#587 From $5M to $200M ARR: What Growth Investors Actually Look For with Isabelle Tashima

Mehmet: [00:00:00] Hello and welcome back to opposite of the CT O Show with Mehmet today. I'm very pleased joining me from the US from Boston, Isabelle Tashima. She is an investor in volition capital. Um, Isabelle, I don't like to steal much of my guest time. When I do the intros, I have a very simple introduction. I just give a teaser to the audience.

Of course, as you can guess, from, you know what, Isabelle. Where she's working. We're gonna talk about investments of course. And you know, we're gonna discuss like a little bit about, you know, what she's seeing currently when it comes to ai. And we gonna talk about like, maybe due diligence a little bit. We're gonna talk about like how, you know, Isabelle look at growth companies and, you know, we'll see how the flow will, will bring us to this discussion.

So without further ado, again, welcome Isabelle to the show. Um, the floor is you. So tell us more about you, your journey, your background, and then we can start from there. 

Isabelle: Yeah. Thanks so much for having me. Excited to be here. Um, a little bit of background on me. I'm an investor at Volition [00:01:00] Capital. We are a Boston based growth equity firm.

Um, I grew up outside of Chicago. I was a competitive athlete growing up through college as well, and I think that shaped a lot of, um, how I approach work. And so I started my career at Goldman. On the middle market, m and a team in New York following my undergrad, um, which I think gave me a strong foundation in terms of understanding how capital markets work.

Um, I worked with some founder owned companies there, which was a great experience, but I think through that I realized, hey, like I wanna be a part of. Their experienced for longer. And I think some of the most interesting, um, kinda like experiences that you can see, um, from a founder perspective actually occurs prior to an exit, not just at the end when there's a transaction.

Um, so then I went and did my MBA at MIT Sloan and when I was there, one of the managing partners at Volition was actually a guest speaker in one of my classes. And he talked a little bit about one of the investments we made in the [00:02:00] company, chewy. And how he thought about that and the firm's approach and it really resonated with me.

So I joined volition about two years ago outta business school, and I sit on our internet and consumer team. 

Mehmet: Great. And thank you again, Isabelle, for being here with me today. I gonna start kind of where you left. Um, I know there is a lot of, maybe some misunderstanding. From everyone. But let's talk about founders, about, you know, when, when it comes to an investment firm like, uh, volition and you say you are, um, you, you focus on, on growth, um, uh, you know, I would say stage right, and I still, I looked at the website and you, you know, there's a lot of talk there about the capital efficiency.

So when we talk about, you know, a company being capital efficient, in simple terms, how do you define this? 

Isabelle: Yeah, so I think at the highest level what we look to do is partner with founders that have [00:03:00] done a lot with a little. So, um, a lot of the companies that we partner with have gotten to where they've gotten to, and usually we're looking at companies in the five to 50 million of a RR range.

Um, they've done it. With minimal to no outside capital. And so that signals to us, hey, this founder is disciplined. Um, they have a product that customers love, not just because they're buying the growth, but because the business is built on strong fundamentals and they have a product or offering that's solving a real problem.

So, um, that's how we think about capital efficiency at the highest level. Um. And then we usually come in with a check anywhere between 15 and 60 million to help accelerate what's already working. Um, and so that's kind of how we partner with founders and how we think about capital efficiency. 

Mehmet: Great. Now from your perspective, Isabelle like.

When do you think, or let me put it this way. So I talk a lot with [00:04:00] founders. I work with them as well. And you know, let's put it, you know, straightforward and I think some people will agree with me like usually. If they are in the funding mode, so we're gonna go everywhere, right? So, and sometime they mix up the VCs with a growth equity, like where you work today with private equity or as sorted as PEs.

So at what moment you consider a fund a founder should stop, let's say, say, hey, like you should. You, you just give a, give a, you gave a hint, but I want to deep dive more in that where they should be stopped actually raising from a VC and maybe start thinking about the growth equity. 

Isabelle: Yeah, I think it's a fundamentally different model.

And so, um, growth equity tends to sit kind of in the middle. If you have early stage venture on one end and then you have kind of traditional buyout, private equity on the other end, growth equity is really in the middle of that. So if you think about an early stage venture firm, they might invest in 50 companies [00:05:00] and it's more of, um.

