After graduating from the University of Pennsylvania with degrees in Finance and Electrical Engineering, Ryan joined the Insight Venture Partners (“Insight”) team as an analyst. Since then he has participated in over 25 platform investments across a variety of transaction types and industry verticals. Now a Managing Director, Ryan frequently spends time in the education market and has participated in Insight’s investments in Newegg, Twitter, Syncsort, Chegg, Pluralsight, and Episerver among others. Investing out of Insight’s recently raised $6.3 billion Fund X, we catch up with Ryan to discuss where he will spend time in the future and what he looks for in a great investment.
RJ: Thanks, Ryan, for taking the time. I really appreciate it.
It’s my pleasure.
RJ: Maybe what we could do is kick off with a little bit of your background.
Sure, when I tell this story to entrepreneurs, I tell it pretty much exactly as I’m about to tell it to you. For all intents and purposes, I was born at Insight. My professional career included a few summer jobs. My last summer job was to explore everything that was out there—I didn’t know what I wanted to be when I grew up. I studied business and engineering and had a somewhat utopian view of marrying the two. I stumbled into Insight as a summer analyst. I joined with no expectation of being here more than a summer. I had a hope to potentially be here longer, but even if I joined full-time, I had no expectation of being here more than the two-year analyst period. Here we are nearly 15 years later, and I bleed Insight orange and couldn’t be prouder of what we built together over those 15 years.
RJ: Fantastic. What was it about your first experience and subsequent year by year experience that you found so compelling that you wanted to commit to Insight for a long period of time?
I remember distinctly I had three things that I wanted as a starting point for my career. One was to be impressed by the team that I’d work with, universally impressed by the team. The second was that I wanted the junior role to really matter. I wanted the impact of what the analyst would do to not be cogs in a giant machine, but to be truly impactful. And three, I wanted to fundamentally enjoy the work.
The first one took care of itself. I met many of the people I now call partners today and I was blown away. That I sit next to them now is a bit of a “pinch me” moment at times, but that was an easy one, I could feel it right away. The importance of the junior staff’s work was also evident. Here at Insight the analysts look for opportunities. Their job is to find the greatest software companies in the world at a growth point in their trajectory, so that we can make the case that we’d be a great investor. And that was the role I was applying for. Without the analysts, the deal flow would dry up at Insight. That importance was very palpable to me and I was attracted to it.
Finally, related to the third one, the opportunity to interact with entrepreneurs all day every day at the ripe old age of 22 was extremely exciting to me. I grew up in a family that was entrepreneurial. We had a clothing store, which isn’t as good of an economic business model as software. Understanding the blood, sweat, and tears that go into a business and interacting with that at a very junior point in a career, was an obvious fit for my interests. It turned out the obvious fit with my interests was not limited to just the analyst job, but with every step along the way. I re-fell in love with Insight, with our mission to help companies, and with our mission to create durable value everywhere we find it.
RJ: A lot of people today know of Insight. Within the community of growth companies and growth capital providers, Insight is thought of very highly. For those in our audience that might not be as intimately familiar with Insight, maybe you could share a little bit of background on the firm?
The founding premise of Insight was relatively straightforward. Software is different and software is special. If you sit at a generalist firm and you’re fighting for allocation for software investing, you’ve already lost the battle. Because the mattress manufacturing team is fighting you for software allocation or the semiconductor team is fighting you for software allocation. Our belief was: if we focus on software we can see more software opportunities, we can move faster so we can win the deals, and then we can ultimately help those companies disproportionately.
Fast forward to today—25 years later and over $20 billion of capital raised—those three founding premises [for my career] still exist across Insight from a topographical perspective. A third of our team are analysts. We find our deals through the analyst program. A third of our team are senior professionals that only do the transacting and we all speak the same language. We’re not fighting for allocation. We know it’s software. There is a liberating purity to that. The last third of our team is our value-add team that we call Insight Onsite. Their mission is to deliver on the promise of adding value.
What we give up in portfolio theory by focusing only on software we get back in expertise. That enables us to disproportionately change outcomes for the companies we work with.
RJ: It would be interesting to hear what you focus on in particular versus your colleagues. Maybe we could tie that into some of the recent investments you’ve made or exited.
