Transcript: What an Investor Looks for in Early-Stage Product | Barrel Kfir (Dell Tech Capital)

Eyal David: [00:01] Hi friends, this is Eyal. You've reached Product Builder, where you can listen to the most interesting product conversations. My journey started in 2012, when I learned what product is at my own startup. Since then I've worked in the industry, and since 2017 my company has been advising a wide range of companies. My drive is to help all of us get better as product people. And before we start, if you enjoy listening to Product Builder, please rate us five stars on Spotify. It gives me great feedback that the podcast is giving you value, and it would make me very happy. So let's go, we're starting. Hi Barrel, what's up? How are you? Great. So nice that you came today. Great to be here, thanks for having me. My pleasure, we've been waiting for this. So with us is Barrel, who is actually a partner at Dell Tech Capital. Right. Congratulations. Barrel, give us a quick pitch about yourself. A quick pitch.

Who is Barrel: from computer science and MAFAT to venture capital

Barrel Kfir: [00:55] So like you said, today I'm a partner at Dell Tech Capital, which is basically Michael Dell's investment fund. We invest in startups from seed to B, we lead rounds, it's a global fund, with quite diverse technology areas: enterprise infrastructure, cyber, we do a lot of application worlds, mostly for the enterprise, but we do a bit of everything. Before I joined Dell about five months ago, I had, all in all, almost ten years in VC. I saw the full cycle: early stage, acceleration, growth, fund of funds, secondaries, Israel, Europe, the United States. So I really feel like I've seen almost everything. Before I got spoiled, as we like to say, I come from the technology side, a bachelor's in computer science, which I started at around 15, during high school. Then almost seven years in the defense establishment, at first in research and development roles, hands-on, mostly in cyber security areas. It's also a bit funny: you arrive in the army with a bachelor's degree, so they assume you're some kind of hacker, and you're like, okay, so what is information security? Yes, everything in my career kind of happens by chance. And then after the hands-on period, more product management, managing teams, a few years at the Ministry of Defense, at MAFAT, working a lot with the security units. And then you basically went out to civilian life? Right. R&D? First civilian job: venture capital. I was sure I'd be, yes, I was sure I'd be a product person at a cyber company, that's what I was looking for. Back then a fund called JVP was doing a lot of cyber, they took CyberArk public, a slightly different generation, again almost a decade back. A conversation that started with "which interesting Series A or seed cyber companies are looking for a product person" ended with "we have an associate role." I thought, what? Venture capital? What do I have to do with that? I said I'd do a short stint there, a year or two, and then go do something real. Fast forward, I'm ten years into being "temporarily" in venture capital. Look at that, and what a period you've seen in ten years? Crazy. Ups, downs, and now what's happening,

Eyal David: [03:12] Hopefully we'll come out of it. An opportunity. So maybe tell us a bit, so we understand, what do you actually do day to day at Dell?

An investor's day to day: before and after the investment

Barrel Kfir: [03:20] Nice. Good question. You know, I talk to a lot of people who are thinking about venture capital, about getting in here and there, and that's the question, how does your day to day look. Roughly, I'd say most of my day is made up of meeting founders and meeting investors. You know, I can split the work into the pre-investment phase and the post-investment phase, okay? So, in all the pre-investment stages, most of what you do is gossip with other investors about opportunities you've seen, meet lots of founders, and if it's interesting, move forward to a due diligence process, you know, examining more deeply, areas of product, areas of go-to-market, other areas, competition, market and so on, which you also do mostly through reference calls with experts in the field and other founders you've invested in before, and so on and so on. And a minute after that you of course also need to win the deal, but if that happened, then you have a new portfolio company, good luck to you. And then, if you're an investor and you managed to win the deal, that's when the work really starts, certainly if you're an early stage investor like us. In the early stages it's a lot of close work with the founders, helping them with everything, basically shortening processes for them. Hopefully you invested in excellent founders whose learning is very, very fast, and you even try to accelerate them with your experience and the number of companies you've seen and your network and so on.

Eyal David: [04:45] So today, if, you said half a year a second ago, then you're basically much more post-deal right now, I assume, something like 80-20, if not more.

