297. The fundraising mistakes that haunt founders for years

Giving away 10% of your company before you have a product might seem like a reasonable price for mentorship and introductions.

But do the math at exit, and you get a very different story.

In this episode, Sophia Matveeva talks to Melanie Nabar, growth equity investor at Volition Capital, about what the fundraising journey actually looks like from the investor side — and what founders need to understand before they enter it.

You'll learn:

• Why the equity you give away at the very beginning is the most expensive equity you'll ever part with
• The difference between seed, venture capital, growth equity and private equity — and which is right for you
• Why a founder owning only 5% of their own business is a red flag for serious investors
• How to stress-test an investor relationship before you're locked in
• Why companies are staying private longer — and what that means for your exit strategy
• The due diligence questions founders rarely think to ask

Sophia also shares her own experience joining a corporate accelerator — and why she wishes she'd had this conversation first.

 Timestamps:

• 00:00 - Introduction: The equity trap of accelerators
• 03:22 - Are all accelerators created equal?
• 08:23 - Why VCs care about founder dilution
• 15:10 - Fundraising stages: Friends and family to IPO
• 24:55 - Why companies stay private longer
• 28:21 - Building investor relationships over time
• 32:03 - Stress testing investor relationships during diligence
• 37:41 - Why growth equity is the sweet spot
• 41:44 - Closing

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Transcript: 

[00:00:00] Melanie Nabar: You can get to a place where the company is doing really well. I have seen businesses where your burn rates are in check. It really feels like things are working and the founder only owns 5% of the business. And that's before we're coming in writing a $20 million check into a business that the founder already owns only 5%. Well, now they're going to own 2.5% which that's not founder type equity. And so that can be a really big problem.

[00:00:31] Sophia Matveeva: Hello and welcome to the Tech for Non-Techies podcast. I'm your host, Sophia Matveeva. If you're a non-technical founder building a tech product or adding AI to your business, you're in the right place. Each week, you'll get practical strategies, step-by-step playbooks, and real-world case studies to help you launch and scale a tech business without learning to code. And this is not another startup show full of jargon, venture capital theater, or tech bro bravado.

[00:01:03] Here, we focus on building useful products that make money without hype and without code. I've written for the Harvard Business Review and lectured at Oxford, London Business School and Chicago Booth. So you are in safe hands. I've also helped hundreds of founders both from concept to scalable product. And now it's your turn. So let's dive in.

[00:01:31] Hello, smart people. How are you today? If you have ever been tempted by an accelerator program, the brand, the mentorship and the very satisfying LinkedIn posts that you get to make. This episode is essential listening before you sign anything. Today, you will learn from me and from Melanie Nabar, a growth equity investor at Volition Capital, who invests in scaling tech businesses and sits on their board. And we're talking about money, specifically how founders lose it before they've even started. So this is why it's super important.

[00:02:12] We get into the full fundraising journey, so from the friends and family round through to the IPO. But the conversation that I think will stay with you is this. The equity that you give away at the very beginning when your valuation is at the lowest, that's the most expensive equity that you will ever part with. And it feels cheap because at that point you have no money. And most first time founders, myself included, don't really understand that until it's too late.

[00:02:44] As you will hear in this episode, as you know, I share my mistakes with you so you don't make them. Melanie also shares how the best investors actually behave versus how they present themselves. She shares how to stress test the relationship before you're locked in and why founders who are too diluted early on can find themselves working really, really hard for a windfall that basically never comes. So this is super useful if you are ever going to fundraise or join an accelerator.

[00:03:16] And if you're finding this show useful, then please leave us a rating and review wherever you get your podcasts. Leaving a rating literally takes 10 seconds and it makes a very big difference to me and my team who are making really good free content for you. Okay. Guilt trip is over and now let's learn from Melanie.

[00:03:38] Melanie, tell us are all accelerators created equal?

[00:03:22] Are all accelerators created equal?

Melanie Nabar: I don't think that they are. Accelerators can be really valuable tools if you're especially a first-time founder and you want mentorship and guidance along the process. There can be a lot of value. But an accelerator isn't free. You don't just get to join and everybody wants to mentor you because they're trying to be nice people. There is a capitalistic component. You're giving away usually somewhere between five and 10% of your equity.

