Venture Capital Evolves Beyond Traditional Stage Boundaries

In Brief:

The venture capital industry is undergoing a fundamental transformation as firms abandon traditional stage-focused investing in favor of comprehensive software investment platforms that can deploy capital from Series A through full buyouts. Deven Parekh, Managing Director at Insight Partners, argues this "stage agnostic" approach provides superior market intelligence and better outcomes for both entrepreneurs and investors, while warning that institutional investors' growing demand for faster liquidity is forcing a major shift in how venture firms operate. Parekh oversees investments at the $90 billion venture capital and private equity firm that has delivered major exits including Wiz's $32 billion sale to Google, and has been investing exclusively in software since 1995. In this wide-ranging conversation with Barry Ritholtz, Parekh explains how AI is transforming every business model, why venture firms are creating new "venture buyout" strategies, and what investors can learn from navigating multiple boom and bust cycles.

Big Picture Drivers:

• Stage Evolution: Traditional venture capital stage boundaries are dissolving as successful firms build comprehensive investment platforms spanning Series A through full buyouts

• AI Ubiquity: Artificial intelligence is becoming an operating system for all software companies, fundamentally changing business models across every industry vertical

• Liquidity Pressure: Institutional investors are demanding faster returns and higher IRRs, forcing venture firms to actively manage portfolio exits rather than waiting for natural liquidity events

• Market Cycles: Boom and bust cycles remain inevitable, requiring patient capital and the ability to learn more from failures than successes

Key Insights:

• Cross-Stage Intelligence: Insight's ability to invest from Series A through buyouts gives them unique market intelligence from evaluating 20,000-30,000 companies annually, helping them spot trends and avoid common pitfalls across all investment stages.

• Liquidity Committee Impact: The firm's establishment of a quarterly liquidity committee 18 months ago to actively target exits has directly contributed to major liquidity events, demonstrating how process changes can drive better investor returns.

• Valuation-Growth Relationship: High absolute valuations become justified when conviction in growth rates is proportionally high, as companies that appear expensive today often look reasonable six months later based on revenue acceleration.

• Learning Asymmetry: Downturns and failed investments provide significantly more valuable learning experiences than successes, as rising markets make it impossible to distinguish skill from luck in positive outcomes.

• Geographic Advantage: Operating from New York rather than Silicon Valley provides strategic advantages by avoiding groupthink and bubble mentality that can lead to following rather than leading investment trends.

• Pattern Recognition Development: Trusting instinct becomes increasingly valuable with experience, as gut feelings represent rapid subconscious processing of accumulated pattern recognition from years of successful and failed investments.

Memorable Quotes:

• "This too shall pass" - Parekh, on the most important lesson from navigating multiple boom and bust cycles over his 25-year career

• "Every company to some degree is an AI company. It doesn't mean that they're .AI in their name, but every board meeting that we go to at Insight, we're talking about AI" - Parekh, describing the pervasive impact of artificial intelligence across all software investments

• "The worst times sometimes are the ones we're going to learn the most" - Parekh, reflecting on how the 2000 market crash provided more valuable education than any boom period

• "Generally, the price we paid, if the company hit the numbers that we thought they were going to hit, even if the price seemed high on current revenue, it feels reasonable" - Parekh, on retrospective valuation analysis and why growth rates matter more than absolute multiples

• "We think about it in terms of if you're paying a high multiple, then your conviction needs to be high on the growth rate" - Parekh, explaining Insight's valuation framework for high-growth software companies

The Wrap:

Parekh's perspective reveals how successful venture capital firms are evolving into comprehensive software investment platforms that can provide capital and expertise across a company's entire lifecycle. His emphasis on learning from failures, maintaining geographic diversity, and adapting to changing LP demands reflects the institutional maturation of venture capital as it moves beyond pure early-stage risk-taking toward more sophisticated capital allocation strategies.