What Dell Tech Capital looks for, and which founders

Barrel Kfir: [04:54] Yes, good question. I think again, at this stage of the career, you know, I joined as a partner, I inherited two board seats, so it already started with portfolio work. Since then I've managed to do a deal and a half, some public, some less so, so the portfolio work is already more intense too. But I think our passion as investors, certainly at these stages, where in the end I'm still, you know, building myself as an investor even though it's already been a decade, the hunger is to never stop meeting new companies, and your day is still full of a lot of deal flow. So focus us really, because you touched on it and also told us about all your previous experience, but now you're basically very focused on... what's actually the criterion you're focused on? Early stage companies? Cool, yes. So today we're basically looking for companies between seed and B, meaning either a first check in the company, or a Round A or Round B, mostly Round A and seed in Israel, in technology areas of cyber security, enterprise infrastructure, data, anything that basically has some technological depth, where, broadly, we probably know how to bring value, anything that sells to the enterprise. So founders in those areas are, broadly, most of my day to day. And what kind of founders are you looking for? Good question, these are questions I also wrestle with a lot in my conversations with investors. There's this kind of answer where you sometimes try to dial down your own bias, right? Like, you're looking for founders where in the first conversation you click, and often those are things related to what you yourself did, you know, founders with a technology background and a leaning toward product, who believe that significant product differentiation is critical, who want to build something with a barrier to entry, that not just anyone can build in a month of work with open source. Although in our world, you know, maybe we'll get to how much AI is shortening development timelines and how that changes all this, but bottom line, founders who have some technological depth and a passion for a specific area they know very, very, very well. Honestly I don't have much more than that, it's hard to categorize them. Say, past experience as a product manager, that's a plus, I assume, it lowers the risk. A very big plus. Personally I think, again, it varies a lot, right, but people who've done product roles before are probably, put second-timers aside for a second, because someone who comes with experience of already founding a company comes with very significant experience and is probably back at the learning point, has already learned a lot, fallen into a lot of pits and will probably fall into fewer the second time. But I'm saying put those second-timers aside, people with product experience are probably, and about product we can talk for a second about inbound and outbound, but... No, let's talk for a moment, like if someone comes to you, does it really matter?

Eyal David: [07:45] Or is it enough that a person did some product role or other, for so-and-so many years in this industry? Nice, so look, it's not that the line on the resume matters, right?

Barrel Kfir: [07:57] I think the conversation you have with someone who has already done a product role is with someone who has had to deal with: what am I selling, what are others selling, what does the market look like, where should I be, in which, you know, in which market has this competitor already taken over, how do I beat them, what's the killer feature I can deliver so I close this deal tomorrow. That dynamic, of a product person who really had some ownership over how to take this product forward, is in the end very similar to the thinking of a CEO at the start of the road, of a startup, of a founder. They deal with a lot of those questions. True, a founder also needs to set up a company, find an office, bring furniture, bring people and deal with finance maybe more than product, but the core, again, of the things we believe need to be the differentiation on day one is very similar to product work. Sometimes founders have it from experience, which is great, and sometimes it's brought in, because the founders have a very, very good background in the field or the market or go-to-market or the technology itself, which isn't necessarily product, and then the slot that gets filled is a very strong product person who knows how to say: guys, let me help you package this thing into a real product and launch it forward.

Eyal David: [09:11] Wonderful, and you can probably even see it when people approach you, right? The person has a product background, they know how to tell the story, how to package it, so it's probably really evident from the start. You also mentioned that you basically have experience in the US and in Europe too, and now you're more focused on Israel and Europe.

Barrel Kfir: [09:30] How does it really look, the companies you look at here in Israel versus companies in Europe? What are the differences in stages, how do they look? Look, in the end we're nine global partners today, a team of 12 people in investments, of which two sit in Israel, Yair Snir and me, two partners sitting here in Israel, and everyone else sits in the United States. So obviously in Europe it will probably be easier for us to do Round A and up, less seed; you want boots on the ground to collect the gossip we're able to collect here in Israel about founders at the very early stages. It's also important at A and up, right? But there, hopefully, you already have some local partner, and that's at the level of stage. Beyond that, I do think there's some difference in culture, right? Let's put all the craziness happening in Israel right now aside. In the end there's something in the ecosystem here that's very similar to the ecosystem in the United States, to Silicon Valley: go big, think big, look at the global market from day one. You also see all the global investors from the best funds in the world who have only been increasing their activity lately, and that actually affects the character of the founders, how much they want to raise at the start, how fast they run, how fast they burn the money, how much they charge at it with full force. That has advantages and disadvantages, right? We can talk about that. In Europe of course there are also founders like that, but roughly, I think you'll also find a lot of founders who are much more conservative, who focus on the German market on day one because it's big and interesting enough, a privilege we don't have here. And then sometimes you also have to work a bit to pull them out of the... I'll call it almost a bootstrap mindset, of: we're not tiptoeing here, we're going, we're climbing the stairs two steps at a time. So I think that's also, you know, the flip side of it is that sometimes the prices of those deals are saner than the madness that sometimes happens here, things like that.

Eyal David: [11:31] You reminded me of those guys from Germany, those brothers who cloned a lot, exactly, I read about it, totally, maybe we'll leave a link later. Okay, interesting. Tell me, what kinds of industries do you actually invest in in Israel versus Europe, is there a difference?

