With a career spanning over three decades, David Blumberg of Blumberg Capital is a veteran of the venture capital world. His journey began in the early days of tech, long before the dot-com bubble, shaping his perspective on what truly drives innovation and success. David was one of the first American VCs to recognize the potential of Israel’s tech ecosystem, contributing to its rise as a global ‘Startup Nation.’ In this conversation, David shares his wealth of experience, from his first investments at T. Rowe Price to founding his own firm. He delves into the key principles that have guided his investments through multiple economic cycles, the unchanging truths of human nature in a tech-driven world, and the importance of backing serial entrepreneurs. He also provides a look into his current investment thesis, focusing on data-intensive companies and the transformative power of AI.
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Nataraj: How did you get into investing in early-stage tech companies? At what point did you decide that you should start investing in tech companies?
David Blumberg: I’ll go all the way back to my high school days because I’m from that generation that came of age after the Watergate scandals of the 1970s. That was an era when a lot of people were depressed about the future of America, about the future of government, and about the ability to solve big problems. I was idealistic. I wanted to solve problems, so I thought I should go into government. I was lucky enough to go to Harvard College, where I started to study international relations in the government department and economics. I loved the courses and was soaking it up like a sponge. I worked in Washington for three summers and after those three summers, I realized that Washington was a place that causes a lot of the problems, it doesn’t solve them. They try, but they have this problem called unintended consequences, which often happens in a non-linear fashion, and a lot of their projections are made in linear models.
At the same time, I had three big influences that moved me toward business. One, I was a middle-class kid, so I needed to work. I started a business at Harvard called Harvard Distribution Services. That company still is going today. It’s part of Harvard Student Agencies. I employed 100 kids doing distribution and courier service. It wasn’t a tech business by any means, but it was so much fun to serve customers, hire my friends, get paid for it, get feedback, and build new ideas for what we could offer them in the future.
Then I had this negative experience in Washington where it was very sexy. I was close to power, at the foot of a senator learning about all these policies, but there was just this level of bureaucratic slowness and lethargy. Nobody cared that the taxpayer was always on the hook, and there was no accountability. I didn’t like that.
Then there was the other interesting thing. I did a thesis on African-Israeli relations between 1973 and 1981. A relatively obscure topic. In 1973, there was an oil embargo after the Yom Kippur War. The Arab countries mostly forced the African countries to break diplomatic ties. But in those same years, trade went up 800% between those same countries that had just broken off diplomatic ties. I thought this was unusual. What I found out by doing a lot of research is that it was the business people, the military people, and the ministers and priests who would bring their flocks to the Holy Land that kept going despite the political rhetoric. They had real interests—economic, military, and religious—and those persevered over the political noise at the UN.
Here’s my conclusion. I decided that I want to help impact the world while I’m alive. I’ve benefited from the history of all the progress of Western civilization, and I want to increase goodness for the world and help everybody thrive. My watchword is human flourishing. To me, the most high-impact way to achieve human flourishing is a combination of capitalism and science. The vehicles, the prophets that drive that forward are entrepreneurs. So I am all about entrepreneurs. I love entrepreneurs. I am an entrepreneur, but mainly I back them now as a venture capitalist. That’s my role in the world, and I feel blessed and grateful that I get to do this every day.
Nataraj: When did you first start investing in a tech company, and if you can remember, what was the first tech company you invested in?
David Blumberg: It was as a public investor. After Harvard, I went to T. Rowe Price, as you mentioned. At T. Rowe Price, I was on the technology team as an assistant securities analyst. My job there was to meet companies that were often about to go public, so they were private and about to do an IPO. I would form an opinion on their financial progress, their future, and their marketing relative to their peers. We would come up with a thesis about which of the IPOs in a new industry we would want to invest in. I started investing that way by making recommendations to the portfolio managers. One of the ones I remember investing in was a company called Scitex. You mentioned that I also invested in Israeli companies for a long time.
That was interesting because T. Rowe Price had never invested in a public Israeli company at that point. Their theory at the time was, ‘Israel’s a very socialist country. It has a very high inflation rate, and there are these periodic wars and terrorism. It’s probably a dangerous place. We shouldn’t invest there.’ My counterargument was that’s already priced into the stocks. Their price-to-earnings ratio was lower than a comparable company in the US or London. They bought my argument, and we started to look at Israeli companies and start to buy them. Scitex was one of the first that helped get into the T. Rowe Price portfolio.
Nataraj: So this is an Israeli company that was going public, or already public, and Israel was considered a socialist country at that point in time.
David Blumberg: At the time in the 1970s and 80s, yes.
