Dear Friends,
It may be that in 2024 we turned the page into a new business cycle. After the up and down gyrations over the past couple of years, this next phase looks to be characterized by more moderate growth, higher capital efficiency, a new valuation environment, lower overall investment levels and higher interest rates, but less risk of a deep wide-spread recession. Newfound stability is a positive for planning and forecasting. Of course, threats loom large in multiple parts of the globe. But in our corner of technology investing the outlook is bright. Technology adoption is still in its early phases in many industries and we should all be excited about the world-changing boost that the breakthroughs in AI will bring in the coming decade. At this time of the year, we want to take a moment to send “Congratulations!” to all the 3TS companies that closed new investments, follow-on rounds or exits. At the same time, we say “Thank You!” for all the hard work from our portfolio company teams, fund investors, co-investors and others that made it possible to make so much forward progress in 2024.
Merry Christmas and here’s to a fantastic, healthy, and peaceful New Year in 2025!
Cheers,
The 3TS Team
3TS KEY LEARNINGS
3 Key Learnings
Every year we look back and identify 3 highlight areas that reflect some of the exciting investment activities and learnings over the past twelve months, across the 3TS and Catalyst family of funds.
2 New Investments, plus 3 More Under the Christmas Tree
5 Follow-on Investments
4 Successful Exits
3 of the Best Key Learnings
Lessons From Piano, After Growing Revenues 9x in 5 Years and Becoming a Global Leader
Originally born in Bratislava, Slovakia, the 3TS portfolio company Piano now has operations in 13 countries and over 1,000 clients across four continents. To scale the business 9x, Piano had to make some critical strategic decisions, executed extremely well and learned a few things along the way. In becoming a global leader, focus is more important than expanding too far, too soon or too fast. Organic growth is great, but it’s not the only way to scale. Once the company reached critical mass, it begun proactively looking at adjacent spaces for tuck-in acquisitions that expanded its product line or geographic reach, and augmented organic growth.
Acquisition of Perfect Gym: Driving a Successful Exit in Challenging Times
Successful companies are bought not sold. Setting up the ingredients for getting bought takes planning, time and execution, like any other process. Therefore, start two years or more in advance. Maximum value comes from generating competitive dynamics. Sounds obvious, but many companies don’t take this seriously and find out the hard way. M&A data shows that exit values increase by 40% on average (and over 200% in extreme cases) in competitive processes. It’s not over till it’s over – no detail is too small. Diligence processes driven by experienced strategic buyers or private equity investors are always broader, deeper and more exhaustive than companies expect. Get prepared, proactively.
Investment and Exit Valuations: Where Are We and What Can We Expect
Revenue multiples have stabilized in a new range for the past 7 quarters. We may not like this new 5-6x revenue multiple range, but its consistent with the prior 10-12 years (maybe a notch low) and it is the best indicator of what we can assume going forward. Incorporate the market-based ranges into expectations for new financing rounds or for exit planning.
Revenue growth plays a major role in multiples and company valuation. Growing too slowly results in 1-3x multiples, while growing quickly can boost revenue multiples to >8x. For every 10-20% of additional annual growth, revenue multiple increase by 40-50% – that’s significant. But don’t forget the current environment demands capital efficiency and profitability, which make up a critical part of the valuation equation. What are revenue growth rate trends and expectations? Well, growth has slowed by about 1/3 from 2021 through 2024. Then most companies missed their 2022 and 2023 plans by 15-30%. The new growth ranges seem to be 50-70% below 10m in revenue, 35-45% between 10-30m in revenue, and 20-25% above 30m of revenue. Plan accordingly.
3TS PORTFOLIO & NETWORK NEWS
ShiftMed Ranked Number #164 on the 2024 Deloitte North America Technology Fast 500 List
For the 4th year in a row ShiftMed has earned this well-deserved recognition in the US! Congratulation from everyone at 3TS. We are fortunate to have worked alongside the ShiftMed for years and continue to be an active partner supporting the future journey on this great company.
Jentis Added to the Sifted 250: Leaderboard for 2024
Way to go Jentis! Selected from hundreds of applications, this ranking showcases the 250 fastest-growing startups across Europe in 2024.
Adapta Robotics Raises €2m from Catalyst Romania
Adapta’s innovative approach to robotics, combining cutting-edge hardware, artificial intelligence, and computer vision delivers highly “adaptable” solutions.
GOOD READS & GREAT IDEAS
Benchmarkit 2024 SaaS Metrics Benchmark Report, by Ray Rike
One of the seminal SaaS Metrics Reports is out. Benchmarkit covers critical leading indicators and KPIs relevant for all B2B leaders, as companies complete end-of-year reviews and finish 2025 planning. Use it to tune and refine growth expectation, resource allocations and become more efficient.
13 Growth Levers and How to Find Them, by Matt Lerner
Which B2B company doesn’t need more growth levers? This quick-read post covers the 13 most important growth levers including discovery, speed, continuous testing, flowcharting the customer cycle, removing rate-limiting steps, how to optimize against customer facing SSS (Struggle/Search/Selection) and more.
12 Ways How the Top SaaS Companies Retain Clients, by Copyhackers
Here’s a series of great tactics to boost retention that can be implemented Monday morning. Net revenue retention (NRR) is equally or frankly more important than new business. Without strong NRR above 100%, consistently, over time, software companies don’t scale. There’s not enough sales resources or new business to effectively fill the gap left by low retention, especially as the revenue numbers get larger in future years.
JOIN US AT THESE EVENTS
IPEM Cannes | Wealth 2025 – 28 – 30 January 2025, Cannes, France
0100 Conference DACH 2025 – 18 – 20 February 2025, Vienna, Austria
Invest Europe – Investors’ Forum – 19 – 20 March 2025, Geneva, Switzerland