[00:03:58] And that's, you know, before you even walk out the front door and have a product. And so before you decide to work with an accelerator, you really want to think about the value you're getting because you're giving away a lot of equity at the lowest valuation you will hopefully ever be assuming things go well. The other thing you want to think about is like, what does your accelerator represent? So there's a few types of accelerators. There are corporate accelerators, which theoretically can introduce you to customers early on, which can be really valuable for folks selling into enterprises. Like if that corporate kind of represents the type of customers you would want to get in and a partnership could be really valuable, maybe it does make sense.

[00:04:44] Then there are accelerators that are more focused on brand and helping you fundraise. Certain accelerators will push you to fundraise faster, tell you that the path to a successful company is raising a bunch of capital, which could be the right move, but it could also result in you raising more capital than you want earlier on. So you need to kind of know what that represents and if it aligns with you. I think where people fall is they don't do enough diligence on what other founders have received from working with accelerators and

[00:05:22] Sometimes a corporate accelerator may say, we're going to help you get into these enterprises. Have they actually been able to do that for companies before? What comes with it? And making sure that you're really getting what you think you're getting out of the accelerator is really important because think about when you're valued at 100 million. 10% of your company would be $10 million. That could be a really big difference. And it could also result in you not owning as much of the company as investors would want you to own and you would want to own. When you exit the company one day, you want to own a big chunk of the business and that can be harder when you give away 10% of the business upfront right away. And so you just want to make sure that you're getting that value versus deciding to just use an accelerator because it sounds flashy and you can do a LinkedIn post about it.

[00:06:15] Sophia Matveeva: Well, you know, I hate to say this, but I actually kind of did that with my last company. You know, first time founder, easily impressed by not necessarily the right things. And there was, by this point, we had actually had a product, we had users, we had revenue. And there was a corporate, I don't think I'm allowed to say who they are because I will get sued, but anyway, there was a large corporate owned by some mean billionaires. That's what I'm just going to say, that you definitely know about anyway.

[00:06:48] So they decided to start this new accelerator and they basically said to startups that if you join this accelerator, then you are going to get a contract with one of our divisions at the end of it. And this is a really big company with loads of money. And so I was like, okay, sure, absolutely. And so we joined and then I quickly realized that the people who are supposed to be mentoring us, actually had no relevant experience. So they had relevant experience for a large corporate, but they've never worked with the kind of budgets, the kinds of teams, the kind of problems that we had. And so there were lots of meetings about meetings. And I remember thinking like, okay, this is all really good in theory, but when are we actually going to get some stuff done? Because the way this is moving, you know,

[00:07:39] We're just going to run out of cash and nothing good is going to happen. I remember one startup in our cohort, they actually just dropped out because there was a condition that if you complete it, you are going to have to give away, you know, a large amount of equity. And as they were going through it, they were like, we're actually not getting the value and you know, we're being pressed to sign this thing and we are going to walk out. I did not make that decision. That's something that I definitely went on to regret later.

[00:08:09] Which brings me to my next question. So as a venture capitalist, why do you care about the founder being diluted too early? So I think the audience really needs to understand that.

[00:08:23] Why VCs care about founder dilution

Melanie Nabar: Yeah, that's a fantastic question. Venture capital and growth equity, which are typically minority forms of equity. So they're not buying the whole business. They're buying a stake of the business. When you're doing that, you're backing the management team, the founders who are in place. You're not coming in and running the company. And so you want to feel like the folks that are at the helm have a ton of motivation to go after their vision. And if you have raised a bunch of capital earlier on when your valuations are low and the dollar amounts that are actually going into the business are not yet large in the grand scheme of capital raises, you can get to a place where the company is doing really well. I have seen businesses where, you hey, you're doubling, your burn rates are in check, it really feels like things are working and the founder only owns 5% of the business.

[00:09:26] And that's before we're coming in. I work with a growth equity firm called Volition. We write checks 15 to 75, writing a $20 million check into a business that the founder already owns only 5%. Well, now they're going to own 2.5%, which that's not founder type equity. And so a venture capital firm or growth equity firm could get uncomfortable that the founders could just decide, hey, like this is hard. Building a business is hard. And if you are not motivated from your equity ownership, you decide to walk away. And then the venture capital firm or growth equity firm is left with a business without its core visionary. And so that can be a really big problem.