Nataraj: I remember India was mostly considered socialist until 1990 when the economy opened up. That makes sense.
David Blumberg: India and Israel share a lot in common. They both had the experience of British colonialism. The British did some good things, and some bad things. One of the bad things was that there was a very powerful group of economists from the London School of Economics that believed in import substitution as an economic model. Israel was told to do that, and India was told to do that. It was completely the wrong idea and really messed a lot of things up. For example, when I first went to Israel, they had a very strong tariff on personal computers. I said to some of the government folks, ‘If you’re trying to build a software industry, it doesn’t make sense to have high tariffs on the tools you need to write software.’
Over a period of time, not because of me, they started to reduce tariffs and regularize taxation of venture capital funds. But in the early 80s, there really wasn’t any venture capital in Israel. There was onerous taxation and not the kind of stock option permissibilities that we take for granted in the US. Silicon Valley was novel. Some lawyers tell me that I was the first person that brought a standard Silicon Valley term sheet from Wilson Sonsini over to use on a deal in Israel in the early 80s.
Nataraj: There’s this amazing book called Startup Nation about Israel. Silicon Valley is obviously the gold standard for tech innovation, and Israel probably comes second or third internationally.
David Blumberg: Certainly in density per capita, it might even be higher in terms of entrepreneurs per capita. But Silicon Valley is the center, no doubt.
Nataraj: There’s an interesting comparison of countries which got independence around the same time as Israel. For example, South Korea and Israel. But Israel was able to develop a tech sector that is as innovative as Silicon Valley. One of the projects that helped them was Yozma, where the government allocated funds and made it lucrative for venture funds to come into Israel. Were you exposed to or part of Yozma at that time?
David Blumberg: Yes, I was very involved. I even helped contribute to some of their ideas, in a very small role. But most of the credit goes to other people. Here’s what I want to push back on: the notion that government leads on these things. I don’t really believe that. I was invited by TIE, The Indus Entrepreneurs, to come to India on a delegation in 1999 to talk to the leaders of India. We met with the finance minister, the military folks, all kinds of leaders of the economy. They said, ‘We want you to tell the story of Israel because Israel had the same British colonial history. They were also a people full of mathematicians and scientists like India, and yet both of those countries lagged until they had a takeoff.’
These Indian folks said, ‘We were village boys in India. We came to a good university, then we went to America and became super successful entrepreneurs because of the American system of the government getting out of the way.’ Whereas in India, Israel, and most developing countries, there’s so much bureaucracy and red tape, which allows bureaucrats to get rich through corruption. It really impairs and depresses entrepreneurial energy. The most important thing for governments to do is just get out of the way and let the entrepreneurs do their thing. We have too much permitting, too much regulation, too much red tape. It’s very hard to do things now in the United States and in most Western democracies. We get sclerotic. What India needed to do was get out of the way of its own people. Israel had to do the same thing. Israel had, since 1948, the most advanced technological workforce in the world per capita, but they were not that successful in tech until the government got out of the way. They had economic reforms and allowed stock options and equity structures. I’ll remind you that in the late 80s, the Israeli economy crashed entirely. The banks failed, the government nationalized all the major banks. It was a complete disaster. It was only with the help of Chicago-style and MIT economists who basically said you have to allow the free market to work its magic. The same thing is what we told India in the 90s, and you’ve seen the power and growth that India has enjoyed too. It’s not that government leads so much as it just needs to get out of the way.
Nataraj: I think I agree with you. The way I understood Yozma was they sort of aligned the incentives and got out of the way.
David Blumberg: Let’s go specifically to Yozma. Most governments are driven by political goals. In Yozma, certain constituents wanted private sector institutional funding. That became the Yozma program. There was another fund to get the retail investor interested. Yozma did a program where if I raised a fund of $100 million, Yozma would put in another $100 million. At the end of the fund’s life, if the fund was a success, we, the investors, could buy out the government at cost—a great deal. The other program, which did not work very well, was an insurance policy attached to publicly traded venture capital funds. It did not work. Again, it’s government trying to be too smart and do too much. The main thing government had to do was get out of the way. I will applaud Yozma because they insisted on one good thing, which was cross-collaboration between experienced international venture capitalists from the US and Europe and Israeli local investors who were doing this for the first time. That was positive because there was a flow of information and a transfer of knowledge.
Nataraj: Another interesting fact about the Israel ecosystem is Warren Buffett’s first investment outside the US was an Israeli company. Intel’s first office outside the US was in Israel.
David Blumberg: Yes, Iscar.
Nataraj: The founders they come up with are usually very exceptional and one of the highest quality of founders that I’ve ever seen in any other ecosystem.
