# PE10X - Lessons from $4.7B in Software Growth Equity with Maitlan Cramer, MD Bow River Capital

An episode of [VC10X - Investing, Venture Capital, Asset Management, Family Office, Wealth Management](https://invisiblenetwork.ai/podcast/1632806986), 25 Nov 2025, 47 min.

Audio: https://anchor.fm/s/a453ddd4/podcast/play/111642220/https%3A%2F%2Fd3ctxlq1ktw2nl.cloudfront.net%2Fstaging%2F2025-10-24%2F413079609-44100-2-db9abb7f26673.mp3

What does it really take to scale a B2B software company from early traction to a category leader? In this episode, Maitlan Cramer, Managing Director at Bow River Capital, breaks down the "Capital Plus" playbook used to manage roughly $4.7 billion in assets across the firm. Maitlan moves beyond the typical VC advice, explaining why growth equity is about "rolling up your sleeves" to fix broken processes rather than just writing checks. He shares why he will always choose a great market over a great product, how to distinguish between vanity growth and sustainable revenue, and why founders need to stop fearing the "growth equity" label. ⭐ Sponsored by Podcast10x - Podcasting agency for VCs - https://podcast10x.com WHAT YOU'LL LEARN: 📒The Growth Equity Playbook: How investing at the growth stage differs from early-stage VC. 📉 Market over Product: Why you can fix a bad company, but you can’t fix a bad industry. 🚩 Red Flags: How to spot "unhealthy growth" and vanity metrics before they kill your business. 🤝 Sales & Talent: Why Maitlan hires for "grit" over resumes, and how to rebuild a C-Suite. 🤖 The AI Wave: How artificial intelligence is reshaping retention, moats, and software pricing. TIMESTAMPS (00:00) - Let's start (00:41) - Introduction to Maitlan Cramer and Bow River Capital (02:36) - Maitlan's journey from Grant Ventures to managing $4.7B fund (04:18) - Stage of investment and growth equity vs buyout approach (05:11) - Majority ownership and buyout strategy explained (06:48) - Misconceptions founders have about growth equity capital (08:07) - Board involvement across different software verticals (08:24) - Case study: Altvia and building go-to-market motion (12:45) - Case study: HR Soft and restructuring the C-suite (15:43) - Impact of AI on competitive advantages and moats in software (16:33) - Assessing competitive advantage through customer calls (20:15) - AI strategy and data flywheel effects (23:29) - Great market vs great product investment philosophy (24:45) - Key operational metrics beyond revenue growth (27:38) - Bootstrap vs venture-backed investment opportunities (30:41) - Trends in customer acquisition costs and retention metrics (33:32) - Identifying and hiring great sellers (38:19) - Biggest learning: trusting the process (41:12) - Rapid fire round begins (41:24) - Sectors and regions of investment (43:03) - Typical stage and revenue range for investments (44:04) - Ownership targets in portfolio companies (45:07) - Typical check size and capital deployment (46:15) - How founders can get in touch (46:45) - Where to follow Maitlan and Bow River Capital (47:05) - Closing remarks ABOUT THE GUEST Maitlan Cramer is a Managing Director at Bow River Capital, a Denver-based alternative asset manager. The firm manages approximately $4.7 billion in assets and operates across seven private fund platforms. Maitlan leads investments for the Software Growth Equity team, focusing on majority-control recapitalizations and buyouts of mission-critical B2B software companies. CONNECT WITH US Website: https://VC10X.com Bow River Capital: https://www.bowrivercapital.com/ Maitlan Cramer on LinkedIn: https://www.linkedin.com/in/maitlan-cramer-b797a744 #GrowthEquity #SaaS #PrivateEquity #Investing #Startups #BowRiverCapital #BusinessPodcast

## Transcript

[0:00] You can fix bad companies, but not bad industries.
[0:02] What do you think is the biggest misconception founders have
[0:05] about growth equity investors? A lot of misconception we have
[0:08] found with founders is a really around you know change is bad.
[0:12] Like what I would say there is change is normal and healthy.
[0:15] What's your process for distinguishing between a great
[0:18] product in a small market versus a good product in a massive
[0:21] market? You can always improve a
[0:22] product. You can, you know, improve a
[0:24] market, right? Yeah.
[0:26] I'd rather take a a great market over a great product any day of
[0:29] the week. What's been your biggest
[0:30] learning investing in start-ups over the year?
[0:32] Trust the process. Things are meant to be broken,
[0:34] right? You got to fix some things,
[0:35] right? It's not always, you know, up
[0:37] and to the right, or you know what the phrase I like to use
[0:39] is. It's not always, you know,
[0:40] rainbows and unicorns. Hey everyone, this is Prashant
[0:44] and I'll be host for the VC10X podcast.
[0:46] And today we have Maiden Kramer with us.
[0:48] Metlin is a Managing Director at Bore River Capital, a Denver
[0:52] based alternative asset manager with dedicated software, growth
[0:55] equity and buy out platforms managing roughly $4.7 billion in
[0:59] capital focused on the lower and middle market.
[1:02] In this episode, Metlin breaks down how Bore River builds
[1:05] durable category leading SAS businesses by rolling up its
[1:08] sleeves inside subscale companies, reshaping C suits,
[1:12] and installing a repeatable growth equity playbook rather
[1:16] than just writing bigger checks. He shares why great markets beat
[1:20] great products, how to separate healthy growth from vanity
[1:23] metrics, and what the AI wave really changes about modes
[1:27] retention and go to market for founders thinking about growth
[1:30] equity as the next chapter. So without wasting any time,
[1:33] let's dive straight in. This episode is sponsored by my
[1:36] own podcasting agency called Podcast NX, where I help venture
[1:40] capitalist, asset managers, allocators and family offices
[1:43] and starting their own podcast and building a strong brand.
[1:46] Podcast NX is designed in a way to work well with the busy
[1:50] schedule of investors where we handle every aspect of podcast
[1:54] production so you can focus on investing.
[1:56] If you're looking to build a strong investor brand, starting
[2:00] a podcast should be right up your priority list.
[2:03] It's the only form of marketing where you can showcase your
[2:06] strong network. In other words, access to
[2:09] limited partners and founders and grow that network further.
[2:13] And contrary to what most people hear, it's still very early to
[2:16] start a podcast. There are at least 10X more
[2:18] newsletters and thousand X more blogs than there are podcasts in
[2:22] this world. You can learn more about our
[2:25] podcasting services at Podcast ten-x.com.
[2:28] I'll make sure to add the link in the description below.
[2:31] Enjoy this episode. Hey Maitland, so good to have
[2:34] you on the VC10X podcast. How are you doing?
[2:36] Doing well? How about yourself?
[2:38] Very well, thank you. And it's a pleasure having you
[2:40] on. To start things off, when we
[2:42] first start with your story of first having founded Grand
[2:45] Ventures and now working on a $4 billion fund, how has your
[2:48] investment thesis evolved as you move from early stage into
[2:52] growth equity investing? Yeah.
[2:54] I mean, you know, you mentioned 4 billion.
[2:56] I think we're actually approaching 5 billion now at at
[2:58] the river, but really at Grand Ventures we are focused on, you
[3:03] know, finding the category killers, right?
[3:04] Think, you know, best in breed technologies, enormous markets,
[3:08] strong unit economics, unwavering entrepreneurs, right?
[3:12] So the, the easiest way to kind of boil that down, if I had to
[3:15] pinpoint it, right, was finding the best deals or we like to use
[3:18] the term, you know, allocators, right?
