Lisa Melchior, Founder and Managing Director of VERTU Capital, welcome to the Get Hired Up podcast.

Lisa Melchior 

Thanks, Maureen, I'm really excited to be here.

Maureen Farmer

Awesome. And you'll recall that we met each other at the Toronto Stock Exchange at an Association for Corporate Growth event back in January of 2023. And I saw you speak you were speaking on a panel of women, a leadership panel, and I believe the topic was relating to leadership during COVID. And during times of building resilience.

Lisa Melchior

Yes, and I recall really thinking it was a fantastic panel of women that had great ideas on how to manage through change.

Maureen Farmer

And from all different backgrounds as well. So you being from technology, I believe one was insurance. And the other one was in the banking industry, as well, all CEOs who are leading large teams during times of massive change, and when I heard you speak and and I thought of you in terms of being differentiated in the sense that you had started your own private equity fund, and that is the focus of Westgate is to support private equity funds and their portfolio companies. And I thought that that would be a fantastic topic for us to talk about here during the podcast. And I would love for you to tell us a little bit about your journey into launching a private equity fund, and we'll just make it very conversational and go from there.

Lisa Melchior

Sure, I'll give me a little bit about my journey in the business. And that'll you know, fold into the the starting of my fund is is background I've been investing in to in private equity for for 25 years now. 20 of those years were at large financial institutions. I'm based in Toronto, and both of those institutions are Toronto based, but they are both large global institutions. So I had a pretty wide breadth and depth of experience in those 20 years. And towards the last end of the of the journey. Of those 20 years, I was on one hand, realizing that there was a great market opportunity in Canada that was unserved and, and on the other hand, really starting to feel the need to go out and do something on my own. And so those two things came together. And VIRTU was born.

Maureen Farmer

What was  role in those large financial institutions? When you were there toward the end, as you were, as you were planning your exit from there, what were you doing for them?

Lisa Melchior

Most recently, I was running the tech group for OMERS private equity. So OMERS private equity being a captive private equity investment group or team for a very large pension fund here in Canada. And we were a generalist investment team with sector specialization within it. So I was leading the tech group and more specifically the software investing team.

Maureen Farmer

Okay. Excellent. Had your background previously been? Obviously you're in private equity and financial services, but did you have an interest in technology?

Lisa Melchior

That's an interesting question. So I started my career in the 90s. Investing for CIBC Capital Partners, which was a large merchant bank here in Canada was one of the probably most active investors at the time in the private markets. And we were investing in everything from early stage venture capital to very late stage buyout. And as many of you your listeners may know, in the late 90s, was really the birth of, you know, web 1.0. And, you know, the beginning of the lead up to the tech bubble, and being in a very invest active investing shop at the time, I was brought into many really interesting tech deals, and really got exposure to the tech industry at that time and was energized by it. You know, I think every year that went by reinforced my conviction that it is an area that has an ever expanding investable universe, I continue to believe so that, you know, there's going to be a greater and greater amount of opportunity to invest and create value in in technology.

Maureen Farmer

What technology really is the business. Now, I think every business, almost every business now is a technology business.

Lisa Melchior

Yes, exactly. What There's a famous thing that Andreessen Horowitz says that said that it tech that Software is eating the world and it's really absolutely true. And there's very few places where you either live work or play that don't have a significant amount of software embedded in in the things you do all the time.

Maureen Farmer

Absolutely. So you're transition out of Omers into the launching of your own private equity fund, I would love to explore that and get a sense of what that looked like for you to the degree that you can can share with us who was involved, you know, what was the ramp up period? How did you plan for it? Had you been planning for a while? And whatever you want to share with us.

