Episode 8: George Rossolatos of CBGF
On How to Build Sustainable Growth with a Longer Term Investment Approach
On this episode
Shiv Narayanan interviews George Rossolatos, CEO and Managing Partner of Canadian Business Growth Fund.
George and Shiv discuss how CBGF’s investment philosophy and evergreen fund are a rewarding alternative to companies choosing rapid growth at all costs.
Learn how longer holding periods can be the basis of sustained, profitable growth and better returns for both founders and investors. Plus, hear how founders should be evaluating potential investors to build the right partnership.
The information contained in this podcast is not intended to constitute, and should not be construed as, investment advice.
- How CBGF’s investment approach can be a major benefit for founders - 3.55
- Why over-ambitious revenue targets can be detrimental to founders and businesses - 10.47
- How a company in the CBGF portfolio found success by taking a lower investments - 13.39
- The balance founders need to find between under- and over-raising capital - 16.08
- Choosing between early profitability vs high burn for high growth - 19.12
- Why and how founders should carry out due diligence on potential investors - 21.33
- The SaaS companies that have great potential but are often overlooked by investors - 27.30
- The potential benefits of a longer holding period - 31.00
- How CBGF create value by helping professionalize processes and systems - 33.25
- A realistic approach to company growth trajectories - 37.29
- George’s book recommendation - 38.46
Click to view transcript
Shiv: Hey, George. Welcome to the show. How's it going?
George: Great, Shiv - nice to see you.
Shiv: Likewise, thanks for being on. So why don't we start with the background about yourself and CBGF and we'll go from there.
George: Sure. My name is George Rossolatos. I'm the CEO of the Canadian Business Growth Fund. It's a $545 million minority growth equity fund. I was a founding CEO of this fund in 2018. And over the five years, we've invested in 31 companies, many of which have been SaaS, many of which have not, but the common theme has been companies that wish to grow and scale and build something that's - we build meaningful businesses over time and we've helped them to do that.
Shiv: And your mandate, is it primarily focused on the Canadian market?
George: Correct. We're focused on Canadian-based businesses. They're often - almost in all cases, exporting. Almost in all cases have US revenue or European revenue. But the headquarters are based in Canada.
Shiv: And what would you say - you know, just for the audience to understand more about the mandate and your approach - what's different about the CBGF from traditional venture capital or private equity firms?
George: One of our most unique features is our fund is evergreen. And it means that we can back companies for the long term. And I was an operator for seven years. I ran a - I did a turnaround of a public company and grew it. And you know, you can't build a great business in three to five years. And a lot of our venture capital world works in a three to five-year horizon. You know, there are five-year commitment period funds. They've got five years to then harvest. And it works out to a three to five-year average, they're tapping entrepreneurs on the shoulder saying, okay, time to go, time to think about an exit. And we don't have to do that. And in my experience is you want to make investments that, that manifest over time. And if you're only thinking about three years, you won't make those investments that don't pay off really quickly. And I think entrepreneurs cheat themselves out of building something that's more of a sizable business when they make those short-term decisions that invariably come from an investor influence sometimes. So that's the most unique part about our fund is that we believe in backing entrepreneurs over the longer term, believe in 10-year builds and 15-year builds.
And I think the other part is - the minority part is important because too many times when an entrepreneur gets to a certain stage and they haven't taken any money off the table for five, six, seven years, and they think sometimes that the only way out of this is to sell the whole business. And it's not, you know, there are sophisticated minority investors that can put some more money in, can create secondary opportunities, can, you know, can reward the entrepreneur for hitting milestones and let them buy their cottage and their house and what have you, and still go on and build something over time. And so, there's ways of getting all of that done. And we're trying to be a facilitator of that process.
Shiv: Right, I think both of those points are super interesting and spot on. So let's start with the longer-term outlook. You mentioned the three to five-year hold period that's standard in a lot of private equity firms and how that leads to short-term decision-making. It's kind of like election cycles, right? It's like you run for a seat, you get the seat and you get to govern for a little while and before you know it, you're running again and you spend far less time actually governing. And I think building companies is similar to that where If you have to constantly flip the business, you're in this deal management cycle where you're doing management presentations and building out these decks with investment bankers and you're spending far less time actually creating the value that needs to be created to grow the business.