[00:10:14] There are ways to solve it. So I do have a portfolio company that when we invested the founders, it wasn't quite 5% that they owned, they owned more than that, but it wasn't as much as we wanted them to own. We wanted them to be really motivated. And at the end of the day, a win is when you exit a company and the founder gets a really great windfall. It doesn't feel great when a founder doesn't get very much because they don't own very much. And so when we came in, we actually negotiated that the existing cap table, basically everybody created an option pool before we came in and we had assigned some of that option pool to go to the founders because we wanted to feel like the founders had a certain amount of equity once we were on the cap table.

[00:11:04] And so there are ways to do that, but that move, that option pool creation, it's not something that is typically done for existing founders. And so you really need to be in a position of strength. And so if you make the decision to use an accelerator, raise a bunch of capital early on, just be really cognizant that your ownership is going to be something that, you know, a venture capital investor will still think about in the future. And so make sure if you're going to do it, you're going to be in a position of strength at the end of that journey or your remaining ownership is still really attractive and puts you in a good position.

[00:12:44] Sophia Matveeva: You know, just to make this real and slightly painful, I remember a conversation that I had with a girlfriend of mine who is a CEO of a startup and they, you know, on the outside, they've got contracts with big companies, like things look good, but also it's really hard. It's really hard work. And I remember speaking to her and you know, she herself also has really good credentials. So she had an impressive job before it. The point is like she could get a really well paid job. Yeah. If she wasn't doing this. And I remember I was speaking to her and you know, she just had a bust up with her co-founder and you know, a contract was not being signed. Just typical, typical like late stage startup crap basically.

[00:13:32] And I said, well, how are you doing? And she said, I just don't know if this is worth eight years of my life. And, and you know, at this point you actually just can do some maths. And you can just look at like, okay, well, if you are working for eight years, given what you were doing before your trajectory, what amount of money with salary and bonuses would you get? Plus also you've probably had like a nicer lifestyle because you wouldn't be checking your Slack messages all the time. And so you look at that amount of money and then you look at what you think you are going to get out of this. And then you think, well, is it worth eight years of my life or not? Because startups are a late monetization policy.

[00:14:16] So if this is the game that you're playing, it needs to make sense. And it's interesting that I have found individual investors not understanding this, or maybe kind of earlier stage angels, sometimes they think, you know, the founder is going to have too much equity. Whereas I find that professional investors, well, because you guys actually know that, okay, no, we need... For people of the kind of caliber who are going to bring a startup to success, they could get a really, really good job elsewhere. So speaking of that trajectory from angel to growth capital to IPO, I would love for you to tell us, to tell our audience about the different stages. So, you know, right at the beginning, you would often have friends and family. Right. And then what are the stages and what are they called?

[00:15:10] Fundraising stages: Friends and family to IPO

Melanie Nabar: Yeah, I'll walk through the stages. I'll also caveat that because all the stages exist, that doesn't mean you need to raise at every stage. In fact, you want to raise kind of as little amount as possible while still enabling yourself to get to where you're going as fast as possible, right? So there's always a trade-off and you should do that calculus at each stage. But if you were to look at every available, you know, capital point, I'd say, of course, friends and family first. You're just trying to get off the ground and maybe $50,000 is going to make a huge difference to starting the company. And you have nice enough friends and family to help you out there.

[00:15:56] Then there's seed investing. So seed investors are typically coming in and the value of a seed investor is, of course, capital because at that point, maybe it's the first million dollars you're raising. And that can go a long way. There are five, six, seven people working on a project, and especially now that AI exists and can augment your team. Seed investors, the value of that is of course the money, but then it's also, I think about the earlier stage investors, the value is introductions. So if I were a founder, knowing what I know about the capital market, I'd say a seed investor I'd be looking for either has domain expertise in the exact segment I've played in, maybe they were a founder historically who worked in that vertical, and they can make introductions. Or maybe they are a part of a corporate or they have connections to other corporates because of whatever their history is. So seed investors is capital and introductions.