David Blumberg: That did not exist before. Israel did not have MBA programs or a culture of appreciating entrepreneurs. In the old days, under the socialist regimes, the smart kids went into the government or the military. Then a few people became successful entrepreneurs, and they became paragons and role models for the next generation. I will credit this: the Talpiot and the 8200 programs, these special units in the military that recruit the brightest people, give them great training, put them in a small group, give them a budget and a deadline, and say, ‘Here’s your project. You must design this new kind of technology.’ They’re bonded through fire. They put people together who know electronics, physics, radar, and tell them, ‘Build this, and your grandmother’s life depends on it.’ These people are forged together, tempered like fine steel. When they come out of the military, they have been bonded and tested. When you’re finding a co-founder, if you’ve been through that experience of the military together and you’ve had each other’s back, it’s a very powerful way of determining if this person is going to be a good co-founder.
Nataraj: Before starting your own firm, you also worked at Claridge. Talk to me a little bit about that experience and how that shaped your investing later on.
David Blumberg: I’m going to go backwards a little bit because my first mentor was Fred Adler. I met him when I was at T. Rowe Price, and he was the only big, successful American investor who was also willing to invest in Israel. I was interested in that combination. I want to give him great credit because although he was a very difficult man, he was brilliant and he exposed me to venture capital. Then I was fortunate to work with Alan Patricof, another great venture capitalist. And then I worked for Charles Bronfman at Claridge, which is the family office of the Bronfmans in Montreal. I was investing in the US, Canada, and Israel. Family offices have different criteria than a traditional venture capital fund. They had certain personal issues they wanted to steer clear from and other areas they wanted to emphasize. Their background was real estate, which was a little incompatible with my background in venture capital. I had to push and pull and try to explain why we should structure deals in a certain way. For example, they were used to structuring deals with debt. I pretty clearly explained that debt in a venture capital structure in the early stages is not really worth the paper it’s written on, and we need to be equity owners and get rewarded for that equity risk.
Nataraj: So then you went on to start your own firm.
David Blumberg: That’s right. The best deal I did at the Bronfmans, which I’m kind of proud of, was a little pharmaceutical company in Israel. I looked at it as an acquisition. The Bronfmans were not willing to do it on our own. So we bought a company called ABIC and back-to-back flipped it right away into Teva Pharmaceuticals in return for a large stake. Teva at the time was only worth about a billion dollars and later rose to between 40 and 60 billion. It was a rocket ship, selling to 50-plus countries. It’s now the largest generics manufacturer in the world. It was a real testament to that Israeli innovation mindset.
Then, moving on to Blumberg Capital, I started that in the early 90s. At first, I didn’t have a fund, so our team was very small. We called it a virtual venture catalyst. We would work with investors, mostly family offices, to find deals for them. In compensation, we received a retainer, cash on the completion of a deal, and equity as a kicker. We had nine investments, and it was a 9x return on that portfolio. Four IPOs, four M&A exits, and one death. In 2001, Blumberg Capital raised its first venture capital fund. Since then, we’ve raised six funds and now have about 65 companies in the portfolio. Our offices are in Miami, New York, San Francisco, and Tel Aviv. We’re about 27 people on the team. We have two strategies: one is early stage, focusing on pre-seed, seed, and A rounds. Then we have a growth fund that starts late A, early B.
Nataraj: When you started your first fund, to now, it’s more than 20 years. Valuations have changed, things have changed drastically. What didn’t change in this business?
David Blumberg: What did not change? I love that question. I’ve got a great answer. Technology changes, human nature doesn’t. The lesson we learned from that is the context is constantly changing. Valuations are up and down. We know that there are cycles. Nothing lasts forever. The average length of duration on the Fortune 500 list used to be about a century; now I think it’s down to about 15 years. Most of the large companies of today didn’t exist 50 years ago. So the pace of change is accelerating. The lesson of life is keep running. The lesson of Silicon Valley is keep up with the change.
Human nature is going to stay the same. There are jerks, and there are great people. There are incentives that motivate people and bureaucratic constraints that slow people down. My lesson from venture capital is it’s about the network. It’s about the people. If you treat people right, as you know from the karmic principle, it will generally come around to benefit you. If you screw people up, they’re going to remember. If they screw you up, hopefully, you will be smarter the next time and not want to work with them again. So I think that technology changes and you’ve got to keep up with it, but human nature is quite stable. We have been so blessed to work with serial entrepreneurs. We’ve backed them one time and they were successful, twice and they were successful, and sometimes we’re on our third round with these entrepreneurs.
Nataraj: Who are some of those entrepreneurs that you repeatedly work with?