A diversification play where they're investing in a bunch of companies and they're hoping that maybe one or two do super well in return the fund. And then on the back end of that, on the private equity side, they are investing in more mature businesses, slightly slower growing. Um, there's some level of financial engineering involved and often they use debt in that case.

Um, and growth equity sits in the middle where, um, we build a concentrated portfolio of companies. So we treat. Each company, like a portfolio of one. Um, and we try to be a very active, um. Partner as part of that investment. So we're not investing in 50 companies, um, with, you know, limited evidence of product market fit.

We're investing in mature, more mature businesses that have proven they have a product that works. They have proven that. Um, you know, they're solving a gap in the market and they're trying to get from A to BA little bit faster with the help of a growth equity [00:06:00] partner to take them from, you know, 5 million of a RR to 200 million of a RR.

So, um, it looks very different than taking a company from zero to one, and also looks very different than taking a company from. 20 to 30. So, um, right. We kind of sit in the middle there, but I think the, the impact that we have is often extremely valuable because the processes that a company has in place, um, to get them off the ground are often not the same processes that work to, to scale them up.

Mehmet: Right. Now, if I want to put this, because, you know, I, um, I educated myself more on the VC side of the business, so. If I want to compare this, so I would imagine what a company would look like. They are A, a pre-series A or maybe post series A, right? And then they want to jump to the series C, series D kind.

Mm-hmm. Uh. At a quicker pace, because [00:07:00] usually, and this is something, know, like it takes time, right? So, so even when you get the money, you still need to build your GTM strategy. You need to build that. So I'm, I'm trying to, to to like, um, you know, understand this more from you. Is that a right, uh, explanation?

Like, you know, the post series A probably to, to, to series C or D. 

Isabelle: Yeah, we typically come in at the series A, series B stage, and the whole time for us is flexible. So we, we will, um, partner with companies. Anywhere from five years to upwards of 10 years. So, um, it really is a longer term strategy for us, and that might span north of a Series D as well.

So, um, it is a, it's an interesting space to plan because we get to really see companies grow and evolve and, and scale. So, um, that's right. That's typically kind of where we come in at the series A, series B stage, 

Mehmet: right? Like any other. Investor, whether you are like an, you know, a VC or P or like growth equity, you must do some [00:08:00] due diligence and of course like you would be looking for some signals.

So when we look at a company doing, let's say between five to 20 million a RR, like annual recurring revenue, what do you think separates the ones who. You know, can become as, as we call them, category movers or, you know, like, uh, can become leaders in that space from those who, yeah, they have the revenue, but you know, they are kind, they have reached a plateau and, you know, they, they couldn't, you know, cross, um, to, to the next level.

Yeah. 

Isabelle: Definitely, it's a good question, and it's kind of where we spend a lot of the time when we look under the hood of a company that we find interesting. I think the first question for us is always, are they solving a real problem and do they have customers that love 'em? I think that is often a good signal of whether, um, the, the traction that they've.

Had to date is going to continue moving forward. And then from there, it's about understanding how they built the business on a foundational level. So looking at things like [00:09:00] unit economics and customer behavior. So understanding, hey, are your customers sticking around? What does your sales motion look like?

Um, and are these things repeatable? Because how we think about an investment is, um, our capital shouldn't be going to. Fix things that aren't working. It should be going, um, to accelerate something that's already working. And so we wanna feel like there's repeatability in that. Um, and that the company has really found a sea in the market, um, that is durable longer term.

Mehmet: Right now. Let's talk a bit about the team, also the founders, right? So. Do you? You know, like usually I know like mainly in pre-seed and seed phase we put a lot of, you know, attention on the founders. But I think you know at that, you know when they are like kind of series A and above, so we know like the team can deliver, but we look at certain metrics probably.

Do you see, you know, also founders still like [00:10:00] over-optimize. Um, some of these metrics, even when they have reached that phase of, they're kind still in that I would call it this, uh, um, mentality or mindset, let's call it like, as if they were still in the pre-seed or seat, uh, stage. And still they try to optimize things to make things shiny.