[3:20] Well, the last seven years, you know, we've really been focused
[3:23] on creating that value from an operating standpoint.
[3:26] So we we use, you know, our software growth equity
[3:29] performance playbook in terms of creating this value post
[3:33] investment. So think operating frameworks,
[3:36] power network, relentless effort to keep on moving forward.
[3:40] And as I personally think about it, you know, I, I really like
[3:43] to roll up my sleeves and, and, and actually kind of get dirty
[3:46] in these companies versus, you know, sitting behind a a screen
[3:49] and, and, you know, throwing the proverbial darts, right and then
[3:52] see what hits. You know, I, I grew up in
[3:54] Michigan and, you know, we were just lays, you know, raised with
[3:57] the, you know, a different level of grit than most folks.
[4:00] And and I don't see myself, you know, changing anytime soon.
[4:04] Yeah. The the other piece of that
[4:05] right is what hasn't changed, right?
[4:07] I think what hasn't changed over, you know, my nearly 20
[4:10] years is, is investing in durable industries, right?
[4:13] Our our belief is you can fix bad companies but not bad
[4:17] industries. Absolutely, completely agree.
[4:19] And to add more of a perspective to the stage of investing that
[4:25] you do. So growth equity, usually what I
[4:27] am saying is Series B and after, is that your street spot as
[4:31] well? Yeah.
[4:32] So think of us really as kind of, you know, growth buyout,
[4:35] right. So I I wouldn't put like a
[4:37] specific seed or series on it. It's more of where is that
[4:41] business at in its evolution, right.
[4:43] So the the easiest way to think about that is has product market
[4:47] fit, has really good customers, you know, has, you know, some,
[4:50] some good product out there in the marketplace.
[4:52] And, and what we're really trying to do is, is take that
[4:55] and extrapolate that, right, and build a, a best in breed
[4:57] business that has the ability to, to withstand market cycles
[5:01] and in different times. And so as we think about that,
[5:04] right, it's, it's less around, you know, specific metrics and
[5:07] more of where is it at and it's kind of current, you know, life
[5:10] cycle. Yeah, absolutely.
[5:12] Buy, buy, buy out. I understand that you're taking
[5:14] majority shares in these companies and then, you know,
[5:17] helping them grow further and then flipping them and selling
[5:20] them to someone else. Is that how it works?
[5:24] Yeah. I mean, it's so, so think of it
[5:25] as kind of a natural evolution of the business, right.
[5:27] So unlike, you know, venture where it's, hey, let's go raise
[5:30] a round of capital, let's hit some certain metrics, let's
[5:33] raise another round of capital and you're you're constantly in
[5:35] that fundraising cycle. You know, we, we tend to more
[5:38] say, Hey, we're the one stop shop when it comes to, you know,
[5:41] those equity investments. And, you know, think of it
[5:44] really as kind of the natural evolution, right?
[5:46] And, and a lot of misconception we have found with founders is a
[5:49] really around, you know, change is bad.
[5:52] Like what what I would say there is change is normal and healthy,
[5:55] right? It keeps your ideas fresh
[5:57] momentum moving. I kind of a good way to think
[6:00] about that, you know, I'll bring it back to Bow River, right is,
[6:02] you know, when John and I launched, you know, fun one
[6:04] within Bow River, you know, nearly seven years ago now.
[6:07] And we were a much smaller team and over time, we added
[6:11] extremely talented people, you know, across the firm that I'm
[6:14] honored to work with every single day.
[6:16] And as a work product, right, that, that, you know, elevates
[6:19] the, the performance of, of everybody, you know, internally
[6:22] and makes us a stronger firm. And, you know, that's really
[6:25] kind of translated into 8X growth here in the last, you
[6:28] know, seven years as a firm. And it's an exciting time,
[6:31] right? So you know, what, what, whether
[6:33] you're at early stage growth, buyout, whatever, right?
[6:36] It's just that natural evolution.
[6:37] And, you know, from our perspective, I tried to relate
[6:39] it back to, you know, also like our side of the fence too,
[6:42] right? We, we have a business, we're
[6:43] growing as well. So you know that that's that's
[6:47] where we currently play. Absolutely.
[6:49] That's quite interesting. What do you think is the biggest
[6:52] misconception founders have about growth equity investors?
[6:55] And they're transitioning from those early stage fundraising
[6:58] grounds to growth capital. Yeah.
[7:01] I mean, what what I would say, right, is trust, you know, in
[7:05] the process trust what we're working on, right.
[7:07] And, and I guess I go back to that thread, I just, you know,
[7:10] pulled on around change is bad, right?
[7:13] You know, and it's hard, right? As, as the misconception of
[7:15] like, oh, I know everything, which, hey, listen, like there's
[7:18] times where everybody thinks that, right?
[7:20] And I think you're having that relatability, you know, is, is
[7:24] what leads to a lot of success from our side.
[7:26] And you know what, we spend a lot of time, you know, from our
[7:29] end with, with entrepreneurs, right, as they're thinking
[7:31] through that and the misconceptions, right, is that
[7:34] private equity or capital is bad, right?
[7:36] Capital is not bad, right? It helps you develop more
[7:39] product, right? It helps you hire, you know,
[7:41] better people, more people, right?
[7:43] It helps you deliver more value for your customers and in and in
[7:46] turn create more efficiency, you know, within the marketplace.
[7:49] And so I, I would say the misconception is really around
[7:52] that, you know, capital is, is, is negative, right?
[7:55] We, we very much view it as as a Capital plus model, you know,
[7:59] and that's, you know, where we see, you know, a lot of the
[8:01] misconception, you know, as people kind of move from early
[8:04] stage to growth and, and even beyond.
[8:07] Yeah, absolutely. And you have served on boards
[8:10] across very different software verticals from Altria in private
[8:14] equity software to product plan in product management tools.
[8:18] How do you adapt your board involvement and value add
[8:21] approach for each of these sectors?
[8:24] Yeah, I did question. So you know, I think for us like
[8:27] every role is different, right, But they deal with similar
[8:29] problems. So you know, let's take kind of
[8:31] stick table stakes away, right. So, you know, we make an
[8:34] investment irregardless of of the examples you gave, right?
[8:36] And it's the table stakes are right.
[8:38] We've got, you know, track KP is right.
[8:40] So reflecting performance, you know, and you've got to follow
[8:44] an you know, OK, R or objective, some key results, you know,
[8:46] framework framework, which is essentially, you know, setting
[8:50] goals and then improving them, you know, towards your
[8:52] performance, right. So tying both of those in that
[8:54] is table stakes, no matter, you know, where you're at, whatever
[8:57] which firm you you should be at as it relates to, you know,
[9:01] specific roles for me, you mentioned all via, you know,
[9:04] that one was where, you know, we really need to build out a go to
[9:08] market motion. So historically, you know, they
[9:10] relied heavily upon, you know, one specific seller.
[9:12] And again, it was subscale, right?
[9:13] So when we got involved, it was, you know, less than 5 million of
[9:16] of a no recurring revenue, but had a good product, had some
[9:20] really great logos in terms of who they served in the in the
[9:23] private capital market space. And, and what we also need to do
[9:26] is keep building out that best in class product, right?