[00:16:58] Then you start to move towards venture capital and growth equity. There's overlap in terms of the stage for venture capital and growth equity. Typically, venture capital is slightly earlier and the underwriting is different in that a venture capital firm is playing for the power law. They're playing for one or two, you know, 20, 50, 100X outcomes. And so they invest in a high number of companies with a higher risk profile because it's okay if 50% of the companies fail because I know that those two companies or three companies are gonna make up for it. And that works, there's a lot of great venture capital firms out there. It is just something that a founder should consider in terms of their alignment with their investors.

[00:17:52] You're going to get more attention if you're doing well, if folks think you might be the one or two, which hopefully every founder thinks that they will be, but that's not always the case. It is not always a perfect up and to the right story. And so you just want to know that going into it, that the attention of folks that are on the board, they're likely going to be on more boards and they're going to be thinking about the power law investment.

[00:18:22] Then there's growth equity. So growth equity, also minority investors like venture capital, tends to be slightly later stage in terms of how big companies are. So Volition, for example, comes in when folks are typically north of five million in ARR revenue, depending on the model, which is not easy to get to. That is an impressive scale to reach as a founder. And growth equity is more concentrated. So you're only taking say 15, 20 bets in a given portfolio. And while that's not a portfolio of one, like a founder would be, most founders are only working on one company at the same time.

[00:19:08] It's about as close as you can get while LPs, folks who you get capital from, are willing to invest in you as a diversified fund. And so the theory is that your board members are on less boards, they're more focused. And growth equity investors, because there's a smaller number of companies, they can't have one or two companies make up for all the rest of them. They need every company to succeed. And so you're going to be a little bit more aligned on the downside.

[00:19:38] And from an upside perspective, of course, everybody would love a 50X, nobody's saying no to that, but typically underwriting for more like a five, you're hoping for a five X plus outcome versus a, you know, 20, 20X outcome. And so it doesn't mean that it limits what you should aim for, but it's more about how you will be pushed to scale the company. If your goal is I want to raise a bunch of capital and I want to keep raising capital and that's how I think I'm going to win this market. Venture capital may be the better route. If you're thinking, hey, maybe I want to raise more capital down the line, but I want to build a good business. I don't want to be pushed to invest when I don't know that the investment is going to drive long-term value, then growth equity may be a better fit.

[00:20:32] Down the line if you're looking to sell your business, that's where private equity comes into play. It's a bit of a misnomer because technically venture capital and growth equity are private forms of capital. They're not in the public market, but they are known for a private equity firm is known for acquiring a company. Typically at that point, management is being changed out. Every once in a while, a CEO will stick around, but usually you're selling most of your company at that point. And so you may be asked to stay on for a year or so, but the theory is let's bring folks who've been there, done that before. And at that point, we're not focusing on innovation anymore. We are focusing on scaling. We're focusing on profitability. Maybe even there's debt on the balance sheet that helped to acquire the company and helps to leverage the returns for a private equity firm. And so at that point, it's almost the cash cow component of a life stage.

[00:21:32] And then of course, there's the option of one day IPO-ing. That is, right now it's a very high bar to IPO successfully in the public market. So it could work, but it's more of a select few that get to that point. And it's also a decision on what you want to do because being a public company CEO is very different than being a private company founder.

[00:21:44] Sophia Matveeva: You know, it's really good that you said that actually you don't have to go through all of the phases because I'm thinking of a company called Highsnobiety. If you're a very fashionable man, you will know what it is. If you're a man and you're not fashionable, then I recommend that you look at it. So Highsnobiety is basically, yeah, it's like luxury men's streetwear. And I remember I met the founder and he had raised his Series A when he was 13 years in. I met him at some sort of, it was a Forbes Europe event, but basically something already quite fancy and he was speaking there. I remember I said to him, well, this is interesting. This is unusual because one doesn't think of a company being around for 13 years and then raising Series A. Series A is something that you do early. He said, well,

[00:22:38] We just grew slowly at the beginning. And essentially he was doing everything on a shoestring budget and he would, sometimes they would have good years. And so he went through that cycle of hiring people and then they would have a bad year and he would have to get rid of them. And it took a while for him to understand the business model because he started off, I believe as a blogger. And so him, you know, him building this company also meant that he had to grow as a person and he had to understand different business models and try lots of different things.