So what are like the real metrics? Uh, Isabelle of course, like they, RR is the most obvious one, but are there like any other ones that you look at? And what do you think they, sometimes, some of the founders, they do mistake where they, they mention things which might affect actually the discount during evaluation?

Isabelle: Yeah, I mean, I think it's a good question and I would say the founders are still very important as part of our investment decision. Um. And the way that we think about it is we don't need a founder to show up and tell us this perfect story of, Hey, my company is perfect. There's nothing that we need help with.

Um, all the metrics are perfect. [00:11:00] That's not really the story that we're often looking for or investing in. Um, I think, uh, it's more important to be clear and concise with the story. I would say like the strongest founders are ones that can articulate what's working. Where the business is still evolving, where they think they could use outside help.

Um, and that sets up the foundation early to have, you know, an open conversation on both sides and figure out where we as partners coming in can be most useful. So. Um, at the highest level, like we're looking for things like, as you mentioned, you know, evidence of product market fit, which we think about.

As you know, typically companies in the five to 50 million of a RR range. We're looking for growing companies. Um, we're looking for capital efficient businesses that have. Gotten to the skill that they've gotten to without raising tons of outside capital and buying the growth. And then we're looking for repeatable unit economics.

So are your customers sticking around? Um, is payback efficient? Um, [00:12:00] what does it cost to acquire a customer and how is that trended over time? Um, but we're not looking for founders to show up and tell this perfect story because oftentimes that's not what, what it really looks like under the hood. Um, and so I think the more that founders can be clear and concise about, Hey, here's what's working.

This is where we're gonna put the capital, and this is where we're still struggling and continuing to. Continuing to evolve the business because the reality is, like early on, going from zero to one, the founder is doing a lot of the work. They're, it's often founder led sales. Um, it's often sub 10 employees.

They're touching every part of the business, right? But that's not a scalable motion to go from five to 500 million of, of revenue. And so, um, that requires processes and structure to be put in place. The founder's no longer gonna be able to touch everything. And so, um, I think a founder that is able to recognize and be self-aware about where they could use help, where they could use [00:13:00] processes and structure, that makes it easier on our end to come in and feel like we can, we can provide, you know, help to the founder as well.

Mehmet: Right now, of course, in order first to achieve, you know, these results before they reach out to you, Isabelle, like they should have implemented kind of a strategy for go to market. Right? Um, you know, the goal here is to double down on what have worked for them, so to go to the next level Now, um, and I, I know like there are like slight differences between like.

Consumer businesses, which I think you focus more versus like B2B, which I know like your company also they, they do that, but in general there are like. You know, the distribution is key. So how much important are you seeing also the distribution in this current, you know, um, market, landscape becoming more important?

And are you seeing, I know it's a little bit, uh, and sorry for doing this little bit of, um, you know, uh, stuffed [00:14:00] question. Um. How much also, it's becoming important for the founders to be leading also this go-to mark strategy. So mainly we call it like sometimes founder led, uh, GTM. What, what are you noticing from the successful companies that you have worked with or you're working with currently when it comes to GTM and distribution?

Isabelle: Yeah, I think it's a great question because distribution is essential. You can have an amazing product, you can be solving a clear problem, but if you can't get it out there and you can't sell it, um, and nobody knows about it, then it's you, it's hard to be successful. So ultimately, distribution, um, is, is key.

So we think a lot about distribution, obviously differs, B2B or B2C, I'd say like on the. More consumer facing side. What we often wanna see is that there's some level of organic growth coming from word of mouth coming from referral. Um, because that's often evidence that there's organic traction because your, your [00:15:00] product is solving a customer pain point, not just because you're buying tons of ads and kind of buying your growth that way.

So I'd say that's one thing that we look for on the distribution side. Um. For a consumer business. And then on the B2B side, often it does start with founder-led sales. Um, and that's very common at the early stage. I think it can be helpful for us to see, hey, this company's hired a few sales reps, this is what the productivity ramp has looked like.

And they've done it a few times to the point where we feel confident that if we put more capital into growing the, the sales team in the go-to-market org, um, it's a repeatable playbook and we know what that will look like. So, um, I think there's a, there's a fine line between companies that, um, have super scrappy founders.