Lisa Melchior

Sure, you know, it was an interesting journey, when I left Omers, to be completely honest, it was not a fully developed business plan, either on paper or in my mind, after 17 years, at Omers, I gave myself time and space to, to really reflect on what exactly I wanted the next chapter to be, and, you know, allow my mind to be free to, to work from a clean sheet of paper. And I actually counsel a lot of people, friends of friends come to see me when they're thinking of starting their own business. And I thought that was one of the healthiest things that I did was, was giving myself that time and space. So I did and really reflect deeply on not just what the thesis would be, but also on how I would form a firm, you know, what are the values that were are important to me, and why. And that exercise, you know, and I wrote all of it down, it's kind of like what I keep going back to all the time just to, you know, make sure I'm reinforcing in all of my decisions today, those values, and in, they're so important to me. And before I launched the business, officially, I did a ton of Industry and Market diligence, I actually traveled across the country, because the thesis behind for two was that there's a real need in Canada for growth, private equity, technology, investment investor specialist in the growth to low urban market space. And I had a lot of data points around that. But I wanted to also validate it with the folks that I know across the country who are early stage investors, you know, would be the source, frankly, of a deal flow for this strategy. And so I did that I went to the major markets, and to a person, I got very positive feedback. So with all of that supporting evidence that deep thinking on what I wanted to do and why I launched on February of 2017.

Maureen Farmer

that's awesome. And I really admire your the diligence that you did around the values and sort of the why behind the business plan and the thesis, but I think the values are really important too, because they become a decision making support and catalysts for all the decisions that you make. So you you run any scenarios through, this is how I do it anyway, you you run all of the scenarios through all of the different values. And you know, does it meet all of the values that we espouse in the organization. And that can be a really great predictor that this is going to be the right decision for you and your business and your and your customers. Your investors, I think.

Lisa Melchior

Exactly. I agree!

Maureen Farmer

So, the cross-country tour that you did, as you're getting ready to launch, you said you got really good feedback from people. I'm not asking for specific names or anything like that. But what types of people who would you be speaking with? Would it be like a general partner or an institutional investor? Who who would be the type of person that you will be seeking that feedback from?

Lisa Melchior

It was everyone from the yes, a general partner of a late stage venture fund, for instance, who invests in in tech companies and scales them up, and I have a very vivid memory of a conversation I had with one of them. And I asked, I've known this guy for over 20 As long as I've been in the business. And I said, So, John, what do you do when your companies hit, you know, 1520 or more of revenue, and, you know, you've been in for five, seven years, the company's not going to go public, but it's time for a liquidity event, or, you know, you need to raise that last round of capital, but the company's mature, it's beyond venture, where do you go? And he said, Well, easy. That's there's a whole list of US investors who will do that kind of a deal. And I said, Yeah, I know, but who do you go to in Canada and he sent the no one. And so that that was just complete validation of the of the, of the opportunity in my mind because I am a strong believer that being local and referenceable matters to a lot of founder CEOs that you know, the fact that for two is dedicated to the Canadian market will be a key competitive advantage against foreign investors who, you know, kind of come up here episodically.

Maureen Farmer

So tell us a little bit about the types of companies that you invest in, so we can get a clearer picture of what that might look like. And then maybe we can talk a little bit about the technology investing cycles.

Lisa Melchior

Sure, well, I mentioned already sort of size stage that we like to invest in companies that are generally hitting 20 million of revenue, and generally have 100 or more employees, in my experience in software business anyway, that correlates with a with an inflection point of growth that is usually associated with companies getting a little bit more organizationally complex. Typically, where to from there is a multi market or multi product strategy. And so it's just a reference point for us, in terms of the experience that we bring to the table in scaling companies fits well, with companies that are around that stage. We like b2b software. And we like companies that are solving really complex problems with their software. And so those are, you know, kind of high level what what we look for, we have a very specific criteria screen that we put all of our prospective companies through, but you know, in general, that that's the sort of business we're looking for.

Maureen Farmer

And otherwise, if you were there for to wasn't there, these companies would otherwise be purchased or invested in by US markets, or European markets or other markets.