[00:23:14] And then, and he also didn't want to take private capital. And frankly, from our conversation, it didn't seem like at the earliest stages, he would have been somebody that, you know, anybody really good would have wanted to invest in because they would have thought, okay, this guy maybe is promising, but doesn't have any relevant experience, doesn't know what he's doing, seems to be changing his business model all the time. He's hiring and firing like this is a disaster. And, you know, he kept on persevering and eventually he found a business model that worked, something that scaled. And at that point, a serious investor was interested. But also I remember I spoke to him and his investor at the same time and they both seemed to kind of be two people who understood and respected each other. There wasn't this, okay, one person has the money and the other one is the broke founder. And I think that's also really important to have that dynamic where I think you often

[00:24:06] don't see that especially at the early stage accelerators where you kind of have the, you know, the important people with the money and the advice like doling out the advice like kings from thrones. And then you have the startups kind of chasing them around for scraps. But you mentioned the IPO route and that it's not really happening right now. Why is that?

[00:24:30] Yeah, so, sorry to interrupt, just for context, I'd love for you to tell us about companies staying private for longer in general, like how long has that been happening? What has been the typical thing and why are we in this new terrain right now?

[00:24:55] Why companies stay private longer

Melanie Nabar: Yeah, it's a great question. So there's a few reasons why companies have stayed private longer if you look at the last 10, 15 year cycle. The first one is that interest rates were really low and so cash was cheap and so folks were investing heavily in private markets, which means that there was more capital in some of these big private equity firms to acquire companies instead of IPOing. So I'm thinking like you're a billion dollar company and you're looking to exit. It used to be you had to IPO because who could buy a billion dollar company who had enough in a fund to do that. And over the last 15 years has been a number of mega funds that have grown that have tens of billions of dollars that can invest at that stage. And so that's the first reason.

[00:25:54] And it enabled founders to make a decision on do I want to be a public company where I have to report every quarter to the public market and my valuation will change according to that and according to public perception. And so you end up having to operate the business in a way that looks good to the public market in the short term, perhaps instead of focusing on what will be the right move in the long term. So that's the first one. And then the second piece is that because the market has shifted over the last five years, so pretty much since 2021, the public market has been trading at a discount to the private markets. So you might take a valuation hit if you are gonna go public. And so again, the private equity firms may sound attractive. The other piece is that because of the market in the public equities trading lower than the private markets,

[00:26:52] the bar for what will be a successful IPO, meaning you go out, you sell shares at a certain price and they continue to rise in value versus see a big crater right afterwards. It's a higher bar. So you need to be now like the best of the best to get to that place. And so as a result, a lot of companies are not yet IPO-ing. And because interest rates have risen, there's actually less money from the mega funds perspective. And so a lot of growth equity firms and private equity firms now have a lot of great assets that they're not necessarily selling. There's a little bit less liquidity in the market, which it goes in waves, right? You know, IPOs are hot, you can IPO and see it successfully. IPOs are not hot, you can't IPO. And so there's a little bit of a market cyclicality question.

[00:27:54] Sophia Matveeva: And so going back to the stage where you're at, at this growth equity stage, when do you start getting to know the founders that you would get to know, that you would invest in? So for example, do you get to know them when they're at seed stage and then you just develop that relationship over years? Or do they come to you when they're basically just raising their growth round and you just start evaluating them then?

[00:28:21] Building investor relationships over time

Melanie Nabar: It's a great question. Ideally, we're building the relationship over time because when you decide to take on an investor on your cap table, you're now in it together. An investment typically lasts longer than an average marriage, right? So you wanna know this person. You wanna know what does the firm represent? What is a win for that firm? Because that's gonna impact how they're gonna behave on the board.

[00:28:52] And you're going to want to know the person, how they're going to behave when things are maybe not going well. Because I can guarantee you even the best companies in the world have had a bad quarter. And you want to know what's going to happen both in the good and the bad. And so we try to get to know folks when usually I would say they have like two or three million in revenue because at that stage, you have some good customers, you're starting to see product market fit, and there's some good value in building a relationship. We can also typically start to be useful at that stage because we've seen companies scale from five to a hundred million in ARR. And so we can start to say, hey, maybe look around the corner for XYZ and give examples of things our portfolio companies have seen.

