Episode 151: Jim Toth of Riverside Acceleration Capital on Turning Data Into an Operating Advantage

Episode Transcript   

00:02:48.760 · Shiv Narayanan

All right, Jim, welcome to the show. How's it going?

00:02:48.760 · Jim Toth

It's great, I'm doing great. Thank you for having me. Yeah.

00:02:53.440 · Shiv Narayanan

Excited to have you on. So why don't we start with your background in Riverside and then let's take it from there?

00:02:58.590 · Jim Toth

Absolutely. Um, so I'm the founder and managing partner of Riverside Acceleration Capital. So we call it RAC for short. And, um, I started the firm ten years ago. You know, I've really spent my, my career investing in high growth software companies. That's what I love doing. Um, I was doing that for 20 years, and, um, when I started the firm ten years ago, uh, you know, I kind of had a chance to start with a clean sheet of paper and just start the firm exactly how I wanted.

Uh, and there were there were two things that were really important to me. One was, I think that I think that scale really matters. So I wanted to do I wanted to have scale in terms of, uh, ability to do value creation. I think there's just a lot that you can do when you have resources. It's hard to do when you're small.

And so we started RAC within Riverside. That's unusual. You know, Riverside is a, you know, multi-billion dollar private equity firm. And so we're kind of the arm of Riverside that invests in these high growth tech companies.

00:04:12.350 · Jim Toth

And then the second thing was that was important to me was that we had a lot of flexibility in how we invest, because I think that the way that founders manage their, um, like their capital raising manage their capital structure, how they strategize around that makes a big difference to how much they, you know, how much value they have ultimately.

And so we have a lot of flexibility in how we invest so we can invest. You know, like everything from like small targeted non dilutive growth loans all the way up to, you know, proper series A, series B true growth rounds. So that's kind of kind of a long answer. But think of us as like big company resources, but very targeted to companies that are at their kind of high growth scale up stage.

00:04:57.590 · Shiv Narayanan

How does the relationship work between the riverside acceleration capital side and the and the standard Riverside firm? How does that work?

00:05:05.910 · Jim Toth

Well, the big thing for us is that we are able to plug into their value creation resources that they've built. And, you know, they've been around for 35 years. They've owned like a thousand companies. They have a team. It's like more than 50 people who are, you know, not like me, not like investors, but people have actually run companies and, um, been CEOs.

And so when we invest in one of our companies, like, it feels exactly like you have a multi-billion dollar private equity firm investing in your business. Um, so that's that's the key thing. And then and we can leverage all that. Right? So we leverage all of that brand. You know, they've got offices all over the world.

So we're you know, executing our strategy and finding the companies that we want to invest in. But then we're we're leveraging that that all that value creation heft, which is like way more than we would have if we were our standalone firm.

00:06:01.350 · Shiv Narayanan

And so you're basically bringing in your own deal flow. It's not just like co investing or focusing on the same deals really.

00:06:08.390 · Jim Toth

That's exactly right. It's where it's it's the companies that are exactly the ones that we want to invest in that are and you know like there are very specific things that we that we look for, but then we're taking all that value. We're like basically plugging into that value creation infrastructure that already exists for Riverside is a much bigger firm.

00:06:27.470 · Shiv Narayanan

And so what is it like an ideal investment look like what what type of profile company are you looking for? What characteristics do you try to vet for?

00:06:34.070 · Jim Toth

Well, so what I really enjoy and where we focus are companies at that. Um, you know, where it's past the startup stage. So the kind of product startup risk is behind is behind these companies. And they have a product that that that people love and they're growing well. Uh, and we are helping them get from, you know, like

00:06:57.900 · Jim Toth

that to 20 million plus of, of revenue is like, what, where, where we really focus. So kind of like our range. We're typically starting to invest in companies when they're somewhere in the two and a half to 15 million of revenue range typically. And then we're applying all the resources that we that we have available to us, um, and trying to help companies get past 20 million of revenue and beyond.

Um, but that, you know, that kind of 20 million mark being a typically a very important inflection point for companies where they they have then a lot of options at that point for what they want to do.

