MasterStroke with Monica Enand & Sejal Pietrzak

Building Legacy - K1 Investment Management, Hasan Askari

• Hasan Askari - K1 Investment Management • Season 1 • Episode 8

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“How does an investor evaluate a company?”

Managing Partner of K1 Investment Management, Hasan Askari joins us to answer that question.  In this episode of the MasterStroke podcast we share critical elements that investors like K1 look for in a company. 

“I love working with founders, they are looking to build a legacy.” 

We use Zapproved as our case study, to dispel the myth that funding rounds equates to success. Instead we focus on the true markers of success, revenue growth and quality service. 

This episode is a must-listen. Monica Enand and Sejal Pietrzak accompanied by trusted colleague and friend Hasan Askari share valuable insights on assembling diverse and inclusive teams, the role of AI in investing, and the ingredients for building a legacy; Passion, Persistence, Humility and Excellence.



Georgianna Moreland - Executive Producer | Managing Editor;
Matt Stoker - Editor


Hasan Askari:

You always have to be paranoid. I mean, I think any founder would appreciate or any CEO would appreciate. You always want to be like, oh God, like is somebody going to make me irrelevant? And you always want to look out for that. So I would always tell people like I wouldn't dismiss any of this stuff Anybody who's dismissing it. We've had enough stories through the history of time. When you dismiss a threat, you're in trouble. Welcome to the Masterstroke Podcast with Monica Enid and Sejal Petruzak Conversations with founders, ceos and visionary leaders in technology and beyond.

Sejal Pietrzak:

Are we saying K1 Capital or K1 Investment?

Hasan Askari:

Just K1.

Sejal Pietrzak:

Oh just.

Hasan Askari:

K1.

Sejal Pietrzak:

You can see our new website.

Hasan Askari:

It's K1.com. We've got the domain.

Sejal Pietrzak:

Oh, wow, okay, oh good, welcome back to part two of our conversation, with Hasan Asghari from K1.

Hasan Askari:

I'm so excited to be back here. Thank you for having me again. By the way, I do want to congratulate you guys on launching this podcast. I think it's incredible. I've become a huge podcast guy, so I'm very excited about listening to this going forward. But I do want to ask, like why did you call it masterstroke?

Monica Enand:

masterstroke. Well, you know, we workshopped the name for a long. No, um, actually, Sejal and I talked about it quite a bit and we uh explored with Georgiana Moreland, our executive producer, um, all kinds of ideas. But when we, when we thought about masterstroke, we thought about those moments in time where you make a decision or you do something differently that has a lasting impact on your life.

Sejal Pietrzak:

We literally Googled what does masterstroke mean. When Georgiana sent it to us I said it sounds more like we're older people swimming. But then we actually Googled it and that's what it was what Monica just said. Oh interesting.

Monica Enand:

And I think that Sejal and I have talked about why we want to do this and both of us felt very strongly that, you know, we've learned so many things along the way that we never knew when we were younger. Feel like if we can pass even some one-tenth of that on to people you know as they're going through their careers, and we can pay it forward, we would be so grateful for that.

Hasan Askari:

No, I think it's amazing. I think huge congrats to you guys to getting this off the ground, and I know for sure there's going to be a line of people that are excited to hear from you guys, because I think you have a wealth of knowledge to share. So congrats.

Monica Enand:

Tell us a little more generally, specifically about K1, like what are you looking for? You know a lot of our listeners in the podcast are executives or aspiring executives and they want to know, like how does an investor evaluate a company and how do you think about what the right companies to invest in?

Hasan Askari:

Yeah, look, I think obviously investors can encompass lots of different things and everybody has their unique angles of how they look at businesses. And I can give you the academic answer of well, your business has got to have I mean, you know, taking the businesses that you guys have both run as examples you know we're focused on investing in B2B software, no-transcript important data to keep in a, you know, well maintained, secure way over a long period of time that can be reproduced in a certain way. And then there's the you know how much is recurring revenue and what your retention is, and you don't want to have customers. There's that academic stuff how much is recurring revenue and what your retention is and you don't want to have customers. There's that academic stuff. I will tell you for me and this is my personal, this is Hassan's opinion, this is not, I think, reflective of probably a lot of different people, but what really gets me excited about a business. So we always like to say our brand promise is K1, is we build category leaders, like to say our brand promise is K1, is we build category leaders. We really want to find and build and accelerate somebody's journey from I don't think I've ever heard of that company to. You're the number one in your industry, right? And it's like, if I think of legal hold software, I think of Zaprude. That's the ultimate goal across a wide variety of different businesses that we've invested in, and for me, I think, executives, the money is important and you know, everybody wants to do well financially and take care of their families, but they're what they're really looking to do is build a legacy and, I think, something that, whether we control the business or they control the business, their dream is they want to build something that would last potentially generations, and I have found in my experience, for me, I love working with people and even if, by the way, they might be selling their business to us and they might not have anything to do with it, but their general desire is I want my business to be this amazing thing that lasts, as opposed to. I'm going to judge my success by the number of financing rounds and the press releases, right, and actually speaking of some of the things that we used to debate all the time, when you know, when we first invested in Ziproof, one of the first debates we had was having a press release. Remember, so, like I just think, like, especially the last 10 years.

Hasan Askari:

In our industry, the measure of success of a founder is oh well, how big was your funding round? Like 50 million? Oh well, mine was 75, so I'm better than you. It's like, well, none of you guys have any revenue. Like, how are you? Like, who cares for us?

Hasan Askari:

It's, it's always been you're building a business based on providing the best products to your customers, and your customers are raving fans and they love you for what you do. Therefore, you have the best business that provides the highest ROI to the end customer. And you know again, speaking of Zapproved as an example, I remember when we were looking at the company, it was like, wow, this company has got a few million dollars revenue. But look at that client base.

Hasan Askari:

Like if they've been able to convince Fortune 50 companies to move what is a super critical workflow and data into this little company, it must be amazing, and I think that, to me, has always been something that's important. And then the C-suite has to share the energy and the excitement that, like we're going to do something. You don't think so, but we're going to do something magical. That's what really like when I look at a company and I meet a founder and I'm like, oh wow, you've got that. Like I love that. Not everybody is like me, so like there might be investors that are like I don't care about this stuff and like what's your revenue in EBITDA? That works too, but I'm just talking about my personal views.

Monica Enand:

Yeah, sejal and I have had conversations of kind of the why we do what we do, how do we think about it, and I think both of us share this idea that the joy is in being part of something that's bigger than yourself. Right, working with people that you absolutely enjoy challenge you, cause you to grow as a human and then putting that together and doing something that becomes then bigger than yourself. Putting that together and doing something that becomes then bigger than yourself and I like when, when any young person asks me like how do I make this choice, or how do I decide on this job versus that job, or what should I be looking for in a career or a job, that is like my number one piece of advice. It's like go for something that you know you can feel a part of, something that's bigger than you yourself.

Sejal Pietrzak:

Well, you know, it's actually really interesting. You speak of that, monica, because when I visit K1 in the office at Manhattan Beach, you feel that you feel like everyone there at K1 is excited to be there every minute. There's an incredible energy in the office. There's only one office for the firm and everybody comes into the office five days a week, even after the pandemic, and it has this energy and this excitement because they know that they're part of something bigger than just themselves.

Hasan Askari:

Absolutely. When we, when we first started, I remember I promised myself that we would build a place not only for me, that like I'd wake up in the morning and be excited to do something. Right, and I have. I mean we all have so many people that we've, you know, been friends with or relatives or whatever, and they're like, oh my God, I can't wait till I retire, I can't, like, I hate my job, and I was like we cannot design a culture where people feel that way.

Hasan Askari:

And again, I consider ourselves to be ridiculously fortunate that we've been able to. You know, we've been around just over a decade and I mean I can speak for myself. I still, like, there are times I walk into this place and I'm like, sweet, like, like, so you know it's, it's and. But but to be honest, I think that's also when you talk about what we're looking for inside of companies, right, I think it's when you look at a C-suite, and if the interaction between that C-suite and how they all work together and are they able to handle debate and conflict, like those are the things that oftentimes people look at of what is the culture of this organization, because I think that's a reflection of you know, how long this business can last.

Sejal Pietrzak:

So speaking of which, if somebody wanted to, you know, let's suppose there's college students listening and they're interested in working at a place like K1, what does it take? What do you look for? Is your hiring people to be a part of this amazing culture?