Barrel Kfir: [11:47] Plus. Say you talked about enterprise, so in Israel it's probably more abundant than... Right, no doubt. I also talked about cyber, obviously, yes, it's a very significant part of the ecosystem here, of my background, of ours as a fund, so we probably, cyber in Israel is the most trivial and easy, and also a lot of the activity we've done to date. I think we already have seven cyber exits in Israel, and we've invested in a lot of companies, including companies that were sold, several companies sold for over a billion dollars, companies valued at a billion dollars in the cyber portfolio. Cyber we know very, very well. Cyber is done in Europe too, occasionally, but you know, the situation in Israel today is that you always have to ask yourself why I need to travel to Europe to do a cyber deal when there's everything happening here. So there it's probably more classic enterprise software areas, and I'd say that sometimes in Europe you even see things that are more deep-tech, coming out of universities, not that there's a shortage of those in Israel, but more unique things, say quantum: there's a sizable scene there and we've seen quite a few companies. In the end we invested in an Israeli quantum company not long ago. QS Labs, right? Right, Quantum Source, basically, Quantum Source Labs. There too, you know, in the end we could talk for a minute about quantum; there were two statements recently, Google came out with a statement that sent all the stocks jumping and everyone thought that any minute now quantum is happening in a year or two. I don't know if you managed to see it, but earlier I saw Nvidia's CEO saying it will take 15 to 30 years, and suddenly all the stocks went back down. So I'm saying, put the debate about when quantum will happen aside for a second; in the case of Quantum Source Labs too, in the end it's about the team. You find a super strong team that combines technology people, professors, at the level of quantum understanding you want them to reach, and also serial entrepreneurs who sold companies, admittedly not in quantum but in the closest thing to it, the semiconductor world. So in the end, even in a field like that it was probably easier for us in Israel, but in Europe we made investments like Exotec, which is also deep tech, in the end it's automation for warehouse robotics, an amazing company. So yes, you probably find more unique things there. Europe is also not bad at consumer, that's less our area, but companies like Spotify, historically Europe knew how to produce some pretty good consumer companies, but also UiPath, which is classic enterprise software, that's an amazing example, or Celonis, one of the fastest-growing companies in Europe today, which can be an amazing example. So obviously in enterprise too there's what to look for there.

Eyal David: [14:26] Yes, or those guys, what are they called? Mistral, the French, right? Right, right. Okay, so since I already pulled you into talking about industries and so on, let's go to trends: when you look, or when you personally look, five years from today, what are you betting on? There's obviously the elephant in the room, but besides AI, and we can expand on that too. There's something called Artificial Intelligence, I heard about it recently,

Trends: defense tech, cyber and the hype around AI

Barrel Kfir: [14:50] I think it'll catch on. Yes, besides AI of course, which we'll say another word about, but I do think there are other areas that we, even some of us, are starting to hear a lot about. Defense tech is one of the first associations after the world reminded us that wars are not a thing of the past, whether in our little pond or globally, Europe and Ukraine and Russia and so on. I think it brings defense tech back to the table. It's a combination of relatively new defense tech companies, where in the United States it used to be giants like Lockheed Martin dominating the market, and suddenly you also see startups, from Palantir and the like, or even Anduril, a US company, that remind everyone you can build very, very, very big companies in this field. That was always true, but they remind us that it's happening. The second thing happening there is that there's actually greater openness on the part of defense organizations to buy technologies from outside, partly, I think, out of a kind of understanding that technology in startups moves faster than what usually happens elsewhere, so why should we keep being so closed, with three-year validation processes before we start experimenting with some product that didn't come from a place we've trusted for the last thirty years. I think that's another thing that happened, and it creates big interest in defense here in Israel too; by the way, you see quite a few startups raising in it lately, and there's no doubt it's an interesting field. I'll say, you know, on a more personal note, in the end there's no way around it: when people ask about the five hot areas going forward, people tend to talk about new areas, because we've all already heard about all the old ones. And that sometimes creates a situation where the talk around the topic is bigger than it really is. Totally, totally. That's a word that captures it pretty well. To tell you, even just as a curiosity, I mentioned cyber earlier; I think the relative share of investments and sales in cyber in 2024, relative to the whole industry here in Israel, only grew, right, like it's not going anywhere. But continuing to talk about it is probably boring; it's more interesting to talk about defense tech or AI. And defense tech, you know, is still at the beginning; admittedly a lot of money and interest suddenly poured in, but a lot of business isn't happening there yet. There's a belief it will happen. Will it become 40-50% of the market like cyber probably is today, doubtful. Can it grow to 10, 15, 20% of the market and still create amazing industries? Probably yes. And you also promised us a word about AI. Right. You talked about hype, so there's no shortage of hype around AI. It's always, you know, we as investors try to find the balance, because something being super interesting doesn't necessarily mean you should pour money into it at one valuation or another. It's always the balance of how much the fact that AI is interesting is already priced in, or reflected in the number of companies or the number of competitors. That's always the challenge. It's also a bit about finding the true AI companies. Right, right. So I'm saying, even if people claim there's hype in AI right now and that a lot of companies aren't worth their price, or a lot of companies will shut down, or that it won't happen as fast as people hope, by the way, I'm probably one of those who think that we as human society tend to imagine that processes happen either too fast or too slow, because we're very bad at predicting how long it will take those processes to actually affect our lives. So I'm saying, there will be people who disagree about how much we're in hype or a bubble, but even those people, I think, understand that even if we can't predict how long it will take or how huge it will be, it's undoubtedly changing almost every sector or parameter or company or field, and everyone needs to address it, and it's accelerating a lot of things. We have to keep obsessing over it a bit, also from the portfolio companies' side, even, you know, suddenly how it affects the competitors, how it affects this, and how fast, how much technology that was hard for us to build is still hard to produce tomorrow morning. These are super relevant questions, and I truly think AI here is an opportunity, and how it affects infrastructure and applications, it can affect the whole stack, and consumer, and ChatGPT; it's no accident it's the app that reached, I don't know, a billion users the fastest ever. In short, it's real even if it's hype, and even if we're probably in a bubble and probably, I don't know, investors are overpaying, the potential and the impact will still be significant.

