can implement agentic AI into different areas of the business? How big of a part is that of these flight plans that you're discussing? I would assume these are detailed value creation plans that have elements of go to market pricing, etc. How big is the AI component there?

Hilary: The most important part of implementing AI is that it has to come top down. As in any change management initiative, as in any reorientation of an organization, the CEO, the CFO, the office of the chairman has to have that as an overwhelming force multiplier in the organization. So in order to be AI first, it really needs to come top down. And so we're working with those leadership teams to say, how do you change your mindset? We're hosting a CEO summit for some of our larger companies where they'll have hands-on experience in building agents. They'll have hands-on experience in thinking through, how do I use LLMs and GPTs, bespoke like co-CEO that they can use for OKR management, for thinking through new product development opportunities, for prioritizing those new product development opportunities. So once the CEOs get the understanding of how AI can transform their business, honestly, then they get really excited by it, and then it becomes something organic that they're pushing. But I think most firms will find that if you piecemeal this thing, you're not going to get anything consistent, and that it really has to come top down in order to be an AI-focused company. And so the first thing that we're doing in flight plans is really working with the CEO to make sure that they understand it. And a lot of them have relied on their teams to do it. The CTO or the head of support is adopting this in a sort of a sporadic, in an organic kind of way, as opposed to being this systemic, standardized, and something that is pervasive across the organization. So for me, it really starts top down with the CEO.

Shiv: Are you seeing that in looking at all these different companies at different stages and different markets, are you seeing that the AI side of the flight plan, even if it's top down, is a big chunk of the value creation planning, does it sit there or is it still in the traditional areas, I say traditional, I'd say more conventional areas like pricing and go to market and sales efficiency or marketing and lead gen and demand gen and things like that? Or is it just that AI is such a huge priority right now that you see a huge transformation opportunity for your companies that, that is like the number one bullet point inside those plans.

Hilary: Yeah, it's funny because we recently sold a portfolio company, Central Reach to Robot Technologies, and the CEO during that sales process joked that we should have a drinking game for the number of times that AI gets mentioned in any sales process. And the of the investment bank is an inside joke that, everybody would be drunk by the end of the meeting because AI is what's on everybody's lips. But I think it's on everybody's lips, but it's not necessarily put into practice yet. I think there's a lot of, you know, execution that's on the come and that hasn't yet really materialized into true ROI. And that stands for the same thing, which is, you know, are we leaning into companies thinking that we can drive an AI playbook and therefore willing to pay more for those? Does it change the multiples of an ingoing multiple when we think about investing? Not yet. I'm not saying that it wouldn't be in the future, but right now I think folks are reluctant to say, you know, we can guarantee that we can drive X points of margin and therefore we're willing to pay more for some of these assets. That being said, every company pitching us is pitching upside opportunity based on what they're doing in AI. Of course, the execution, the proof of the pudding, as they say, we need to believe that they can execute, which is why we have a very strong capability internally to make sure that if the management team says they're going to do it, we can hold them accountable to actually executing.

Shiv: Yeah. And the reason I asked that question is that AI is that hot button topic. it comes up in almost every conversation I have with a private equity firm or a CEO. And yet I find that these companies don't have a lot of their fundamentals in a great place where maybe they don't have great product marketing. Maybe they don't have the right sales infrastructure to be able to actually scale up or have the right amount of pipeline being generated for their business. But yet, because AI is the new shiny object, it gets a ton of attention and yet the fundamentals aren't in a great place. So I guess from your perspective, looking at all these companies at different stages, like I was trying to gather like prioritization wise, like where should that stack rank against everything else that these companies have to do to reach a higher degree of sophistication?