David Blumberg: One fellow is Oren Netzer, the founder of DoubleVerify. We invested $8 million in the seed, A, and B rounds. Ultimately, we were able to take out $578 million in profits when the company went public. He’s started a new company called DataHeroes, and we’ve invested in that. Another example is a man named Dan Sanker. Dan has been the CEO of two of our companies. One, CaseStack, in the logistics area, was sold for $255 million. The acquirer did not want a small skunkworks Dan had set up, so I said to Dan, ‘Let’s just take it and build another company.’ We built another company, and seven years later we sold that company, SupplyPike, for another $216 million. Now Dan is going to do the next company with us, so that will be the third time. Another is Benny Nachman, the founder of Credorax, an Israeli/Maltese merchant acquiring bank. That company ultimately sold for $1.1 billion to Shift4. Now he’s started a new company called Jazzypay, which we’re also invested in. These ties that bind are absolutely wonderful because I know how he thinks, he knows how I think, and we trust each other. We’ve been through hell and back together.
Nataraj: In pre-seed, there is no data. It’s all qualitative. Talk to me a little bit about your decision-making in pre-seed, especially for a new founder.
David Blumberg: At the pre-seed stage, the premium is on the team. The team is much more important because they’re going to pivot no matter what they say. Something’s going to change. A successful investor once told me, ‘No good company pivots less than twice.’ I don’t know if that’s statistically true, but the point is very few people can really predict the future. It’s opaque, it’s unknowable, it’s probably non-linear. So you’ve got to be able to react quickly and effectively. A great team is more likely to do that than a not-so-great team. We look mostly for the teams. I also look for large market potential because it’s better to hit a big target. We also favor industries where there’s not a lot of competition. My friend Peter Thiel talks about this a lot, like little monopolies. Some of the best companies, like DoubleVerify and Nutanix, really didn’t have much competition at all when they started. Or what they were doing was very distinct. We could differentiate and say, ‘They do it this way, we do it differently, here are our advantages.’ So, team first, large market, and minimal competition are three of the key factors for us.
Nataraj: I’ve come to think of two criteria in pre-seed. One is I want an absolutely insanely talented founder, and my definition is they must be writing code way better and faster than any senior team inside Microsoft or Facebook. Do you have your own definition of what talent is for you?
David Blumberg: You remind me of my mother who used to say, ‘Before we had children, I had three theories about raising them. Then I had three children, and I no longer have any theories.’ My analogy would be Nutanix. We were the first investor. We made hundreds of millions of dollars on the exit. They came to us and described exactly what you said. Mohit Aron was one of the most technical of the three. He was considered one of the 50 best programmers in the world. He came from Google, he helped develop the Google File System. He and the other two founders said, ‘We’re going to do what Oracle does for storage. Everybody buys these old, big systems that are hardware and software. Instead, we’re going to emphasize the software and buy commodity hardware.’ We have this wonderful CIO Council. We took the Nutanix trio to them and said, ‘If they build this virtual storage idea, would anybody buy it?’ Three hands went up. Those became their initial customers. But the funny story is, you’re right, they were all really talented. Mohit was probably the most talented coder, but Dheeraj was an executive and Ajeet was the other fellow. They were all brilliant. Each of them started unicorn companies. Ajeet started ThoughtSpot, and Mohit started Cohesity. So they split up, but they were each successful in their own domain. So I think quality is recognizable. You tend to want it to be coding quality, but there are other qualities. I heard somebody recently say that every CEO needs to be the best salesperson for their company. I think that’s true. They may not be the best coder, but often the lead in the company is going to be the more business-oriented person.
Nataraj: You talked about the CIO council you have. Talk to me about that council and how it’s helping you pick winners and losers.
David Blumberg: Our innovation council consists of chief information officers, chief security officers, and chief technology officers. We get them together about four times a year. They really enjoy conversations among themselves on a topic of mutual interest, like AI in production applications given privacy constraints. We’ll have them talk about that topic, and then we present a couple of our companies, either before or just after we’ve invested, and we get feedback for the entrepreneurs from this council about how well the messaging is coming through, product-market fit, pricing, and the go-to-market plan. A lot of feedback comes, and often what comes next are design partners. It really helps because there’s credibility that we’ve built up over decades of bringing them companies like Nutanix, DoubleVerify, and Braze. When these CIOs see something from us, they know that we’ve vetted thousands of companies down to a few that we invest in every year.
Nataraj: I always like to ask investors where they’re investing their own personal capital. Can you talk a little bit about your own strategy?