00:07:40.820 · Shiv Narayanan

Mhm. Mhm. And are you guys getting involved operationally inside these companies. Are you more hands off than your investment model?

00:07:48.260 · Jim Toth

We're very involved. And that that, again, is where kind of the riverside value creation like being able to plug into that. That's where that becomes so important. So we like, you know, when we invest in a company, even before we close the investment, we're bringing somebody from that value creation team, um, in into the, um, like they get involved in the process.

We're kind of building the business case with the company, uh, even before the investment. And then once we make the investment, we take companies through, like quite an extensive, uh, kind of assessment process that it's very iterative to work with them on. What are their priorities, what's important for them, what's really going to what are the levers that are going to drive growth?

Um, and then whatever we decide on is those priorities they're executing together with the value creation team. Um, and meeting with, you know, that they're very active, actively involved. So, you know, like weekly, bi weekly type basis executing like we call them sprints. And then we on the investing team are also involved with companies either as board members or board observers.

So it's kind of both sides of it.

00:09:07.340 · Shiv Narayanan

I guess that takes a big investment on your side as a firm, right, because you're bringing these resources to the table. So how do you stack up for that? Or like how have you managed that as a firm versus, let's say, hiring internally inside these companies or using outside firms and resources?

00:09:24.460 · Jim Toth

Well, so it is a big investment. Um, but, you know, for one thing, we're so we're very picky about, like, as you can imagine about what companies we work with. Um, so we're starting with, like, you know, probably this year we're going to talk to something like 700 companies. So it's really, really high volume.

But we're only investing in a tiny fraction of those. So we'll maybe make 12 or 15 investments in a year. Um, so it's very, very selective. And then that's where, uh, like having access to such a big team that is, you know, kind of broader Riverside that we're able to leverage that. Uh, and that's the, you know, the Riverside value creation team is more than more than 50 people, you know, there, like there are a few that we work with a lot who are more like software focused.

But it's that kind of combination of like being being very, uh, like only investing in a small fraction of companies that we talk to and then also drawing up the big resources that we have here.

00:10:31.300 · Shiv Narayanan

And can you explain how that model works, like is Riverside paying for that or are you passing the cost on a portfolio companies like how does the model actually work?

00:10:40.970 · Jim Toth

Most of what we do is part of what comes with working with us. And so like that's it. That to me is like as an investor in, um, in our companies, you know, we're trying to constantly prove our value. We like we want our companies to love us. We want to be able to keep investing behind that, behind them. Uh, in order to do that, I think we have to.

I think they they should expect a lot from us. Um, and so most of what we do is part of what comes with working with us. Um, you know, there are other aspects of it that, you know, like, still benefits that we get from scale. Um, where so, like, for example, Riverside has a,

00:11:28.330 · Jim Toth

a development team offshore that our companies can use, and they can use that at cost. Like that's a huge that's a huge advantage. Um, like we have a recruiter on on our like actually who works with us that that goes in like. Finds especially like go to market roles for our companies and. That's kind of like below market rates.

They can access that. You know, we have things that are negotiated at a firm level like, uh, um, you know, like we discount on, on AWS, like, you know, those are small examples, but it all adds up to actually like a big impact for our companies. And those are the kinds of things that we can only do because we're so big.

00:12:07.450 · Shiv Narayanan

Yeah, I think I think that's definitely one of the, one of the big advantages of having a value creation team like that is they're like a uniform approach that you follow. Because I get the idea that you're vetting these companies up front. Is that the X factor in determining like, hey, we have this team, this is what we specialize in.

So we're going to find specific types of companies that this team can help or after the fact. Are you kind of like building a value creation plan that's custom to that business. Um, and then trying to figure out which resources can map to, to that particular business.

00:12:40.050 · Jim Toth

It's two separate processes if you want to think about it that way. Um, so we have um, and like because we look at so much volume. Uh, you know, I mentioned that we're going to talk to, you know, whatever it is, 700 companies or so this year. We're going to invest in 15 of them. Um, there's a lot of data science that goes into that decision.