They're doing everything. Um, and they've achieved growth that way with very little outside capital. And that can be great, but it can also be helpful on the investor side to see a company that's already started building out that org to [00:16:00] understand, hey, this is repeatable and we should put fuel on the fire.

Mehmet: Right now I gotta ask you a question, Isabelle. Um, it's, it's more about, okay, we have the capital, but also we need to take care of the efficiency of, of using this capital Now. Um, I'm not an expert in B2C to be very frank with you, but, you know, a couple of months ago, um, I read the book, um, uh, called, called Start a Problem.

Right. Um, so, and you know, my takeaway from the book and you know, of course, um, uh, I'll remember the author name and sorry for that, like, um, he used to work at Uber. So when we look at companies that reach this very. You know, fast growth in short time, we see like they had to burn cash like crazy. And of course, but at the same time, it fits the thesis [00:17:00] of, you know, as you mentioned, it's organic growth.

So it was kind of an organic growth. Of course, they run ad they run campaign. So if, if we look at companies who are, you know, I'm not say similar to Uber, but let's say they, they have. Yeah, great potential and they need the capital. How much do you think, you know, the trade off is acceptable between, you know, this fast growth and efficiency?

Or are we living in times where the pendulum completely now shifted and, you know, does it matter, like grow as we used to say before, like grow at, at any, at any price, at any, uh, cost. So what, what's your take on this? 

Isabelle: It's a good question. I think it depends on the type of business model. So especially on the consumer side, there's companies, um, especially in the social space, social network space, um, companies that rely on network effects where maybe they're, they're spending a lot to acquire users and they're not yet [00:18:00] monetizing them.

And so it appears like they're burning a lot of cash. Um, but. I think it's kind of like a, an art rather than a science when you look at those types of businesses, because you could argue that the user base and the data mode around it, um. It's worth it. And then there could be a flip of a switch and you start monetizing them.

And the business then looks very different from a, a burn profile perspective. So I think it definitely depends on the type of business. And there's different strategies around, um, what you're optimizing for in terms of are you optimizing for acquiring users or are you trying to monetize them while you do it?

Um, and so I think like this concept of growth at all costs, which used to be. Kind of the norm has definitely shifted, especially as AI is making companies more and more capital efficient. And for us as investors that have always focused on capital efficiency, I think it's exciting because it's opening up the market to see companies be more and more capital efficient.

And so I think our view is like we. Prioritize [00:19:00] and, um, tend to partner with companies that have been capital efficient the whole time. Like they've, they've built their business, um, in a way that allows them to control their own destiny. So it doesn't rely on the capital markets to continue to fund the business.

Um, it puts them in a position where they can choose to go out to the capital markets to raise capital and accelerate what's working, but, um, they're able to control their own destiny in that way. And I think that that's. That's optionality, that becomes invaluable when ultimately inevitably hype cycle shift.

Mehmet: Mentioning ai, uh, speaking about AI is on everyone's mind. And you know, if I want to look at, you know, your space, Isabelle, like, I'm sure it's like any other industry, is reshaping the full thing. So from your seed. Where do you think AI is actually creating real value versus just, you know, it's the narrative, like, yeah, we [00:20:00] have ai.

Isabelle: It's definitely a reality. Right now, I feel like almost every company is calling themselves either AI enabled or AI native, and it's for sure a buzzword. I think there's a couple ways to think about it. First, I think. You have to ask the question, is AI actually improving the unit economics of the business?

Not just layering on top of the product. So is it lowering cac? Is it raising retention? Um, is it raising gross margin? Is it allowing you to use, you know, a smaller set of people to deliver the same outcome? That's when you start to get the sense of, okay, maybe it's structurally changing the business, but.

If, um, the financial profile of the business looks the same before and after implementing ai, then maybe it's. More cosmetic than the founder is saying it is. Um, second, I think we try to think about, okay, is the data proprietary? So I think defensible AI [00:21:00] applications have mm-hmm a data moat where a competitor can't come in and do the same thing because the data that they're using and feeding into the AI is actually proprietary.

Um, and that helps from a durability perspective as well. Um, and then I think like. The last thing that we're trying to think about, which I, I am sure is on every investor's mind right now is like, what is replaceable and, um, what can you recreate with AI tools that are advancing very fast? So that's a question that we didn't used to have to ask is, okay, could somebody go out and recreate this exact same business, um, you know, with two people and.

