The Road to Success: How do We Work with Portfolio Companies

View on a road from above
November 29, 2023
Written by
Lars Jensen
Founding Partner

At Scale Capital, we have been founders and company builders ourselves for many years and have the battle scars to prove it. The fine line between success and failure is something we accept and continuously manage together with our portfolio companies. We believe that “Success is not a random process”, meaning we can impact and optimize the outcome of our actions by executing well, iterating often, and having a (flexible) plan for creating a successful business.

Our experience gained from helping numerous companies on their scaling journey has provided us with operational, tactical, and strategic insights. This accumulated “wisdom” serves as our back catalog when engaging with portfolio companies. We continuously learn, not only from working with our companies, but also from the hundreds of industry experts, investors and other founders that we cross paths with on an ongoing basis.

The collective learnings and reflections have resulted in a number of operating models or methodologies that we draw on and implement when helping Nordic technology companies scale. In this article, we present some of the most foundational ones.

“Kissing Period”

Would you marry somebody you met in your local supermarket or at a technology show in Finland? Maybe, but certainly not right away, and not before you got to know the person. Taking onboard professional investors is a serious commitment, and as a founder, you should choose wisely. The same goes for the investor, hence getting to know each other prior to signing the dotted line is a good idea.

At Scale Capital, we spend on average 3 months on the Kissing Period, where we, apart from deep-diving on the market, business metrics, goals, and aspirations of the team, look for fit and common values. We do not believe in a transactional approach to investing and see the kissing period as the potential beginning of a long-term professional relationship.

100-day Plan (pre-investment)

The collaboration between the founder team and us typically begins pre-investment, by creating a 100-day plan for growth acceleration. The purpose is to align on how the company can optimize the funding received from Scale Capital and other investors. It’s not a long-winded, high-level strategy document, but rather a tactical plan for how to execute on questions like – what is our “Go-To-Market”?, i.e. define the ideal customer profiles (ICPs), select the geographic focus and perform customer segmentation, create/revise the recruitment plan, revisit the business model (incl. pricing) and decide on the sales approach (outbound, product-led, partner, etc.). Furthermore, our team works closely with the company’s management team to set actionable goals, and growth objectives, and discuss North Star metrics and aspirations.

All of these things are not done overnight or in a “war-room” vacuum. It often takes weeks or months and continues after the investment is completed. The process is as important as the outcome, and when done right, it sets the standard for a structured way of thinking, working and collaborating that eventually becomes part of the company’s operating model. Sounds straightforward and easy? It’s not, but we believe it’s a good way to kick off the investor-company relationship and ensure alignment and optimal execution.

Whether it’s connecting commercial teams with potential partners, mentoring founders on leadership, or brainstorming on expansion/growth or funding opportunities, it’s what we, as an investor, are there for.

Partnership (post-investment)

We aim to provide value to portfolio companies throughout the journey. The post-investment partnership can take many forms depending on the needs of the business and the founders. Regardless, staying in close contact is essential for understanding how, where, and what to help with. Whether it’s connecting commercial teams with potential partners, mentoring founders on leadership, or brainstorming on expansion/growth or funding opportunities, it’s what we, as an investor, are there for.

As part of the commercial toolbox, we have designed frameworks that we teach in a workshop format, and which are designed to equip teams with the skills and knowledge needed to drive the company forward. It could be the implementation of SPIN Selling and other sales techniques, customer success, and Go-to-market-specific strategies.

US Acceleration

Scaling technology companies in the US is core to our investment thesis, hence we look for teams who view North America as their next (home) market. Our job is to provide acceleration support, making the company, the team, and the product ready for the US market entry. When starting out, founders can receive tactical support on the ground in San Francisco. Our colleague Lene Schulz is there to support portfolio companies with access to the right network of professionals and assist with company formation, regulatory guidance, and introductions to potential partners and customers.

We recommend a 3-phased approach:

Phase 1: Market Validation – Search for product-market fit.
Phase 2: Market Establishment – Setting up US operations.
Phase 3: Market Scaling – Hire and raise growth capital.

Customer uptake and growth can be quick once product-market fit is found. One of our portfolio companies went from $150k to €15M in revenue in just three years from entering the market, where for a few others the US market quickly became the main revenue driver for the business. Our team has so far assisted 13 portfolio companies on their US expansion journey, which has brought us a lot of learnings around customer segmentation, recruitment, partnerships, and sales acceleration. This experience, we carry over to other technology scaleups embarking on similar journeys.

By focusing on the US market, we aim to give our portfolio companies a significant edge in achieving a successful and prosperous exit.

Keeping Companies Funded

Building technology companies requires cash management discipline, and a funding strategy closely tied to the product roadmap and commercial roll-out plan. Consequently, we actively encourage and assist our portfolio companies in forward planning to secure liquidity, whether through additional investment rounds, exploring debt financing alternatives, or optimizing their financial architecture.

It is important for founders to communicate with their investors ahead of time and, if feasible, secure sufficient funding to sustain company operations for 18 to 24 months, particularly given the present market conditions.

From Startup to Exit

The path of a technology company from a startup to a successful exit is marked by several critical stages of growth and development—usually, it starts with a visionary idea and a small, passionate team of founders. In the early stages, a startup seeks funding from angel investors. As they evolve, they tap into venture funds or similar sources for the much-needed capital to scale their products, operations, and revenues. Each stage requires adaptability, innovation, and a relentless pursuit of growth to successfully navigate the path from startup to exit.

A pivotal part of our approach involves making a strong entry and/or expansion in the US market, a strategy we believe is crucial for increasing the company’s potential and making a successful US exit, which has several advantages. The rationale is straightforward: the US market is vast and mature, providing access to a wide customer base to scale quicker. Its advanced financial markets are ideal for later-stage growth funding or conducting an IPO. Additionally, favorable regulatory frameworks and a robust ecosystem of legal and financial advisors simplify the exit process. With numerous tech giants and potential acquirers, the US market presents an increased likelihood of lucrative mergers and acquisitions opportunities. By focusing on the US market, we aim to give our portfolio companies a significant edge in achieving a successful and prosperous exit.

There is no silver bullet to scaleup success. The journey takes hard work, persistence, perseverance…and a certain portion of luck and timing. We help founders apply tools, techniques and learnings to make the hard work more fruitful, increase the chances of encountering luck and endure long enough until the timing is right.

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Lars Jensen
Lars is an entrepreneur at heart who loves to innovate and see companies and people develop and grow. He invests in and advises technology startups on how to build globally scalable companies, leveraging his experience and network in the United States.
Scale Capital
Scale Capital a Danish venture fund investing in digitization and disruptive technologies within B2B. €1–3M in Nordic and German B2B tech startups at Seed and Series A, and helping them win in the US. Scale is headquartered in Copenhagen with a presence in the Nordic countries and Silicon Valley.