Eyal David: [19:32] Cool, great overview. Anyway, if you're operating in the areas Barrel mentioned, he'll probably be happy to hear from you. Totally. So let me go back for a second to your product past, it's a podcast about product after all. How much do these product skills you acquired actually help you, if we split your work for a second like you said, up to the deal and after it?

How product skills help an investor

Barrel Kfir: [19:55] Let's put it this way: up to the deal it helps a lot in evaluating opportunities. By the way, again, I said I did both early stage and late stage. I think at the start of my career I believed that early stage is all about, of course, people, but also product and competitive and market, and in later stages it's already financials and performance: okay, give me the performance in the Excel, I'll run my formulas and tell you how good the company is. I think the good growth investors, or early growth, let's call it, right, not some pre-IPO or something, also need to have some thesis about the market and the product and the competition, about which winds are blowing and who the players are and how they behave, so that their bet is hopefully more informed. Maybe the word "bet" hurts it here, but yes. So I'm saying, I learned that at early growth stages and up this is also interesting, and super critical, because in the end the part of crunching down the numbers and benchmarking performance on sales efficiency, growth rate, gross margin and so on is probably a commodity. And this product part, the deep understanding of the product, of the competition, of the opinion on why the approach will catch on in your view; you meet, I don't know, five companies, each with a different approach, and each explains to you why the world is heading in that direction and why, I don't know, cloud will catch on or Kubernetes will grow, and you need to be convinced that this is true at the level of global trends, and then, okay, how your product rides it. That's the first step: which trends it rides, and how your product will win if that bet on the trend also hits. And I think that's a lot of product work and product thinking, and it helps a lot in these processes. In the post-investment world it's also very important and very dependent, but hopefully, again, it's part of the support you give the company, and I always say, in the end the founders or the company need to be the world champion of the product they're working on. So of course you can help with benchmarks, with things you've seen, with connections to the right people and so on, but if you know the company's field better than they do, then maybe you'll pat yourself on the back, on the ego, but you have a problem. Yes, yes, but then you probably caught it too late, and shouldn't have closed the deal before. Very true. But really, at that moment when you become an active player helping the company, it's a bit like what you described earlier, basically raising the risks and everyone thinking about them together. Right, absolutely, totally, absolutely. You're also exposed, you're exposed to lots of companies, you give them some exposure to trends happening that they're not exposed to, because you have a lot of other companies you meet, and you have a rich portfolio, and each of them, I don't know, has a thesis, and

Eyal David: [22:46] it gives them a kind of signaling about the theses and about their product positioning relative to the market. That benchmarking, right? So okay, we talked about your product skills. Now, you really see a lot of companies, you work with companies, you've worked with them throughout your career. What are the most important skills in a product manager today, in your opinion?

