Where do we invest in?
Quite often, when I speak with startups, other investors, or even friends about what we do I get the question “Where do you invest in?”. It is a common question, one that I ask other investors as well. The most boring answer that I can come up with is that we invest in rounds and sectors that we believe have the potential for high growth and strong returns.
What an abstract answer… ps. that’s actually what I had written in this blog, before rewriting. I do have a more detailed, better answer.
Our focus: software companies
We look for software companies whose clients are businesses.
Sounds familiar, hmmm… B2B SaaS? (“Wow, never would have guessed that!”).
What ticks the boxes further for us is if the majority of your clients are in the SMB sector and the commercial risk is gone. By commercial risk, I mean that your product is being used in production by your clients. The current client pool doesn’t have to be large as long as the ones you have are commercially using it.
That being said, we do make investments elsewhere as well. The key to everything is if we can understand the business and whether we are a good match with the founding team. So if you are reading this blog and wonder does your business fits us, here is a rule of thumb:
- Are your client’s businesses?
- Are you selling software/data/services etc.?
If answer yes to both, then I would like to talk with you!
What type of growth do we look for?
We are looking for companies that focus on organic growth instead of inorganic growth. Organic growth is much more tangible than for example M&A. By that I mean that it relies on the “usual” building blocks of a company: you have the marketing, the hot and cold leads, the salespeople, the bookers, the blogs, etc.
M&A on the other hand is less “business-like”. Yikes! Don’t get me wrong, it is an extremely demanding business. However, it is a specialized field where multiple arbitrage and financial engineering come into play. This is not the typical playbook for us. However, in exceptional cases where market consolidation is inevitable and growth can be achieved through M&A, we can be the right partner.
What makes us different: flexibility with custom solutions
The follow-on question is often “how do you differ from all the other capital providers?”. In comparison to funds, we do have a lot of flexibility. Let me do some marketing! We are not bound by regulation or investment thesis. This gives us the freedom to design instruments to fit your company’s needs. This is because, unlike traditional PEs and VCs, we invest from our own balance sheet.
This allows us to have fewer bureaucratic restrictions and opens up many opportunities. Of course, there are conditions (“Surprise!”) but those are business-related. The flexibility
Our values: hard work over glory
We prioritize businesses and individuals who are committed to making a difference rather than seeking personal recognition. We firmly believe that honest hard work is the key to success. In our experience hard work and the pursuit of glory are negatively correlated. We have experienced this too many times to ignore it. Glory hunting is a game of its own that we do not want to be a part of, instead, we invest in founders who stay out of the spotlight and focus on changing the world in their way.
What we leave for the others
Even we have to sign out from something: we do not invest in the gaming and device industries. There are much better experts out there to help you with that!
What is in our portfolio
If you got this far you might be interested in if we are the right investor for you. Well, I recommend looking at what we have previously invested. You can find the complete list of current investments and exits here. In short, we have invested in marketplaces, B2B SaaS, e-commerce, and service companies. In all investments technology and a committed founding team play a significant role!
Please find more about our investment philosophy here. If you are missing the story behind Trado and our introduction, please click here.
Author: Sami Aho