That's becoming more and more real as some of these models are advancing fast. And so I think all of those things together, we try to look at holistically to determine, um, is there a moat around how this company is using ai or is it purely kind of a wrapper that appears more cosmetic to inflate multiples.

Mehmet: Now on this, [00:22:00] Isabelle, this is. My own, I would say 2 cents, kind of of opinion, uh, on the matter. So because, you know, I couldn't, I couldn't, you know, neither as, uh, as someone who work in tech or as someone with, let's say an investment lenses, I couldn't yet decide on this. Why so, because I have some contradictions in my mind for sure.

The. Mode is not anymore what features you have in your product. So we know this, like you, you can just go and, you know, vibe, code this feature in, in any of the tools in no time. So some people, as you said, like maybe the data, the property data is, is kind of a mode. But we started to see now that even like sometimes startups or companies, they have prepared data, but you know, they're not reaching the next phase.

The reason is back to the, you know, growth motion, the distribution. So some people they go and say it's a [00:23:00] distribution, which is your mode now. Like how big is your network? Right? So you mentioned like a couple of minutes ago about, you know, um, the organic growth. So your organic growth becomes, you know, your actually defensible mode, right?

So defensible against, you know, what other startups who might, you know, take the same thing and people give the example again of, you know, entering a crowded market. Let's say people give the example of Google all the time, like there were like. Tanks and maybe, I don't know, maybe more of search engines.

And Google went in and they were able to show the difference. Right. And we can take a lot of other examples. So do you think that now it's combination of all things that we just mentioned, or it's really, again, back to the data only, or it's like. Because I, by the way, and also one thing I noticed, I've seen some of these rappers, um, startups, they're doing very well, right?

Yeah. So, so, so they have, they have, I'll, I'll just mention, and this is maybe will shock some people. [00:24:00] Every company that offered the vibe coating, they are actually rappers, if you want to think about it, because they, they set on top an l and m. It's not their own model. So I can argue that a company like Rept for example, or you know others which are like similar to Rept, they are actually rappers.

Of course they have infrastructure before, but I can argue this way. What do you think, Isabellele? Like, am I kind of philosophical here, or what's You 

Isabelle: think totally. I think businesses that are wrappers can still be giant businesses, but it's, it's not because they're a wrapper that they become giant businesses.

There has to be some other element there. So to your point, it's companies with some sort of distribution advantage, whether it's channel partners, whether it's they have some sort of like embedded distribution, um, that's allowing them to scale faster. That could be a reason why. Um, I think something else that we're seeing, especially on the consumer side, is.

Companies that might just be a pure wrapper, but they have some sort of [00:25:00] community element. They have some sort of brand halo, they have some sort of network effects that's keeping people there despite there being alternatives or, you know, they could build this themselves. They choose to stay with this other company that's might be purely a, um, partially because of that community brand.

The network effects like those, those elements are very powerful and so. I, I think you can't underestimate a company that's simply a wrapper if there's other elements at play that are keeping people around. 

Mehmet: Right. Um, now I gotta go back to the founders. Um, and of course, maybe few people they know when.

Any kind of investment, uh, company or firm, they do an investment. It's a partnership at the end of the day, right? Because, you know, it's not just you put the money and then you sit aside and then you wait. What happened now? In your opinion, what makes a founder easy to [00:26:00] back at this growth stage, which you focus on, versus someone who you would say, like, let's say if I, I recommend you someone, you tell me me.

Never bring someone like this person again. Like what would be like the, these two, uh, kind of, um, uh, personas, I would say for, for, uh, you know, being, I would say investible and backable. 

Isabelle: I think focus and self-awareness are very important as founders. I think, um, the strongest teams and the strongest founders, they know what they're good at and they're comfortable with saying what they're not good at, and they're able to attract really strong talent to fill in those gaps.

Um, another quality that I think is consistent across some of our best founders is that they are completely customer obsessed. Like they're not just focused on. Growing the metrics of the business. Optically, they're focused on the customer experience and if that means they're growing a little bit [00:27:00] slower to, um, to scale thoughtfully on the customer experience side, like that's, we, we view that as a strength from a founder perspective.