Key product manager skills: technology vs. go-to-market

Barrel Kfir: [23:02] Nice. So I'm saying, we mentioned at the start that there are all kinds of product types. I think there's some correlation between product and go-to-market, a certain correlation, where sometimes you see product people who are very strong at core features, feature comparison, know very well everything the other competitors offer, installed all their products, tried them themselves, know them in depth, know enough customers to say that the customer actually wants this feature and this is what hurts them, and so on and so on. And those are, kind of, world champions of, I'll call it, the technology side, pro-technology, pure-technology product. But product also has a side that's very strongly tied to go-to-market, which is sometimes things that are almost sales, but they need to have very strong communication together. Because if I don't only understand the product but also understand the forces at work in the market. I run into examples like this all the time, right, where you suddenly come and help even a founder, and this also connects a bit to what I said earlier, say, you know, but there's a very strong partnership between this player and that player, and they operate very well together, and it's true that one lacks X and the other lacks Y, but in almost every such customer they bring you in, just a minor example that helps you understand, beyond the feature comparison of each of them, how the go-to-market and market dynamics work, or that they target a very specific segment, or that they bet on companies with one infrastructure or another, and then maybe if I bet on other companies, again, assuming of course it's a big enough and interesting enough market and that what I bring there will be different enough. That combination of not pure tech product but a combination with product thinking in go-to-market too,

Eyal David: [24:54] I think that's maybe the strongest trait in a founder who draws the map for themselves and why they're going to win it. That's true for a founder and obviously also for product people, and I'll even say I really agree with you. That place of doing the competitor analysis, which today, by the way, is also shrinking a lot thanks to AI; let's say AI services and products, there won't really be some specialty left in that. So I really agree with you. The second part you mentioned is something that just takes time; it's a kind of muscle, of identifying the business insight and putting one and one together, and there too AI can probably help a lot.

Barrel Kfir: [25:36] So absolutely, two skills that are very important, probably, like, now it's easier to acquire them. I very much agree. I think I'd even say it feels to me like the first part you can almost, let's call it, learn a lot of remotely, right? Like, I'll sit and read and learn and install. But there's something in the go-to-market part that you can't learn by reading a lot or searching. It's also partly acquired through experience and mistakes and going out to the field and meeting the field and talking to customers, more than analyzing each of their products from home and installing it and so on and so on. There's also something in it that, let's call it, you know, has to happen in real life; you need to fail, you need to try, you need to understand, and it's hard to train the muscle exactly like that. It's really quite similar between founders and product people. So we touched on that, but maybe complete the picture for us in terms of challenges: what are Barrel's challenges today? What are Barrel's challenges? You can take it as Barrel within Dell. Look, my kid isn't... just kidding. Look, in the end I think as an early stage investor in the market we play in, the Israeli market, the challenges are always also to differentiate yourself against the number of players here, the number of investors. Let's say, the inherent challenge in the role goes back a bit to... predicting where the market is going and betting on which companies will succeed; it's an endless challenge that will probably forever be a dance between art and science. You can argue how much it is of each side, and how that relationship plays out in early stage versus late stage. But I'm saying, let's say that's the core challenge inherent to the role. I think lately there are growing challenges. We talked at the start of the conversation about the last ten years and how I saw all the cycles, right? I still joke with friends that I used to do seed deals ten years ago at a million dollars on a two pre. That's, you know, out of this world. And then there was a period here where, yes, you had a week to make a decision, and if you didn't decide within two days you'd probably already lost the deal, and the number of deals per year was 100, which creates other challenges. How do I even do due diligence? How do I get there so fast? How do I decide so fast? I think since then the market crashed and suddenly there weren't many opportunities, and now we're coming back a bit to a lot of opportunities, still probably not the madness of what was here in 2021, but let's say it's starting to approach very high competition, very short timeframes to make decisions. That brings us back to that kind of challenge, where very often the competition for the deal is huge, and you need to get there first, hear about it fast,

Eyal David: [28:29] be in front of the founder, decide fast how interesting it is, and then also convince them. So that's it, these are capabilities you already sharpened in 2020. So now, right. Exactly that part you talked about, product, that quick assessment, of basically understanding the market, understanding the product, how the founder sees the market and the product, so today it's probably much easier, but today it basically goes mostly to the same industries, that's also something you're saying, so really it's about being sharp on the specific industry. Absolutely,

Barrel Kfir: [28:55] absolutely, and the clearer those industries are to everyone, the more competitive they are too. And you know, I meet all kinds of investors with all kinds of styles; some will say, I'd rather go for the less obvious industries, and the deals there will be less competitive. What can I do, my background is cyber and I'm a big believer in it, and it produces a lot of the exits here, and I don't intend to move away from cyber just because it's probably one of the most competitive areas there is, or enterprise software, or AI today, or data,

Eyal David: [29:24] so for me it's calm. That's your 1.1, I think... Okay, so now we're actually going to talk about something pretty cliché, but we'll dig into it, okay? The importance of a product manager, a product person, in early stage companies; you obviously see a lot of those.