George: That's so true. And the other parallel to that is I ran a public company and I'd be sitting on analyst calls thinking, what the heck is going on here? Because as you know, on branding and marketing spend, you make investments for the future, you make investments for time - sometimes you don't have an immediate payoff. And so when an analyst says, well, it didn't pay off this quarter, you look at them and say, ‘well, it was never meant to. And that's not what we're trying to build here.’ And I think we... the longer-term perspective is something that we need to really impart on a lot of our companies. And we're just in this environment of impatience and instant gratification that we want quick flips and quick turnarounds, but those are rare. And in a tougher market and a more muted market like we're in today, that doesn't really happen. You need to build it the old-fashioned way - build it over time and grow it.
Shiv: Right, right. Yeah, it's easier when you're in a bull run market and you can also almost, like, hot potato, you sell it to the next firm and then they sell it to the next one. And at some point, somebody's getting that hot potato and then the market's going to crash, right?
George: Exactly right.
Shiv: So yeah, and that's definitely happened to a ton of investors who've had to mark down their books or the cap table has more equity on it than the company is actually worth, right?
Shiv: And do you see that in your companies at all, like compared to other investors or because of this meticulous approach, like are the book values and the actual businesses that you've got, like are they in a better place?
George: So, to be clear, we're not a kind of unicorn chaser type investor. We're not a VC. We're backing companies that are scaling at a reasonable pace that are not really on the radar screen of a VC. For example, like, you know, we back SaaS companies that are - I say 30% service, 70% SaaS, that are growing at 30 or 40% a year. That's a good company. You know, that's hard to do. I - like I said, I ran a company - growing something at 30% a year isn’t easy - it's work. And so we find those companies, we back them, we help them grow. But as a consequence of that, we're not into the world of those really nosebleed multiples of revenue that I think a lot of VCs are getting caught on right now. We're more in between. We do back companies that aren’t profitable yet, but they're generally lower-burn companies. They're not the deep-burn type. So we're in a zone that's a bit different. So there's a correction there, you're correcting from three or four times revenue to two or three times revenue, you're not correcting from 50 times revenue to zero.
So I think we're in a better position. For sure we get caught up in markets that go up and down, but everyone does on the multiple side. But if you back businesses that have a real product market fit, that have got an entrepreneur that's driving it, and we... we've got a measured an approach to how we grow it. And we think that there's defensibility in all of that.
Shiv: I think that's really one of the key things that founders of companies need to look at more often is that you don't need to go on this VC hamster wheel where your valuations keep increasing. Then for you to actually have a meaningful outcome from that business, you now need to grow that business significantly more than if you bootstrapped it and you slowly grew it over time. I think those incentives are not fully aligned for for the founder versus what the VC investor wants to do because they want to deploy their capital and get rid of the dry powder and actually grow it as quickly as possible. And whereas the founder may not even be able to hit those numbers because they're unrealistic.
George: Yeah, the number of conversations I've had with entrepreneurs with exactly that topic - I can't even tell you how many - in that there are less sophisticated entrepreneurs that are just trying to hit a valuation number. And I want a 100 billion valuation. And I say to them, what are you talking about? It doesn't mean anything until the end. And by the way, having a step function to your valuation, there's value to that. You know, by hitting 100 just because you say 100, the next one's 50, you've lost your momentum and you've lost a whole set of investors that would otherwise be following you. Whereas if you build it to 60 to 80 to 100 to 120 over time in a modest manner, you're showing that track record and there's value in that track record of valuation growth over time and conservatism over time. And it doesn't mean anything to you. There's a bit of dilution here and there, but the real end result is when you sell it at the end. That's the only valuation that matters.
Shiv: That's when you actually get the opportunity.
George: The other, I mean, the other, the junk point to that is that, you know, don't raise too much, you know, don't say - and then entrepreneurs will say, I want a hundred million dollar value valuation, and I want to raise $50 million. Like, what are you going to do with the $50 million? How fast are you going to invest it? And so generally, if you get into the numbers and get into the details, they won't need 10 or 20. That other 30 is going to sit on their balance sheet. They will have raised it at this kind of early valuation, it would sit there and then they could have raised it later in a much higher valuation and avoided the dilution. So I think entrepreneurs, you know, they need the right advisors and they need people around them that can help them if they haven't been through it. And you know, we try and, you know, have these conversations with them and whether they - you know, we invest five to 20 million, whether they take five or 20, we're indifferent. We want to do the right thing for them. And then we'll put 10 the next year or five the next year - the right valuation, whenever that is. We'd rather them stay in control of their companies longer, and far too often entrepreneurs make that early bad decision to take too much money or lock themselves in a valuation that doesn't matter and is way too high to ever beat. And they get into the spiral of negativity and it's hard to overcome.
