Quick notes on LPs #4- CRPTF and Insight Partners Opportunity Fund I Pitch Deck(part 1 of 3)
This article is going to be the first part of three posts looking at CRPTF’s investment into Insight Partners.
Part 1 — What Insight pitched (pitch deck)
Part 2 — How the recommendation to invest in Insight was determined (recommendation report)
Part 3 — Why CRPTF invested (investment memo + compliance report)
Background:
Today we are looking at the pitch deck Insight Partners used for the fundraising of their Opportunity Fund I when pitching to Connecticut Retirement Plans and Trust Funds (“CRPTF”) for $100M earlier this January. This series is going to be broken down into three parts: pitch deck, investment memo, and the recommendation report. Please note, the Opportunity Fund is focused on much more later stage deals than the average VC fund.
Discussion of slides:
Intro slides:
Starts with a “this is who we are, this is what we do”. Insight Partners discusses the total previous cash they had invested and the number of companies they have invested in. They also discuss their competitive advantage at a high level.
For their team, they focus on showing the number of years the different team members have spent with Insight. This helps potential LPs reduce the perceived risk of the fund potentially dissolving, as all the team members on this slide have been with the firm for 10+ years.
Details of the strategy
We start with a slide which clearly describes the fund’s thesis and how they plan to achieve it. The next few slides are going to touch on each of the three columns one by one.
Opportunity
This slide is closer to an investment banker slide than your typical VC slide. Left diagram shows an increase in deals and deal volumes for software, while the right diagram shows an increase in PE’s involvement in acquisitions. Right diagram is interesting as it leads to the question “which PEs are involved in these acquisitions and will Insight be able to compete with them?” This could also explain why Insight seeks to pursue a minority interest in target firms.
This slide goes over the key drivers: high growth, high margins and high retention (note the repetition of the word high for consistency and effect). One of their sources is Meritech Capital’s GP, Alex Clayton, link to his article is here. The EBITDA multiples are good, and builds credibility around Insight’s strategy. Something to note for future: the right diagram only looks at companies above $100M acquisition price.
This is a nice slide as it shows how Insight plans to develop their strategy. In the eyes of the market they will be a cheaper alternative to the traditional equity and debt route that management teams can consider.
Here is a slide where they can potentially get into trouble. Note, the slide with acquisition multiples only considered acquisitions above $100M. The target profile they use here does not tie in well with the story they used above. A stronger story would be made if they also touched on: # of IPOs in the space, whether they plan to invest in companies that have already passed a valuation fo $100M or whether they plan to come in earlier.
This slide discusses market dynamics from a more micro view, helping to understand why a founder/team who built a company and has chosen to keep it private would choose to accept Insight as an equity partner. This slide gives us a view into the types of teams they are targeting.
This slide discusses their competitive advantage. Deal flow is interesting, the 44 employees reach out to an average of ~568 companies over a year (or 2.61 companies per work day). This helps to set a potential standard for how many companies prospective analysts/associates within VC/PE firms should be reaching out to in terms of outbound pipeline. Further note, that Insight still has not discussed their fund performance up to this point.
One of the members Draper Esprit mentions they do not like the table format for competition slides, and would rather a 2x2. It seems to have worked effectively for Insight (but we will go into more detail into Insight’s competition next week).
DEI & ESG mandate
CRPTF has defined DEI and ESG mandates. Most funds with a heavy DEI/ESG focus tend to have these themes built into their slides. I suspect the previous slides were part of a standard pitch deck, while these next few slides had been added to align Insight with CRPTF’s DEI and ESG mandates.
Note how they break down DEI initiatives into three buckets: internal recruiting, portfolio and ecosystem. They also show where they are currently and where they plan to be. Observe how they do not actually put numbers to the success of their DEI programs: what percentage of their firm would be defined as “under-represented minorities”.
Here they discuss what they are doing to build their reputation and branding in the segment they target. This talks towards their involvement in the industry and also allows them a safe transition to discuss thought leadership they publish. Most firms that tend to showcase their diversity will generally use this slide to showcase portfolio companies they have previously invested into that are minority owned and put a picture of the founder here.
On the diversity side, we have the public statements they have made. Personally, it would be more valuable to have seen numbers associated with the success of their DEI programs than to see public statements. It could also be that CRPTF has a rigid DEI mandate, and this would be the best way for Insight to meet requirements.
ESG is an interesting slide. They show that they have a partner who specializes in ESG DD and discuss that ESG is part of their DD process. Again, they do not put in any information about “CO2 emissions saved” or anything like that. Reading this, you get the feeling that the ESG and DEI is new to Insight, and they are still trying to figure out how to integrate these mandates into their core services.
Conclusion
These slides managed to successfully secure $100M. Notice the structure of these slides from: intro slide=> team => exec summary of the opportunity fund => market overview => strategy to realize this opportunity=> Profiles of target acquisitions => Competition => DEI =>ESG.
In Part 2 we will be going over the recommendation report and exploring it in further depth to understand how the recommendation to invest $100M into Insight Partners was made.
Full deck can be found here: https://drive.google.com/file/d/1ls6MeM9qyItn6tFmgQEIyCfNbzb10DoF/view?usp=sharing