Um. And so I think like the best founders are doing a combination of surrounding themselves with, with great people, um, being focused and being self-aware, um, and then being totally customer obsessed. So I think those are all very important and, um, often shared themes. When I think about some of the best part founders we partnered with.

Mehmet: Right. I know Isabelle, you talk about, which is kind of, we covered that, but I'm gonna ask it in a different, in a different way. So you talk about, you know, a formula which can do the five x outcome, right? Mm-hmm. Which is the capital inefficiency and the growth, like any of these, do you think it's coachable?

Like do, do you think like someone might come and. When you partner with them, you would be able to coach them to reach Exactly, you [00:28:00] know, the, the criteria that, you know, usually you would have as requirements to invest in what I'm trying to say. Like, you sometimes say, okay, maybe they, they're missing on this, but we think like the team can be coachable.

Like we can still partner with them because, you know. Maybe they don't have experience, you know, scaling companies to, to that level before. Um, and this is maybe applies, correct me if I'm wrong to first time founders, maybe definitely that, that crack the code, but they get stuck. So what are like some of the things that you say, okay, we can, we can not ignore, but we can Yeah.

Like we can wait for them to learn it, but let's, you know, regardless, partner with them. 

Isabelle: Definitely we aren't just solving for a specific checklist of has to have experience in the sector or has to have a successful previous outcome. Like we aren't trying to check boxes around that. All of our founders look totally [00:29:00] different.

Um, at the end of the day, I think we're just trying to understand like, will this be a, um, will this be a collective partnership together? Like will we be able to add value? Does the founder. Want our help as well because it's a two-way relationship. We wanna, you know, help and add to the business in any way that we can through the hold period.

Um, and we also just wanna support the founder and what they're already doing. Like, we're not trying to come in and change a bunch of things about the business. We're choosing the partner with the founder and the business because we love what they're already doing. Um, so I think for us it's about the relationship.

It's about understanding, you know, does the founder. Want and appreciate our, what we can bring to the table in terms of value add, um, and, um, what does that relationship look like for the long term? Because this isn't just a one or two year, uh, relationship. This is sometimes a five to 10 year relationship.

And so, right. Um, we wanna feel like the foundation is there to have a successful [00:30:00] partnership. I think that's probably the most important, um, above all. 

Mehmet: Right. Um, so like any other investor, I believe Isabelle, like, you know, you, you have to prepare your memo, right? So you need to, when you do your evaluation, how much ai, you know, went into this and change the way how investors prepare their final, you know, recommendations when it comes to, to, if we're gonna invest in a company or not.

Isabelle: It is changing very rapidly. In some ways I think it's making our job a little bit easier because we can now get up to speed on companies, get up to speed on markets better understand risks that may have historically been blind spots a lot quicker. Um, so in that way it's speeding up things that could have taken two days to make and two days to research and we're doing it in two hours.

So in that way, um, it's pretty amazing. I think. On the [00:31:00] other hand, um, there are some ways in which I think it's making it our, our job as investors a little bit harder because patterns and metrics that we used to look at, like I. Is net revenue retention strong? Is gross margin high? Like what is payback?

Okay. If those metrics are strong, that's probably good evidence of a strong SA business. Like that's kind of how, at the highest level you could think about it. Um. And now those aren't necessarily signs of a, of a durable business. And so as investors, the diligence questions that we're asking haven't really changed, but I think the answers now have a lot more variance, and that requires a lot more discussion internally about some risks that we didn't used to have to discuss.

Um, especially as the market's changing so fast, it's introducing a whole new set of unknowns that. We're spending more time on internally. So I think in some ways, um, it's making our job both [00:32:00] easier and harder 

Mehmet: and decision faster. I would say 

Isabelle: getting to decisions faster. 

Mehmet: Yeah, 

Isabelle: I think it's getting us the information faster.

But at the end of the day, investing is still a people business. We are partnering with founders and that relationship is still very important to us. And, um, it's getting us the information faster to make a decision. But, um, there's still, I would say on the back end, a lot more questions that we're having to answer now than we didn't used to have to.