Hasan Askari:

So this is also again, I keep saying a few things. I apologize that I've said K1 is a little different when it comes to hiring. So this what I again, I keep saying a few things I apologize that I've said it K1 is a little different when it comes to hiring. So what I tell you for K1 probably is not what you should do for other firms. So our measure of success as a firm in terms of our hiring goal is how many of our employees are the first in their family to go to college. That is a metric that we monitor, we measure it and our keep have this goal of continuing to grow it. We don't hire from traditional kind of Ivy League institutions. We don't hire laterally from other, you know finance firms Both things. By the way, if you want to get a job at a traditional private equity firm, I would recommend that you go to an Ivy League school and you go, you know work at a bulge bracket investment bank. That's a good way to get into one of those places.

Hasan Askari:

For us it's always been and we've been very conscious of this when we started. There are four things, four values that we have. You know passion, persistence, humility, excellence and the entire interview is designed around. Do you fit those values? Because we it's the the saying of you know you hire for values and you train the domain and I'm like a good example of. I'm not that smart, but I felt very passionate about making a difference, so we didn't feel like we needed to have this, like, oh my god, you went to a school, so that proves that you're smart enough to work here, cause I'm only going to hire, you know, the best and the brightest.

Hasan Askari:

The challenge is is that the best and the brightest don't always end up in the best schools. And you know, I have my. My oldest son is, you know, getting ready for his SATs and I'm like that's totally a rigged score, like it's totally rigged. So, um, you know, a lot of people don't get to go to the traditional best schools for family health, you know, whatever it might be, and oftentimes you know again, I'm an example of this I thought I was going to go to an ivy league school and I didn't get in and I had a chip on my shoulder.

Hasan Askari:

I I was like I'm just as good as those people and now I have a point to prove and I would bet 10 times out of 10 on somebody that has a point to prove. So I think for us it's what we're always looking for. If I was talking to a college student, it's you know. Make sure a this is something that you're truly interested in and you can show that to somebody when you go to meet them, that this is not just another job. You're applying to the classic advice of do your homework. Look at our website, read some press releases, have some knowledge, but then differentiate yourself especially at a place like K1, about how you're going to be additive to the culture. Not that you can run a spreadsheet better than everybody else.

Hasan Askari:

Because I'll teach you the spreadsheet. And no matter how good you run a spreadsheet, chances are it's not good enough. So you're going to have to go through training anyways. But like, how are you going to make our culture better Through the lens that we look at it in our way, which is through those four values? That's what we look for and you know, obviously you had to have shown. You know the interview at K1 is very much like very pointed of proof to us you have passion, proof to us that you're persistent, proof to us that you think about something other than yourself and prove to us that you always want to get better. And telling that through stories. Uh, I think that's critical for us.

Monica Enand:

Yeah, and I think I think you're critical for us and not the sort of traditional screens on that, and a lot of that is talked about in the context of DE&I these days. Right, you're talking about the I part of the DE&I. In my opinion, you're talking about building an inclusive culture where everyone feels like they can bring themselves to the party and they can add something, right, and so I think we both talked about wanting to understand how you think about DE&I, but I want to you know, our executive producer pulled up some stats and, according to the Wall Street Journal and I think this is still not far from true, if not exactly- true.

Monica Enand:

Yeah, fewer than 2% of enterprise software startups have a female founder. K1 is a minority and employee-owned firm and made its first investment in a woman-led business yours truly in its first fund over a decade ago.

Hasan Askari:

Just this week we announced, so now our two largest businesses are both run by women.

Monica Enand:

Yep, I saw that, that was exciting.

Hasan Askari:

And look, I think, monica, I'll tell you honestly like there is a lot of work still to do, like I feel I feel like you know, it's one of those things you want to, you want to appreciate and, um, celebrate the small wins on the way, and I feel very good about being able to you know the stats that you mentioned and saying what I just said but at the same time, it's a massive problem, and you and I have talked about this in the past.

Hasan Askari:

My little sister, who's probably the most important person in the world to me, has told me on multi, she's a biomechanical engineer by training, she's a software developer that's worked at large companies and small companies and she's expressed many times and I think it's really what made it real for me is hearing the stories of the challenges that she has on a not unlike oh my God, it happens once a year.

Hasan Askari:

It's like literally a daily issue for her when she works, and you know it's. It's remarkable because we all you know I'm a Pakistani Muslim guy from you know another for a lot of people in this in California, from a different universe. I've experienced, you know, the effects of bias in many different ways, but it's not, it's different. When it comes to when you're inside of a company and you're treated different, where people are taking credit for what you're doing, you know you're kind of ignored and put on the side. I appreciate kind of the comment of I think we're going in the right direction, but there's like we're like scratching the surface of what actually needs to be done.

