Warsaw Equity Group

Growth equity – a sweet spot in the financing landscape

Tech entrepreneurs aim to bring their companies to the next level – disrupt their market, expand internationally or introduce new products – endeavours that require substantial funding. However, the available financing options are limited, and all have some shortcomings.    

For fast-growing earlier stage companies, Venture Capital is frequently a go-to option to raise capital. However, this is only good fit for a small subset of companies, as venture capitalists require very scalable business models and huge markets. Also, embarking on the VC financing path often means that the company will be pushed by investors to raise subsequent VC rounds and to “grow at any cost”. 

More mature companies can turn to Private Equity funds which typically acquire majority stakes and require founders to sell a large part of their shares. This path is a sensible option if you have already achieved the full potential of your firm, but not when you still see significant opportunities for the business and want to continue actively participating in the growth journey.  

So what if you want to achieve more before exiting? What if you don’t want to turn to the VC path and commit to a high-risk high-growth model or cash-out to PE funds?  

We asked ourselves these very questions after speaking with entrepreneurs and believe that the answer is Growth Equity – investing (typically) in minority stakes in more mature companies who have achieved a solid pace of growth, established a customer base, solid unit-economics and have further potential to grow the business. This model constitutes a viable alternative to VC and PE buyout models as it enables the entrepreneurs to fuel the growth of the business while still capturing the majority of the value to be created.

Why does WEG focus on Growth Equity?

Over the past years, a significant influx of local and foreign VC funding has been directed toward companies based in CEE. However, as the tech ecosystem in CEE matures and capital needs evolve, there is a financing gap between early-stage VC and mature buyout PE funding opportunities. Our aim is to bridge that gap with Growth Equity financing. 

With a focus on growth equity, we can support companies beyond the early-stage investment phase, but without the need to take-over control of the business.

How WEG works with entrepreneurs & what sets us apart from other investors

Do we invest to make money? Of course! Do we know exactly what IRR would keep us smiling? Sure thing! However, we have a bigger perspective in mind and the businesses we invest in have to excite us – from the perspective of the technology, the team and the growth potential. 

The reason? 

We are Partners for Growth and believe we should take the growth journey hand-in-hand with PortCo leaders.  “Committing to the founders’ vision allows true partnership, where we can stay dedicated not only to supporting growth on the business side but also, perhaps most importantly, personal growth of the founders.”

Beginning with the end in mind

For many investors, “exit” is the end goal. We start with the vision of that exit. 

In the past 30 years WEG have successfully invested in over 50 businesses and exited the majority of them, realising an average multiple of invested capital of 7,6x. 

Our secret sauce? Beginning with the end in mind! 

Every investment we make is preceded by an in-depth analysis of your business and the market. We not only think about today but also envision the future, to ensure that you capitalise on opportunities. Before we mutually commit to partnership, we will demonstrate the opportunities we see and analyse how we think we could achieve them together.  Our journey to exit will consist of several strategic initiatives and actions that make up something that we call Value Creation Framework. In simple terms it will clearly picture what we need to do together, so that your business can grow at an expected rate.

WEG Value Creation Framework – a focus on the personal growth

After the investment is complete, it’s time to execute on the agreed Value Creation Framework. There are two dimensions to this framework: 

  • Internal – this is what we, as the WEG Team, will do to support your business and personal growth 
  • External – this is the wider WEG network which will accelerate your growth  

The cornerstone of our internal value creation framework is leadership and organisational development.  

Every founder and management team member can expect leadership development support. With a Human Capital Partner onboard, WEG has a structured process aimed at enhancing organisational effectiveness in several areas: 

  • Personality assessment – with psychometric tools, you will be able to decide on the most critical roles and their fit but also identify critical yet missing talent, which is necessary for your further growth 
  • Building effective teams – teams are as strong as their most challenged members therefore; we will make sure that your core management team understands their talents and areas for their personal growth. 

Company culture assessment and development to strengthen your company’s commitment, collaboration, and shared vision.

Growing you and your business with WEG Community 

During the first six months of the investor-founder relationship, we will also provide support in finding the best seasoned professionals who can help you and your team grow. 

We have a multi-tiered community of mentors, experts and partners with whom we cooperate in order to best match with the needs of PortCos. For example – your team may be lagging in sales skills – we have global experts who can bring you up to speed. Or as a CEO, you may want to refine your delegation and communications skills – we’ll match you with the best placed professional to help you get there. 

We constantly build our network of verified experts and partner companies, so that we can, on a wider-level, link and ensure preferential service offers from market leaders to our PortCos. Such experts include, but are not limited to, areas such as sales, marketing, PR, recruitment, finance, legal etc.  

We also create regular opportunities for our PorCos to network amongst each other and with experts and partners, and where possible – with potential customers, as well as gain high-level content from global experts in specific fields, such as at WEG Masterclasses, Breakfasts and workshop events.

“Show me the money!” – what we provide financially

We’re on the lookout for growth-stage businesses—those rapidly scaling, with sustainable models, strong product-market fit, and minimal technology risk. We focus on unit economics, seeking businesses with superior or potentially superior metrics compared to competitors. 

Our target businesses will have annual revenues of at least EUR 2m and the potential to grow by 20% or more annually. Typically, these revenues come from product sales rather than services, and the products are mainly sold to other businesses (B2B). We’re interested in technology-driven businesses, whether software or hardware-based, across Central and Eastern Europe (CEE), and opportunistically beyond. 

So, what do we bring to the table financially? We offer EUR 4-15m in capital to supercharge growth, and we can also buy secondaries for partial or full exits to some shareholders. Our aim is to secure 20% equity stakes, but we can also take majority stakes of up to 70%. We believe management teams should hold sizable stakes to stay incentivised to drive the business forward. 

When considering an investment, we ensure a deep understanding of the founders’ vision beyond the pitch deck and financial model. Aligning on vision and expectations is crucial for successful strategy execution. 

As our motto says, we aspire to be “Partners for Growth”.