Lisa Melchior

Yes, yes. And there's another really interesting stat that I learned, that was important part of the validation of the thesis to me when I was researching the idea behind Beartooth. And that was that this would have been circa 2016. At that time, almost 50% of Canadian technology companies exited at Enterprise values below 25 million, which blew my mind, because that number in the US, the percentage that exits that early in the US is tiny. And then on the other side of the spectrum, the exit values above 500 million in Canada, were only 10% of the ratio of the US. So you know, there was a, there was a huge to me in the data message, which is Canadian companies are exiting too early. Why? Because maybe they don't have the kind of capital that we're talking about. But furthermore, there hasn't been an ecosystem of experienced, you know, managers and advisors that have been scaling these companies. So, you know, what we're looking to do is come in and, and help scale those businesses. And yes, if we weren't there, most, most of the companies will either be receiving investment from a foreign firm or most likely be acquired entirely by a strategic acquire.

Maureen Farmer

Thank you for sharing that. I think that is a very surprising statistic. And, you know, all the more validation for your thesis, of course, on a day to day basis, what what types of things are you doing? Are you listening to pitches? Are you what types of things are you doing as the leader of your organization?

Lisa Melchior

Yeah, well, I'm so fortunate to have an amazing team. And, you know, that was part of the, of the list of things that were important to me when I launched, you know, having a team of people that were super high quality, but also, those that were complimented me and, frankly, are all so much smarter than me, that I have confidence in them to, you know, run with much of the day to day, you know, my time is spent now in a split between strategy, business development, you know, fundraising, frankly, takes up a lot larger, large percentage of my time, and then you know, making sure that the people in the team are resourced effectively that we're, we've got the right people in the right seats, and enough of them. I've been lucky enough to to invest in some really excellent companies run by amazing entrepreneurs. And I've learned a lot along the way and a lot of the things that I've learned in investing behind them I'm implementing now, in my own business, which is fun.

Maureen Farmer

So in terms of your portfolio companies did ensure that your firm act as have a shared resource across those portfolio companies like for example, maybe you have all the CFOs in your companies or CEOs in your company, companies come together for things like professional development or other types of shared resources is that something that you employ in your portfolio companies are you that, you know, operationally close to them?

Lisa Melchior

Not in that way, but there are some private equity firms that that do have very deep connections with their portfolio companies, our approaches, is slightly different we do. Each one of our portfolio companies has a deal team, that deal team stays close to the to the companies and the point of staying close is to be able to make very quick decisions, you know, our companies, we want them to move fast and, and do big things. And I always say, to folks who are maybe cynical of the private equity model, ask any CEO that's at a private equity investor, about the value of the speed of decision making, when you have one person to call to, you know, to say, Hey, this is I want to, I want to move in this direction, I want to pivot, what do you think it's a huge advantage. So our deal teams serve that role, they stay close to the company and make sure they're really up to speed so that if decision making needs to happen, it can happen in real time, those deal teams in ours, in our case, always include at least one of our operating advisors. So we have a bench of folks that are former executives or current executives with a depth of experience in running technology firms. And, you know, we've got a matrix of skill sets. So we select the operating advisor, who we think is best for the for the portfolio company, can help out add the most value. And they form an extension of our deal team, that we engage very regularly with our portfolio companies. But we don't go so far as to show up with our, you know, internal team in their office.

Maureen Farmer

I was I was curious about that. I know that that is a model that some private equity funds deploy. But but it sounds as though your organization stays very close in in terms of, to your point, advising and being able to support in decision making. Exactly, which is really, really important when when the market is moving very quickly. And I guess that would be a good segue into the topic of investment cycles for software and technology and Canada. Can you talk a little bit about that?

Lisa Melchior

Sure. Although I'd say the market for software knows no borders. And so our right, well, our companies are theirs, their base are they were founded in Canada, they are already global businesses, we are very fortunate in Canada to have the largest trade, you know, trading partner in the world is our neighbor. And, you know, all of our companies have, you know, over 50% of their revenue generally coming from US customers. And as a result, they've got to be competitive at a global level, you asked about the cycles of, of technology. And, you know, it's really been, you know, kind of a number of cycles in generations. As technology has developed, you know, what, 1.0, web 1.0. And then there was mobile and social and all of the consequential developments on the technology front from those big grow developments. Now we've got AI and AI is putting a whole other bringing a whole other dimension of opportunity and growth to our ecosystem. So there's the technology cycles, and then you have to layer on the financial cycles, which don't always coincide. I'd say over my career having started pre the tech bubble, no financial cycle in technology has been identical. Although there are patterns, there are times when, you know, both development of new technology and expansion of technology when it is coincides with a financial bubble. You know, that's when things can get extremely heated. And I've seen that happen a few times.