[9:28] So we are competing with, you know, the deal clouds of the
[9:30] world, which had much better funding and and more much larger
[9:34] at the time. And so we, we sat down and said,
[9:37] hey, we got to focus, right. And so a big part of our
[9:39] initiative was around rebuilding that go to market motion and
[9:43] having an inbound outbound motion centered in in Denver,
[9:47] Co. So we had built out a center of
[9:49] excellence there, which the business was already
[9:51] headquartered there, but our one seller, of course was in London.
[9:55] And if you know anything about subscale, you know, SAS
[9:57] businesses, right? Like there's a natural evolution
[9:59] to where it makes sense of kind of planting that flag in a Mia.
[10:02] And I would say it was a little premature.
[10:04] So we, we, we shifted that strategy, brought it back to,
[10:08] you know, our core, which was Denver, Co built out a really
[10:11] great sales team and, and really started seeing, you know, the,
[10:14] the growth engine, you know, accelerate.
[10:16] The other piece there too was, you know, we did not have a ACTO
[10:20] when we first made our investment.
[10:22] And so there was, I won't say a lack of focus, but there wasn't
[10:25] somebody or one person kind of driving that daily initiative in
[10:28] terms of, you know, the product innovation and where the market
[10:31] was moving. I'd say we had some sneeze,
[10:33] right, some subject matter experts in terms of, hey, here's
[10:36] kind of market pain points, you know, etcetera.
[10:39] But I think it was drawing from too few voices versus really
[10:42] understanding at A, at a core, you know, private capital
[10:45] markets and, and, and where it's going.
[10:48] And then the last piece there was driving a specific focus
[10:51] around tighter implementation. So yeah, they really were a
[10:56] services first mindset, which when you're a bootstrap thinly
[10:59] capitalized, you know, software company, you have to be right.
[11:02] Like you want to keep all your customers, everybody happy, but
[11:06] in the end, right, like we needed to build a scalable
[11:08] organization. And so using our performance
[11:10] playbook in terms of how to derive true SAS implementations
[11:15] in a servicing model, you know, around that so we could drive,
[11:18] you know, profitable services organization.
[11:20] So that's kind of one example, right, in terms of, you know,
[11:23] where we're at on the on the spectrum of of board rolls.
[11:26] Yeah, you mentioned prod clan, but I think a a good example is
[11:28] HR soft as we're trying to, you know, compare polar opposites
[11:31] here, not necessarily full opposites, but you know, this,
[11:34] you know, really is, you know, centered around compensation
[11:37] management, right. So when you think about
[11:39] struggles that large organizations, you know, mid
[11:41] sized organizations struggle with, right, is how do we
[11:43] compensate our people fairly relative to market?
[11:46] How do we show them that journey in terms of, you know, I
[11:48] understand you want to get to here, how do we get there
[11:50] together, right and providing that transparency, you know,
[11:53] around pay. And quite frankly, it's it's
[11:56] really changed, right? We've we've moved away from, you
[11:59] know, an annual salary and a merit based raise, you know,
[12:01] during the holidays and in December to truly a, you know, a
[12:06] real time compensation model where sales commissions carried
[12:10] interest. You know, you know, whether
[12:13] there's rewards, whether there's spot bonuses, right?
[12:17] You can you see, you know, raises being handed out not just
[12:20] once a year. And so that was really around
[12:21] the great resignation anyway. That's kind of the pain the
[12:24] landscape of, of what that business did.
[12:25] But really, you know, from from our standpoint and, and the, you
[12:28] know, tie it more back to your question on board involvement
[12:30] was we really needed an entire new C-Suite.
[12:34] And, and so we had found, you know, this business actually
[12:37] back in May of 2020, you know, they weren't ready to, to
[12:41] transact at that point. They wanted to see some more
[12:43] initiatives. And, you know, hats off to the
[12:45] team there that was able to drive those over the next two
[12:48] years. And, you know, they were
[12:49] finally, you know, in that, you know, evolution of, you know,
[12:52] it's, it's time to do something. And so we transacted in, in
[12:55] August of 2022 and, you know, we spent, you know, Q3Q4 of that
[13:00] year bringing in our, you know, power network folks, right?
[13:03] You heard me say that the onset of, of, of the call here today
[13:07] and really that's, that's a big secret sauce to what we're
[13:09] working on, right? And so we brought in, you know,
[13:11] Joe Poxon as our new CEO, who he historically, you know, has done
[13:15] three different companies with us, you know, across his 10 year
[13:20] and we've had great success. So it started with, you know,
[13:22] his leadership, Chris Seeger as our CRO, who he's, you know,
[13:25] sold software for us across six different companies.
[13:28] And really it's, it's getting the right pieces into this,
[13:31] this, this, you know, chess game, if you will, of how to
[13:34] create your real leverage, you know, in these subscale
[13:37] companies. And that's just two examples.
[13:39] We, you know, CFOCOOCRI mean the, the full gamut was
[13:43] replaced, except for the founding CTO Tushar, who he is
[13:46] absolutely amazing. He's one of my favorite CCT OS
[13:49] I've ever worked with. And we really needed to drive,
[13:53] you know, product road map initiative.
[13:54] So, you know, they didn't have a lot of fun in Cree, you know,
[13:57] Bow River stepping in and a big part of of our thesis was
[14:00] saying, hey, we've got to provide some clarity to the
[14:03] market around short term, mid term and long term, you know,
[14:06] product Rd. maps. And so driving that both within
[14:09] the internal teams and quite frankly, the external teams,
[14:11] right, like communicating down to the customer base of here's
[14:14] where our products today, here's where we're going, here's how
[14:17] we're going to deliver on that and then doing what we said
[14:19] we're going to do. And so Fast forward three years,
[14:21] that's led to us growing that business three times, you know,
[14:24] in a pretty short period of of time.
[14:26] And then it's quite frankly a difficult SAS selling market.
[14:29] And so it all starts back to, you know, driving, you know,
[14:32] going back to the top. The KP is and OK, ours, right,
[14:34] is the, is the the framework. And then it's how do we execute,
[14:38] you know, against that the other pieces.
[14:40] And I didn't really mention it was, you know, a lot of times
[14:42] when you're finding, you know, companies along the revolution,
[14:45] they don't have all the pieces, you know, to what they're trying
[14:48] to do. And so a big part of our thesis
[14:50] on this one was, was building that world class go to market
[14:53] motion. They had had some great pieces
[14:55] there. Don't get me wrong.
[14:56] It was they had just did not have a marketing function.
[14:59] So we brought in Abby Sandbach, who has done this with us
[15:02] several different times to lead that effort.
[15:04] And she's built out a really solid team there, which we're
[15:07] very excited about. So again, it kind of goes to and
[15:10] you're probably sensing my excitement.
[15:11] I'm I'm generally A passionate person.
[15:13] I love what I do every single day, but it really is rolling up
[15:17] your sleeves and, and getting dirty into these companies and
[15:20] not, you know, sitting back and, and waiting for that quarterly
[15:23] board meeting to try to, you know, lob in a, you know, a
[15:25] strategy point here or there. It's really locking arms with
[15:28] our teams and, and quite frankly, aligning, you know,
[15:31] interest to where we can go build, you know, world class
[15:33] organizations together. So again, board roles are, you
[15:37] know, for every company's different, but you know, have
[15:39] have similar, you know, pain points and, and problems that
[15:41] we're trying to solve for. Absolutely.
[15:43] That gives our listeners a pretty deep inside into your Rd.
[15:47] it and it can be you know restructuring the sea suit or
[15:52] even changing the strategy of the business or the business
[15:54] approach itself, right, moving on.