Hilary: Yeah, no, your observations are really acute. The fundamental that everybody needs is a great data architecture, because a lot of the stuff is to do with any time I'm building an agent, whether that's on a lead nurturing campaign or hyper personalization or SDR or a customer success workflow. What really matters, honestly, is access to the data so that the agents can go out and work on what they need to do, bring that back, have another agent do something else, especially in multi-agentic workflows. So the most fundamental thing you can do is get your data architecture in place. And what we find is that the newer companies, they've built data architecture that is less siloed, that is more distributed, that is more readily accessed right from the get-go, where some of the later stage buyouts that we've invested in, obviously that requires a lot of retooling or a lot of rethinking. Around that, it's not to say that we couldn't get going with agentic or even just AI in a static sense, which is really just ML frankly, know, initially, but if you're going to drive something that is systemic and that is company wide, then you really need to start with the data foundations.

Shiv: Yeah, yeah. And how is that influencing how you're building your team? Obviously, we started this conversation by saying, Insight has one of the bigger operations teams out there. But as you think about scaling in a world of AI, do you look at building your teams out differently with the types of tools that are out there or how you can amplify the impact your team can make with some of those solutions as part of their process?

Hilary: Yeah, I think there's two answers to that. On the one hand, the industry is rapidly changing and it's changing so quickly that it's almost impossible to keep up. We keep up as best we can because we have a sourcing team that talks to everything that moves and we're momentum investors. And so we're constantly seeing the stuff that's emerging in the market. And that does provide a source of knowledge and advantage for us because our teams, especially in the diligence, are talking to those companies and learning what they're doing. And we're able to bring that to the center. On the other hand, the current teams, it's almost like there's a distributed node of information that's flowing back to central where we can share best practices because we're to, in any one quarter, we're placing more than 100 executives, we're introducing more than 200 executives to our portfolio, we are working with more than 250 companies. And so we're learning what they're doing at the call phase and there is a lot of experimentation going on. And when we start to see some of that experimentation really hit, that's when we try to make a playbook out of it, standardize it, and raise the bar across all companies. So on the one hand, the existing software advisors, they're learning as they go, but they're learning rapidly because they're talking to so many companies in the marketplace and they're seeing it actually happen real time. On the other hand, we're probably never going to be experts in this. And so we really are looking to work with a series of next gen consultants and implementation partners who are helping to drive new products, who are helping to build this out using Windsurf or using Codeium or using some of the next gen tools in order to do rapid prototyping, rapid development. And so I think we're seeing it as a mixture of both. We're organically making sure that our advisors are fluent at the call phase, but at the same time, we recognize that we need to be working with some of the experts in the industry.

Shiv: Do all these changes impact the types of companies you're investing in? Like, you going after, you mentioned your momentum investors and the types of changes that your team has to take in terms of its approaches. Do you change the types of companies you're investing into because of all this change that you're seeing where you're maybe more focused on premium assets or companies where AI will be a bigger play that'll help you kind of scale? Or are you still kind of focus on the types of companies that you've been more traditionally investing in or that have potential to grow in more traditional avenues.

Hilary: Yeah, on the private equity side, I think, you know, one of the the monikers coming into this year was that there would be a lot of companies coming to market, you know, in the last couple of years, especially post COVID when the market turned down and interest rates were very high. So few of these private equity companies were actually trading. And that's because the buyers were not willing to pay too much given that interest rates were high and levering up was expensive. But also because, you know, the prices that some of these companies commanded during the kind of COVID bubble were not the multiples that you were going to get on the back end. And so a lot of companies were waiting to kind of grow into the valuations. And we all thought that this would be a year in which that deal volume picked up. Of course, a lot of that changed after the tariffs were announced and people kind of pulled back and got a little nervous around stuff. But the kind of assets that you do see trading are really the A-quality assets. And it's very interesting. A-quality assets have everybody showing up. Everybody's running the same model. Everybody's, pricing to the same IRR. And that's where Insight gets really skeptical. We don't want to be pricing towards high teens IRR. We're both private equity and venture capital. We need to maintain IRRs that are high 20s. And it's not we don't want a price to that. So in a lot of those environments, we're not going to win on the private equity side, where we do think there's a lot of opportunity is on the buy and build side, where we can find a platform company as part of our sourcing team and create a deal thesis around the kind of buy and builds that we can go and do, what we call venture bets. And those venture bets, I think, are hard for a private equity company to really do because they are venture bets in that we own a majority, but the company is not profitable, therefore you can't lever it up. That's not where private equity is going to play. And equally, the venture firms are not going to play there because these are really large checks that we need to write. in a smaller size fund, it would be a much bigger percentage of your portfolio if you were to do a lot of these venture bets, too much exposure. So I think Insight is kind of uniquely positioned for these venture bets. And I think that's where we're leaning in right now. It doesn't really have much to do with whether it is AI or not AI. I think that we always view that as gravy. That might be the 5 or 7 or 10% that could really make this an outsize winner. But we're not pricing towards that. And we're not using that as an incoming assumption.

