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Insights / Partnership Q&A: Scaling a profitable early-stage business

Partnership Q&A: Scaling a profitable early-stage business

In May 2020, BGF invested £3m in ROI – a lead generation technology company operating in the home improvements sector. ROI rents highly optimised websites to small businesses, helping to attract more leads and boosts sales. The funds will be used to support the company’s expansion into 12 cities across the UK and Europe.

ROI co-founders Robin Kaneteg and Joel Halling discuss why the decided to take on growth capital and partner with BGF.

Why did you decide to partner with BGF? 

Robin

We met with a number of other investors, who all had great reputations and CVs behind them, but BGF stood out as it was by far the biggest compared to the others. Naturally, that means they’ve touched base with more businesses in our industry and, as such, they have a greater reach and more experience in different sectors. Because of their regional structure, they also have the intelligence we need to capitalise on localised markets in the UK, which was very attractive to us.

When did you know for sure that your business had growth potential?

Joel

We actually started selling the product before we had a company. We saw that people had an appetite for it, when we secured our first client and finally got the company registered, we knew we’d identified a real market need. It all worked really well. In fact, we won our first contract before we even knew how to invoice! If you can sell the product quickly, then you can deliver it and then grow the business at a fast rate.

What is it that has made the business successful to date? 

Robin

Apart from finding a novel approach to market and working very hard to scale up to this point, it definitely comes down to the relationship between the two of us as founders, which has been key. The way in which we both complement each other – where one can focus on one thing and the other focuses on something else – has helped hugely.

The match between us has been phenomenal. Don’t get me wrong, we have had our struggles, which you would expect from a fast-growing business, but we moved that aside and kept on working. You can buy in products and you can develop software, but a partnership has to be the right match for things to truly work.

 

Why did you decide that now was the right time to expand? 

Joel

It definitely came down to appetite for growth and a strong belief that what we are doing really works and is completely unique to the market. Our ambition to break into new territories, build on the product and enhance the service we offer, definitely drove us to seek the right funding partner to help us realise those goals.

Where next for you and the business?

Joel

In the short-term, it’s about getting more of the right people onboard. We are currently recruiting for a sales manager in Manchester, who will be key in helping us to scale up. It’s then very much about pushing sales and opening up new markets. We have put together a detailed plan for the opening of sales offices in 12 major cities in the UK and across Europe to grow our customer base. With the investment from BGF, we will continue to invest in key elements of our business as we continue our growth across Europe.

What advice would you give to other business owners embarking on their funding journey? 

Robin

It’s important to work with good people – find those people who can help you and that’s half the battle won.

 

What lesson have you learned through the investment process? 

Joel

It’s all about data. When you launch a business, it’s important to have data and KPIs in place – it will make the whole due diligence process so much easier! We’ve now started to collect and mine our data much more thoroughly and have systems and processes in place for any future investment rounds.

It’s key to set up your business in such a way that you can easily extract the information you need and start tracking the data from the word go. Ultimately, that’s what investors are going to be focusing on. It’s no good talking a good talk if you don’t have the stats to back it up.

When we completed, Stephen Welton, BGF’s chief executive, sent us a personal email welcoming us to the business. It feels like we are joining a growing investment company and that feels really good and makes all the effort well worth it.

Rhys Davenport, Investor at BGF and part of the team behind the deal, provides an insight into the workings of this deal.

Why did you want to invest in ROI?

Right from the outset, it was hard not to be impressed by two young entrepreneurs, Robin and Joel, who showed serious ambition to scale their already profitable early-stage business. They were extremely motivated as individuals and the business clearly had potential to meet a market demand.

As a minority, long-term investor, we’re looking for business owners with plenty of drive to take their company to the next level. Despite knowing their offering inside and out, and being very clear on what they wanted to achieve, the ROI team was open to advice from BGF and prospective non-executive directors.

They understood the value that the combined team would bring around the board table. This allowed us to really get under the skin of the business and help to nurture the business plan throughout the process.

As any investor will tell you, the people behind a business are of at least equal importance to its proposition. Behind this investment is a proven and successful non-exec board with Miss Group CEO, Mattias Kaneteg, and Phil Male, whose appointment is the result of an initial introduction from BGF’s Talent Network, which is the UK’s largest pool of non-executive directors.

This follows our successful exit of investment in Miss Group earlier this year. The exit delivered an exceptional return for shareholders and IRR of more than 100%. The insights and experience Mattias and Phil brought to the deal were invaluable in terms of exploring and articulating potential of this business and the market.

 

What about timings, why did you believe that now was the right time to invest? 

Broadly speaking, the Nordics are further ahead than the UK when it comes to tech scale-ups like ROI. The fact that ROI was proven there was very attractive. As with all businesses, there’s always room for improvement.

Investment channelled into improving the service offering and helping drive sales performance will undoubtedly enhance the business. ROI has ‘first mover’ advantage in the UK and other new geographies. This combined with a genuinely novel approach really appealed to us. Not only do they have an excellent window of opportunity to capitalise on being ‘first mover’, but ROI is hugely scalable. It’s a global opportunity with a vast addressable market.

What are your ambitions or hopes for the team and the business?

We’re excited by Robin and Joel’s ambition to grow into new markets outside of the Nordics and we believe that other countries and territories hold just as much potential, with the UK, mainland Europe and the US on the agenda.

A sector focussed expansion will also provide growth opportunity, as the team builds on the success in the home maintenance market. And, investment in internal processes and infrastructure will help refining how the company captures, managed and responds to data with the aim of increasing revenue and bolstering retention.

We will also consider the possibility of future M&A activity, which is further down the line.

What advice would you give to business owners embarking on their funding journey?

Be very clear about what makes you stand out from the crowd and what defines your strategy and structure. Many companies struggle to articulate what their business USP is and how they will scale to the next level.

Easy access to management information and business data is vital in proving the case for funding, as is the ability to refine your business and set KPIs that will help to drive business growth. Being able to extract this information is crucial to the deal process and creates the best foundation for future growth.

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