[15:56] Right now what we are experiencing is an interesting
[15:58] time for software because with the coming of AI, it's in debate
[16:04] that what's what was earlier considered a combative advantage
[16:08] or a mode for software or a differentiator for SAS companies
[16:14] is which is tech is no longer that and it now has to shift
[16:18] from tech to distribution or marketing or brand.
[16:22] How are you seeing that in your portfolio and how are you
[16:25] internally at the firm analyzing all this that's happening with
[16:30] the AI wave that's coming? Yeah, so I think there's kind of
[16:34] two parts to that question, right.
[16:35] I think the first part you mentioned, you know, competitive
[16:37] advantage and then the AI strategy.
[16:39] So I'll kind of take those in two parts because I, I, I do
[16:42] think they're different, but you know, similar, right.
[16:44] So, you know, from a competitive advantage perspective, you know,
[16:47] how, how do we assess that, right, from a, a, a risk
[16:49] perspective, that's, you know, for me, the easy one, right,
[16:54] that that's the favorite part of the job.
[16:55] So we speak with customers. So when we're thinking about,
[16:58] you know, making a thematic investment in one of the core
[17:01] areas we play in, you know, we do, you know, on the low end 20
[17:05] customer calls, you know, on the higher end, sometimes 40.
[17:09] And I understand that's that's a big lift.
[17:11] But as I think about and as John thinks about, you know, what
[17:14] we're trying to do, right, it kind of goes back to that theme
[17:17] of, you know, we can fix companies, we can't fix bad
[17:19] industries, right? And what we find a lot of times
[17:22] as you get to the core of the problem, right, is why did
[17:26] somebody buy this product, right?
[17:28] How did that implementation process go?
[17:30] Has it continued to add value in the sense that it's then going
[17:33] to renew, right? So if you can kind of go, you
[17:36] know, full A-Z here in terms of finding a customer, which is
[17:39] extremely difficult, right, to making sure that the right, you
[17:42] know, ideal customer profile, selling them, getting them
[17:45] implemented, getting them service and then the fact that
[17:48] they're willing to spend their hard dollars, you know, back to
[17:50] renew with you, right? You're showing ROI.
[17:52] So as I think about competitive advantage, you know, and how we
[17:56] think about, you know, viewing that in our investment themes,
[17:59] that's huge, right? And it gets down to the product
[18:02] strengths and weaknesses. The other piece there too,
[18:05] right, is around it finds out key employees across the
[18:09] organization, which for us we love, right, because when you're
[18:13] when you're meeting with the founding teams and and C-Suite,
[18:16] you don't always get, you know, the full breadth and depth of
[18:18] the full team, right? And so and for right reasons,
[18:22] right? Like, you know, listen, at the
[18:23] end of the day, the business still has to function and still
[18:25] has got to, you know, grow and operate.
[18:27] But you know, it gives us a real view inside of saying, OK, like
[18:31] asking that customer, you know, how did that sales process go,
[18:34] right? Did we did they deliver on what
[18:36] they said they were going to from a product perspective,
[18:39] right? How was that hand off from sales
[18:41] to to professional services, right?
[18:43] You know, did the implementation team deliver on time?
[18:46] If not, why right. Were there, you know, repeatable
[18:49] processes in place to where you felt that, you know, it wasn't
[18:52] recreating the wheel every single time you guys, you know,
[18:55] got together? And so, and so we love that
[18:58] piece of it too, to really figure out, you know, where
[19:00] there's, you know, key pieces within the organization that we
[19:03] can make sure that we're further investing in too, right?
[19:05] Like, we love finding great talent to where, you know, they
[19:08] can spend, you know, a, a career with us, you know, assuming
[19:11] things go well within that organization.
[19:14] And, and quite frankly, that leads to, you know, the
[19:17] stickiness of the platform, right?
[19:18] Like how sticky is that product in the day around SASS, you hear
[19:22] a lot about retention. You know, that that is, you
[19:24] know, a Holy Grail for, for what we're trying to do.
[19:26] That's why they're, you know, so valuable.
[19:29] And then quite frankly, you, you tease out a little bit of brown,
[19:31] you know, price elasticity, right, in terms of how is the
[19:34] product price? How do you feel about that?
[19:37] You know, when they historically, you know, maybe
[19:39] have gone through renewal, you know, if there was a, a price
[19:42] increase, you know, how did they justify it, right?
[19:44] You know, was it kind of a standard, you know, CPI increase
[19:48] or was it saying, Hey, we, we delivered a bunch of new
[19:50] innovation, you know, around the, around the platform and
[19:53] therefore it's going to cost more.
[19:55] You know, how, how was that received?
[19:56] And so that to me that is, you know, on your piece around
[19:59] competitive advantage, you know that that truly is, you know,
[20:03] kind of everything on, on your question around AI, right, which
[20:06] is, you know, everybody's favorite thing to talk about
[20:08] these days. You really do have to move, you
[20:11] know, beyond kind of traditional metrics like features and brand,
[20:14] you know, to your point, right? You really have to focus on, you
[20:18] know, sustainable competitive advantages, which I just alluded
[20:21] to from, from kind of the, the diligence perspective.
[20:24] But then as you think about how does that relate to, you know,
[20:27] data network effects, you know, speed and execution, which is
[20:30] paramount? And then how, how deeply
[20:32] integrated are you within, you know, kind of the core
[20:35] ecosystem? So take data, right, you know,
[20:38] companies that can analyze and interpret, you know, customer
[20:40] usage data, right? That can offer a nice
[20:43] personalized predictive experience, right?
[20:45] That that is what you're trying to to get to.
[20:48] And that creates that kind of data flywheel where you know,
[20:51] the product gets better with the more use, right?
[20:53] And so as the customer is using it more and more and more,
[20:56] you're creating this proprietary, you know, data
[20:58] asset, quite frankly, you know, that can't be replicated, right?
[21:02] So as you're thinking about its core value from a a software
[21:04] perspective, you know that is, that is kind of #1 right.
[21:08] So let's assume you've got that. So, you know, going over to kind
[21:12] of network effects. So think of it as this, right?
[21:15] Switching costs, you know, can be tremendously expensive, you
[21:19] know, leaving a platform, right? And so going off of that data
[21:22] point, if you're a tremendously valuable and you're giving
[21:25] proprietary insights into that business, you're trading more of
[21:28] a Moat for yourself, right? And as you think about AI
[21:31] powered product, which you know, seems to be, you know, the
[21:34] buzzword these days, it really enables the customer, you know,
[21:39] to, to make it extremely difficult to replace you, right?
[21:42] And, and that's where we want to be from all of our companies.
[21:44] And, and we're not perfect at all, right?
[21:46] Like I think for us, it's, that's got to be part of that
[21:49] diligence process, right? It's understanding where they at
[21:51] in our AI journey and most the companies you know will come in
[21:55] at the onset don't have that full picture.
[21:57] And that's fine, right? We just, we want to make sure
[21:59] you're thinking about, right. How are you thinking about
[22:00] today? How are you thinking about it
[22:01] tomorrow? How do you think about five
[22:03] years from now? Because as we think about Bow
[22:05] Rivers investment, right, there is that natural evolution over
[22:08] that whole period. And then, you know, you know, I
[22:12] brought up, you know, speed and execution.
[22:13] That's a, that's a big part of, of what we need to do, right?
[22:16] Like the quicker you can get new AI models, you know, into your
[22:18] capabilities and into your products, you know, the faster
[22:21] you're going to see, you know, real business outcomes.
