Transcript: Building a Billion-Dollar Portfolio: David Blumberg's Investment Strategies

Host: a famous investor the other day at a conference we were speaking at both in Boca Rotan and Leon Cooperman and he said, every day in Africa, a gazelle wakes up and realizes it has to outrun the lion to survive.

And every day in Africa, the lion wakes up and realizes it has faster than the slowest gazelle to eat or it'll starve. So the lesson of life is keep running and the lesson of Silicon Valley is keep up with the change.

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 to benefit you.

If you screw people up, they're going to remember, if they screw what you up, hopefully you will be smarter than next time and not want to work with them again. And I'll give you one more lesson.

We have been so blessed to work with serial entrepreneurs. We've backed them one time they were successful, twice when they were another successful, and sometimes we're on our third round with these entrepreneurs.

Host: Hello everyone. Welcome to another episode of Startup Project podcast. My guest today is David Bloomberg.

Host: Uh David is a long-term investor with multi-decade experience in investing in early stage tech companies. Um he had invested in tech company starting from the 90s. Uh so one of the most experienced investors to be on the show.

Um, he's also one of the early investors to be investing in Israeli ecosystem.

Uh today we'll talk about uh you know some of his successes, lessons, um and what he's focusing on right now and what he'll learned investing over these uh last three decades and a lot more.

Host: Uh David, welcome to the show.

Guest: Thank you Naja. I'm so glad to be with you.

Host: Uh so where are you joining us from today?

Guest: Uh in our offices in Miami area. The town is called Sunny Isles Beach and we're right across from the beautiful Azure blue Atlantic Ocean.

Host: Amazing. So I think a good place to start is um you know you have this amazing breath of career starting from working at Tiro Price to starting your own fund. the question is, I want to start with is, how did you get into investing in tech companies, that do early stage tech companies. At what point did you decide that, hey, I should be start investing in a tech company.

Guest: All right, I'm going to go all the way back to my high school days because I'm the generation that came to age after the Watergate scandals of the 70s. And that was an era when a lot of us people were depressed about the future of America, about the future of government, about the future of being able to solve big problems.

Guest: I was idealistic. I wanted to solve problems. So I said, I think I should go into the government. So I was lucky enough to get to go to Harvard College, I started to study international relations in the government department and economics.

I love the courses. I was really learning a lot soaking it up like a sponge, and I worked in Washington for three summers. After those three summers I realized that Washington was the place that causes a lot of the problems, doesn't solve them.

They try but they have this problem called unintended consequences, which often life happens in a non-linear fashion. a lot of their projections are made in linear models.

Guest: Any case, at the same time I had three big influences that moved me toward business. One, I was a middle class kid and so I needed to work. I started a business at Harvard called Harvard Distribution Services.

Guest: That company still is going today. It's part of Harvard Student Agencies.

Guest: I employed 100 kids, we were doing distribution and courier service.

And 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. So that was number one.

Then I had this negative experience in Washington where you it was very sexy, it was close to power, you were at the foot of the senator or whatever learning about all these policies, but there was just this level of bureaucratic slowness, lethargy, nobody cared that the tax payer was always on the hook and there was no accountability.

So I didn't like that. And then there was the other interesting thing I did a thesis, and I'll make it very short. It was on African Israeli relations between 1973 and 81, relatively obscure topic. What happened?

Well, in 73, there was an oil embargo after the Yom Kippor War. The Arab countries mostly forced the African countries to break diplomatic ties.

But in those same years, 73 to 81, went up 800% between those same countries that had just broken off diplomatic ties. So I thought this is unusual.

Guest: And so what I found out by doing a lot of research is that it was the business people, the and the military people and the ministers and priests that would bring their flocks to to the holy land that kept doing going despite the political rhetoric the other way, they had real interests.

The real interests were economic, they were military, they were religious and those persevered and out shown and out persevered the political noise at the at the UN. So I thought, well that's interesting. Here's my conclusion.

I decided that if it really I want to help impact the world while I'm alive. I want to I I had great family, great parents, I've benefited from the history of all progress of Western civilization.

I want to increase goodness for the world and help everybody thrive. I like my my watch word is human flourishing. I'm all about human flourishing.

Now to me the most high impact way to get human flourishing is the combination of capitalism and science and the vehicles, the profits of that drive 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. So that's my role in the world and I feel blessed and grateful that I get to do this every day.

Host: So uh talk to me about your first when did you first start investing in a tech company and if you can remember the first tech company that you invested in.