There are really two dimensions to where one might focus. I say might because this is not a “hard and fast” rule. At Insight, some of us like earlier “growth-ier” type investing and some of us like more complex private equity leaning buyouts or other more complex transactions. We as a firm can do both and some of us do both. I personally have done both to an extreme. I’ve done take privates and I’ve done investments into companies with $1 million in revenue, so pretty much the entire spectrum of what’s possible. Some of us have more thematic tendencies. I have a partner that does predominantly software infrastructure investing. I have another partner who really likes healthcare investing. If I look at my own portfolio, I’ve done a lot in education, notably Pluralsight, Instructure, and a number of other well-known software companies in the education space.
We just announced the signed purchase agreement for Episerver, which is north of a billion-dollar valuation, but that valuation is attached to super high growth. That’s like cat nip for us. Big scale, big growth, big market opportunity. We get really excited about that.
The threads that are common to what I love are related back to the education part of my story from a training perspective. I love complex problems and structured deals appeal to that, cohort math appeals to that. In summary, I’ve been all over, but education tends to be the most dominant in my portfolio.
RJ: Looking back on your career as an investor, are there certain characteristics that, once you see them in a company, you have conviction that an opportunity is a good one to pursue?
Absolutely, but it’s hard to distill that down to a sentence or two. I almost think of it as between ten and fifteen attributes that are good indicators of success. You never quite find all fifteen. For example, a fully developed management team is unlikely at an early stage. Or a highly durable technology moat, pretty unlikely until you’re a little further along the growth curve. Or a very robust and built out unit economic model, meaning very high profit potential that’s well established, is not always evident. There are buckets or categories of these indicators that can be seen. However, what is almost more important is what’s not yet there that could be developed.
Things like an entrepreneur’s ability to attract talent is a critical success factor to building out a management team. Do I believe that an entrepreneur can do that over time? Another is receptivity to help. We’ve talked about Insight Onsite and what we do to help companies—to have receptivity to help is an important indicator. Not because we know the answers, but what we absolutely know is that at some point an entrepreneur will have to share responsibility with a growing senior team and receptivity to other ideas is important. I can go on and on with examples.
We look for patterns that match success stories in the past, but also vacancies in those patterns that we can help solve. A quintessential way we can deliver on value-add is by helping an entrepreneur solve for $100 million company scale even at a $25 million revenue moment.
RJ: What are you most excited about these days? We could talk about it in terms of segments of the education market or types of opportunities.
I would say it’s both the most exciting and also the most disappointing thing, but people have figured out and woken up to our founding premise that “software is special.” It’s really exciting because that has led to a lot more attention and interest in our world. We see it manifest in valuations, which are great as a seller and obviously harder as a buyer. I think it’s a net good thing that SaaS has evolved as a revenue delivery model for software and that people now appreciate it as a profoundly powerful predictor of future revenue. Getting credit for that is fantastic. It’s allowing entrepreneurship to happen without the need for $50 million of server equipment just to get started. A great idea and a great customer reaction can help you launch an idea. It’s expanding the pace of innovation.
Even though valuations are obviously affected by a lot of interest in the space, by touching tens of thousands of companies per year Insight can see opportunities hopefully just a little faster than when they appear in the mainstream psyche. We can get access to these opportunities from an investment perspective, so I’m excited that the frequency of new ideas is up. It’s exciting that the interest in our portfolio companies is up and that the benefit of having a bench of resources is palpable to CEOs and management teams. I feel that trend can continue to feed on itself for a long time.
RJ: Excellent. Thank you for your time, Ryan. We covered a good amount of ground here. Is there anything that we didn’t talk about that you’d like to mention?
It’s a great time to be running a software company. It’s always a hard question of “when should I raise capital” or “how can a capital partner help?” One of my favorite lines on this is, it’s just never a good time. If you’re really, really growing, you can always make the case to wait a little bit. If you’re not growing, it’s a lot harder to raise capital. It’s extremely hard to pick the exact moment to take on a capital partner. What we hope to create and what I would encourage anyone listening who is thinking about growth capital to focus on is the ability for your partner to help change the outcome for you. That is a really important part of these relationships. Hopefully those listening to this session can hear the passion we have as investors in helping deliver outcomes for our teams. That’s the most important takeaway for what a partnership with a firm like ours can look like.
RJ: Excellent, thanks so much.
You’re welcome, thank you.
Hear the full conversation with Ryan on iTunes at the GrowthCap Insights page.
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