Monica Enand:

Oh, I agree. I mean, I think the medical industry is just now starting to document the effects of just daily racism that people experience. You know that that black people in America face, and so I think there's you know you're you're kind of alluding to that. It's sort of the wear and tear of the daily bias that people are facing.

Hasan Askari:

Yeah, and I think you know, for us, part of the hiring that we do inside of K1 is to try and drive. You know, if you care about these things and you try and do things different to everybody else, then hopefully you will see different results. And our firm today is almost half women and you know, hopefully it will continue to grow. And there are certain pockets of areas that we need to focus on where we're still. There are certain pockets of areas that we need to focus on where we're still, I would argue, deficient. But what if you, if you look at trying to hire from a different universe of people and you truly focus and again, we're not perfect but on hiring people for the merit and really for the values, then you're going to see some really interesting people come through the door.

Hasan Askari:

And I think what's critical is leadership has to want to and believe in the benefits of having a diverse workforce where everybody's got an opinion and they're different. Right, if you're the type of leader that likes everybody to nod and agree with you, then, like you, can do all the DEI training in the world. It's a waste of time because I don't fundamentally think it's going to make a difference. So you need leadership to say that, like I want to have people around me that bring something unique to the table, and you encourage them to your inclusion point. How do you encourage them? Because, again, society is built not to encourage different opinions, minority voting. Yeah, I think you've got to encourage them to speak up. And how do you do that? And, again, it's not an overnight thing, but I think there's a lot of work to be done.

Monica Enand:

But all with the mission of building the best performing team, hiring the best and building the best performing team. I mean, there's never been a question about that in your mind, is that?

Hasan Askari:

correct, I agree, but it's again like leadership has to believe that that's the case.

Hasan Askari:

Right, and I think that's the challenge with this topic over the last couple of years is I just see too many times it's like a check the box and, okay, In theory I would argue it's better to have the check the box than not to have the check the box, but at the same time, like we've experienced the benefit of what you like the best teams, it just, I mean there's, there's all sorts of research on this.

Hasan Askari:

It's not like a secret, it's like one of the first things they teach you in any kind of organizational behavior class. I mean, it's like you know, as you know, we do a lot of personality testing, getting lots of different personalities on the same team or getting different skill sets. It's why we're set up. The way that we're set up is each of us have our strengths and weaknesses. The best thing to do for me is to pair me up with somebody who's really good at something I'm bad at, and you know. You extend that to life experiences and upbringing and cultures. And going back to the Bollywood story, right, there aren't very many people in the world that you could have said that to right. So there's that same kind of thing of like the more perspectives you have at the table, the better.

Monica Enand:

I want to ask you about the future and I'm going to put you on the spot to kind of make some predictions. Can you tell us? I think we're at an. You know, I think a lot of people would say we're at an early, interesting turning point for tech, for tech investing free money. Money is not readily available or cheap. Interest rates have risen. Do you think this is a short-term trend? Do you think about how, do you think about what does it look like for the next decade in terms of tech investing? Does it ever go back to the good old days and this is just an anomaly for a few years, or are we in a different, new normal that we need to expect?

Hasan Askari:

So I think, look, I think, as we all know, like markets go in cycles, right, it's like you look at 1999 and you know 2000 and the dot-com boom and people are like oh, my God, is you know the?

Hasan Askari:

internet ever going to be as exciting as it was in 2000,. Right, and then you go through you know 2006 and seven, and it's like, oh my God, is you know real estate ever going to be this expensive again? And you know. So you go through these ups and downs so I don't know. I personally don't think that we're going to get to the same level of maybe exuberance is the word to use for kind of the 2020-21 type of valuation environment that we went through in the near term. But you know, if you look at even where valuations are today compared to what they would have been 15 years ago, like people 15 years ago would not be talking about the same numbers that people are talking about today. So you know, go back in time and today looks crazy. So I think that's just the natural ebbs and flows of market environments. I do think that, look, and we're taking a general bet that interest rates are going to be higher for longer. It's probably a little bit of a defensive ploy, but we're making a bet that interest rates are going to stay higher for longer, even though most of the market's telling you that interest rates are going to come down. And maybe it's a little bit defensive, but we think that it allows us to be safer in terms of how we manage our businesses and I don't think the valuations are going to come back to what they were in 2020 or 2021 in the near future.