Shiv: Does your Onsite team make it easier, I guess, to invest in those companies that are more on the venture side or kind of build and grow as you're kind of saying versus necessarily investing in more mature companies where everybody has these high multiples that they're chasing?

Hilary: Look, I think the benefit of our strategy is that we can pivot where the value is. So, you know, we had always been kind of classic growth investors, but, you know, during COVID, where there was not a lot of growth to be got in the public markets, know, airlines were shut down, hospitality was shut down. There was a massive pivot of capital, especially crossover capital into the tech industry and particularly late stage. And so there was, in our opinion, those late stage deals that got exceptionally expensive and so we could pivot earlier. And so we started to do a lot more early stage deals. Now I think where we see a lot of value is in our kind core growth equity. We're seeing a lot of value. And then on the private equity side, we look at a lot of stuff, but again, it's the A assets trading, they're commanding A multiples. The B assets are either not coming to market or when they do come to market, they're not really getting great multiples or great valuations. I think as companies, private equities firms get more familiar with the promise of AI and the productivity that that could bring through greater efficient growth, through driving points of margin or points of revenue, potentially you'll start to see some of those B assets move faster in the market, but there is a large overhang of those kind of B quality assets, whether that's a B quality because of the size of the TAM, because they could easily be disintermediated by new upstarts or the quality of their revenue. It's hard to tell exactly the reason why there would be, but there's a myriad of reasons. Maybe AI will change the quality of that or the opportunity that's associated with those assets.

Shiv: Yeah, I definitely see your operations team as an advantage that allows you to make those kinds of adjustments because I think in many, many cases, I meet funds that have a singular focus. We only invest in 10 to $25 million AR companies in health tech and that's kind of all they can do and they don't kind of step outside that. And that kind of forces them or makes them miss opportunities that are sitting out there in the marketplace. I think at the scale of Insight, because you're kind of in everything and at different stages as well, can kind of decide where is the best place to find alpha and how can you leverage your internal team to drive that better than a lot of these firms that have that kind of a singular focus.