[22:23] And, and then the other piece where we've seen, you know,
[22:26] great success and I'll, I'll bring it to our portfolio,
[22:28] right? Is, is really around kind of
[22:30] vertical solutions that you are, you know, a mile deep, not an,
[22:34] an, you know, an inch, you know, deep and a, and a mile wide,
[22:38] right? It's a really understanding your
[22:40] kind of core models and and what it needs to solve for.
[22:43] And yeah, I mentioned, you know, HR software earlier in the call
[22:46] and yeah, that's a great one here again, right, is, you know,
[22:49] it is specifically built for compensation management, right?
[22:52] And everybody says, Oh well, you know, work day, SAP, you know,
[22:55] etcetera. The HRISS can do that.
[22:57] It's like sure that, you know, if you've got very simple
[22:59] compensation, you yeah, of course those, those guys can go
[23:02] do that, right. But as you think about the
[23:04] complexity of of compensation and how it's evolving, you know,
[23:08] we we are best in breed around that, right?
[23:10] And we've taken that, you know, AI centric approach with within
[23:13] Hrsoft with our product called Hrsoft Intelligence.
[23:16] And so, you know, we're we're very excited there.
[23:18] But again, I know these were a little long winded, but I do
[23:21] think it's, you know, helpful to kind of paint that full picture
[23:23] as we view, you know, both the competitive advantage and AI
[23:26] where our separate but also together.
[23:29] Absolutely. Yeah, it's quite insightful on
[23:30] both fronts. But what's your process for
[23:33] distinguishing between a great product in a small market versus
[23:36] a good product in a massive market when making investment
[23:39] decisions? Yeah.
[23:42] So I mean, you know, if I, if I had to say it simply right, you
[23:45] can always improve a product. You can, you know, improve a
[23:48] market, right. Yeah.
[23:50] I'd rather take a great market over a great product any day of
[23:53] the week. You know, when we're kind of
[23:55] developing our investment themes, you know, we spend a lot
[23:58] of time on ICP, our ideal customer profile, you know,
[24:02] willingness to pay. Is there actually a real need,
[24:05] right? Like I think a lot of software
[24:06] was created just because, oh, they're going to chase the shiny
[24:09] object, right? Like, oh, this is sounds, you
[24:11] know, fascinating. We're or, or, you know, just
[24:13] following a flash in the pan, you know, trend.
[24:16] We really are looking for, you know, mission critical products
[24:19] that solve a real business need. And, and so as we think about
[24:23] it, right, like we spend much more time on that and identify,
[24:26] OK, can that more, is that market already there
[24:28] established, right. And then can we just go build a
[24:32] product around it or further build that product?
[24:34] And so it's, you know, it's less around moon shots and more
[24:37] around, you know, building A, you know, B to B enterprise, you
[24:40] know, SAS business that's going to be around for a for a long
[24:42] time that that is growing sustainably.
[24:45] Yeah, absolutely. And what's specific operational
[24:48] metrics do you look for in software companies that indicate
[24:51] they're truly ready for growth equity capital versus just
[24:54] hitting revenue milestones? Yeah.
[24:56] So I would say we're less focused on, you know, revenue
[24:59] growth, right. And I know there's a lot of
[25:01] pressure on that in the market. You know, our whole thing is we
[25:04] tend to create that growth. So we're we know what we can go
[25:07] build a world class, go to market motion, no matter what
[25:10] industry we're selling into. So you know, for us it's less
[25:13] around that. It's really more around, you
[25:15] know, retention and and I think for us, you know, on the gross
[25:18] retention, so that, you know, think of that as you know,
[25:21] churned customers have gone and down sell, right.
[25:23] So they, they fluctuated, you know, month over month or, or
[25:26] you know, quarter over quarter. That that is key, right?
[25:29] That's kind of your initial indicator of, you know, how, how
[25:32] in theory sticky is that product.
[25:34] You know, gross margin, you know, for us is a, is another
[25:36] one, right? Like, yes, best in class could
[25:39] be 90%. You know, we, we know at this
[25:41] stage, right? You, you don't always have that
[25:43] right? You don't have the economies of
[25:44] scale behind your business. So what we look for is, you
[25:47] know, at a minimum, you know, 6065, but that path to kind of
[25:50] mid 80s or maybe 90, right? So with our investments in
[25:54] people, processes and systems, we can get through our, you
[25:57] know, whole period to that point.
[26:00] And that, that piece is, is, is critical, right?
[26:02] Because, you know, if you've got a really, you know, inverse
[26:06] gross margin, right? It's really hard to, to improve
[26:09] that to where you need to, to get kind of that true, you know,
[26:11] software SAS valuation. The other piece.
[26:13] What we've seen really, you know, over the last 18, even 24
[26:17] months now is, you know, the shift to cash flow break even,
[26:22] you know, as, as we think about, you know, our, our companies,
[26:25] right, it's not growth at all costs.
[26:26] So, you know, we, we really try to figure out as like, hey, you
[26:30] know, even if you're burning a little can, you know, most of
[26:33] the time you can solve for that, right?
[26:34] And then you get a little bit more scale, you've kind of grown
[26:36] at that profitability. So I would say cash will break
[26:39] even are are neutral is is very important to us.
[26:42] And then as I think about, you know, we, I've highlighted a lot
[26:45] here on this call around, you know, our ability to as a team
[26:48] to, to go create great go to market motions.
[26:50] It starts with sales efficiency, right?
[26:52] So take your, you know, revenue growth and divide that by your,
[26:55] your selling costs, right? That's both sales, marketing,
[26:58] etcetera. And if you're north of one,
[27:01] right, that in theory would suggest a profitable, you know,
[27:05] sales function, right? We, we try to be better than the
[27:08] median or average, right? Like we, we want to see that
[27:10] number much higher than that. And, and for us, right, that,
[27:14] that shows that, you know, hey, we need to invest further behind
[27:17] the go to market motion, right? Like the market's ready for this
[27:19] product. We're, we're driving revenue.
[27:21] We just, we don't have enough on, on the on the go to market
[27:23] motion yet to, to, to suggest that that should be pulled back.
[27:28] So, you know, those are the main ones that, you know, as we're
[27:30] thinking about, you know, the operational metrics of these
[27:33] companies and, and kind of stage, are they ready for this?
[27:36] Those are the areas that we we really like to focus on.
[27:39] Absolutely, quite interesting. And from the investments you've
[27:42] made over the years in growth equity capital, have most of
[27:47] them or all of them been through the journey of venture capital,
[27:51] you know raising those earlier rounds?
[27:53] Because I'm a trend that I'm also seeing these days with the
[27:56] coming of AI is that a lot of founders are bootstrapping and
[28:00] getting that early growth themselves, keeping those early
[28:02] rounds and scaling themselves. You don't need a lot of money
[28:06] now to scale if it's a really good product and it catches
[28:10] fire. So are you also seeing those
[28:12] kind of investments where just founders built it themselves and
[28:15] they're directly coming to growth equity capital to you
[28:18] guys or someone else to further grow from there?
[28:22] Yeah, good question. So you know, fun one was was 6
[28:25] platform investments. All of those were founder loan.
[28:29] So as, as we think about it, right, they did not go raise,
[28:33] you know, a a ton of venture dollars to to go and, and
[28:36] achieve what they wanted to do. And they were able to create
[28:38] great businesses by, you know, Finley capitalizing or, or
[28:41] bootstrapping the organization fund 2 right?