Um, so, um, because we've been looking at like, we have a lot of data because we look at so much volume. Um, we have a lot of, uh, also outcomes data for because we make a lot. You know, it's it's, uh, we're choosy, but it's relatively high volume. So we have a lot of outcomes. We see a lot of companies multiple times.

We're able to use kind of machine learning pattern matching against that to really pick out which of the companies that we think are ready to hit that inflection point and really scale. Um, and, you know, like the more companies we look at, the better those predictions become because we get more data that feeds the model.

00:13:48.120 · Jim Toth

Um, that's how we get to who enters the portfolio. And then like shortly before we actually make an investment, that's when we start the second piece of the process of like from a value creation standpoint, what's going to be the best, um, use of capital here for the company? Um, and so I'll give you maybe just use like a specific example that like the most recent company that, that we just invested in, I was just looking at this and we go through an assessment that takes a long, it takes like maybe half a day, and it involves most of the executive team and we go through, um, uh, sales, marketing, customer success.

Like, those are the big three. Um, and it's like quite an exhaustive list of, you know, think of like best practices, things that like, and not every company does everything. Uh, nor should they, but you kind of go go through that all. And then we benchmark that against other companies that are of similar stage that have done the same assessment.

And we can tell a company like so in this example, like, um, you know, for the marketing one, uh, this particular company was, is really good, like unusually strong on digital, um, like digital strategy. So we're not going to touch that. They are kind of below benchmark on their content strategy. But in this particular case it's it's like not a market where content is particularly important.

So we're not going to think about that. But they're also kind of below the benchmark on their channel strategy. And so okay. But that's actually important and low hanging fruit. So let's put that to the top of the list. And then we go through a version of that for sales and marketing and customer success.

And then the output is like, here are these things where there's like maybe low hanging fruit opportunity. And then here are the things that are actually important versus not. And then that's how we prioritize the like the value creation program.

00:15:46.280 · Shiv Narayanan

Right. Yeah. That's that's a really good approach. And I think it just helps you stack rank what to focus on. And I feel like a lot more companies should be doing that. I think one of the things that as you're talking and you kind of walking through this, it's interesting to see your model because you guys are investing a lot into your portfolio companies beyond a regular private equity firm.

Can you talk about that just because that's a strategic decision as a firm?

00:16:11.000 · Jim Toth

It is. And um, and especially where we invest a lot of our energy and a lot of our resources is on kind of like go to market scalability and repeatability. Like, like our companies like the reason I love this stage is that the like? I think that once that, you know, once the startup stage is behind you.

00:16:37.120 · Jim Toth

Um, and you've proven that there's a product that the market wants,

00:16:42.200 · Jim Toth

and almost all of our companies are founder led software companies. It's a very exciting time because if you get the if you then get the marketing, the sales and marketing motion, right. You can, you know, you can really grow quickly. It's just about adding fuel to what works. And that like that sounds easy, but it's actually is very hard to do.

And especially like our companies there. These are founder led companies like most of them haven't scaled a business from 5 million to to 30 million or 50 million. But Riverside's done that a lot of times. Um, and so that's what they're looking to us to do, is to help them in whatever way that we can find that kind of repeatability so that it becomes something that's like systematic, and the growth also becomes inevitable.

00:17:28.470 · Shiv Narayanan

Yeah. Yeah, I think I think that definitely, definitely resonates because I feel like the more you invest, it's kind of like sometimes PE firms will buy a business and they don't provide enough operational help, but at the same time they need to generate alpha for their fund. And those two things go very hand in hand.

And yet they're hesitant to invest more resources on their own team or what value they're bringing to their companies. And I feel like a lot of value is left on the table because of that. And but I also understand, like some firms are smaller and they may not have the resources and they're making these kinds of trade offs, but it's definitely like a lever that the PE firm itself could pull.

00:18:07.950 · Jim Toth

I think that's exactly right. And I think that, um, like, the other thing I love about the way that Riverside, uh, and the way that we're kind of plugging into the value creation mindset here, like, is that idea of being so kind of targeted with with how you invest like because I think there's a big challenge.