Hilary: I think that's exactly right. And I think that because of our staffing model, going back to what you said in the beginning, where these are FTEs, there's a lot of trust in what the operators can accomplish. And there's a lot of trust in what our network access can bring to the table. Just in the last month, one of the IC teams leant into one deal because the sales pipeline diligence came back very strongly, even though the company is in its early stages. And you know, there's a lot about the technology that is new. It's a true AI technology. And in another, we walked away from a deal because the sales pipeline review as part of diligence made us really believe that the company was going to miss its numbers. so availing ourselves of that expertise is a core part of why we make the investments. And then, of course, that just translates into how do we scale the company afterwards? You know, the other part I think that we've really been able to do over the last year where having an on site team is very helpful is what we call exit prep as a service. And so we recognize in the last 18 months, the LPs have really struggled because they haven't had DPI and they've been talking about liquidity, as you know, and asking the VC firms and the private equity firms to produce liquidity. And so we realized that we needed to be systematic around this. And so we set up a liquidity committee of which the Onsite team is a core component. We work with each of the IC teams to look at their portfolio. What companies are a little long in the tooth? What companies we think have still got great runway? Where and how should we be thinking about exiting? And then we've set a roster. And then the Onsite teams really help work towards that roster, specifically helping to set up the data rooms, helping to make sure we anticipate the questions that buyers will have. In the case of when we're selling to sponsors, obviously, they're going to be really diving into the data room, looking at all the core KPIs and metrics. And when we're selling to strategics, we really need to think through how do we adapt the narrative based on the strategic imperatives of their core dev teams and what they state in their public filings around where their growth vectors are going to be. And so we want to make sure that we position our companies best for public sales. You know, the rigor around this process led to the fact that we produced $8 billion of DPI last year, which was an enormous amount and certainly one of the leading folks in the industry. And the important thing around that was that through our enterprise team and through some of our relationships, we didn't just only sell to sponsors. So we had a couple of deals go to sponsors, but Recorded Future was bought by MasterCard, Feature Space was bought by Visa, Own was bought by Salesforce. We had SAP acquire a company. We've got a lot of these deep strategic relationships that I think we can really bring to the table. And again, that's the power of the scaled platform. That's the power of having a large strategic footprint. This year we're lucky and sometimes it's better to be lucky than good. And Siemens agreed to buy one of our portfolio companies, Darkmatics, for a great multiple for us. And that was announced the day before the tariffs. So sometimes it's good to have good lucky timing. But even prior to that, Wiz had been acquired by Google for 32 billion and we'd had a couple of other exit central reaches bought by Roper. And so already in Q1, through early April, we'd already delivered another $8 billion of DPI this year. So even if nothing happens between now and the end of the year, I know the process that the Onsite team is helping to run, helping to calibrate, helping our companies to think about exits, you know, the very last part of that value chain. You know, we've talked about, you know, how we help win and source, how we help select and due to diligence, how we help scale. But the exit process is equally as important. And I think more and more firms are starting to realize that they need an actual process for thinking through, how do I deliver returns back to the LPs?

Shiv: Yeah, that's a great insight. I think you started this conversation when you mentioned that you look at the Onsite team helping on the sourcing, the diligence, the growth part, and also the exit. And that's the exit piece, which is there's a ton of value to be generated there. If you do some of this exit prep work well ahead of time, like there's a lot of companies that might want to exit in 2027. And the work to exit in 2027 kind of starts now because you need to build a story and build how, what the metrics need to look like. There might be an M&A acquisition that you need to kind of tuck in into that process. So that planning kind of starts now. If you have a team focused on that, that kind of increases your likelihood of getting the kind of multiple that you'd want.

Hilary: Yeah, that's right. And you know, I think everybody's always noted about IPOs and we've had 55 companies IPO over Insight’s history. And so we're well aware that, you when you talk to NASDAQ, you talk to NYSE, you know, they're very careful around saying, you you've got to start this process 24, 18 months before you want to IPO, you start to put in place the rigor and the requirements that you need in order to be a successful IPO company. But we've never thought or applied that same methodology to, you know, strategic exits or sponsor exits thinking through what is a take to exit in 18 months. So you're right, we are already thinking about the companies that are going to exit in 2026, 2027, and thinking about what do we do to set them up for success. Of course, you know, in a minority deal, that's not always possible. We don't control anything in a minority transaction. We have a lot of other investors sitting around the table. Their funds are at different points of their life cycle. The kind of multiples that they're holding these companies at or valuations they're holding them on, their books may be different than how we think about it. And so there's just a lot of coordination. And I think that's what we're really good at. And I think it's one of the things Insight is known for, is really collaborating with the other voices around the table to make sure that everybody's on the same page and everybody's marching to the same drum beat. And that's always one of the drawbacks of being a minority investor is that you've got lots of different opinions around the table. It's why some PE firms like to be PE firms because you have control, you make decisions yourself.

Shiv: Totally that makes a lot of sense in terms of the portfolio companies themselves given that you have this type of a team, do you end up having smaller teams inside the portfolio companies in some ways because you have this deep bench of experts? Or are they kind of mutually exclusive?