And so, um. It's kind of a balance. I'd say maybe a little bit faster, but um, because there's new factors involved and um, things that we didn't use to have to think about, we're probably spending more time discussing on the backend, 

Mehmet: which I think, you know, what I tell people about is like. Not only investment, it's like also let's say sales, right?

So anything that requires this human interaction and building the trust and building the relationship. So you need to be patient on this. Like AI can, [00:33:00] you know, can make everything faster. Except I think, you know, the, the trust and the relationship building. Yes. Uh, because this is needs time and you know, like even if you come with the perfect, um, you know, business proposal.

Data room is clean, you know, still, and this is, I think it's a human nature because if someone comes to me and everything looks perfect, I might say, Hey, this is good. This is so good to be true. Right? Yeah. So I, I need to spend time with this founder to make sure, you know, like we can work together, we'll not have clashes in the future.

Like, they kind of understand my culture, I understand their way of thinking and all this stuff. So I agree with you on this now, 

Isabelle: definitely I think we see. 

Mehmet: Yeah, please. 

Isabelle: Oh, no, just on that point quickly, um, I think we often see some founders that are so concerned about optimizing for valuation when they raise, like they're looking for the highest term sheet.

Um, oh yeah. And I think they can lose [00:34:00] sight of what it means to partner with somebody. Like this is somebody that's gonna be not just a name on your cap table. Like they're gonna be with you on a journey that, that will not only have ups, but it's gonna have downs. And so who do you want to be there with you, like rolling up their sleeves and helping you along the way.

Um, and that is, it comes down to, to relationship and trust, to your point. So, um, I think that that's. That's something that I would probably advise founders not to only optimize for valuation. Of course, it has to make sense economically for you and the rest of the shareholders, but, um, think about like the relationship and who you're choosing to, to partner with as well.

A 

Mehmet: hundred percent. I agree with you on that. Now, if we look at not the far future, I stopped asking for the far future, but I mean at least in the coming one, two year with everything's happening, um, in ai, which sectors or themes, you know, you are very bullish on when it comes to, you know, companies that are [00:35:00] investible?

I would say when it comes of course, to new area growth equity. 

Isabelle: There's a ton happening in the market and it's evolving every single day. So I actually think this is one of the most exciting times to be both on the, the building side, but also on the investing side. I think there's a couple areas that we're pretty excited about.

Um, one being the concept of. Um, historically PE firms have focused on rolling up services businesses. That has been, you know, a, a, a replicable playbook that a lot of private equity firms have, um, executed on. I think now we, in the growth equity stage are thinking about. With the introduction of ai, um, services, rollups look a lot different.

You can now roll up these legacy businesses, um, slot in ai and they start to operate more like software businesses and not just like services businesses. And so we're thinking that there's a pretty big opportunity in that segment of the market for these, um, AI native services roll up. So [00:36:00] that's one area that we're starting to spend time in.

Um. Another area that I think is really interesting is, um, vertical AI businesses, and that goes back to the data mode that we were talking about earlier. I think, um, there's always gonna be this question of build versus buy, and I think a lot of companies will end up building their own internal tools, but, um, companies that have deep domain expertise in certain verticals, especially ones that have.

You know, historically been pretty offline. I think there's the potential for them to build these very impressive, um, domain specific vertical AI businesses that, um, will end up being massive opportunities as well. And then the last segment of the market that I think there's gonna be some interesting opportunities starting to emerge, and we're already seeing evidence of this, um, already is in the AI sort of infrastructure space.

So what I mean by that is, um. Now all of these businesses are. Creating or buying, um, [00:37:00] or rolling out their own agents. And that introduces a whole set of businesses that will have to emerge around how do you monitor the agents? Um, how do, what are the, the ways in which agents are executing payments like insurance for agents, um, security for agents.

And so I think there's gonna be a lot of. Opportunities that come forward around, um, creating the infrastructure around managing and, um, allowing these agents to run insecure ways. And so we're continuing to monitor that space, but I mean, there's so much going on. We're just trying to kind of throw ourselves into it and look at everything happening, but it's evolving very quickly.