[28:44] It's going to be, you know, 8, you know, platform investments
[28:47] were, you know, already in six of those.
[28:50] I, I would say, you know, we've seen kind of 5050 there, right,
[28:53] where 50% were the bootstrap founder led.
[28:56] And then the other 50 was, you know, they had raised a bunch of
[29:00] venture dollars or, or growth capital even, you know, in, in
[29:03] kind of the heydays or the euphoric days of 2020-2021,
[29:07] 2022, right at these, as these, you know, astounding multiples.
[29:12] And, you know, they weren't able to kind of meet that demand
[29:14] from, from a growth perspective. It doesn't mean they're, you
[29:17] know, a bad business, right? It just means that the, you
[29:20] know, the union economics are upside down in terms of the cap
[29:22] stack. And so for us, we, we see a big
[29:25] market, you know, right now where we're getting those phone
[29:29] calls from folks saying, Hey, listen, we've got this, you
[29:32] know, ass in the portfolio. You know, we, we believe in the
[29:36] team, we believe in the market. It's just we're upside down on
[29:38] the cap table and it's time for us to start thinking about, you
[29:41] know, strategic alternatives and whether that was they layered in
[29:44] debt when it was cheap and now it's very expensive, whether
[29:47] they raise way too much equity and they're never going to see
[29:49] that, you know, to, to, to quote your podcast, the 10X, you know,
[29:53] pop, right? If they're not going to see that
[29:55] right, they're like, well, we got to go find the next one
[29:57] that's going to give that to us, we start wringing our hands
[30:00] around that, right? That that's where we see deals
[30:01] where it's like, hey, this really makes sense for us to
[30:03] take a playbook approach that is consistent to creating these
[30:07] market winners. And we're OK with, you know,
[30:10] slower growth because we'll get to scale sustainably.
[30:12] And so when you have that, you know, realignment of
[30:15] expectations and, and resetting of, of what the business needs,
[30:20] we think there's a huge opportunity, right.
[30:21] And that's where, you know, the software growth equity team
[30:23] within Bow River, you know, spends most of our time and we
[30:27] see a huge market opportunity, not just, you know, to wrap out,
[30:30] you know, fun too here, but you know, as we go into to fund 3
[30:33] deployment excetera, you know, we've got a, a long room to, to
[30:36] run here. So a great question and and
[30:39] something that we think about every single day.
[30:42] Absolutely. Quite interesting.
[30:43] And looking at your current portfolio, what trends are you
[30:46] seeing in terms of customer acquisition, cost, retention
[30:49] metrics and market dynamics that other founders of building
[30:53] should be aware of? So what I would say there,
[30:55] right, is kind of during that run up I just talked about,
[30:58] right, the 2020, 2122 era, you know, it was easy to go sell
[31:03] software, right? There was people selling
[31:04] software left and right, right. And as we kind of thought about
[31:07] it, you just saw these costs, you know, naturally escalate,
[31:10] right? Great sellers were much more
[31:12] expensive, right? Marketing costs were much more
[31:14] expensive, but that doesn't necessarily change how much
[31:18] revenue you were booking, right? So you saw that, you know, CAC
[31:20] or customer acquisition costs as you referenced, you know, start,
[31:23] start to creep up. What I would say is, is we took
[31:26] the, you know, a more disciplined approach and, and
[31:28] because of our, our power network, we were able to bring
[31:31] folks in that had a proven track record of selling across
[31:34] multiple market cycles with us, right?
[31:36] Booms and busts, right. And So what we, we, we shifted
[31:39] our focus on was, you know, less is more, right?
[31:42] Finding those, those, those great sellers and incentivizing
[31:46] those great sellers to go perform for us, right.
[31:49] So sure, maybe we paid a little bit more on, on Commission, you
[31:52] know, during that era, but I'd rather pay, you know, more
[31:55] Commission for, for great sellers that are delivering to
[31:57] us on a consistent basis. Then it's kind of massive flux
[32:00] that you saw in the marketplace. So that, that, that's kind of
[32:03] one. Yeah, you, you mentioned, you
[32:05] know, retention metrics and I've highlighted here, you know, a
[32:08] couple times today. I would say for us because of
[32:11] the mission criticality of our business, we didn't see that
[32:13] massive, you know, spike in and then through, right, we, we
[32:17] really saw kind of actually consistent improvement.
[32:19] And a good example is HR soft, which I just talked about, you
[32:23] know, a little bit ago is, you know, we stepped in, in August
[32:25] of 2022, you know, retention was kind of in the 80s.
[32:29] Fast forward to today, you know, we're 95%, you know, grocery
[32:32] retention. That's a very healthy business,
[32:35] right? And that, that goes to us
[32:37] investing across the organization, product, people,
[32:40] systems, right? And, and a real market need for,
[32:43] for what they're trying to solve.
[32:44] And So what I would say is if, if you have a great product with
[32:47] a real market need, you should right, see that improvement,
[32:51] right? So as, as an entrepreneur, you
[32:53] know, trust that process, right? And and understand that, Hey, if
[32:56] I'm truly delivering to my customers, you know, and selling
[32:59] to the right ICPI think that's where a lot of founders get it
[33:01] wrong, where they try to be too many things to too many people
[33:04] and they just start selling whatever they can, right?
[33:06] And I get it, like been an entrepreneur myself, right?
[33:09] So you're trying to keep the lights on, you're trying to keep
[33:11] payroll going, right? You want to see growth in your
[33:13] organization, but sometimes that's not good growth, right?
[33:15] That's that's, you know, you know, unhealthy growth.
[33:18] And so having that, you know, discipline is what's going to
[33:21] lead to a better terminal value for your business.
[33:24] And so that's where, you know, we tend to spend, you know, a, a
[33:27] good chunk of our time, you know, and, and around the metric
[33:31] side of the house. Got it, quite insightful.
[33:34] And you mentioned about great sellers, you know, and how to
[33:38] incentivize them and how you can lure them to come work with you.
[33:42] But the other aspect of this it is how do you identify great
[33:47] sellers or what questions do you ask them in an interview or or
[33:50] things to look for in in the resume or maybe do reference
[33:54] calls Background 6 to really identify these star sellers.
[34:00] Good question. So I'm less of a resume reader.
[34:04] What question to ask type of person.
[34:07] As soon as you have like a fixed agenda or fixed question list
[34:10] with with interviewing somebody, in my opinion, you lose its
[34:12] authenticity, right? And so we tend to love to, you
[34:16] know, be in person with these sellers, right and sitting down
[34:19] face to face and having that like see where the conversation
[34:22] goes right. If, if this seller is moving the
[34:25] conversation is, is piquing your interest right, to where you're
[34:28] learning together. And I know that sounds silly,
[34:31] right, when you're meeting for a coffee or whatever, right?
[34:32] But you should, you should view it as a, a sponge, a, a chance
[34:35] to learn, right? And if you're not learning and
[34:38] kind of pushing each other and, and, and figuring that out, how
[34:41] are they going to do that to a prospect, right?
[34:42] How, how are they going to go and say, Hey, we're selling
[34:45] into, you know, XYZ company? Who, how am I going to find, you
[34:49] know, the right ICP? Who am I going to find the right
[34:51] decision maker within that organization?
[34:53] And then how am I going to convince them over 3-6 months,
[34:56] maybe maybe even nine months, you know, that, Hey, you know,
[34:59] our product is, is the best in market.
[35:00] And so I, I look for more and, and we look for more of those
[35:04] kind of intangible skills, right?