Hilary: I think they're mutually exclusive. I think what we do have, and it's something that we will see as we go forward, is that through the implementation of AI, our companies will grow without adding headcount. I don't think we've really yet seen massive cost reduction as a result of AI workflows and agentic. But I think that as companies scale and they have some of these more efficient workflows, they will be able to add revenue without needing to add headcount. And so I don't think that we've necessarily seen any of that kind of real change in organizational structure yet, but potentially in the future, that's a promise.

Shiv: What about with the Onsite team? Because you have this deep bench of experts that are coming in and actually helping these companies grow in a way that kind of like are bringing in expertise that is not inside the company, right? So does that help you curtail hiring a little bit or at least not hire as aggressively inside those companies?

Hilary: You know, it might almost be the reverse, which is by virtue of working with the incumbents, the executives there, we might realize that, you know, we need to upgrade that talent because at the end of the day, you know, from your consulting, the ability to execute or for a consultant to be successful is only as good as the execution capability of the people that you're working with inside the company. And so if there's no one to catch the ball on the other side, there's almost no point in us doing work. And we really realize that in some of these early stage companies where they don't yet have a head of marketing. We could put somebody in on an interim basis, but it really does need to be an interim basis. And then once we've replaced it with a, we can put in place some of the systems and processes, we can get things set up. But at the end of the day, you need a leader to really run that on a full-time basis. And then we help recruit the leader, coach the leader. And once they're in situ, obviously they tend to want to work with us.

Shiv: Yeah, I completely agree with that. In general, whenever we come into companies, we are actually finding that there are these gaps inside this organization and that's why they're missing these opportunities. Actually, we need to invest more because maybe they're under leveraged or their team is just not staffed up enough or they don't have enough talent. So I do agree with that. Just last question and before we close up because we're coming up on time here, because there's a ton of PE firms that are listening and I've seen PE firms kind of wrestle with this to invest aggressively into having a large enough ops team, what would be your message to those teams in terms of looking at the cost versus benefit or the ROI of making such an investment?

Hilary: You know, a lot depends on the orientation of the leaders of the GP in that team. know, if they truly believe that they can drive outsized returns, which is what we do believe by having this team, you know, and it's not just that, you know, the team helps you scale and drive returns. It also helps you raise capital. And I think that our partners are very well aware that part of the reason that our LPs are willing to, you know, invest behind Insight’s platform to the tune of, you know, 12 and a half billion in our most recent funds is because they know that they’re in safe hands. And so we also have a very large portfolio, and that's one of the questions the LPs ask us, how do you support a portfolio of 500 companies? Well, we have 120 people dedicated to supporting that. And so we want to make sure that there's great coverage, that we have sufficient resources to support that large scale portfolio. And it's not just that that drive returns, but by virtue of having that, we're able to raise large funds because the LPs really believe in the vision. So I think it works both ways. And it really just depends, I think, that our GPs, the two Jeffs, Mike and Devin, originally now Richard and Mike, are very visionary in realizing that the FTEs have a different orientation around support. The pull that you get, the barriers to not accepting help, the not billing this back to the portfolio companies all means that the usage is exceptionally high. And when you have high usage, you're just going to get great economies of scale, but just great virtuous circles.

Shiv: That's awesome. Great, great advice, Hilary, and appreciate you sharing that. And as we come up on the close of this episode, I just want to say thank you for sharing all the insights that you brought. I think Insight is very well respected in the industry for a reason. And I want to thank you for sharing all the ways in which you're bringing best practices to this space. So thank you for doing this.

Hilary: No, it's a pleasure. And Shiv, thank you. And thank you for all the work that you and your team do in our portfolio companies. I know that part of our strategy is also to have great partners. And you're one of the great partners that we work with in the marketing arena. And it's always symbiotic. 

Shiv: Appreciate it. Thanks, Hilary.

Hilary: Yeah, cheers. Thanks Shiv, Bye.