Your Daily Eko 5.1.25

🧠 Insights You Won’t Forget

Today's insights are inspired by a recent episode of Joys of Compounding w/ Rich Wells.

1. “Boil the Ocean” to Source Alpha

   Insight Partners’ unique strength lies in its outbound-intensive sourcing model. Starting with just a few callers in 2004 and scaling to 75+ today. Their thesis is to proactively reach out to software companies long before they hit mainstream investor radars, securing edge through early insights and relationships.

2. Software > Deal Type: A Sector-First Investment Model

   Rather than being constrained by deal structures (venture, LBO, minority growth), Insight aligns itself around a single vertical, software, and adapts deal type to market conditions. This inversion of the traditional investment lens is a powerful differentiator.

3. “Growth Equity” Can Look Like a Venture Buyout

   Insight often turns minority growth deals into majority positions by aligning incentives with bootstrapped or founder-led companies. This hybrid “venture buyout” model allows them to pair high-growth potential with deeper operational involvement.

4. The Real Magic of Shopify: Reducing Friction, Not Just Expanding Features

   Shopify succeeded where others failed by obsessively removing friction for customers, not just stacking features. This reframing of product strategy, from cross-sell to enablement, led to exponential growth and enabled creative monetization like payments.

5. From Analyst to Architect: How Rich Built His Investing Philosophy

   Rich Wells’s progression from consultant to investor centered on becoming operationally literate and learning to lead investments through authentic connection and relentless experimentation, especially in hard-to-price software environments.

6. Invest in Your Learning Curve Like It’s a Deal

   Rich advocated “plunging in” and spending absurd amounts of time absorbing everything, even if 98% goes over your head. His early success was built on relentless study, borrowing credibility, and refining communication with precision.

7. Tragedy Transforms Perspective: Identity Beyond Work

   The loss of Rich’s wife, Rachel, redefined his priorities. He emphasized letting go of over-identification with career, seeing life as a journey, and valuing adaptability, family, and daily presence, what he called “stacking good days.”

8. Software’s Resilience: Post-Bubble Strength and Strategic Liquidity

   Even after the valuation compression post-2021, Insight had one of its best years for liquidity, validating that high-quality software assets (Jama, AMCS, Tricentis) remain sought after by strategics and PE, underscoring software’s enduring utility.

9. Vertical SaaS + Payments = Durable Market Expansion

   Companies like Shopify, Toast, and Storable transcended TAM ceilings by embedding payments and auxiliary services. The key insight: succeed alongside your customer, share in their upside, and unlock new revenue in finite verticals.

10. AI’s Next Chapter Will Be Owned by System-of-Record Players

    Rich predicts that companies already embedded as core software platforms will be the ones to deliver on AI’s promise. Customers are turning to their current vendors with a clear ask: “Give us the value prop of AI.” Those who can embed it natively will win.

Recall from last week

1. Teach, don’t sell: Marketing as education

   Patagonia doesn’t pitch products — they tell stories, teach values, and spark activism. Their catalog is an educational tool, not a sales brochure. This approach, termed “nonfiction marketing,” builds trust and connection that no ad campaign can replicate.

2. Build for 100 years, not the next quarter

   Chouinard’s long-termism isn’t just talk. From his use of the Iroquois’ 7-generation framework to his rejection of public markets, Patagonia is run as if it must last a century — and its decisions reflect that time horizon.

💡 Eko Worth Remembering

⚡ Active Recall – Test Yourself 

🛤️ Off the Record

Every investor eventually has to answer the question: What do I believe makes a great investment? But early in your career, that answer often isn’t your own. You absorb the worldview of those around you—bosses, mentors, institutions. Their heuristics and mental models become your defaults unless you actively interrogate them. It’s critical to remember that those views, while valuable, are not gospel. There’s rarely only one right path.

Rich Wells’ journey at Insight is a powerful example. He began with a value-oriented mindset inherited from early mentors, grounded in conservative cash flow multiples. Over time, he evolved into someone comfortable paying up—if the growth trajectory justified it. Contrast that with an investor like Mark Leonard at Constellation, who stayed dogmatically focused on small vertical market software roll-ups with strict discipline around price. Two different philosophies, both generating extraordinary outcomes. The takeaway? Don’t just borrow convictions. Test them. Shape your own.

Eko’s Top Pods

Answer: Sector consistency + structural flexibility gave them the agility and insight to win competitive deals and build long-term relationships, becoming a trusted name in growth software investing.

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