Guest: Well, yes, it was as a public investor because after Harvard, I went to Tiro Price as you mentioned. At Tiro Price, I was on the technology team as a Assistant Securities analyst.

And my job there was to meet companies often that were about to go public, so they were private and they were about to do an IPO, and I would form an opinion on their financial progress, their future, their marketing relative to their peers and we would come up with a thesis about which of the IPOs in a new industry we would want to invest in.

So I started investing that way by making recommendations to the portfolio managers. One of the ones that I remember investing in was a company called Sitex, SCX. And you mentioned that I also invested in Israeli companies for a long time.

That was interesting because Tiro Price had never invested in in a public Israeli company at that point. And they their theory at Tiro at that time was, well Israel's a very socialist country.

It has very high inflation rate and there are these periodic wars and terrorism. So it's probably a dangerous place, we shouldn't invest there.

Guest: My counter argument was, that's already priced into the stocks. Their price to earnings ratio, of the stock, was lower than a comparable company selling for the same relevant revenue and profitability in the US or London.

So they bought my argument and we started to look at Israeli companies and start to buy them. So that was Sitex was one of the first that they helped get into the Tiro Price uh portfolio.

Host: So uh you mentioned so this is an Israeli company that was going public or already public and you mentioned that Israel was considered as a socialist country at that point.

Guest: At time. In the in the 1970s and 80s, yes.

Host: Yeah, I think I remember, you know, even India was mostly because I came from India. India was mostly considered sort of socialist until 1990 when the economy sort of opened up. Uh that makes sense.

Guest: If if if if I can take take up on your thread, Indian and Israel share a lot in common. They both had the experience of British colonialism sitting on top of them. And the British did some good things and the British did some bad things.

One of the bad things that they did at the end of their colonial rule was that there was a very powerful group of economists from the London School of Economics and probably Cambridge and Oxford that believed in what's called import substitution as an economic model. and Israel was told to do that and India was told to do that.

It was completely the wrong idea. It really messed a lot of things up. So for example, when I first went to Israel, they had a very strong tariff on computers, personal computers.

And 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.

And so over a period of time, not because of me, but they started to reduce tariffs to regularize the taxation of venture capital funds. But the early stages in the in the early 80s, there really wasn't any venture capital in Israel.

There was owners taxation, there were not the kind of stock option permissibilities that we take for granted in the US and Silicon Valley was novel.

And I think some people, some lawyers tell me that I was the first person that brought a standard Silicon Valley term sheet from Wilson Sanni over to use on an deal uh in Israel in the early 80s.

Host: There's this amazing book uh called Startup Nation.

Guest: Of course.

Host: Yeah, and I was about to bring that up. Um, you know, Silicon Valley obviously is considered the gold standard for tech innovation and probably Israel comes probably in the second or third. I I would say probably second internationally.

Guest: Certainly in density per capita. It might even be higher.

Host: Yeah. In terms of entrepreneurs per capita in that country. But Silicon Valley is the center, no doubt.

Host: Yeah, and there's a there's an interesting comparison of countries which got independence at the same time as Israel. For example, I think it's South Korea, Israel and Hong Kong.

They all sort not Hong Kong, there's some other country, but they all sort of got independence at the same time. And even India got the independence at the same time.

But it's not only Israel was able to got you know, sort of develop a tech sector that is innovative as in comparison to Silicon Valley.

And one of the sort of projects that helped them to do that was Youma where, you know, government seated or allocated certain funds and made it so lucrative for venture funds to come into Israel and invest in companies in there.

Were you exposed or part of Youma?

Guest: Yes, I was very involved. I I even helped contribute to some of their ideas. I should take a very small role, but yeah most of credit goes to other people. But here's what I want to push back on.

The notion that government leads on these things. I don't really believe that. Here's what happens. I I was invited by the group you I'm sure know called Thai, the Indus entrepreneurs, right?

So they invited me to come to India on a delegation in 1999, um to go to talk to the leaders of India, the that we with uh Moman Singh, I think he just passed away, we met with him, we met with the telecommunications minister, the finance minister, the military folks, all kinds of leaders of the economy, the Amabani family, etc etc.

And the message I said to them, well, I'm very honored you want me to come on the delegation with all of you Indian American uh billionaires and and entrepreneurs. Why me? Why David Bloomberg?

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.

And and then what they said to me is these Indian folks, you probably know them, Sati, Suhas Patel, Canal Reki, among others.

