Invest Like the Best• Sep 16, 2025• 1:43:22Interview

5 Ingredients for the Perfect Investment | Jeff Horing Interview

From Invest Like the Best

Jeff Horing•Co-Founder and Managing Director, Insight Partners

Executive Summary

Insight Partners employs a flexible, stage-agnostic strategy, allocating its ~$12B fund across early-stage, growth, and 'venture buyouts' to capitalize on market inefficiencies.
The firm holds a strong contrarian view that gross dollar retention is the single most critical metric for software company valuation, dismissing net retention as potentially misleading.
Insight has pioneered the 'venture buyout' of moderately growing software companies, a niche that is often overlooked by both traditional VCs and strategic acquirers.
The firm views AI not as a disruptor to incumbents, but as a massive Total Addressable Market (TAM) accelerator that will expand the user base for existing complex software.

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Concerns Raised

Over-competition and compressed return profiles in late-stage private growth rounds.
Slowing growth rates for large-cap software companies, making traditional LBOs more challenging.
Difficulty in finding high-growth companies with shareholders willing to exit at sub-billion-dollar valuations.

Opportunities Identified

Acquiring moderately-growing, profitable software companies ('tweeners') in niche markets via 'venture buyouts'.
Utilizing AI as a TAM accelerator to drive new growth within established software portfolio companies.
Executing follow-on investments ('double down checks') in the firm's highest-performing companies.
Consolidating fragmented software markets through inorganic M&A strategies for portfolio companies.

Key Themes

The Primacy of Gross Retention

The firm posits that gross dollar retention is the most fundamental driver of long-term value and exit valuations for software companies. They argue it is the truest measure of product-market fit and future cash flow potential, viewing the more popular net retention metric as less informative and capable of masking underlying customer churn.

This provides a disciplined, first-principles framework for evaluating software businesses, focusing on the stickiness of the core product rather than growth from up-sells, which can be a less durable advantage.

Flexible, Stage-Agnostic Investing

Insight Partners does not confine itself to a single investment stage, instead allocating capital dynamically across early-stage (10%), growth (30%), venture buyouts (30-40%), and LBOs (20%). This approach allows them to pivot towards the most attractive risk/reward opportunities as market conditions and capital flows change.

This adaptability is key to deploying large-scale funds effectively. It enables the firm to find value in less crowded segments, like 'tweener' companies, avoiding the hyper-competitive, high-valuation late-stage growth market when it becomes overheated.

The 'Venture Buyout' Niche

A significant portion of Insight's strategy focuses on 'venture buyouts'—taking control of established, moderately growing (e.g., 30-40%) software companies. These businesses are often too slow for traditional VCs but not large enough for strategic acquirers or classic LBOs, creating a market inefficiency Insight exploits.

This strategy targets a less competitive landscape, allowing for acquisitions at more reasonable valuations. It provides a high-hit-rate method for generating returns by professionalizing and scaling already-proven business models, often through M&A.

AI as a TAM Accelerator

The firm believes AI's primary impact will be to dramatically expand the Total Addressable Market (TAM) for existing software leaders, rather than displacing them. By making complex software like Adobe Photoshop more accessible to a wider audience, AI will act as a major growth catalyst for incumbents with deep customer integration.

This investment thesis suggests that the most significant financial returns from AI may accrue to established software giants that effectively integrate AI into their core products, shifting focus from pure-play AI startups to AI-enabled incumbents.

Systematic, Proactive Sourcing

Insight's investment strategy is powered by a large, dedicated sourcing team of 60-80 individuals. This team proactively seeks out companies in niche markets globally, such as 'salmon software in Norway,' rather than relying on inbound deal flow from the mainstream venture ecosystem.

This industrial-scale sourcing engine creates a proprietary deal flow that is essential for finding the unique companies that fit its venture buyout strategy and for consistently deploying billions of dollars in capital each year.

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Topics

Venture Capital Private Equity Software Investing Growth Equity Venture Buyouts Leveraged Buyouts (LBOs)SaaS Metrics Gross Retention Net Retention Fund Strategy Capital Allocation AI Investing Total Addressable Market (TAM)Deal Sourcing Insight Partners

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