The corrections, though, on the financial side, when you're a technology investor are often mitigated by the growth in the underlying asset class. And I think we saw it very clearly this year with you know, the financial markets have been extremely weak, but we've seen some continued strength in in the big tech names in particular. And you know, a lot of financial investors just scratch their head, you know, why how's that? And, you know, it's really been the emergence of AI as an opportunity that then, you know, just gives you greater font, you know, potential for growth of those businesses. And that's, it's reflected in the market even more broadly, which is, hey, yes, there was a very heated 12 year cycle, frankly, from the end of great financial crisis to the end of 2021, beginning of 2022 is an extremely long run of financial stimulus and economic growth, right, that superpowered, the underlying or the the underlying growth in the tech sector, and then the financial markets weakened, but which would all things being equal should bring down, you know, the opportunities and growth of every every industry, except you've got tech coming up with new stuff that expands the investable universe and the growth of their of the of the industry overall, which hasn't, you know, mitigating effect on what's going on in the financial cycle.

Maureen Farmer

Yes, it's certainly a complicated relationship, for sure. And I'd love to ask this one brief question around AI. And what are you seeing? I know, people are talking about the tremendous opportunities that come with the development of various forms of AI? What do you see as a challenge, if any, at all, to the advent of AI in its introduction into every aspect of technology today?

Lisa Melchior

I think the biggest challenge is going to be quote unquote, controlling it, we're gonna have to create guardrails. And I expect there will need to be some form of regulation around AI. Yes. So that will take time. In the meantime, you know, there, there's a lot of experimentation of use cases. And, you know, there's still very few revenue producing use cases. So we're early early days on AI, there's a lot and an appropriate amount of, I think, scrutiny on on what's going on, I'm sure in the fullness of time, the right guardrails will be put in place. So I think the challenge is going to be between now and then you know, how it's all going to transpire. Unfortunately, bad actors have a way of doing things quickly, sometimes more quickly than regulators. So we will see some bad stuff happen. I just couldn't predict where or when.

Maureen Farmer

I think organizations need to be really, really careful in terms of their content creation for any of their marketing materials, because not knowing exactly where some of this stuff could be coming from, what type of content is being scraped from the internet or other vehicles? You know, I think there is an arms race to utilize the tool. And I think the appropriate amount of risk mitigation needs to be applied in that sense.

Lisa Melchior

Yes, yes. And I'm not an optimist. So I, I believe that, you know, the folks who are in positions of decision making positions are, for the most part, being mindful of that. I hope so, anyway.

Maureen Farmer

I was listening to a podcast the other day about AI and how in the healthcare industry, for example, radiologists are using AI to help with reporting and and the question that the podcaster posed was, you know, is it appropriate for a radiologist to be using AI for this type of image interpretation? And the way I look at AI, is that it's another tool in the toolkit. And as long as it's well supervised, and we know the types of machine learning that it's involved with and utilizing, I think it's like it's the the diligent use of appropriate tools. And I'm an optimist too. I think AI is going to be a wonderful productivity enhancer, as long as it's done appropriately, and to your point, you know, with with the guardrails. Like any other tool, I think.

Lisa Melchior

Yes, I was reading the history account of, you know, when the printing press was invented, and there was a lot of concern about the risk associated with being able to print material for everybody to read and oh my gosh, what would what will happen to society when everybody can read the same thing and yeah, yeah, it made me chuckle because I think these these innovations have repeated themselves through in human history, and they always seem very daunting at first. 

Maureen Farmer

Yeah, for example, when the television came along, society was afraid that it was going to replace the radio, for example. And it was going to transform the way people were going to consume news, which is true and content. But but it didn't displace it. It didn't replace it, it just augmented it. Exactly, in another way. So I find that very fascinating.