Why a product person is critical from the seed stage

Barrel Kfir: [29:46] How important is it? Let's start from the top and why. How important is it? Among the most important. I don't know, you know, if you force me to start ranking it, but in my opinion it's among the most important. I think, again, I also keep shifting my opinion as things progress and as you meet the market, and in the end every case is on its own merits, every team and how it needs to be complemented, right? But I think... we talked a bit about the product role and how close it is to the founder role. I think already from the seed stages, product work is critical, critical, critical, maybe the most critical thing a company has to deal with in the early stages from seed. True, I don't know, it depends of course on the sector and the direction, but you know, in three to six months you need to start developing something at all. It could be that, you know, it's clear to you how the first three to six months will look, so you feel there's less of a product challenge right now and more of a development challenge. Or you need to get this thing called a company on its feet at all, but in the end you very quickly reach classic product challenges that are better dealt with as early as possible. Now the question is whether the founders are equipped to deal with these challenges, on top of everything? Are they both equipped and do they have the capacity to give them the attention they need? I think, you know, in the end we talked a bit about the type of founders I like, the type of founders Israel has to offer; many of them have a technology background and a product background almost by definition, and still sometimes, you know, one of the first hires needs to be a product person, just so there's someone dealing with it full-time, because in the end a founder has a lot of work that isn't just product.

Eyal David: [31:34] Exactly, you as a founder, go ahead. We're also looking here, let's say, only at the companies that reached A, right? Maybe a second before that, you're really making decisions, forget fundraising for a moment, decisions that really work and can significantly ease your path, and beyond fundraising, they can also pave the company's path significantly forward. So I'm trying to think about it; it's also the fresh eyes of those who really, forget it for a second, the founder really needs to go deal with a million other things right now.

Barrel Kfir: [32:03] Is it also the fresh eyes of someone from outside who comes in and you trust them? A question. No doubt there's something in those fresh eyes, someone who comes with a product prism that's supposedly free of, I don't know, all the other challenges there are. But I don't know if we'd compare it to other roles; I strongly believe that the first sales must be founder-led sales. I strongly believe that founders, even if they bring in a product person, need to be involved in the product work from A to Z and be super integral to every decision that's made or every thought that goes through, and certainly those of them who are in front of the customers all day. Yes, it's not that I bring in... sometimes there are roles in a startup where you're trying to complement yourself, so you bring someone who understands it because you don't understand it, or because you understand it less, or because you haven't experienced it. And between us, sometimes you don't even have the skill to manage that person; it's more like, come teach me what needs to be done. And I think, let's say, if you do that in product, then we're already really in some kind of...

Eyal David: [33:02] I think founders need to have the product understanding so they can hold an intelligent discussion and be involved in the product process even if they brought in a person who does it. Exactly that challenge, I'm also striving toward that. Wonderful. And now let's maybe talk about which type of product person, since like you said there are several types. And I think in the preliminary conversation we talked about the question of whether you now bring someone who's an executor, because you're really flying now and you're going to make this whole thing happen and bring the sales, and you need someone to bring it down to the ground as precisely as possible, versus the person who has already done this industry for, I don't know, not 20 years because nobody does 20 years, but already 10 years they've been digging into it and understand it and they're a domain expert, and now they'll sit and challenge me, and basically increase my chances

Which PM to hire: senior, executor, or someone with something to prove

Barrel Kfir: [33:44] of bringing the product strategically from a more correct place. So which type of product manager fits all this, how do you actually see it? I think in working mainly with early stage startups, right, there's a certain stage where you already really start operating as a much more mature company, but in working with early stage startups I don't think I've ever seen a job description that didn't hope to hire someone who on one hand has 10 years of experience and sold four companies, and on the other hand is hands-on and still writes code. And is now rushing to work for me at a startup. Obviously that's the dream, the dream scenario, right, of bringing someone senior who for some reason is also hungry and, I call it, writes code, by analogy, but yes it can be in any other role in the company too, right: getting down to the most hands-on level there is on one hand, and "I managed the biggest people and have four exits under my belt." Yes, that's the dream candidate; in 98% of cases they either don't exist or don't come. And you start managing compromises, I'll call it. Yes, the worst thing to compromise on is ultimately the quality of the person, in my eyes. I mean, again, that's my opinion, right, and I think at least I encourage the founders I work with to bring people about whom there's no doubt how much they're rock stars, how high their skills are, how high their learning ability is, how successful they've been at everything they did in life before, and how everyone who worked with them before would tell them it's the best move of their life to bring them. That's what I give the most points to. Of course I'd be happy if from that moment we start collecting more check-the-boxes: they know the domain, they do product work, they managed people, they sold to the organizations I sell to, or know the industry. Like, also, what does "managed people" mean, let's think about that for a moment. At this stage it's people... you have, you have... Right, mostly not, but you're 100% right, even if you don't, let's say, "managed people" is because, you know, the company will always bring someone hoping I double the team in a year, and a startup as a startup, I also think in the end a lot of what's appealing in bringing senior people, right, is: come join now, because in, whatever, three years we'll already be a monster, and I'm bringing someone who knows how to manage people. By the way, that's also a question we can discuss, the pros and cons of bringing someone senior versus bringing an executor who in the end also needs to recruit a team, maybe not today. But in a year, or suddenly I need, you know, I raised more money, they need to recruit people: are they able to attract interesting people to work under them, do they know how to manage them? I don't intend to replace my product manager every year. So now the question is whether I bring someone and then bring someone above them, or bring someone and then bring someone below them. Again, these are questions we can discuss; probably you can manage all of them, but it's a very interesting discussion.