[00:29:46] You said something interesting about how accelerators behave where, you know, the mentors and the people with the money are doling out advice. It's interesting because my view is no two companies are alike. So an investor can help you maybe skip a few mistakes that are very common. But they can't tell you exactly the right way to scale your business because there are many ways to scale a business and every sector is different. Every team is different. And so while a founder, you know, may look to their investors for advice and hopefully they have some and they're valuable at the end of the day, I think the best investors give you the information, but are backing you to ultimately make that decision and believing that even if it contradicts with what they believe, it's the right one.

[00:30:47] Sophia Matveeva: So you said something really interesting about, okay, get to know each other when things are stressful before you sign the deal. And that's really good advice, but practically how do you do it? Because let's say that signing a deal, that's like, okay, you're in, you're trapped, that's it. Well, not trapped, but like, you're going to have to do some really serious stuff to get out of this thing. So that's, and so basically at that point, people can kind of let it loose. Like, well, you're here now, you know, I'm in a bad mood. This is what I'm really like. Whereas before people are still in this kind of dating scenario and putting their best face forward. So you as a founder, you as an investor, speaking to a founder, is the founder really going to be open about what's going on or how stressed they are

[00:31:38] when they're not having a great quarter and are you really going to be able to see that and to support that? And how can you really stress test the relationship before it becomes formalized?

[00:32:03] Stress testing investor relationships during diligence

Melanie Nabar: It's a good question. And you are right. If you're building relationships with founders over the course of years, you may talk about like, Hey, this is keeping me up at night, but this is what I'm excited about. And you're likely going to skew towards talking about the good because you're trying to get the investor to be interested. So it's a fair call out. I think where it really comes into play is if you do have a bad quarter and you're honest about it. Does the investor want to continue the relationship? Like are they still intrigued by what you're doing even if the numbers may not be showing it? Because that shows that they really believe in the vision, which I think is a good indicator.

[00:32:52] The other place and the place you can actually figure it out before you sign the dotted line and you're in it together is during a diligence period. So if you've decided now is the time to raise capital. I know exactly what I would do with $25 million or, hey, business is going really well. I'm going to take a few chips off the table so that I can go after my big vision, not worry about my mortgage, whatever it is. If you've decided you're going to share data with investors, you're going to have conversations about each functional area, you're going to dive into the business. And that is a great time to assess how an investor is going to behave because diligence is a fairly high stress situation. You're usually trying to make a decision in 30 days for what will be a marriage, right?

[00:33:48] And so the questions I would ask myself as I'm going through diligence are things like, is the investor telling me why they're asking these questions or, you know, are they trying to kind of like manipulate me into giving a certain answer? Or are they sharing back their analyses with me? Are they being an open book? Because if they are during diligence, most likely they will be after close and it will be a much more open relationship, which is what you ultimately want with your investors is to feel comfortable being fully transparent so that if there are ways that your investor can be helpful, they will be. And you're not going to be punished in any which way for being earnest about situations.

[00:34:36] The third way and most important way is, talk to their existing founders. Most of the time a founder will ask for a reference or two, but it's very rare that founders will ask like, hey, I wanna speak to a founder where things have not gone well. Or like, I'm going to call out the four founders I want to talk to, I'm not going to let you cherry pick. Those are things that we do when we're talking to a company's customers, because we don't want a founder to cherry pick, we want to get the full picture. So we'll pick, these are the five customers we want to talk to. And you want to do the same thing as a founder on the other side. And so those are the period, that's really the period of time you can get the most information on how an investor is going to behave on a board. And so that's where I would focus because you're spot on. It's not likely you're going to share every little painful detail with somebody you maybe catch up with every six months.

[00:35:39] Sophia Matveeva: And you know, I think the tip here is that don't get too excited or don't already emotionally make the sale. Don't already emotionally make the deal before due diligence. Because as somebody who has raised money themselves, I know just the excitement. I remember the first time somebody said that they were going to invest in my company, this was my last company. It was a text message and I took a screenshot and I was like, oh my God, this is insane. This is great. This is just the best thing.