They said, we were village boys in India, nothing. and we came to good university and then we went to America, we became super successful entrepreneurs.

It's because of the American system of the government getting out of the way, whereas in India and Israel and most of Africa and a lot of developing countries, there's so much bureaucracy, so many red tape and it allows the bureaucrats frankly to get rich through corruption. but it really impairs and it depresses the entrepreneurial energy.

The most important thing for governments to do is just get out of the way. Let the entrepreneurs do their thing. We have too much permitting, too much regulation, too much red tape, too much impact studies.

It's it's very hard to do things now in the United States and in most Western democracies. We get sclerotic. And so what India needed to do is get out of the way its own people, get off the back of its own entrepreneurs.

Israel had to do the same thing. And I must tell you, Israel had since 1948, the most advanced technological workforce in the world. In other words, the most people with postgraduate um you know per capita in the world.

But they were not that successful in tech until the government got out of the way, they had economic reforms, they allowed stock uh options and equity structures, reformed their previous socialist mindset.

I'll remind you that in 19, I believe 88, right right in the late 80s, Israeli economy crashed entirely. the the banks failed, the government nationalized all the major banks. It was a complete disaster.

They had just had a period of terrible inflation and it was only with the help of Chicago style economists and MIT economists who basically said that you have to allow this free market to work its magic.

Same thing is what we told India in the 90s and and you've seen the power and growth that India has enjoyed too. So it's not that government leads so much, it's just get out of the way.

Host: I think uh I mean, I I agree with you in that sense that the government didn't really like got in the way. In terms of like the way I understood the was, they sort of aligned the incentives and got out of the way.

Guest: Okay.

Host: I think they gave the incentives for sort of like a trigger point.

Guest: Let's go let's go specifically to Youma. and there was another program interestingly because you know most governments are driven by political goals. In in uh Youma, there were certain constituents that wanted private sector institutional funding. That became the Youma program.

Guest: There was another fund. I can't recall what it was called, but it was to get the retail investor interested. So Youma did a program where if I raise a fund of $100 million. Youma would put I forget, but something like another 100 million. And at the end of the fund's life, if the fund was a success, we the investors could buy out the government at the nominal value.

Guest: Great double profit.

The other program which did not work very well was I forget the name of it but it was um to reach out to retail investors and those people are not some interested in more gain to to accommodate for the risk that they perceive. But they want less loss.

So they wanted insurance. So this was an insurance policy attached to publicly traded venture capital funds. That did not work. And again, it's government trying to be too smart and trying to do too much.

The main thing government had to do was get out of the way.

I will applaud Youma because they insisted on one thing that was good to promote, which was cross collaboration between international experienced venture capitalist from the US and Europe and maybe Asia and Israeli local investors who who were doing this for the first time.

That was positive because there was a flow of information, there was a transfer of knowledge, a sort of osmosis of the brain, and I I do credit that as a positive thing.

Host: Yeah, wow.

Host: Other interesting fact about Israel ecosystem is Warren Buffett's first investment outside the US. He's an Israeli company. Yes that's first office outside the US was Israel.

Guest: Is. Yeah.

Host: Yeah. Uh I mean Israel sort of uh came a long way from 1990 and even now like for security companies, you know, Israel is the place and I always keep tabs on, you know, what Israel companies are building and and 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 ecosystems.

Guest: And again, that did not exist before. Israel did not have MBA programs. Israel did not have um really a culture of of appreciating entrepreneurs. In the old days under the socialist regimes in the 50s, 60s, early 70s and even 80s, the smart kids went into the government or the military.

Host: Yeah. You're serving your national duty and that was the highest value.

Guest: Then there were a few people who did become entrepreneurs, became successful, and they became paragons and and and role models for the next generation. And then I do I will credit this. I think the Talpiots um and the 8200 programs.

These are special units in the military that recruit for the brightest people. They give them great training. They put them in a small group, they give them a budget and a deadline and they say, here's your project.

You must design this new kind of technology and they're bonded through through, you know, fire essentially under under fire.

The way I say it is, they put, you know, John and Jill and Jack together and you know electronics, you know physics, you know radar, build this and your grandmother's life depends on it.

And so these people are forged together, they're tempered like fine steel, and when they come out of the military, they have been bonded and tested.

So that think about it, when you're finding a fellow to co-found your company with, if you've been through that experience in the military together, and you've had each other's back literally, it's a very powerful way of determining if this person's going to be a good co-founder.