You know, you like, uh, as a, as a founder, there's so many different areas that you can invest. And it's like, I think it can be very I think it can be quite overwhelming. And so I love the the methodical way that we're kind of going through and figuring out where like where is the opportunity, what's important.

And let's, let's like only focus on the intersection of those two things. Like we literally get to the level of like, all right, um, even before we close the investment, we say to a company, uh, all right, here's what you're spending today on sales and marketing. And here are your metrics. Here's your growth rate and your retention and all the 15 KPIs that you track.

We're going to we're going to increase that sales and marketing spending by X million dollars. Here's exactly here's like how we recommend we're going to spend that. And this is what we think the impact is going to be on exactly those metrics. Like we really try to make like a very specific business case.

And the only reason that we can do that, it like it does, come back to just the like scale. And the fact that we've done this so many times.

00:19:38.110 · Shiv Narayanan

How did the founders or the management teams take that? Because a lot of executive teams want to run the business their own way. And so in this case, they're partnering with someone who's very actively involved. So is that part of your vetting process to make sure that they're okay with that? And just curious how you how you manage through that.

00:19:56.110 · Jim Toth

That's why I think it's important to talk about these things ahead of time. So that like that, um, the business case that I just described to you of here's, here's this is what you look like today. This is kind of what where we're going to invest over the next three years and what we think that outcome is going to be just like, make sure everybody's agreed on that.

And if there are and, you know, I guess it is part of our vetting process in a way, because if if companies don't like if they're not interested in making those kinds of investments and talking about it in such a specific way, then they're probably not going to want like we're probably just not the right partner for them.

Mhm. And by the way, you know the other thing I'll say that that's so unusual is that I mentioned at the start this idea of like how flexible we are with the types of capital that we can invest, whether it's a growth loan or, or growth equity round. You know, we're doing this even sometimes as low as like a like $1 million growth loan.

Like we'll start with that. And you know, it might be very targeted investment. And it's a great like sometimes that's what companies need. And I love that we can be like tailored to to that degree. Um, like if you want to do something small and hit some specific milestones, we can help you with that. And then when, like when you do hit those milestones and you decide maybe, you know, maybe you want to do a bigger growth equity round, then we can be with you for that whole journey.

I don't think there's anybody else that can say that.

00:21:27.150 · Shiv Narayanan

Mhm. And so then in those situations like how do you look at returning the fund because you're getting so operationally involved and you might stick around with these businesses for an extended period of time. So how do you look at more just managing the fund and making sure you're doing right by your LPs?

00:21:43.270 · Jim Toth

It's a huge advantage for us. Like I think it's it's a, it's a, um, like I think a lot about network effects and like I started

00:21:54.950 · Jim Toth

um, like again, like very foundational to me is I wanted to make sure that we were that we were big. Uh, because I think that having with scale, you get more volume, you get more intelligence, you get more nodes in the network. Um, you know, like our companies, we had them all together. We had our CEOs together in New York a couple of months ago.

And the big topic right now is, um, like AI search and AI discoverability. And, you know, we've got a we've got a big portfolio. We have, uh, I think like more than 50 active companies right now. And we can we can put them together and they can talk about this stuff. Like, I think it becomes sort of a self-reinforcing cycle that helps them kind of innovate and learn from each other.

00:22:45.460 · Shiv Narayanan

We'll get back to the show in just a moment. But before we do, one of the most common and important value creation levers that we hear about on the show, from private equity investors and our own PE partners, is go to market. Yet when these same PE partners bring us into their portfolio companies or new target investments that they're exploring, we find that the marketing function is quite immature, underutilized and under optimized.

And so that's a huge opportunity that we see inside these companies. And if you have a portfolio company that you feel like it'd scale a lot faster to drive more pipeline and revenue, or you're looking at a new investment where you feel like that could be core to your investment thesis. But we'd love to explore that with you and figure out how we can partner with you to drive more enterprise value creation on the marketing side, similar to the way that we've done with major PE firms like Updata, HG, STG, and many more.