[35:06] Less so than oh, what you know, what school did you go to or, or
[35:09] this or that, right? Like I go back to, if you just
[35:12] rely on kind of the, the outputs, you know, I think you'd
[35:15] be hiring a lot of false sellers because as I mentioned, it was
[35:19] very easy to sell software in 2020-2021, 2022, where I would
[35:23] say if you're really going to get a go to that during your
[35:26] review process, how have they sold in the last 12 months, 18
[35:29] months, right? Have they created funnel?
[35:32] Have they gotten throughput? Have they, have they closed
[35:35] right? And are they happy with it?
[35:36] Right? Like we, we love one, one of the
[35:39] words we, you know, we use as a, as a meat eating seller, right?
[35:42] Like we, we want folks that are going, you know, out there every
[35:44] single day prospecting, trying to, you know, find the right
[35:47] customers for our organization and, and, and getting those
[35:51] closed right. And so for lack of their term,
[35:53] maybe a little bit of aggression, right?
[35:55] Like, hey, hey, like that's okay.
[35:56] You know, like sitting back and waiting for orders.
[35:58] We've passed that cycle, right? That was, you know, 2020 through
[36:01] 2022. We are now much more in that
[36:04] proactive side where, you know, deals aren't going to fall into
[36:07] your lab. You got to go create those
[36:08] opportunities. You got to nurture those
[36:10] opportunities. And then the other piece too, is
[36:11] like, can you play well with others, right?
[36:13] Like can you go in and tie in the product people when you need
[36:16] to? Can you tie in professional
[36:17] services, right? So they're seeing a fulsome
[36:20] effort, you know, from from our side of the house.
[36:22] And then kind of the crown jewel is saying, hey, like all these
[36:25] organizations want to see, you know, executive sponsorship, you
[36:29] know, on the selling side. And so finding those right
[36:31] moments to bring in the velvet hammer, so to speak, in terms
[36:34] of, you know, getting it over. And that comes with humility,
[36:37] right? And so at the end, you know,
[36:39] they've got to be able to have all of that, right?
[36:41] Have that hunger and and that tenacity, but at the end you've
[36:44] got to be empathetic and and and humble, right And it's a very
[36:48] rare, you know formula for for for people to have.
[36:52] And that was long winded, but it really goes back to, you know,
[36:56] the the folks that we've worked with.
[36:58] And I credit a lot of this to John Rader are, you know, you
[37:01] know, here, you know, within Beau River and, and, you know,
[37:04] the, the main, you know, founder of the strategy.
[37:05] And, and when I joined him to, to Co launch, it was really, he
[37:09] was, he was steeped in that from day one, right?
[37:11] And, and, you know, we, we've been able to, you know, over the
[37:14] years and over the decades, you'll have, you know, hundreds
[37:17] of sellers that we've worked with, right?
[37:19] So when it comes to thinking about building a human Capital
[37:22] Management business, like, you know, we can, you know, go in
[37:25] and we know those people already ahead of time, right?
[37:27] So we're saying, Hey, we're going into compensation
[37:29] management. All right, perfect.
[37:30] We've got, you know, 5 or 6 folks that we know that, you
[37:33] know, can go sell into that vertical and we can have them
[37:36] ready to go day one. And we don't have to go through
[37:38] recruiters and, and pay a bunch of, you know, unnecessary fees
[37:42] and, you know, are they going to work?
[37:44] Are they not right? Like, I think the biggest thing,
[37:46] right is no seller is going to come in day one and sell a piece
[37:48] of software the next day, right? You're going to have that ramp,
[37:51] that evolution in terms of understanding.
[37:53] The shorter you can truncate that, the faster time to value
[37:56] you have, right? And at the end of the day,
[37:58] that's what we're trying to provide in a replicable formula.
[38:01] And and so quite frankly, you know, we like to have those,
[38:04] those reps and those sellers, you know, along with us and
[38:07] along the journey. And quite frankly, whether it's
[38:09] this company or, or or platform 7 or 8 within Fund 2, you know
[38:14] that that I would say that's the least of our worries when it
[38:16] comes to tax execution is it's finding those right sellers.
[38:19] Absolutely. Go ahead and thankful.
[38:21] Again going to a last main question before we move to our
[38:24] rapid fire round. This is what's been your biggest
[38:27] learning investing in startups over the years, earlier, earlier
[38:30] stage and now at growth stage. Yeah, so and it's simple as
[38:36] form, trust the process, you know, early on or I've been
[38:40] blessed to work with, you know, amazing people throughout my
[38:43] career, you know, from the onset to today.
[38:46] And I've really viewed it as as a sponge opportunity, right,
[38:49] where, you know, I should be learning from whomever in every
[38:53] interaction, right. And early in my career, I'd say
[38:56] I had a lot of uneasiness. And by that, you know, think of
[39:01] it as things are meant to be broken, right?
[39:02] You got to fix some things, right?
[39:03] It's not always, you know, up and to the right or you know
[39:06] what the phrase I like to use is.
[39:07] It's not always, you know, rainbows and unicorns, right?
[39:10] And I would say, you know, I struggle with that early on in
[39:13] my career because you saw these great examples, right?
[39:15] You saw, you know, what, what Facebook did, right?
[39:18] You saw what some of these companies you did.
[39:20] And you're like, wow, like can't every business be like that?
[39:22] And, and part of that is, you know, just being, you know,
[39:24] early in your career and, and, and not seeing, you know, those
[39:27] things, right? And it's a repetition and, and
[39:29] reps is very important. And then, you know, when John
[39:33] and I launched, you know, software growth equity one, I, I
[39:37] would say, quite frankly with, with his mentorship, you know, I
[39:39] found my stoicism and my ability to trust the process no matter
[39:43] what. And so, you know, from my
[39:45] perspective, that was, that was a hard lesson learned, right?
[39:48] And I think that relates to a lot of our entrepreneurs where,
[39:51] you know, when they start their companies, right, they're
[39:53] fearless. You're right.
[39:54] It's like, Oh my, like I've got the best idea.
[39:57] Everybody wants it, right? Field of Dreams, if you build
[39:59] it, they will come. Well, then reality sets in,
[40:02] right? And it's hard, like, and it's
[40:04] the same on our side of the table too, right?
[40:06] Like every single day, right? It is difficult and it's it,
[40:10] it's mashing through problems. But when you have really good
[40:14] people, you can get through anything, right?
[40:17] And so for me. You know, being with my team is
[40:22] something that I absolutely love, right?
[40:24] And I would do anything for them.
[40:25] And I hope if you ask them the same question, you know, they,
[40:28] they would reciprocate, right? And that's hard, right?
[40:32] Like it, it's just a hard thing to, to come to terms with.
[40:34] And I was, you know, lucky enough to have, you know,
[40:36] amazing mentors and, and quite frankly, you know, John, who,
[40:40] you know, had a lot more experience than than I did at
[40:42] the time. And, and saying you've got to
[40:44] trust this process, right? And, and as soon as you know,
[40:48] adhering to that and trusting that when things feel uneasy, we
[40:52] had a lot of great success. And I would say, you know, Fast
[40:55] forward to today, like it's all worked out extremely well,
[40:58] right? Like the, the fund is
[41:00] performing, the firm is performing, we're having a lot
[41:03] of fun while doing it, right. And so, you know, from my
[41:07] perspective, it it just is truly boiled down to to trust the
[41:10] process. Absolutely.