Host: There was also a comparative study with as I said those three countries which got independence at the same time.

Host: Oh the third country was Singapore.

Host: The reason one of the reasons why they're not able to replicate what Israel did is the hierarchy structure in military that force us by us. every Singapore has very bureaucratic system, Singapore, South Korea and Israel has a pretty flat structure.

Guest: Yes.

Host: You and you are always counter arguing with your leadership. Right. you are allowed to question while Singapore is completely opposite of hierarchical respect. And you just follow the rules kind of system.

So if you are not questioning the rules, you can never innovate. And that sort of like the conclusion between these three ecosystems is that you can never sort of be such a rule following place and at the same time be an innovator.

Guest: Well, I'll I'll I'll quote one of my favorite authors that the the psychologist and political public intellectual Jordan Peterson.

He talks about the fact that hierarchies need to be based on competence and raci unless otherwise they will ultimately not be efficient and they will crumble.

So the Israeli military structure is very practical, it's very positively inclined to reward excellence and to reward bravery and to reward initiative. A lot of militaries are not structured that way.

And so I think that's benefited the Israeli um economy if you will or the society a great deal. One of the best things that they do is called a 360 degree review. Where after a mission, everybody gives a critique and it's no holds bar.

A private can tell a general, you could have done this better. And it's very clear and very focused. There's no blame. It's just here's what happened, here's how we make it better next time.

Host: Yeah, yeah. So uh I mean moving on.

Guest: Yes.

Host: Before starting your own farm, you also worked at Claridge, which is also one of the famous family offices. Talk to me a little bit about that experience how that shaped, you know, your investing later on.

Guest: Sure, I'm going to go backwards a little bit because my first mentor was Fred Adler.

And I met Fred Adler when I was at Tiro Price and he was the only big American investor who was very successful in America, who was also willing to invest in Israel. And I was interested in that combination.

I wanted to be American and Israeli and and invest in high tech. And he was the only name in town.

So first I want to give him great credit because although he was a very difficult man, he was brilliant and he he exposed me to venture capital at my beginning of my career.

Then I was fortunate to also work for Alan Patricof, another great venture capitalist who's still investing in his 90s. He was great.

I worked for him in Paris. and then I worked for Charles Bronfman at the Claridge, which is the family office of the Bronfmans in Montreal. And again, I was investing in the US, Canada and Israel.

It was a family office, so family offices have a different criteria than a traditional venture capital fund.

They had certain personal issues that they wanted to steer clear from, they wanted area to emphasize other areas there were certain cash flow goals and certain and their background was real estate.

So that was a little bit incompatible with my background in in in venture capital. So I ended up push and pull and try and explain and convince why we should structure deals in a certain way. For example, they were used to structuring deals with debt.

And I pretty clearly explained to them that that debt in a venture capital structure in the early stages is not really worth the paper it's written on and we needed to be equity owners and get rewarded um for that equity risk.

Host: So then you went on and started your own uh That's right.

Guest: But the best deal I did at the at the Bronfs, I'm kind of proud of it was a little um company in Israel was wanting to sell. I looked at it said's an acquisition. I wanted to buy it outright.

It was a pharmaceutical company. the Bronfs were not willing to do it on our own. They wanted us to merge it into another blue chip in Israel.

And so we bought a company called Abic, AC, and back to back flipped it right away into Teva pharmaceuticals and in in return for a large stake. Teva at the time was only worth about a billion dollars.

And it later rose to I think between 40 and 60 billion over the years. it's since fallen a bit. But in those early years it was a rocket ship.

Export heavy selling to 50 plus countries. that's I think is now the largest generics manufacturer in the world.

And it was a real testament to that Israeli innovation uh mindset of taking something and improving it and reducing its costs and then being able to export it at world class scale. um and and and so doing they made a a world leading company.

Then moving on to Bloomberg Capital, I started that in the early 90s and at first I didn't have a fund. so our team was very small and what we did is we called it a virtual venture catalyst and what we would do is work with investors, mostly family offices to find deals for them.

So in compensation we received a salary sort of a retainer, we received cash on the completion of a deal and then equity as a kicker to make sure we were investing in in the best quality deals.

We had nine investments and it was a next return on that portfolio of nine companies, four IPOs and four exits and one death. four exits of.

Then 2001, Bloomberg Capital raised its first venture capital fund and since then we've raised six funds and we have now about 65 companies in the portfolio. Our offices are Miami, New York, San Francisco and Tel. We're about 27 people on the team.