At this point, we've done hundreds of engagements across hundreds of industries and verticals, and we have a ton of benchmarks and frameworks that we bring to these engagements to help you drive as much enterprise value as quickly as possible. So if that sounds like something that you might be interested in, you can just email me directly at [email protected] or go to our website and schedule a demo, and we'd love to speak with you about it further.

And now with that said, let's get back to the show.

00:24:04.300 · Shiv Narayanan

One of the things that I've heard about Riverside, and I think it's one of your distinguishing factors, is how you guys are leveraging data. Maybe you want to talk a little bit about that.

00:24:12.060 · Jim Toth

Well, the data science piece is, is is like I can't overstate how important that is. Um, and because we look at so many companies, um, and every company that we evaluate, um, we're seeing, you know, like in extreme granular detail,

00:24:35.500 · Jim Toth

the, the, the key metrics, these, these companies. So the, the financials, the the scaling metrics, the the retention metrics, the rule of 40 metrics, you know, it's like whatever, like 100 plus data points on every single company. And we've been doing that for years. And these are all because we're so focused on these software, uh, technology businesses that are in that like two and a half to 20 million revenue range at investment.

Like, that's it's really hard to get that kind of data on private companies. Most of what you can get usually it's like surveys and you don't know if it's right or it's like self-reported stuff like this is. This is like verified data. Yes. Um, and that helps us to

00:25:21.500 · Jim Toth

well, it helps us make better decisions because we can make very good predictions about like given a set of metrics today, what are the chances this company is going to scale over the next, you know, x number of years without burning too much capital. So it helps us with our decision making. But then it's also like really helpful for our for our companies.

I mean, if you think about it like we, we know these, these things that you can't, uh, you know, like we know that, uh, companies that are growing over 35% right now are spending eight percentage points more on product than companies that are growing less than 35%. I mean, I'm just like pulling out a random example, but it's like to that level of granularity, like that's super, super useful for our portfolio companies.

00:26:05.780 · Shiv Narayanan

Yeah, yeah, I know totally. Um, even on our, in our business. Like when we, we meet so many companies every week, every week I'm talking to like 15 to 20 CEOs or PE investors. And you see their data firsthand and they're real. And there's pattern recognition, right, in terms of how much their marketing spend should be or how much pipeline should they be generating, or which channel should they be spending money on, or what's a good amount of return on ad spend that they should be seeing in a market like this?

Like there's all these benchmarks, and I feel like a lot of those are the metrics are invisible to people that are not in, in that particular space or don't have exposure to metrics like that. And private equity firms in particular, you guys need so many companies, and it would be a shame to not leverage that data to operationally.

00:26:51.050 · Jim Toth

Yeah, I totally agree. I think I think there's so much value in it. Um, and, and we're seeing it and, and, uh, it's healthy, you know, so we actually make it like I have a strong belief that that this data is very hard to find. It's very useful for founders. We actually make it. It's most of it. Not all of it, but a lot of it we make publicly available.

You can you can like every month we kind of obviously we blind it everything. But these are like aggregated metrics that I hope are useful for people. It's like definitely useful for our portfolio.

00:27:23.050 · Shiv Narayanan

Yeah, yeah. How has that helped you on the AI side with your companies? Talk about how you're leveraging it for how are you leveraging AI as a as a fund and a PE firm, and then how you're looking at it for your portfolio companies?

00:27:39.890 · Jim Toth

Well, the like the big thing for us is on the, you know, it's AI, but it's really kind of in the sense of like advanced statistics and machine learning. So because to take the like these predictions that, that, that, that we're able to make to help us in our decision making, you know, it's, it's, uh, you're running through like extremely complex combinations of of hundreds of data points.

And, and we're able to make predictions that are. I mean, it would. Like I can't share exactly because it's like blow your mind how accurate we can get when we backtest this stuff. So that's so it saves us a tremendous amount of time because it lets us only focus on the, you know, we're trying to find the very, very best companies.

Like I talk about like the top decile of companies. Like that's really what we're targeting. Which is easier said than done. Um, but we actually have the data so that we can kind of objectively when, when we have a company like, we can kind of objectively make a determination of which ones really are like, best in class to that degree.