Shiv: Can you give an example of that in the CBGF portfolio? I think we've touched on Prodigy before, so maybe that would be a good story worth sharing here.
George: Yeah, Prodigy is an ed tech software business and run by two founders that literally founded this company out of their dorm rooms in Waterloo. I know you're an alum there. and they're, they're fantastic. Alex and Rohan are their names. And you know, they built this business and they had not taken an institutional investor and they were first - you know, it was the first time out, young guys, super smart young guys haven't been through the raising process before. And they had a number of firms saying, ‘take 40, take 40 million’. That's what I meant about take 40. And I met them and they said, well, the same speech. I said, what are you gonna do with that? It's gonna sit on your balance sheet. You're gonna give away most of your company, big part of your company. Take a smaller number, use it conservatively, build your book, build your momentum, then raise the other 25 next year, a year after, and double the valuation or triple the valuation. And I actually showed them on paper, on a one-pager, what that would mean to them in an exit event over time. And it's just tens of millions of dollars, you know, for each of them. And so they ended up deciding to take our smaller amount. So I was talking 40 US and we invested 15 Canadian. And sure enough, two years later, they raised 150 million from TPG and multiples of the valuation. And they're very thankful they did it this way because, you know, that money would have definitely sat on their balance sheet. It would have definitely over-diluted early and it would have been a mistake and cost them generational wealth. They still would have done fine. It would have done well - but it would cost them additional generational wealth they would have left on the table.
Shiv: Right. Yeah, I was talking to a founder that did the opposite. They raised like, I think, one hundred and twenty million dollars in like a series C or a series D round. And we were talking about our different businesses because I've bootstrapped this business and we were talking about potential exit events. And he was saying that even if he grew the company to one hundred, two hundred million dollars in revenue and exited that company, the exit event and his portion of that would equal if we were to exit our business as a bootstrap company at some point. And so he was saying that it's a significantly greater challenge that he has to overcome now to reach that kind of an exit event. And it's like a self-inflicted pressure that he's put on himself as a founder.
George: Yeah, I agree. And I'm speaking against what I do, but I always tell founders, bootstrap it as long as you can and get it to as much scale as you can before you need help, with the caveat that if you think you're going to lose part of your market position or someone else is going to take it and you need to go a bit faster, then you might have to call an audible on that, but use your working capital, use your vendors, use your bank, use your PDC, use whatever you can do. Government money - there's grants. Bootstrap it as long as you can. But then when the time is right, you know, you need to cover your market off before someone else will. So there's a balance there and it's up to the entrepreneur to understand that.
Shiv: And how do you contrast that with this idea of like, stockpiling the war chest, right? Because like founders that, let's say, went the approach of, okay, we're gonna raise a little bit in 2021, got to 2022 and the markets kind of dried up. And so if their burn rate was too high, now they don't have enough cash for enough periods to survive. So like, how do you balance that need between raising too much and raising too little and kind of exposing yourself to some systemic risks?
George: A great question - and there's not a clear answer to that - but we always - what I advocate is figure out what you need. Add 25 or 50% to that, whatever the number is. And then invest it wisely. I think we see - or at least, you know, over the years, I've seen a number of entrepreneurs come into money and they think, let's start spending, let's go crazy, you know, let's hire up. And I know in your book, you know, you advocate for - and it's really well done where you advocate for milestones and measurement and understanding what your meterstick is, what you're measuring it against and what success looks like and testing versus going all in on a concept. And these are things that are real life. And entrepreneurs that understand that can do a lot more with their cash. And the ones that just think ‘I have cash to spend’ without actually thinking about the measurement and the systems and the analytics, I think those are the ones that get in the trouble. They overburn and then they under-deliver on what they create in terms of revenue. And then they run into a problem because they far underperform their marks on their budgets and where they think they're going to be. They burn more than they thought they were going to burn. And then they get into these spirals. And so, we've seen companies that have hit a downturn. It's harder out there right now to raise capital for sure. But they haven't overextended themselves. They might have had a lighter burn and then they can pare it back a bit and just go through a couple - a year or two, if they need to, and weather a storm and still be growing. And so I think - that's the trick is you want to walk that fine line of not under-raising but not over-raising. But then when you do get that money in, especially if you're a relatively new entrepreneur that hasn't been through it before, resist the temptation to think you've got a lot of bucks to spend and start kind of doing it without a systemized approach to doing it.
