Chad Bayne: Hello, everyone. Today I’m here with Nilam, who’s the founder and CEO of Beacon Software. Nilam and I have been working together since the founding of Beacon in 2024. Nilam, thanks for joining us today. Maybe to begin with, maybe let the audience know a bit about yourself and your background.
Nilam Ganenthiran: Awesome. Thanks for having me, Chad. Nilam Ganenthiran, I’m the founder and CEO of Beacon Software. I live here in Toronto with my wife and two kids. I started Beacon two years ago, and what we are is we’re a holding company, a technology holding company for great main street niche, vertical market businesses. Before starting Beacon, I worked as an investor at D1 Capital, and before that, I spent eight years at Instacart, where I was employee 12 and ended up with the privilege of becoming president of the company. So scaled it from 12 to 3,500 people.
Chad Bayne: What inspired you to found Beacon?
Nilam Ganenthiran: Great question, Chad. So I started Beacon, the inspiration of it, actually happened just over two and a half years ago. As an investor, I was, this was the first generation of AI coding agents that was coming to market. So pre-Claude code, precursor, and I was evaluating an investment in one particular software engineering agent, and I remember doing a bunch of work on it and, everyone was talking about, well, if this works, this is going to be the end of software as a category. It’s kind of funny, where it seems like we’ve come back around to that. And I looked at that, and I said, “Wait a minute, this is completely misunderstanding where the value of software comes from.” Software is just a term that we have invented that actually represents an encapsulation of a bunch of business workflows. And the thing that I think will hold a lot of value in the age of AI, when things like, coding agents become more prevalent, is the customer relationships that, vendors have with their technology providers, and two, the workflow understanding that came, as a result of those customer relationships. So I thought, well, what is the best way to make sure that AI disseminates itself across the industrial last mile, to Main Street? And I said, “Well, we could try to buy entire Main Street businesses and implement AI top-down,” but that felt very unnatural. What I thought is actually, a better path is work with the incumbent technology providers but arm them, you know, kind of similar to the arming the rebels for Shopify, arm them with the tools, technology, capital to be able to automate more and more tasks for their end customers, and hence, bring AI to Main Street. So that’s what we’re doing. Over the last couple of years, we’ve partnered with and, and purchased dozens of businesses, and we’re just getting started.
Chad Bayne: Given your inspiration for founding Beacon, can you explain a bit more what you mean by AI portfolio of critical vertical software? And how does this relate to the vision and how your ultimate strategy is going to differentiate you from other software consolidators?
Nilam Ganenthiran: I think it’s pretty simple, Chad. At its core, AI is just a term, AI agent software, they’re a term for the delivery of technology. And the thing that I believe is inarguable is over the next five years, a greater portion of any company’s P&L will go towards technology than it is today. So if you’re any business, and you’re spending five percent on technology today, I bet that more than doubles over the next five years. And what Beacon’s trying to do is use, via partnership and acquisition, a group of incumbent technology companies that already know their customers, and then implement AI and implement agentic tools to be able to automate more and more tasks that are happening in these Main Street businesses so that they get the benefit of AI that historically has only been, saved for Fortune 500 or frankly, Fortune 100 companies. We focus on niches that often get ignored by the large enterprise technology companies, or Silicon Valley, VC-backed startups because these TAMS are too specific, the markets are too niche, and frankly, the customers are too nuanced to be interesting for any of these large players.
Chad Bayne: In terms of Beacon itself, I guess you could call yourself a consolidator but also a technology company at heart because you’re actually developing your own technology stack. Is that correct to say?
Nilam Ganenthiran: That’s absolutely right. So, we think of M&A as just the start of a long process. We describe ourselves as a tightly managed technology holding company, and we don’t know if there is a great comparable. So you mentioned Constellation Software earlier. I actually do not view them as a comparable because, they’re in the business of M&A. What we’re in the business of is using M&A as the start of the innovation process, where, again, we partner with entrepreneurs who sold their businesses to us and then build a lot of new products on top of what they’ve already started. So we’re just a continuation of the journey.
Chad Bayne: In November of last year, Beacon announced a very large financing round, 250-million-dollar U.S. raise, led by such notable investors as General Catalyst, E1 and Lightspeed. How did you choose those investors, and what made them the right partners for Beacon?
Nilam Ganenthiran: It’s actually something I thought about deeply as I went about building a company again. At Instacart, I had the privilege of raising a lot of primary equity capital. I think we raised 2.7 billion dollars during my time there. And my big learning is, you want to partner with investors who you know and trust, but most importantly it’s a very simple rubric. The second time around I didn’t want to partner with any investor whom I wouldn’t be happy, when I made them a lot of money. It sounds, really rudimentary, but you really want investors who are going to cheer you on, during the tough times, increase your ambition and dial up your ambition during the good times, and you want investors who, I don’t know, you like as people. I and Beacon were fortunate that, we were able to have that in D1, General Catalyst and Lightspeed.
Chad Bayne: Given the, the current marketplace, and you know, the sort of the focus on AI as, AI native companies, what advice do you have for other investors looking to raise money, looking to scale at this time?
Nilam Ganenthiran: I would say don’t try to force an AI narrative on something that isn’t authentically AI native. I’ve seen many businesses, that are trying to apply AI, and it almost seems jerry-rigged onto what they’re doing. In my simple mind, every business will be an AI business, just like every business will be a technology business, in the fullness of time, and AI again is just a delivery mechanism. It’s a different name that we’re applying to something that sort of existed since human beings invented the wheel and fire. It’s just a different form of technology. I think as a founder, don’t focus on the AI story, focus on the business story when you’re pitching yourself. Why is this a good durable business, and why do you have a moat or a barrier to entry, versus competition and new forms of competition that will get unleashed as AI becomes more prevalent? Because I think, from an investor’s point of view, that’s the big unknown right now. It’s probably why capital is flooding to safe harbours, larger private companies and names that everyone already knows and trusts. So if you’re building a new company, the question that investors are grappling with right now is how will this company survive, and what are its moats in this new world? So just focus on business fundamentals versus the AI wrapper.
Chad Bayne: And following to that, how do you think the financing environment, the fundraising environment has changed, you know, over the last couple of years, even while raising money for Beacon and then previously when you’re at D1 and then before that when you’re at Instacart?
Nilam Ganenthiran: I think the numbers we’re talking about now, I thought they were large, when I was building Instacart. We did rounds as big as four or five hundred million dollars at our peak. Now, that’s an average B round it seems like. So you know, you add a zero in some, especially for the foundation model companies. So the capital intensity in the private markets is just dialed up dramatically. The use of both equity and debt and structured instruments, and everything in between is completely different than kind of plain vanilla, preferred equity, which was more common, ten, twelve years ago. I do think the thing that worries me is, the comment I made earlier about, just the sheer concentration of capital. So when we were building Instacart, the famous company that raised a lot of money and used capital as a weapon was Uber, in their market. And again, if you think about the numbers of sheer dollars Uber raised relative to an OpenAI or an Anthropic or a Databricks, we’re not even in the same ballpark anymore. So I think again, as a new entrepreneur looking for a niche, you almost have to zig when they zag. So if you don’t think you’re going to win the capital war, pick a very specific, end market and area that you can win and show your investors extreme capital efficiency. Be open to structure and debt-like instruments, not just equity. Just figure out how to fund your business plan as opposed to shooting for vanity metrics and a big equity round.
Chad Bayne: Nilam, thanks very much for joining us today. We look forward to seeing the growth of Beacon Software over the next number of years.
Nilam Ganenthiran: Thank you, Chad. Really enjoyed it.