So it's a huge time saver for us. And then in terms of our portfolio. So,

00:28:56.250 · Jim Toth

you know, like I just think this is such a cool time to be investing in technology. You know, Like I said, I've been doing this for 20 years. I mean, this is like, without a doubt, this is the most interesting time to be doing this, because I just think that there's there's this idea that has taken hold in the world.

You know, it's almost like a cultural phenomenon that companies want to they want to grow, but they don't want to add a lot of people.

00:29:23.320 · Jim Toth

Um, and,

00:29:25.880 · Jim Toth

you know, you look at how people are doing work today and the amount of functions that, that you can automate now that you couldn't automate even five years ago. And just like the throughput per person is going up in like, really dramatic ways that we haven't seen in probably decades. And the only way to make that all work is with technology.

Um, and so like that. So that to me is what's so interesting about it is that all the like the way that people work, I think is changing in, in, in a, in, in quite dramatic fashion in our companies. These these sort of like post startup high growth enterprise technology companies. Like that's like exactly where all the changes are happening.

00:30:10.840 · Shiv Narayanan

Yeah. Yeah. 100% agree. As an investor on the software side, how are you managing the risks associated with AI and also just the underlying product threat, if you will. Like are this this something that a lot of companies are trying to scramble to add AI components to their to their product offering or capabilities, and at the same time, like there's this displacement risk as well.

So I'm just curious, like, how are you managing that?

00:30:38.480 · Jim Toth

You got to think about it in. Um, so I think about it this way. Like there, there there are kind of three like broad categories in my mind. There are

00:30:50.080 · Jim Toth

companies that are

00:30:53.200 · Jim Toth

like so like there's no doubt that that the way people work is, is changing like that is like, you know, there are trillions of dollars being spent on AI right now, and it's just like right in the front of everybody's mind. I mean, so like the changes are absolutely, absolutely coming. Um, and so

00:31:12.920 · Jim Toth

we, you know, I think about like there are companies that are enabling these changes. Uh, so think about things like cloud infrastructure or, uh, data, data hygiene, data management. Um, that's a big focus in our portfolio. So just kind of like what's the enablers of, of AI transition.

00:31:38.680 · Jim Toth

Um, and then category two are

00:31:43.000 · Jim Toth

kind of outcomes of the, of the AI transition. So the things that, uh, almost like because this is happening, it's almost inevitable. So like the big one there is like cybersecurity. So with with the advent of AI, Cybersecurity has become a much more intense problem. And so that's category number two.

And like, you know, if you take our portfolio and you sort them by growth like some of the ones that are growing the very fastest or are in those first two categories like kind of data management, cloud infrastructure and cybersecurity, uh, fraud prevention. And then there's a, there's a third category of which I think is kind of where your question is, which are

00:32:26.040 · Jim Toth

complex enterprise applications. Um, you know, certain, um, like vertical software solutions, um, kind of very specific, complex enterprise applications, uh, enterprise automations, things of that nature. And when thinking about those companies, you just have to make sure that you're not competing directly against the

00:32:57.240 · Jim Toth

large language models. Like, obviously you don't want to be competing against them, but a lot of these companies are really, you know, kind of supercharged by AI, like the like. A lot of them are growing super fast. I'm trying to think, what's a good example? Like so we have a one of our companies is is in the health care area.

And they were selling a tool that was that was used in um, in call centers, in health care. And now they've been able because they have all those like kind of very complex workflows encoded already in their software. They're able to put, you know, an agent on top of it, and they can automate the whole process now.

And so they're like, they're literally charging four times what they were because instead of selling a tool now they're they're like really selling like a full automation and things like that are happening everywhere. Like not everywhere. You got to be, you know, not every company is a winner and all this.

But if you pick the right companies and if you're super selective that like the tailwinds right now, are probably more dramatic again than anything that's that I've seen in 20 years of doing this.

00:34:03.910 · Shiv Narayanan

Has it changed how you're vetting companies when you're deciding to invest? Because there's this existential risk involved? A lot of these companies. So I'm curious, like how has it changed your investment approach?