Eyal David: [36:37] I think I'm looking at startups I see now. Even after that, really, at that moment I'm not saying it like... you need some combination of the two hats, because you need the person who'll sit on the logs now and understand and dig and enjoy it.

Barrel Kfir: [36:57] And someone with that non-existent profile we described won't do those things. Absolutely, I like to say: bring someone who has something to prove, and then by definition you supposedly need to compromise maybe on the experience you'd have liked them to have. Bring someone for whom this is a step up from what they've done until today, and they're going to charge in and they're hungry and, certainly in startups, you cannot afford employees who don't come to devour. And they have some drive; you need to explain to yourself where it comes from and why, but they come to prove something.

Eyal David: [37:32] Excellent, that also connects strongly to the founder criterion you presented, so we already understood what the vibe will be in the company, in the companies.

Barrel Kfir: [37:40] Great. Tell me, you really see a lot of companies. In terms of product, do you see pitfalls that repeat themselves, maybe not, places where they're more lacking, and maybe that will lead us to think about what type of product manager we're looking for? I think I talked about it a bit. I think sometimes I see people who talk about product and disconnect from every go-to-market consideration in their product analysis, or explain why some giant player that would be very hard for me to compete with doesn't have a few specific features they claim are very critical, and then here we go, tomorrow morning I'm kicking out Microsoft. I'm exaggerating for a second, because that's really something I've never heard, that would really be exaggerated, but you know, sometimes you explain why your product uniqueness is better than some giant player. Okay, so you do it a bit better than them; where does that delta even meet a customer, and why would they be willing to replace them, and how, and why. They already have partnerships with 40% of the go-to-market partners; you have no chance of getting in, especially when it comes to enterprise. Totally, totally. So I think, again, we talked about it a bit; I think that's the pitfall I see: product thinking that's disconnected from go-to-market and market dynamics. Is that how you actually assess the product ability of that founder, do you do other things through which you can sense it? Nice. I mean, we said you need to make a fast decision. I don't like to say assessment, it's like, you know, honestly for me, I'll call it, I check the vibe. But you're 100% right that in the end, in most of the due diligence process you ask a lot of questions, and I'll say the answers matter less to me, how they answered or what they answered, and more what it says about them. Or even, I'll take you as an example that represents it well: in the end you can ask a founder about competition and discover they don't know 50% of the players they're playing against. Now that's not, let's say, I'm aware of the competition and understand pretty well how they're different and how they're not, but the very fact that they don't know can bother me. Or again, it's fine, no founder needs to know every company that's founded, certainly not ones that raised; it's not that I have some obsession with knowing all the competition. But you can just as well ask them two questions related to product and they suddenly go, "ah, okay," or give some hand-waving answer. That too, you know, if we can talk about it; I don't know how much it's related to product.

Eyal David: [40:09] I'm a very practical person, so let's talk about hand-waving and storytelling a bit. Nice, it's a scale. On one hand it's important.

Hand-waving, storytelling and selling a vision

Barrel Kfir: [40:18] We're Israelis. Right, we're also Israelis, and every salesperson will tell you that, like, a founder is a salesperson: they sell themselves, sell the company, sell products, sell a lot of things, when they recruit people, when they raise money, when they sell the product, when they, and so on and so on. Every salesperson needs to know how to, I don't know, what we called hand-waving. You're selling a vision, you need to sell well. It's a scale of how well you do it. I think, I'm still, you know, I'll wrestle with myself forever, but I think the most important skill is to identify who the person in front of you is and hand-wave to the right degree, so that they don't, so they don't feel you're insulting their intelligence and that it's disconnected from reality, on one hand. And on the other hand, you do need to sell some vision that's mostly based on facts but partly based on feelings or thoughts or opinions that are less solid. So I'm saying, I'm sharpening it: in the end it's a lot about reading the person in front of you. And then if you're sitting in front of me and I'm having a conversation with you about cyber, where it's clear that I, I don't know, understand a bit, you know, not a super expert but understand a bit about what I'm talking about, and you're hand-waving at a level where it's already clear to both of us that you're hand-waving, then you have a problem. I think it's like, you know, a bluff in poker works when nobody knows it's a bluff, then it's amazing; when they know it's a bluff it looks really bad. I think that's interesting, you're touching here on soft skills and also really on storytelling ability,