We have two strategies. One is early stage. We focus on preed, seed and A rounds.

We like to lead or co-lead those rounds. usually putting in between $1 and $5 million to start and then save about 50% for follow ons and those that merit additional funding.

And then we have a growth fund that starts late A early B uh and can write 10, 5 to 15 million checks.

Host: So, I mean, uh when you started your first fund to now, it's probably more than 20 years. you know, valuations have changed. Things have changed drastically. An AI company raises a seed round of $100 million. Mm. So things have drastically changed. Uh I guess my question to you was, what didn't change? uh in this business.

Guest: What did not change?

Host: Yeah.

Guest: Oh, I love that question. I've got a great answer. Technology changes, human nature doesn't.

Guest: So, 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. That's very unusual. So the pace of change in that respect is accelerating. Stand still.

I heard a a famous investor the other day at a conference we were speaking at both in Boca Rotan named Leon Cooperman and he said, every day in Africa, a gazelle wakes up and realizes it has to outrun the lion to survive.

And every day in Africa, the lion wakes up and realizes it has to defeat, run faster than the slowest gazelle to eat or it'll starve. So the lesson of life is keep running and 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, there are bureaucratic constraints that still people down.

Let's try and move better and better into the future toward a way that is productivity enhancing, life affirming, dignity respecting. And 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, um it will generally come around to to benefit you. If you screw people up, they're going to remember.

If they screw what you up, hopefully you will be smarter the next time and not want to work with them again. So, I think that the technology changes and you got to keep up with it, but human nature is quite stable. And I'll give you one more lesson.

We have been so blessed to work with serial entrepreneurs. We've backed them one time and they were successful, twice when they were another successful and sometimes we're on our third round with these entrepreneurs.

Host: Who are some of those entrepreneurs that you repeatedly work with?

Guest: Sure. One fellow is Oran Netzer. Oran Netzer was the founder of Double Verify.

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 and we distributed to our LPs. another um he's now he's now started a new company called Data Heroes.

We've invested in that company. We're friends to this day. me up.

He just sent me an offer to go to an event here in Miami that I didn't even know about. right up my alley I wanted to attend it. so if he's thinking about me all the time, I'm thinking about him. Another example is a man named Daner.

Daner has been the CEO of two of our companies, one called Case Stack in the logistics area. It was sold for $255 million and the acquirer did not want a small skunk works which Dan had set up to work on some SAS model software.

And so I said to Dan, let's just take it and build another company. And so we built another company and seven years later we sold that company for another 216 million called Supply Pike. and they're both based in Arkansas.

And now Dan is going to do a next company with us. So that'll be the third time. there there are more examples but you get the picture. And I'll give you one more. Benny Naman. I just was on the phone with him before our interview.

Benny Naman was the founder of a company called Crerax, Israeli/ Maltese Merchant acquiring bank. It's probably the most complicated company ever in our portfolio. works with Visa with MasterCard. They make sure that the merchant gets paid.

So it's a very complicated financial regulatory regime all the European governments, Asian governments, US, Canada and the card providers etc. It's complex. and then there's debt and equity and bonds and etc. Anyway, he did very well.

That company ultimately sold for $1.1 billion to shift four and now he started a new company called Jazby, which we've also invested in. It's doing extremely well.

And then now he and I are investing personally in companies together and so these ties that bind are absolutely wonderful because I know how he thinks. He knows how I think. We trust each other.

We've been through hell together and back and we've seen failures and successes and that's a wonderful part of life to have that long-term relationship where you build, you learn, you teach. it's a give and take.

Host: Yeah, I was just talking to another founder friend of mine and we both write Angel checks and I was telling him that, you know, I trust your judgment. so you know, if you're writing a check just let me know I'll write a check, right? like if you know a person enough and their judgment and what they value in terms of a deal especially at an early stage and if you know that it matches with your own way of thinking, it's easier to make these decisions faster.

I get that. So you mentioned preed and growth. In growth you have a lot of data to look at and make a decision. In preed there is no data.

Guest: Correct. It's all qualitative, it's more of an art than science.

Host: Yes. That's where I feel a lot of experience and you, your own unique individual ability to distill a good idea versus bad idea, a good technology versus bad, a good entrepreneur versus bad comes into picture.