Hasan Askari:

I also think, obviously, there's a lot of conversations about the impact of artificial intelligence and what that does to businesses. I think that's going to change the view of the types of applications that people build, because I think, if you can now design something by a few prompts I look at a lot of workflow applications. I think a lot of like you know five years ago oh my god, single pane of glass this is a good way to you know. I think those types of things that you can replicate. I think there'll be a tremendous amount of interest and emphasis on businesses that hold mission critical data, because without that data, the AI is useless and oftentimes in you know again, even with your business, like that's not data that people are going to just happily hand over to the public domain, so there's a wall around it, so it gives you that defensive mechanism. So I think there's going to be a lot of businesses that are going to look at how they can integrate that type of, you know, machine learning or artificial intelligence into their own products. I think there's going to be a tremendous amount of investment into AI and ML, which most of it's going to turn out to be I think, hassan's opinion nothing, and then there are going to be certain things that are going to take over. I think the challenge that a lot of businesses are going to have is you've got folks like Microsoft and Google with unlimited money and unlimited resources going after these problems.

Hasan Askari:

I just used Copilot in Office for the first time. It's wild what that stuff can do. I just used Copilot on an office for the first time. It's wild what that stuff can do. I mean it's wild.

Hasan Askari:

So I think we're going to go through this really interesting time where people are going to be trying to attack a different set of problems in a different way than what they might have done the last 10 years, mainly because of the risk of well, I can just replicate what you're doing with the prompt. But I think the core true kind of mission critical enterprise software that's sold into large enterprise where you're really solving real problems and oftentimes you know you might be saying, hey, this software is taking you from a manual process to an automated process. That kind of stuff I think will continue to show real ROI and I think people will continue to invest behind that. But I think at the earlier stage you're going to see a lot of changes, I think, in terms of what's interesting versus not interesting, because of not necessarily only the impact of interest rates, but just what's happening with the world with artificial intelligence.

Monica Enand:

I guess, in that context, what advice would you give to executives, or do you give to your executive teams who are dealing with this changing environment and disruption from AI?

Hasan Askari:

So one thing, just to put context most of our businesses have been built in the last 10 to 15 years, so these aren't traditional legacy systems where it's really hard to integrate newer applications. And you know, a lot of them had some level of automation that whether you call it AI or not, because that's the other part of it's like AI, can you know? There's real AI and then there's like what most people think is AI. So a lot of them already had some level of automation that could be marketed as AI in their products. But we've had some businesses acquire some products that are bringing kind of interesting ways that are vertically focused. So they have very kind of it's a nice moat where, hey, this is a specific problem that solves sorry, specific solution that solves a specific problem in a specific industry. So that gives you a wall to defend against.

Hasan Askari:

So I think either building, but mostly buying, opportunities to integrate AI into their products because of what I said earlier, I think now and over the next couple of years there's going to be a lot of businesses that aren't able to hit scale because maybe they're dealing with regulated data, that they can't get large customers. But they've got really good tech. They might have been overfunded. They weren't able to commercialize it. We can buy those companies and provide a home for those products and we can just sell them as add ons to our existing products. So it's, the commercialization is a lot easier. So I think we're saying, look, you always have to be paranoid. I mean, I think any founder would appreciate or any CEO would appreciate. You always want to be like, oh God, like is somebody going to make me irrelevant?

Sejal Pietrzak:

Yeah, and you always want to look out for that.

Hasan Askari:

So I would always tell people like I wouldn't dismiss any of this stuff, anybody who's dismissing it. We've had enough stories through the history of time. When you dismiss a threat, you're in trouble. So I think we should always be on top of. Okay, well, what are people doing around us? Okay, well, what are people doing around us. But then also, how can we play offense in terms of staying ahead of the market with whatever unique solutions we bring to the table and supercharge them, maybe with AI, but with the commercial mindset like it has to make money?

Monica Enand:

Well, that is a great thought to end on, and thank you so much, hassan, for being with us today, and thank you, sejal, for co-hosting this with me. And thank you so much, hasan, for being with us today, and thank you, sejal, for co-hosting this with me, and thank you so much to our executive producer, georgiana Moreland.

Hasan Askari:

Thank you guys for having me. This was super fun and yeah, no, thank you so much. It was really incredible.