Eyal David: [42:04] how important it is that you must stick to a true story; you can expand it into a vision that has logic, and you can describe its story. Based on a true story, as they say. A true story, yes. We live in Israel, as mentioned, we've all been there; it would also be right if you really have a few slides in the deck that you don't present, and maybe they can shed light on the... get you out of that situation. Totally. Very interesting. I want to wrap up the episode for a second; I think it was a really interesting episode, and before we wrap it up, I just want to ask, how do people get in touch with you? What's the most effective way? LinkedIn is probably the most convenient platform, you can

Barrel Kfir: [42:43] also find me on the Dell Technologies Capital website and from there get to the link to LinkedIn and just reach out.

Eyal David: [42:50] Yes, I saw, they updated your photo there, it looks good. You saw? I invested. I invested, I paid attention. And tell me, really, it looks like a great website. I also wanted to know about this path of basically going from product to VC. It's not a path many have walked, at least,

How to move from product into venture capital

Barrel Kfir: [43:08] how do you do it? Good question, you know, that's nice, it really closes the loop. We talked a bit at the start about people who consult with me about the field, what my day to day looks like and so on. I always say you can get to VC in many, many ways. There are people who come from finance, people who come from consulting, I know people who come from law even, and of course there are founders who become investors; there are a lot of ways to get to VC. Product isn't among the most common, certainly not out of Israel; in Israel maybe a bit more. How do you do it? I don't have a definitive answer. It starts with passion for the field; you can stumble on it by chance like me, or you can know very clearly at some point that this is what you want. And once you have the passion for the field, you start enlisting the decisions you make in your career so they optimize for building you into the right investor long term. That's the path at a high level; you know, maybe it's too generic, but bottom line, start like a lot of founders do: start consulting with people who've been there, with people who understand, and start learning from them; start talking to VCs, meeting VCs, reading about VCs, reading about startups, living this world. You know, sometimes a lot of people talk to me like, "I'm in product and VC interests me." Like, okay, it interests you, great, then start. "VC interests me." Start learning, start reading, start talking to people, ask questions, you know, "VC interests me and I don't know what funds are and I don't know what investments are and I don't know what..." so. You know, it interests you, start taking an interest before it's relevant. Exactly like that, like anything else, like getting into product, right? Absolutely. You already got into product, you did it, or did,

Eyal David: [44:46] so it's the same idea. By the way, let's maybe also open a door for them, I don't know, I'm feeling my way here: there are a lot of VCs that actually have a product role, a lineup.

Barrel Kfir: [44:55] Right. Is that something you have? We don't. I think it's usually in much bigger VC platforms. Let's say in Israel I'm not even sure examples come to mind. I had a few in my head. Yes, specifically for product people. There was also something else here. Nice, nice. I think that, again, as part of the VC industry maturing and changing, a lot of investors understood that to stay relevant they need to bring some added value too, and you know, everyone takes it from different directions, and there are whole value creation groups for founders, and some understand that product is probably something important and bring people who help portfolio companies with product and are part of the fund also in the due diligence stages and so on. That makes total sense. With us specifically there isn't one. A bigger VC. Yes, usually it's probably a bigger VC that already has some platform, or that has product on its banner, and that's the thing it provides.

Eyal David: [45:48] Which is also a good way in, as mentioned; there aren't many, there aren't many opportunities like that in Israel. Right. It's a great way in. Or really to start a startup, which is hard, and get to know people through it. Okay, so let's really wrap up the episode. I'm curious, what do you wish for yourself in 10 years? Gishon. Gishon, yes, nice. You caught that there in some sentence that slipped out of me after three hours a year.

Barrel Kfir: [46:12] I want to be the best investor in Israel as a first step, and then globally. I wish for myself to keep doing the work I enjoy so much, and I'll say for a second, on a maybe slightly more, you know, note, in the industry I'm part of and started in not long ago: I keep telling myself, without naming names, that even if I become big and amazing and a great investor, I hope to stay humble and look at the founders and understand that they're the real engine of this industry, and we're just somehow trying to help this thing happen.

Eyal David: [46:45] Wow, wonderful. Barrel, so great that you came. It was a pleasure to be here. Great, come back in a year and tell us how this industry is doing. Totally, totally. Okay, bye for now. Bye bye bye. Hi friends, thanks for listening. If you found this podcast valuable, you can subscribe and follow us, of course, for more episodes on Spotify, Apple Podcasts or any other app. And of course, if you didn't find us on some app, I'd love for you to write to us. We'd be very happy with five stars on every platform, and for you to follow us so more listeners can discover us and find the podcast. You can also find the previous episodes on every app and on YouTube; we have links in the description. So until next time, let's go, be efficient, and bye bye.