Well, Lisa, I know the last question we had on our roster is an interesting one, given the where I met you in Toronto at the Toronto Stock Exchange, and at the panel that you gave, or that you were a participant of, and that is the question of women in private equity. And I would love to have a comment or two from you about if you want to, if you have, if you have an opinion on that, about being a woman, a woman in private equity, and I do believe that you are the first female private equity entrepreneur in Canada, is that right?

Lisa Melchior

Sadly, yes. Well, I won't say sadly. I'm very proud to be doing what I'm doing. But I was shocked when I learned...and I will tell you, I learned it not that long ago, that there had been no other woman in Canada to start a private equity fund. There are many women who have started venture funds in Canada, just not at the private equity stage. Honestly, it's a statistic that needs to change. And I'm confident it will that I already know one of my friends is launched her own private equity fund. So I I would certainly be not be the only for very long. But the challenge is there's just too few of us, a women in positions of, you know, senior leadership positions within the private equity industry, at the you know, management partner level, or mark or managing director level, even fewer. And the stat in the US, I believe is somewhere between eight and 10% of senior roles are women. And in Canada, the number is even less. So it is shockingly low. I can't explain it. Because it's a fantastic career. I if you're an intellectually curious person that enjoys a new adventure every day and working with really smart, committed people, I think it's the place for you, I think it's we probably as an industry have not done a great job at you know, making it easier for women, frankly, to stay in, in the business. But, you know, I'm doing my part to to make sure that that changes. And I really hope that if we were to talk about this topic, you know, five years from now that the needle will have moved.

Maureen Farmer

Well being a historical first is certainly...there's a certain I guess cachet to that statistic. I would love to just take a moment before we round out the call to encourage anyone listening here today, if you're interested in private equity in your earliest stage career. Lisa, what's the path that you took? Or what do you see as the most less circuitous path? What's the most direct path to where you are today? If somebody were to look at a career path for for what you're doing?

Lisa Melchior

Yes, look, the most common paths into private equity are you know, financial background investment banking, so capital, understanding capital markets and deal doing, you know, management consulting, so understanding how businesses work, and how value can be created through change, those are the two most common ways to get into the, the business, you know, it's not a large industry. So if you have an opportunity to get your foot in that door, take it, you know, you'll learn something, and, and then just continue to develop your, I would say, inherent in private equity as a longer term ownership mentality. It's not like being an investment banker or Trader where things happen very, very quickly. You have to be oriented to long term ownership. And with that also comes an orientation to, you know, building your career over time. There is no shortcut for becoming a good investor other than, you know, call it reps or, you know, doing it experiencing it. And the more experience you have, the better your toolkit is in terms of investing acumen.

So, just get out there and, you know, develop some experience and you know, the one thing I'd say that women often do is there Life, you know, often the time in your life where your personal life becomes more complex, because maybe you you're thinking about starting a family often intersects with when your career path is, is becoming more complex because you're taking on more and more responsibility. That is a tricky time to navigate through your your professional career, but it is possible. And you know, it's a moment in time, I have three daughters who are now all grown up. And that tricky period of time when you're raising a family, it's a period of time, it's not forever. And if you can manage your way through it, it's very worth it.

Maureen Farmer

I've not been in private equity. But I have two grown daughters myself. And I agree with that. I think it's certainly doable. And I think that, well, obviously, it's doable. And so thank you for sharing that. I didn't know that you had three daughters...you don't look old enough to have three grown daughters. And I can say that because I've met you!

Lisa Melchior

Thank you! They're not that old. We just moved my youngest into university this this fall.

Maureen Farmer

Thank you for sharing that. I think a lot of people are reluctant to talk about those types of things, you know, publicly but I think it's important be because I think that that if you plan it right, and understand that that period of time and intense period of time, when things are getting more complicated during the career, they're getting more complicated, personally, from a family point of view, but it's not forever.

Lisa Melchior

I don't think this is, you know, specific to being a woman. But one thing that I, you know, feel has been a source of success for me is just my approach to how I work with my companies and manage those those relationships. I think it is different than how many other PE professionals do manage.