Shiv: Do you encourage your companies to try to be profitable from earlier on? I know like there are some companies that inevitably have to burn cash in order to grow within the market that they're in and the competition that they're facing. But just one of my underlying philosophies is that if you have gross margin from the very beginning and you can keep your costs in check, you can kind of grow profitably. It's a little slower, but you remove a lot of these risks off the table where you always have to raise, or you have a burn rate that kind of keeps you a little bit on the edge to figure out, okay, when am I going to need to raise my next round? So just trying to understand how you balance those two objectives of growth versus profitability.
George: We would stand in the middle of that continuum. So, you know, a lot of the companies we backed operated roughly breakeven on purpose. And so they've got positive gross margins. They could grow a bit slower and make money. You know, they don't carry debt per se, but what they choose to do is run it to right, right to breakeven or even slight burn to growth as fast as they can, but under control. And so they can pare that back at any time. They know they're profitable. They know that the skeleton of the business is profitable. They're... overspending, if you will, on marketing, on sales, on product development, what have you, to build up their pipeline. But they can pare that back. They know they've got a real business, they've got product market fit, they're selling a product at a gross margin, but they also want to grow as fast as they can with their own resources. And I think it's wise for that founder to reinvest in themselves, leave that capital in, run it to a break-even point or even a slight loss. Don't take the money out. Put it... reinvest in yourself and build it that way, but don't take that risk of running. And we've seen businesses - we haven't invested in them - but they have a burn rate that's tripled their revenue or quadrupled their revenue. And that's just not sustainable. That's a market bubble type construct. It's not real. I've been around for - investing for a lot of years and that just happens in a temporal period where people accept it and put money into them and then it stops. And it’s stopped now. And those companies that are, it's hard to come back. It's easy to come back from a break even-ish or slight burn. It's really impossible to come back from a deep burn like I described.
Shiv: Right, yeah, we've seen companies that are burning so much capital. And oftentimes, because we're getting pulled into these marketing engagements to identify where the opportunities are on that side, we often see it in paid media, for example, where they'll be spending $4 to acquire $1 in ARR. And so they're breaking even on their CAC in four years plus. And in some cases, I've even seen six or seven years, and that's because they've raised hundreds of millions of dollars and they're just comfortable burning through the capital, but that's not sustainable growth. And even if you acquire that $1 of ARR, like what if it churns in year two or it's a bad fit customer? Not enough of that work is being done to truly understand, is this my ICP and are they gonna stay with the business? Is this even profitable growth? And so I wanted to see if the companies that you're investing in, are you seeing that pattern as well?
George: Well, we're doing that diligence upfront. And if an entrepreneur isn't thinking about their lifetime value, customer value, and their customer acquisition costs, we're not really that interested because the devil’s in the details, you know, in growing your business, and if they're not, we try and work with them to understand it and just understand the diligence period, how we'll work together. And we'll try and teach that. We'll try and mentor that. But again, the entrepreneur has to be receptive to it. I think, you know, just taking it aside on the point for a second, I think it's really important for entrepreneurs to do diligence on their VCs, you know? And sometimes you have a great idea. It looks good. You have a number of VCs calling you say we want to put money in. And a lot of times entrepreneurs think it's up to the VC to do diligence on the company, but it's got to go the other way too, because there are a number of VCs that are looking for that big win. And so they'll have 10 and they'll ask every single one of them to go as fast as they can. So they'll want the big bird. They want, you know, in their portfolio, they want everything to be tuned up to be a tenbagger and they hope one of them hits. And so it's not really fair to that one particular entrepreneur that can't go faster or that can't execute as fast as a VC wants them to. And it puts their personal net worth at risk and their success at risk because someone's managing them from a portfolio perspective. And we've seen that, exactly that, where, you know, there's a less patient VC involved and they're just pushing them really hard. They don't necessarily want to burn as much as they're burning, but they're getting pushed to double or triple their growth. It's not so easy. I've tried, I've been involved. I mean, I've operated - you have to - you can't just say, I'm going to triple my business. You need to be able to execute. You need to have the people, you need to have the fulfilment. You know, there's a lot of things that go with that. And if the entrepreneur can't do it, like that's probably the whole business at risk.