[00:36:12] I didn't, you know, at the time I didn't know that there's such a road between the text and then the money in the bank. And that road is really long and really painful. And I think like, yes, see that text message as an expression of interest and as a compliment. It's like, you know, somebody is telling you that your company is really hot. That's really nice, but that's very different to, okay, actually let's go and do this and let's go and get married. And during that road, essentially emotionally be prepared to walk away as opposed to start thinking like, well, they've given me some compliments. And even though I'm seeing all of these massive red flags, I'm just going to go along with it because, and also like because A, I'm flattered, but also because I really need the money.

[00:36:58] Because when essentially whenever you really need the money, that means that the other party is in a powerful position and you're not, which is a bit scary. So my last question to you is why do you specifically like working at this stage? You know, you could be working at the earliest stage, the venture capital stage. You could be working at the private equity stage where actually I used to work in before I went into the wild world of entrepreneurship. So what is it about growth equity that you think is the most fun?

[00:37:41] Why growth equity is the sweet spot

Melanie Nabar: Yeah. I love this stage of business because you've already accomplished a lot as a founder. There is a basis for, you could call it success. If you sold your business at five million ARR, you could make tens of millions of dollars if you own the whole thing and that's a great outcome. What I love is that if you're deciding to raise growth equity, you are looking far beyond. Like you're, you now are starting to be able to taste like we're going to be a hundred million ARR business. Like we're going to own this market. And so the types of folks that we're working with tend to be at a really exciting stage where they've done something great and they've said, not enough. I want to go after that next piece. And so that excitement, hunger, innovation, I think is really fun.

[00:38:42] And then the other piece is that I think this stage is a really valuable place to be as an investor. I don't feel like I'm just selling money, right? I think we can be really helpful in that scaling journey because it's no longer about product market fit. It's no longer just being scrappy. Like there are best practices that you can leverage and no two businesses, again, are alike, but there are things that every company tends to need during that scaling phase. And so as a firm, you can actually have those resources. So at some point, you're going to need like a CRO when you never needed a CRO before. And hiring the wrong one could put you back a year and a half because they hire their own team and you got to let them ramp and see if it works out. And then you have to start all over again if it doesn't.

[00:39:38] So we have a recruiting team in-house that can help find the right person and they're not paid on placement, they're focused on the returns of our funds, so they're aligned. That's just one example of a resource you can provide at this stage to be truly useful and beyond the capital. And then the other piece is we're coming in and we're typically putting cash on the balance sheet and folks are hiring and that's fun. You know, people are coming in and they're finally able to do those things that they know would be impactful and hire those folks they know could change the business because they have those resources. And I think just from a human perspective, it's nice that, you know, we're coming in, we're giving people resources and they're able to hire more folks to go after that big vision.

[00:40:28] There is a little bit of a feel good stage from that perspective. And we're aligned in terms of we want every single one to succeed and we'll roll up our sleeves to try to make it happen even when things aren't going well because we have the benefit of not having too many companies in the portfolio where it's just not feasible to give the attention. So it's a good combination. I will say I am biased of course but that's why I focus on this segment.

[00:40:54] Sophia Matveeva: Yeah, this actually does sound really fun. As you were saying that, I was just thinking, oh my God, when I worked in a private equity firm and we were investing in distressed assets, I remember we actually had a slide in our presentation saying that we're ambulance chasers. And I'm thinking, that's so horrible. What Melanie is talking about, it's nice. So where can people learn more from you? Where can they find you?

[00:41:17] Melanie Nabar: Yes, so my email is on Volition Capital's website, so you can do that, or you can find me on LinkedIn. You can follow, you can connect, and if you're a founder building a tech business, I would love to get to know you.

[00:41:31] Sophia Matveeva: Awesome. Thank you very much. I've seen your LinkedIn. There's good stuff on there. So yes, please give Melanie a follow. Well, thank you very much for joining us today. It has been a pleasure speaking to you and have a fabulous day.

[00:41:43] Melanie Nabar: Thank you, Sophia.

[00:41:44] Closing

Sophia Matveeva: Wasn't that interesting? What point did you find most insightful or surprising? I would love to know, so send me a connection request on LinkedIn and please tell me. And on that note, thank you very much for listening. Have a wonderful day and I shall be back in your delightful smart ears next week. Ciao!