Episode

Key Takeaways

Stratum Capital, managing over $1 billion, focuses on B2B software with a hyper-transparent investment process.
The firm employs a 'five-point plan' to provide clear, actionable guidance for portfolio company growth.
AI is viewed as an 'invention' currently undergoing 'innovation' through business model experimentation and application.
AI integration has driven efficiency gains and enhanced product capabilities for Stratum's portfolio businesses.

Host RJ Lumba introduced Bob Morse, co-founder and managing partner at Stratum Capital, a private equity firm.
Stratum Capital manages over $1 billion in assets, specializing in B2B software and technology companies.
Morse's background includes roles at Oak Hill Capital Partners, GCC Investments, and Morgan Stanley, and he has been recognized as a top software investor.

Stratum Capital was founded to add more value post-global financial crisis, emphasizing a hyper-transparent investment process.
The firm positions itself as a better choice for founders than traditional private equity, prioritizing belief in founders and their industry experience.
Stratum cultivates a culture of continuous improvement, questioning existing methods, and valuing founders who solve customer problems with new technologies.

Stratum utilizes a 'five-point plan' agreed upon before a deal signs, limiting actionable items to five from an initial list of 50.
This plan is written in the founder's voice and communicated to the team, providing clarity and direction to reduce employee stress during control investments.
A specific example showed a founder-led business's revenue grow from $10 million to $54 million within four years by implementing a demand-generation strategy outlined in the plan.

The guest proposed a framework distinguishing 'invention' (a new capability like AI) from 'innovation' (market introduction and business models around a capability).
Companies are currently in a phase of experimenting with AI business models, drawing an analogy to the application of the steam engine to ships.
The focus is on adapting AI to deep industry expertise to solve customer problems, rather than simply delivering AI tools.

Stratum Capital seeks founders who prioritize their innovative spark and customer focus when considering a capital partner.
The firm offers a bespoke investment approach, emphasizing product, transparency, and empowering founders with choices, often without banker involvement.
Stratum gravitates towards vertical-specific software, with investments in supply chain solutions and organizations with extended constituent bases, such as government, hospitals, and universities.