Shiv: Totally, and in that type of a model, the VC fund might still win because on a portfolio level, out of 10 companies that they're pushing like that, if two end up making it, that returns the fund, but individually, each of the founders involved with those companies, eight of them lose out with that type of funding. Yeah, and so talk a little bit about that. If there's a founder out there listening to this, what should they look for when they're diligencing the types of investors that they can partner with when looking for that type of capital?
George: Well what I say when I meet a company and we're getting close to doing, doing a deal with them, is, I say, pick - go into our web page, pick - don't pick all of them. There's 30 of them. Pick a few companies you'd like to talk to. I'll introduce you to them. And I don't care which ones they are. Doesn't matter. I - and look, we - they could be good situations. It could be situations where we've had hard conversations with them, but no matter what, like, the integrity has to shine through for a firm and don't let me pick them - you pick them, right? And that's what an entrepreneur should do. They should think about what companies that the VC has been associated with in the past, whether they went well or poorly. It's not necessarily the indicating factor, it's how they were treated and how they interacted with the entrepreneur in good times and bad times. You need to know how it all worked. You need to know their overall philosophy. And so I suggest they ask for which companies they wanna talk to and if they refuse, take that as a flag. I'd also wanna know what stage they are in their fund. So if a typical VC fund has a five-year commitment period, are they in the first year? Are they in the fifth year? You know, if you're the first investment in a fund, usually you're the one that gets tapped on the shoulder in year three or four saying, I need a sale to get my new fund. And so how about we put this up for sale? If you're the last investment in a fund, it might be the afterthought where there's no follow-on investment and they're onto a new fund. So you just kind of want to - it's not necessarily true, but you just want to mitigate and ask the questions of how that works. And I think you want to know who the person is that's going to represent that firm on your board. Sometimes one person does the deal and it's handed off to another and you've got a different report. You just want to understand how you're going to work. You want to understand what their - what metrics they're looking for, what their objectives are, so that you can fulfil those objectives, you want to make sure you feel you can. And you want to know what reporting they want and what frequency of contact and how interactive they're going to be. And sometimes, sometimes offers want more interactive VCs, they like that. Sometimes they don't. Sometimes they've they know what they want to accomplish. They want to run their business, but they want advice and strategy help. They don't necessarily want somebody pulling up a chair beside them and telling them what to do, but some VCs do that. And some entrepreneurs want that. So I think it's really treating it like you're doing diligence on the firm, just like that firm is doing diligence on you. It should be equal. I know it's not one-sided.
Shiv: Yeah, because not all investors are created equal. And so depending on the type of business, the different answers in those questions might appeal to one founder versus another founder. It's really finding the right partner for yourself.
Shiv: Yeah, one of the things that you mentioned in some of our communication is that the types of companies CBGF invest in, you'd almost call them like the ugly duckling of the SaaS world. So you wanna touch a little bit on that and we can maybe dive a little bit deeper there.