Maureen Farmer

Can you tell us a little but more about that?

Lisa Melchior

Yeah. My best way to describe it, as I sat on a board. Many years ago, I was the only woman and the guys at the table. The majority were, you know, your kind of prototypical alpha male, including the CEO, who always needed to be right, always need to win the point. And, you know, what I think folks who sit on boards know is that the board dynamic can be it's a social dynamic, right? It's a small group. It's a small group of folks who tend to be, you know, leaders in their respective fields, who are used to being the decision maker. And the whole point of the board is to come together and collectively make the right decisions for the organization. And my observation is in that social dynamic, when you've got people who tend to be the ones making the decisions themselves, so kind of, quote unquote, always right and wired to be a little bit more, you know, alpha male or dominant, it can create strange dynamics around Are you really listening to each other? Are we really answering the questions with the right amount of information? Or is the person with the loudest voice winning the point, and I will never have the loudest voice, my voice just doesn't project. I was raised with brothers, by the way, and my dad who are all extremely talkative and large, physically, even people. And so at the dinner table, I, in order to get my point across, I used to have to literally wait for a break when they had something in their mouth. And then I could say my piece. But my brothers are all in my dad, and my mom too. But my mom was very soft spoken that, but the guys were not not only talk a lot, but extremely smart. My brothers are really smart guys. And so an impatient. So I learned very quickly to get my point across extremely succinctly, like, almost like piercing and, you know, it stops you in your tracks. So that was good training for sitting around a board table, I will tell you, and that's been effective. So I'd say I'm a very good listener. I am you know, I think it's really important to be a good listener in this business. Because you're, you're just taking in so much information all the time and needing to make decisions, important strategic decisions with processing a lot of stuff. So you have to be open to listening carefully. and communicating very effectively with low ego. You know, this, the CEO of the business is running the business and the and that person reports to the board. But you want to make sure that that hierarchical relationship, doesn't cloud the right answer, if you know what I mean.

Maureen Farmer

I do know what you mean. So in terms of your relationship with your portfolio companies, you're the investor, and the CEO is running the company, you're around the board table. So am I hearing that it's a collaborative style that you deploy?

Lisa Melchior

Yes. The way I like to describe it, and I do before I make any investment is, philosophically I believe, in a open, transparent environment, where, you know, good news is shared bad news, share it faster, please. And we will all work together, to rowing the boat in the same direction, with little friction to make sure that the company is a success.

Maureen Farmer

So how long do you hold your companies? Is that a question you can answer here? How long do you? Or is it different for different companies, different businesses?

Lisa Melchior

Typically three to seven years, with five being the average.

Maureen Farmer

Lots to get done in that period of time. So decisions do need to be made quickly, succinctly and responsibly.

Well, Lisa, it's been an absolute pleasure having you on the podcast. And before I let you go, I do have a fun question for you. Not that these weren't fun questions, this is a different fun question. And that is, if you could provide us with the name of a restaurant that you could endorse. And we will include on a list that we publish every year. It's a great resource for people who are traveling around the globe, because we interview people from around the world. And it becomes a little bit of a go to resource for for our listeners as they as they travel around the world. So what restaurant would you recommend?

Lisa Melchior

I'm really lucky to live in Toronto, where we have so many excellent restaurants. And by virtue of the fact that we have, you know, folks heat living here from all over the world, you know, we get you. I don't know if there's a region of the world that isn't represented in our restaurant scene. So it depends what you like. But there's a restaurant in Toronto called Joso's which started many decades ago by the Croatian family that does the best fish and risotto if you're into that. And it's a really interesting place to visit here in the city.

Maureen Farmer

Awesome. So we'll make sure that we get Joso's on that list and have it in the show notes as well. And before I finally let you go, can you tell people how they can get in touch with you?

Lisa Melchior

Sure. The best way to get in touch with me is through my LinkedIn, feel free to message me and happy to connect.

Maureen Farmer

Awesome. Well, it's been an absolute pleasure having you on the podcast today, Lisa, thank you very much for joining me and maybe we'll do it again.

Lisa Melchior

Thanks, Maureen!