So talk to me a little bit about how your decision making is in terms of preed where there's no data, all you have and especially for a new founder and not a repeat founder because a repeat founder then again you have a lot more data about the founder itself, right? and how he executed.

Guest: Absolutely. Yes. So my way of looking at that is that at the preed, the premium is on the team. The team is much more important at that preed because they're going to pivot, no matter what they say. Something is going to change.

I once spoke to a successful investor years ago who said, no good company pivots less than twice. I don't know if that's statistically true, but the point is that very few people can really predict the future.

It's opaque, it's unble, it's probably non linear. And so you've got to be able to react quickly and effectively. A great team is more likely to react quickly and more effectively than a not great team. So we look mostly for the teams.

I also do look for large market potential because it's better to hit a big target than trying to aim at a small target. We also uh favor industries where there's not a lot of competition.

My friend Peter Teal talks about this a lot in like in little monopoly and economically we don't like monopoly, but when you're running one, of course it's good to have pricing power, it's better to not have a lot of competition nipping at your heels.

So some of the best companies and I named a couple of them, Double Verify and uh let's see who's another one, Nutanix, another company with very strong Indian Nexus.

Those companies when they started, they really didn't have much competition at all or what they were doing was very distinct from what their competitors were how they other competitors did it.

So we had we could differentiate and say, they do it this way, we do it differently. here are our advantages. That's helpful. So team first, large market and minimal competitive competition are I'd say three of the key factors for us.

Host: I I think we so I I've been doing Angel investing since 2017 2018. I worked with a fund here in Seattle called Inside VC where we invested in SAS companies.

And my experience has taught me that there are only two criterias at least I come to think of it now in preed. One is I want an absolutely uh insane talented founder.

And my definition of talent is because I invest in tech companies, he must be writing code or the team must be writing code way better, way faster than any senior team inside Microsoft or Facebook.

So if you're writing above that, that is the definition of my talent. And you can have your own definition.

So I basically drill down to, it's similar like you when you said talent, but the talent that I really look for is their ability to show me the product, come up with the product as fast as they can and they have to write it and they have to iterate it.

And one founder might be really good technical founder, the other one might be, you know about thinking and strategy and operation side. but I want that one as my talent. So that's how I sort of narrowed it down to what I look for my founder.

Do you have your own definition of what is talent for you?

Guest: You 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, I no longer have any theories. So my metaphor there or analogy would be that in Nutanix, let's take that. Do you know the company Nutanix?

Host: Of course, I work in store. sotics is like I followed closely. it's the stock has been outperforming last couple of years and still.

Guest: Amazing. So this company, we were the first investor. We made hundreds of millions of dollars on the exit. We were very close to the founders. Now they came to us and they described exactly what you said.

Mohit Aaron was one was the most technical three. He was considered one of the 50 best programmers in the world. He came from Google. He I think helped develop some Google file system.

He left Google. the other two fellows were from Oracle and together they 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. and the cost curve will keep going down and we'll be able to help people afford more and because the cost curve of the rise in demand for digital storage is growing exponentially and nobody can spend that much, we've got to find a lower cost curve.

That was the thesis of the business. We had this wonderful CIO Council, an innovation council. We took the Nutanix trio to them in New York and we said, if they build this virtual storage idea, would anybody buy it? Would they be any interested?

And three hands went up. A big law firm, a big investment bank, and I've forgotten the third. Those became their initial customers. The first customers came from this council.

And I remember Diraj the CEO calling me right before the IPO and saying, David, I just want to thank you guys at Bloomberg Capital, you and Bruce and and the others because those first customers, which happened to be Wile Gotshal, a big law firm, has gone wall to wall Nutanix just before our IPO.

And it shows that a world class multinational firm is willing to take a bet on us as a rising technology provider. And so you want to say thank you.

So but the funny story about my mother and then the the three founders of Nutanix is, you're right, they were all really talented.

Mohit probably the most talented in terms of coding ability. but Diraj was an executive and and let's see the other fellow named Ajit. Ajit Jane. they were all brilliant. Each of them started unicorn companies. Ajit started thought spot.

Diraj and he start up new one and Mohit started uh cohesity. So they they split up but they were each successful in their own domain. So I think quality is recognizable. You tend to wanted it to be coding quality. There are other qualities.

I heard somebody recently say that every CEO needs to be the best salesperson for their company. And I think that's true in a sense. They may not be the best coder. You need a great coder. often that's the CTO or the co-founder.

Yeah. often the lead in the company is going to be the more business oriented

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