George: I think that there's this construct of the perfect SaaS firm that people have in their mind that's growing and it's doubling year over year, that's all SaaS revenue, that's all recurring, that's B2B, that's sticky. That's a great concept. Yeah, there are a few out there, but there's just not that many. And maybe those few that are out there are worthy of those massive valuations. But, again, we’ve met with, I think, 3000 companies since we started, and, you know, I ran a security technology business - and it's not the norm. You know, the norm is entrepreneurs that are grinding out revenue, grinding out margins, trying to get recurring revenue the best they can, knowing they have to provide services to get that and support that. And the business turns into a hybrid - has some recurring, has some service, has some things are one-time, some things don't really fit into any one category - they're opportunistic kind of revenue that's generated. And those are generally overlooked. And they're good businesses. It's really the majority of the mid-market world, I think. And we've backed a lot of those with success. We backed a company called Zello, which is - kind of provides software to the guidance counsellor function in high schools. And - great business. And it has a service component. It has a SaaS component. It had a... it was transitioning to a new platform at the time. And so you had to understand what that risk was. And it was work to do. It was messier than - it wasn't - a great entrepreneur, great business, great product, but it wasn't a perfect painting to go and invest in. And we worked with the founder - great person - and it's been a great investment. And I think it's - VCs and growth firms are not always willing to dig in and get into the details because sometimes the VC diligence is fairly high level, right? It's what's - how big is the market? Is this product okay? Is the founder okay? Let's do it. You know, and we're more akin to a private equity diligence where we're getting to know what's what, we're getting to know the numbers and the metrics and their CAC and their LTV and their prospects and valuing the service component, valuing the SaaS component, trying to figure out what transitions they have to make, putting a risk premium or, you know, what have you. And so I think it's a little scrappier. And, even, you know, companies that have technology aspects and have recurring components, but are recurring, like, that aren't exactly recurring - like, for example, you have companies where the same referrals send you business over and over and over again, but it happens to be different end customers. There's a recurring component to that. It's not perfect recurring revenue - there’s a recurring
Shiv: It's re-occurring, right?
George: Reoccurring, correct. They’re a good business. And I think if you get away from the formulas and get into the actual business and do the work and the analysis, you're able to find good prospects for returns and businesses we can help.
Shiv: Right. I think those are some fantastic insights. And I think by looking at businesses in that way, and also I think the fact that you have this evergreen fund or the outlook is more than three to five years, it allows you to get into the weeds and do some of these activities that maybe somebody else would shy away from, because to turn some of those things around takes time and they don't have enough of a hold period to be able to do some of that work.
George: Yeah, it allows the company to make investments this year that will benefit them in three and four years down the road, which could be real lasting, sticky decisions that could really help them secure parts of their market. But that payoff might be down the road and we're able to work with them and they might have a long horizon. A lot of the entrepreneurs we meet are young and I say to them, what are you going to do? Are you going to retire at 30, 35, 40? You're going to sit down on a beach somewhere? Like build this thing, you know, build it. We've got time. You've got time. And think about a longer build. And that's the thing. We're building less and less big companies - US and Canada. Too many of them are getting sold early. Too many of them are getting bought by strategics early. And it's rare that something gets built into something that goes public and is a new Fortune 500 company. It doesn't happen that often versus...
Shiv: It’s really rare. It's becoming more and more rare that you see a company like a Shopify in the Canadian ecosystem grow from just startup through to IPO. Like you usually see somewhere along the line, there's just so much capital out there. There's just too much of an incentive that founders end up selling to somebody and don't end up taking that full journey.
George: Yeah, and there's a lot to be said for doing it in a traditional manner, building it with kind of traditional valuation increases, not going too fast, not going too slow, take your burn if you have to take it, but let's not overdo it. Do an acquisition here and there, grow organically as you go, don't go public too early either, build it, be patient, go public when you can actually put out a real meaningful float where you're followed by analysts and you can raise capital, you don't become a penny stock. You know, there's - I think there's a lack of proper guidance and advice to young founders to get them through that, that tried and tested business scale-up model that just is not - doesn't see that many businesses get to completion anymore, the full cycle.
Shiv: Right. And so with the approach that you take at CBGF, like what are some of the primary areas - given that you have this longer hold period or longer investment horizon - what are some things that you're able to do beyond just working with the founders in terms of growth strategies or value creation that maybe other funds aren't able to do, or at least what do you focus on?