[41:13] Moving to the rapid fire on wherein I'll ask you 6 quick
[41:17] questions about the investing you're doing and you have to
[41:20] give 6 quick answers. Sounds good.
[41:22] All right, let's do it. Awesome.
[41:24] The first one is what are the sectors and regions you invest
[41:27] in? Easy.
[41:28] All right. So sectors, human Capital
[41:30] Management and I've talked about it a lot on the call.
[41:32] I would say 1/3 of the portfolio, you know, 4th of the
[41:34] 4th, 1/3 to 40% of the portfolio will be in that DevOps
[41:38] productivity, right? Think of Excelo, you know, which
[41:41] isn't fun too, you know, we'll sit in that category.
[41:45] And then anything around kind of risks, you know, compliance
[41:48] governance, you know, we we really like that.
[41:49] And that could be anything from supply chain, you know,
[41:52] industrial tech, etcetera. I think from our perspective,
[41:55] there's there's huge opportunities to build those
[41:57] mission critical companies. And then in terms of regions, so
[42:00] the firm is is coined the term, you know, Rodeo region, which to
[42:04] the coastal folks may seem, you know, you know, different the
[42:07] easiest way to think about it, right is, is, is great core
[42:10] values at the end of the day. And so finding great people that
[42:14] are trying to build great companies, you know, is
[42:16] important. And so we spent a lot of our
[42:17] time in that that rodeo region, which is 16 consecutive States
[42:21] and two Canadian provinces. We always launch, you know, a
[42:24] headquarters or a center of excellence within Denver, Co.
[42:28] That's a big part of, of our investment thesis.
[42:30] However, you know, we, we find opportunities globally.
[42:33] So from a software perspective, which is different than you
[42:35] know, maybe you know, traditional buyout or something
[42:37] of that nature. We've acquired companies in, in
[42:40] Wollongong, you know, Australia, we just acquired a business over
[42:43] the summer in, in London. We acquired a platform asset in,
[42:48] in Tel Aviv, Israel, you know, earlier this year as well.
[42:51] So we can go global, but keep in mind that we bring that inertia
[42:57] to Denver, Co and into that Rocky Mountain region as we
[43:00] think about building those companies in the rodeo region.
[43:03] Got it. What's the typical stage of
[43:05] investment? You can talk in terms of maybe
[43:07] the fundraising ground last close or in terms of the revenue
[43:12] they're at right now? Yeah, I think what's more
[43:14] relevant is it's kind of size and scale.
[43:16] So for us it's less around, hey, you know, how much money have
[43:19] you raised? You know, we kind of look at
[43:21] that as aside. I think for us, it's more around
[43:23] how much scale have you put on the business with what capital
[43:26] you've had, right, and that efficiency.
[43:28] And so I would say on the low end, 5 million of annual
[43:31] recurring revenue, you know, and we'll go up to 20 million.
[43:34] I'd say if you kind of look at, you know, core portfolio in the
[43:37] last, you know, 3 or 4 platforms, I'd say closer to 10
[43:40] to 15 on entry is where we see a lot of great stuff.
[43:43] So for from our perspective, it's really, you know, you've
[43:47] been able to prove that you can get to some scale, right?
[43:50] You built a good enough product and how can we, you know,
[43:53] extrapolate upon that is, is where we like to focus.
[43:56] And so as you kind of get closer to that 10 market, you're
[43:58] pulling out some of that inherent risk that may have been
[44:01] historically at the 345 million of of annual recurring revenue.
[44:05] Got it. Do you have ownership targets
[44:08] and companies? Yeah.
[44:09] So we only do majority control transactions.
[44:12] So the, the smallest ownership we've we've taken in in a
[44:15] company is 60%, the largest have been 100.
[44:19] I would say kind of both of those are the outliers.
[44:21] So you know, the 60% it was unique where you know, we had
[44:24] folks founders that you were huge believers in the business,
[44:27] you know, didn't want to you know, sell a majority and wanted
[44:30] a big piece of that proverbial second buy the apple.
[44:33] And then at 100%, we had a, a platform where, you know, there
[44:36] was 83 people on the cap table. No one owned more than, you
[44:39] know, 2, three, 4%. And so as we kind of thought
[44:42] about it was, it was, and it had been around for quite some time
[44:45] and it was just the natural evolution.
[44:47] You kind of cleaned that up. And so we, we acquired 100% of
[44:49] that. But if you wanted to ask about
[44:51] kind of sweet spot, I would say that kind of 70 to 90% is that
[44:55] kind of core sweet spot of, of what we try to target.
[44:57] And you know, that's kind of fully inclusive of the the
[45:00] mansion pool we put in place, you know, post ownership for for
[45:03] the power network folks and the rest of the organization to go
[45:05] create value together. Absolutely.
[45:08] Do you have a typical check size?
[45:10] You can give a range. Yeah.
[45:12] So, you know, right now I'd say we're averaging kind of 40 to 50
[45:15] million. So I would say we can go as as
[45:17] low as 3035, you know, on the front end, you know, we can go
[45:21] up to, you know, 100. But I'd say as we think about
[45:25] where we play and, and kind of that course, we spot it really
[45:28] is, you know, 40 to 50, you could even say 60 million as we,
[45:32] you know, think about going and building companies and that
[45:34] that's kind of all-encompassing, right?
[45:35] That's not, you know, all going on the on the cash, you know, on
[45:38] the balance you get close most of that's going out in terms of
[45:41] secondary, right? So that's acquiring that
[45:43] majority position. And then we'll put, you know, 8
[45:45] to 10 million of of primary capital on the balance sheet for
[45:49] growth initiatives. And the other piece, you know,
[45:51] maybe a little bit different in our strategy than others is, you
[45:54] know, we want to be that one stop shop, you know, from the
[45:56] capital capitalization perspective.
[45:57] So it's not a hey, we put this money on the cap table, you go
[46:01] burn it for 12 months and then we go back to market and and
[46:04] fundraise and raise another round.
[46:05] That money is meant to last us the entire whole period, you
[46:11] know from from kind of investment day all the way to to
[46:14] liquidity event. Got it.
[46:16] We can found. Let's get in touch in case
[46:18] there's a direct way. So I'm less of a socialist
[46:22] person. That's just more my, my
[46:23] personality. But, you know, people can get a
[46:26] hold of me at kramer@bowrivercapital.com.
[46:29] We, we always are, you know, love to talk to folks and, and
[46:32] people reaching out. And, you know, we like to call
[46:35] it corporate karma, right? So whether it's a fit for us or
[46:37] not, we're happy to share, you know, that advice and and kind
[46:40] of key Nuggets of how to build these companies because in the
[46:43] end, we want to see great companies be built across the
[46:45] board. Absolutely last one way, can our
[46:47] listeners follow you and board over?
[46:50] Well, on your podcast here, you know, and, and hopefully you
[46:53] know, we, we've had a, you know, a good time today where you
[46:55] know, you'll, you'll invite me back for, for another series
[46:58] here to maybe talk about an exit or, or something like that.
[47:01] But you can listen to me here and you know on on LinkedIn.
[47:05] Absolutely. I'll make sure to put those
[47:07] links in the show notes. Hello, thanks so much for doing
[47:09] this with us and it was a pleasure having you on and loved
[47:13] all your insights. Thank you.
[47:14] Wonderful. Thank you so much.
[47:15] Have a great day.

Shows are listed from Apple Podcasts' charts and directory, and Podcast Index where it is used. Every show and episode belongs to its publisher and plays from the publisher's own feed; this site hosts none of them.