00:34:15.909 · Jim Toth

To me, it gets it gets down to

00:34:18.870 · Jim Toth

to innovation. And

00:34:23.510 · Jim Toth

you know, like where like where

00:34:26.870 · Jim Toth

if I kind of step back in technology, like if you get these investments right now, the rewards are, are, are really substantial in tech. And so there's competition is, is is a natural state of the world. Like that's kind of what that's what makes it interesting. And that's like that's why we're here. Um,

00:34:52.629 · Jim Toth

you know, like, one of our companies was a they were excited. We were. They were in a board meeting. They were saying they'd gotten number five on, on G2 for for their category. Uh, and I was like, oh, I'm like, curious how many are in that category? And it was like almost 5000 companies, like in one tiny little category.

Like, there's always been a ton of competition. Um,

00:35:15.230 · Jim Toth

so that that hasn't changed. Um, but I do think that

00:35:20.550 · Jim Toth

innovation has become a lot more pressing. Mhm. And so like the companies that are growing fastest, they are they're spending a lot more on products. They're a lot more like product focused. And then the other point is that there's like what we're seeing in our data is that there's an increasing dispersion between called the median company.

And like the very best companies. Um, so like like for example, just one data point. Um, companies that are, uh, rule of 40. If you look at their growth rates and you compare it to the non rule of 40. Group are growing three times faster. I mean there's a huge difference. And that's a gap that's increased in since ChatGPT came out.

So I think there is this dynamic of like um the best companies are getting better. And probably a lot of that is because of AI, because like the best companies are taking AI and they're automating their internal processes, and whatever is working there is, is working like more at the speed of AI. And then companies where there's friction, like probably the AI is like amplifying that.

I mean, I don't know that to be the case. That's just my hypothesis.

00:36:31.270 · Shiv Narayanan

Yeah, there's definitely truth to that in that, because the best companies would be better at process too, and have better people and better product market fit a bunch of other things working in their favor as well.

00:36:41.710 · Jim Toth

Um, yeah. You could basically like, automate what's working really well. But then when companies have like whatever friction or dysfunction in there. They're automating that too. So I think that's going to continue.

00:36:51.150 · Shiv Narayanan

There's some. Yeah. Exactly. And then also I think AI is also created a situation where there's a lot more noise and less quality work out there as well. So there's an opportunity to stand out. Um, Jim, we're coming up on time. Just in the interest of that, just if people want to learn more about, uh, Riverside or work with you or get in touch with you, what's the best way for them to do that?

00:37:13.230 · Jim Toth

Uh, riverside.ac, uh, come to our website. It's very easy to find us. Uh, we love talking to software companies that are two and a half to 20 million of revenue. Uh, and, um. Yeah, we'd love to hear from you.

00:37:27.310 · Shiv Narayanan

Awesome. Yeah, we'll be sure to include that and the links in the show notes. And with that said, Jim, thanks for coming on and sharing your wisdom. I thought it was a very good deep dive into how you guys approach growth and work with your companies. And I think a lot of firms that don't have as much of a robust team and involvement with their portfolio companies may kind of rethink their approach and potentially do the same.

So I appreciate you doing this.

00:37:46.900 · Jim Toth

I hope so, thank you. It was a lot of fun.

00:37:49.660 · Shiv Narayanan

Thanks for listening to today's episode. Before you take off just a few requests from our side. Number one, if you haven't done so already, please subscribe to the podcast on iTunes or Spotify or YouTube or wherever you go to listen to your podcasts. Number two, if you are in the market for due diligence services, strategy consulting or fractional CMO services, please get in touch with us at

00:38:14.460 · Shiv Narayanan

two. And third, please buy a copy of my new book, Exit Ready Marketing. It covers a ton of concepts that we take our customers through private equity investors, B2B companies, CEOs, operating partners, and marketers. And there's a ton of great value in there that expands on my previous book post acquisition marketing as well.

So with that said, I hope you enjoyed today's content and we'll see you on the next episode.