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June 26, 2023

Shifting Lenses: changing the perspective on growth companies

By Evli Growth Partners

From my past experiences in different roles inside the startup ecosystem I had cemented my mind on a certain mental image on how startups should be viewed and how they are approached. This meant that I had some expectations on how the internship would be most likely to pan out and what to expect. Little did I know that this mental image went through a definitive shift during my time at EGP.

First and foremost, I must give kudos to the team at EGP. The team together shifted my thinking on how an efficient team functions and what it truly looks like when everyone is passionate about the work that they do. The support and guidance I received helped tremendously with the steep learning curve that the fast-paced venture capital world offers. I am surprised by the amount of learning and professional development that happened during my short stay here.

In the traditional paradigm, growth companies are evaluated primarily on metrics: revenue, EBITDA, user base, CAC, and LTV. It's the investment equivalent of judging a book by its cover. But this approach, while practical, often overlooks the soul of the company - the passion, people, commitment, and vision that fuel its engine of growth.

Take for instance the parable of the blind men and the elephant, where each man, upon touching a different part of the elephant, declares it to be like a wall, snake, spear, tree, fan or rope. Similarly, if we restrict ourselves to specific metrics, we risk missing the 'elephant in the room' - the broader perspective, and what lies beneath the surface that reveals the true potential of a company.

Not saying that the traditional approach with metrics would be irrelevant. What I learned during my time at EGP that these factors of course always play a crucial role in evaluating companies. Especially when investing in Series B stage companies it is crucial to have a look in to the numbers early on, but what is even more profoundly important is to fully understand what happens behind the scenes, what are the factors that influence these numbers. And who are the people that are chasing a vision that will in the long game be influencing the numbers. To fully understand all the dynamics that influence companies is no easy job and it requires a lot of work. This was an aspect that I was impressed at EGP, as the whole team worked seamlessly together and supporting with their own unique strengths.

Another huge perspective shift was the approach that EGP had towards their portfolio companies. The unique Growth partner model meant that investors weren't just silent partners; they offered a wealth of experience, strategic guidance, and mentorship that significantly contributed to the company’s evolution. Coming from their own entrepreneurial background, it was evident that the Growth Partners were on the founder’s side, living the hardships and celebrating the achievements. This symbiotic relationship revealed a whole new dimension to growth companies: their growth is not just a function of their product or market dynamics, but also of the quality of collaboration between investors and founders. This active involvement of all parties fuels the company's momentum, enriching its journey towards sustained growth and success.

This relationship was best portrayed during the portfolio company weekend that I got the privilege to attend and help organize during the internship. Here, EGP invited their portfolio to Lapland in the spring for a weekend with the idea of sharing knowledge and to strengthen the bond between us and the founders. It was an impressive experience to be part of and see how both parties expanded their understanding of the other and how it felt when founders and investors are really on the same journey in building the most beautiful company for the future. This kind of relationship gives a whole new meaning on the journey of a company and how companies are more than just numbers to be analyzed.

In conclusion, my time at EGP has significantly broadened my perspective and deepened my understanding of the startup ecosystem. It has instilled in me a respect for the complexity and dynamism of this world, and the multiple factors, seen and unseen, that drive a startup's journey. I have learned that while metrics are crucial, the soul of a startup lies in its vision, the passion of its people, and the strength of the relationships it fosters. Most importantly, I have come to appreciate the paramount importance of an investor’s active participation and strategic partnership in a startup's journey towards sustained growth and success. My view on growth companies has shifted forever.

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