David Blumberg: Sure. First of all, I’ve been very fortunate to become wealthy through the venture capital business. We’ve had a lot of successes, and the carried interest really rebounds to the benefit of the investor founders. A lot of that capital comes in the form of stock in public companies. I’ve often held those stocks. Sometimes I do what’s called an exchange fund, where I’ll take a chunk of a concentrated stock and trade it over a period of eight years tax-free into the S&P 500. So I diversify without any transaction costs.
I’ve also personally invested in real estate and particularly one non-obvious area. I really enjoy investing, and I’ve made a lot of money in oil and gas and fossil fuels. That’s very uncool, but I am what’s called an energy humanitarian. It’s fine for wealthy people to feel good about themselves by thinking about green energy, but you come from India, so you understand there are hundreds of millions of people that have zero electricity. There are 700 million people on earth with zero electricity today. Four billion people have less than four hours a day of access to electricity. The world needs a lot more power. The only possible way we can get the poorest people on earth to have enough energy is if we utilize more of the God-given resources of natural gas and coal. I’m all in favor of innovation—solar, wind, nuclear, hydro—where applicable. But the vast bulk, 80-plus percent of the world’s energy, is still coming from fossil fuels. So while everybody’s voting against it, I vote for it, and I make lots of money because when people are voting with their emotions instead of the data, they lose and I win.
Nataraj: Who are the investors you admire the most and like to learn from?
David Blumberg: Peter Thiel is a friend, and I admire him greatly for his intellect, his ambition, and his rule-breaking mindset. Joe Lonsdale is in a similar vein, and we’ve invested a lot together. I also think that Marc Andreessen and Ben Horowitz are amazing; they’ve built an incredible franchise relatively quickly. Of course, the classics, the people at Sequoia like Moritz and Leone, are tremendous. And I’m old enough to have worked with some of the great guys from the old generation. Venture capital has changed. When I was starting out, it was very much a hardware business, centered around semiconductors and test equipment. That’s why we call it Silicon Valley. Today, obviously, it’s coders that are at the top of the rank. Now we’re automating the information world, the world of knowledge workers, the world of data. That’s why we at Blumberg Capital look for data-intensive companies that can sell into one vertical or more, using intelligent algorithms to shape, refine, distill, and interpret that data. Every industry on earth can become more productive. My way of describing venture capital is we are the outsourced R&D function for large corporations.
Nataraj: What are you consuming right now—podcasts, books—that is influencing your thinking?
David Blumberg: This always shocks people. I’m a huge reader of the Bible. I think that the Bible is the greatest guide to human nature, to wisdom, and to what really matters in life. I have a specific version I like by Dennis Prager called ‘The Rational Bible.’ It doesn’t require suspension of belief or disbelief in science; it’s totally copacetic with science. But it teaches you why and should, rather than just what and how.
In other domains, I love listening to economics podcasts and edgy technology discussions about what’s going to be next in four, five, or 10 years. Also on demographics and regulatory changes. I like to read the editorial page of the Wall Street Journal. A politician who doesn’t understand economics is not going to be helpful, and an economist who doesn’t understand politics is not going to be successful. One needs to know both. I would say the most important thing is continuous learning. I’m told that an engineer today is outdated in seven years after they graduate from college because things are changing so fast. So nobody’s a genius constantly. You need to continue learning, and the best way is learning from other people.
Nataraj: Who are your mentors who helped you in your career?
David Blumberg: Fred Adler was one of my great mentors. A lady named Abby Joseph Cohen hired me at T. Rowe Price; she went on to become the ‘Queen of Wall Street’ at Goldman Sachs. Alan Patricof has always been a gentleman. Charles Bronfman is a prince of a human being, a great philanthropist. And the people I learned most from are the entrepreneurs we’ve worked with because they’re always confronting really difficult challenges. I love watching the way their minds think about how to overcome a challenge. That’s the beauty of being an entrepreneur and the privilege of being a venture capitalist.
Nataraj: One last question, what do you know about investing now that you wished you knew when starting your first fund?
David Blumberg: This is very easy. The most important thing for young people is to always get your contracts pinned down. Make sure you have a contract and it’s clear, especially if you’re doing consulting. Make sure that everything is written down and bound into a contract because after one starts a project, people’s memories change, incentives start to diverge, and you can get into a big fight. The most important thing is to get everything squared away up front. You can always adjust it later, but if you don’t get it signed, you’re at grave risk of losing what you’ve worked so hard for.
David Blumberg’s insights offer a timeless perspective on venture capital, emphasizing that while technology constantly evolves, the fundamentals of backing great people and solving real problems remain the same. His story is a masterclass in long-term vision, resilience, and the power of building lasting relationships.
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