Entrepreneur and investors: Mutual trust leads to successful exit

Text Risto Pennanen    Photos Junnu Lusa

Mutual trust leads to successful exit

Case

A company seeking growth often must make difficult strategic choices along the way, choices that require mutual trust, note Eniram’s Henrik Dahl, Conor’s Manu Mäkelä and Finnish Industry Investment’s Jussi Hattula.

Case

A company seeking growth often must make difficult strategic choices along the way, choices that require mutual trust, note Eniram’s Henrik Dahl, Conor’s Manu Mäkelä and Finnish Industry Investment’s Jussi Hattula.

A change in ownership in one of the few success stories of the Finnish Industrial Internet occurred last summer when Wärtsilä acquired the vessel fuel consumption optimisation company Eniram. The voyage that started back in 2005 seemed to have sailed effortlessly to the end of its entrepreneur-driven journey and on course with its crystal clear vision.

In reality, it was an eventful voyage during which the company changed course multiple times. The changes required hard decisions. Tensions increased on each leg as new private equity and venture capital investors came onboard, bringing to the table capital and problematic suggestions. One of these was the decision to hire an outside professional manager.

“Back in 2009, I considered it to be the wrong decision because I believed it would disrupt the culture and dynamics. And disrupt it did, but it was ultimately the right decision and it helped us to grow,” says Henrik Dahl, Eniram’s current CEO.

The founding entrepreneurs were also surprised when private equity and venture capital investors known to be growth-oriented encouraged putting the growth target on ice for a while to focus on getting the core business in order.

“At that time, a big change was made from product-centricity to selling analytics and SaaS. It significantly increased the company’s value,” sums up Manu Mäkelä, a founding partner of the venture capital investor Conor, which has been with Eniram since the beginning of 2008.

Trust is a prerequisite for growth

Eniram’s first product idea was related to the development of vessel safety. Later Eniram discovered an interesting product from a solution that helps to optimise vessel fuel consumption by, among other things, adjusting the vessel’s trim. For a large vessel, the savings generated by optimisation can add up to a million euros per year.

The financial crisis in 2008 caused problems when there was a real need for the capital brought in by private equity and venture capital investors.

“We couldn’t have come this far with our own resources. A few competitors have tried it, and they still remain small companies to this day,” says Dahl.

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We couldn’t have come this far with our own resources.

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Henrik Dahl

The entry of external owners is often vital for a company. On the other hand, financing rounds are discontinuity points in which even heated discussions about continuity are sometimes held. That is when maturity is required – both from the entrepreneurs and the investors.

“The parties must maintain mutual trust that they are on the same side when resolving issues,” says FII Investment Director Jussi Hattula.

Dahl-Makela-Hattula-UK

Trust between the entrepreneur and the private equity and venture capital investor requires that both are accepting of the other’s goals, note FII’s Jussi Hattula (left), Conor’s Manu Mäkelä and Eniram’s Henrik Dahl.

Understanding the other party’s goals

Trust between the entrepreneur and the private equity and venture capital investor requires that both are accepting of the other’s goals.

It is of utmost importance for the entrepreneur to understand that exiting is also part of the private equity and venture capital investor’s agenda, even if that isn’t what the entrepreneur is aiming for.

And the goals of the different private equity and venture capital investors do not always align. Investors who have come onboard at different phases might have different ideas about things like the development timetable and the exit.

“At one point, we had three different private equity and venture capital investors on a different curve. It’s amazing that it didn’t lead to big problems for us,” says Dahl.

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This is a good example of why it makes sense to invest in long-term operations.

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Jussi Hattula

It’s important, at least during the first round, to find investors who have somewhat similar goals.

Retaining trust requires the private equity and venture capital investor to understand the entrepreneur’s motives in particular. The worst mistake a private equity and venture capital investor can make is to disproportionately increase its relative share during the financing rounds at the expense of the entrepreneur.

“That’s when an investor can quickly end up owning one hundred percent of nothing,” sums up Jussi Hattula.

Properly scaled steps

The hard work of Eniram’s owners is reflected in the M&A now completed and in the fact that this year the company launched the scalable Skylight product. The deployment of Skylight on a vessel costs a fraction of the older products. It has opened totally new markets for Eniram.

In one decade, the company has grown from a product business to services and, now, to a scalable business. The company’s revenue has increased to over EUR 10 million and the number of personnel is close to 90.

“This is a good example of why it makes sense to invest in long-term operations,” says Hattula.

Eniram acquisition expands Wärtsilä’s digital offering

Eniram and Wärtsilä announced their EUR 43 million transaction in June 2016. The acquisition supports Wärtsilä’s growth and strengthens its digital offering and in-house capabilities, specifically in data analytics, modelling, and performance optimisation. For now, Eniram will continue as an independent business entity supported by Wärtsilä’s global capabilities.

“Digitalisation is a trend that will continue to grow. Wärtsilä’s leading market position coupled with Eniram’s cutting-edge technology forms an unbeatable combination in the marine digitalisation space,” says Eniram’s CEO Henrik Dahl.

Established in 2005, Eniram provides the maritime industry with energy management technology to reduce fuel consumption and harmful emissions.

Wärtsilä supplies technologies and complete lifecycle solutions for the marine and energy sectors. The company has operations at over 200 locations in more than 70 countries.

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Henrik Dahl, Eniram

  • Co-founder, CEO.
  • Prior to Eniram, a software entrepreneur.
  • Worked in analytics and business Consulting.

“The capital a private equity and venture capital investor brings is important, but equally important is the sparring in developing the company’s focus.”

Manu Mäkelä, Conor Venture Partners

  • Founding partner.
  • Worked at Holtron Ventures and Eqvitec Partners, among others.

“You don’t sell a good company, you buy it.”

Jussi Hattula, FII

  • Investment Director, Industrial Investments team.
  • Worked at Eqvitec Partners and TeliaSonera, among others.

“Trust and valuing the views of others are key requisites for collaboration.”