George: I don't think we're that special, to be frank. Like I think we're very thorough. We're detail-oriented. And just like in your book - there's a lot of parallels - we start with the systems and the processes and the goals and the thesis and what we're trying to shoot for. What are the organization goals? And then is the company equipped to actually go out there and achieve those goals? And if not, what holes are there? And there's always holes, you know, you never - as you're scaling a business, you're always doing some things the best you can that aren't perfect. You're always - and at some point there's thresholds where you've got to make improvements. And so, a lot of times systems and CRMs. It could be personnel, could be needing a CFO, could be needing a board. It could be not reporting, not knowing your numbers. It could be not having the right metrics to run your business and having to create a system where you get the right metrics. Because you can't grow a business without having some of those foundational items set up. It's having a plan, having a budget, having a five-year plan, having a 100 days kind of plan post-investment and thinking about, you know, how you measure that. And so once we're comfortable, there's rigour around - to some of these processes, then we say, ‘okay, now you've got capital, let's figure out how you're going to invest it and where’. And some of it could be marketing, some of it could be, you know, sales, sales orientation. Some of it could be for product improvement, some of it could be for acquisition. But until they have the right infrastructure set up to actually handle that, we're patient. We want them to build it and be ready before they go up because otherwise they're going to make a lot of mistakes and use their capital unwisely. And that's a real shame, you know, when money gets wasted. And you've seen it on, you know, paid marketing spend. We've seen it too, where they just go and start, and they haven't kind of got a way of gauging success and a way of pivoting when they need to pivot and kind of self-imposing goals and deadlines and what have you. So I think we're no different than a lot of private equity investors out there, but I think a lot of entrepreneurs don't have that mentality until they're asked to do it. And then once they're asked to do it, they're thankful. And a lot of the companies we back have never had a board. They've got a few couple of informal advisors here and there, but it's very important for an entrepreneur to get into the understanding of what a board is, and how do you report it? And what does that discipline look like? Because they're never gonna get sold or bought by anybody if they haven't mastered the reporting process and the board process, they need to master that. And so it's funny, we're not - I always tell an entrepreneur, we're never gonna run your business, we're never gonna make sales for you, we're never pulling up a chair and gonna tell you how to pay your payables, we're never gonna do that. But we can help you. And we see a lot of repeated errors out there and scale-up errors. And we can help you avoid a lot of those by helping guide you in some of this rigour and some of the discipline. And that's what we try to do.
Shiv: Right. I think that is a really great takeaway. It's - you know, a lot of firms tend to have similar strategy or at least focus areas. We're trying to build a business. You look at sales or marketing or pricing or adding additional products or M&A, like those types of strategies do overlap across firms. But I think this underlying philosophy of discipline and sustainable growth and longer investment horizons and just discipline around metrics, I think that's a really great message for founders to think about when they're trying to pick an investor or just building their business overall. So I think that's a really great insight.
George: And the other point I would make is that having run a business, I know that nothing grows in a straight line. Every model grows in a straight line, every single one. And I think some investors tend to lose their patience really quickly when that first bad quarter comes up and they miss their numbers. And we understand - like, no business will ever hit their quarter every month. It will just not happen. And so we work with them, we understand. It's life, you know, that's how it works. And I think some younger VCs hit the panic button and start yelling and screaming and throwing stuff. And it just doesn't work. It doesn't - it's not the right - first of all, it's not real life. No business ever grows in a straight line and you’ve always got problems. You'll always lose a big customer. You'll always have hiccups. You'll always have fulfilment hiccups or execution. They'll always happen, but you cannot avoid them. And so, having a firm that understands that, is constructive in challenges and can be constructively helpful is important.
Shiv: That's a phenomenal message. So I think that's a good place to end the episode. And I think just even for me, it was great to hear you talk about that from a patience and diligence standpoint. So thanks for sharing that. One question I have to ask, I'd like to ask this to all guests, what's one business book that you recommend any of the listeners that are listening that might be your favorite that you think might be worth reading for them?
George: Good question. I've read a lot of them. I think one of the ones that I liked that was fun, was a fun book is, I believe her name is Annie Duke. She's from the World Poker Tour.
George: I think it was called Thinking in Bets.
Shiv: Thinking in Bets, yeah.
George: Just - our whole life is making bets. And as an investor, we make bets. As an entrepreneur, you make bets. You're trying to gauge risk and reward. You're trying to gauge the hand you have, the hand that others have us. I thought it was a very - you know, I play poker with my kids now, my young kids, it's really fun, and I thought it was a really interesting take on decision making.
Shiv: That's a great book recommendation. So yeah, I've read it too. It's a good one. So we'll put that in the show notes as well. And before we take off - any closing thoughts? If people want to learn more about CBGF, where can they find you guys
George: Our website is cbgf.com and I think we're really trying to make a difference. And I'm personally passionate - I know our firm's passionate about helping companies grow and doing it the right way and be happy to hear from any firm that they think we could help them.
Shiv: Awesome. All right, well, George, thanks for doing this. I appreciate you being on.
George: Shiv, really appreciate it. Thank you.
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