Mehmet: Indeed the, you know, the wave of the agent tech AI, as people call it, or you know, the deployment of agents in the vertical, uh, way that they are doing it, is opening a lot of, you know, new opportunities. And I would say not only because you mentioned monitoring, you mentioned [00:38:00] payments, and people might think it's only software.

Actually, you know, what I started to notice is also there are like some opportunities coming in the physical world as well because of the ai. Um. I'm lucky because, you know, I, I, I meet a lot of founders on the podcast and, you know, when they come with the ideas and they say, oh, okay. I never thought like, because now let's say, um, ai, you know, it's, it's like consuming, you know, the GPUs, the GPUs like are in the data center.

So there's a like whole business of data center optimization Now that. You know, someone is building it and there's like the power part of it, and then you have like the cooling part of it. So there are a lot of things which are kind of related to AI somehow and using AI that are also like emerging and we're gonna see more.

But I agree with you. Like, you know, the infrastructure, whether it's the digital one or the physical one are like, you know, areas to watch. I would say, um. As we are almost coming to an end, uh, Isabelle, like, uh, maybe it's a answer question, but [00:39:00] you know, I, I still have to ask it anyway. If you want to advise, you know, founders, uh, trying to build a hundred million plus companies today efficiently, where they should start from day one before they come to.

Isabelle: I would say to focus on building a business built on strong fundamentals and not just optimizing for headline metrics. Because as soon as an investor, um, gets under the hood and sees that, hey, your business has a churn problem, it becomes immediately uninvestible. So I think building a business intentionally, even if it means slower growth at the start, um.

Is the way to build a very durable business that, um, will withstand market changes long term. In terms of advice to founders around, maybe specifically like fundraising, I would say I would recommend being intentional about why you're ways raising capital. I think especially during hype cycles like [00:40:00] we're in right now, it can feel like, um, you know, everybody's going out to raise capital, everyone's raising at these big valuations, so.

I'm gonna go out and raise capital. Um, and so I think like being intentional about, Hey, should you even raise capital in the, in the first place? Like do you have a repeatable playbook? Do you know where it's gonna go? Um, is the capital gonna accelerate something that's already working? Or does your business have holes that you need to focus on first before you go out and try to raise capital?

Because. Fundraising is can be a long process. And at the end of the day, if you go out and and try to raise a bunch of capital and it takes multiple months and you're not ready, that was multiple months you could have spent building the business. And so I think being thoughtful around should you even go out and raise in the first place is a good place to start.

Mehmet: That, that's a fantastic answer. Thank you for mentioning this, Isabelle, because you know, that's why I tell people a lot. Yeah. Is the first question they should be, um, you know, asking themselves and trying to, to [00:41:00] answer it. Final thing, Isabellele, where people can, you know, learn more and, and, uh, stay in touch.

Isabelle: Definitely. Our volition capital's website is volition capital.com. Um, we are active on LinkedIn both. The firm and myself, and you can go online and see our portfolio, which should give you a, a good sense of the types of businesses that we partner with as well. 

Mehmet: Great. I will make, I will make sure that the links are in the show notes.

Also, for people who are listening on their favorite podcasting app, you'll find the links in the show notes. If you're watching this on YouTube, you'll find this description. Uh, Isabelle, I can't thank you enough for the time. It was a very, um, you know. Great conversation for me also as well to learn about the specific, I would say, area of investment, which is the growth investment.

Uh, and um, I think, you know, founders will find it beneficial. Other investors will found, will find it beneficial also as well. So thank you very much for sharing your insights today and this is the way how I end my episodes. For the [00:42:00] audience if you just discovered us by luck. Thank you for passing by. I hope you enjoyed.

If you did, so give me a favor, share it with your friends and colleagues and subscribe. We available on all podcasting apps and we are also on YouTube. And if you are one of the people who keep coming again and again, thank you very much for your loyalty. Thank you for keeping the show. Since last year, 2025, all the year, we are always in.

And some countries top 200 Apple podcast charts, which is nice. This year you took it like further and we are like in multiple countries at the same time. So thank you. This cannot happen without people recommending the show and coming and listening. So I really, I appreciate, you know, all the support that you are showing.

And as I say, always stay tuned for a new episode very soon. Thank you. Bye-bye. 

Isabelle: Thank you.