Software businesses

Software with customers who do not leave

Not the fastest growing software business in the country. The one that solves a specific problem for a specific industry, has done for years, and would be genuinely difficult for its customers to replace.

The kind of software business we mean

There is a particular sort of software company that the market tends to undervalue. It serves one industry properly. It has a few hundred customers who have used it for years and built their working day around it. Renewal rates are high, not because of clever retention work, but because the product is genuinely embedded in how those customers operate.

It grows steadily rather than dramatically. It is profitable, or could be with different choices. It is not going to be a large company, and the founder stopped pretending otherwise some time ago.

For a growth investor that profile is a problem, because the return depends on a multiple of growth that is not there. For the customers it is excellent, and for us it is close to ideal. Revenue that recurs, customers who stay, and a product that matters to the people using it.

Robin has run software businesses rather than only invested in them: COO of a private equity backed software group, leading diligence and integration across four acquisitions, and the first European hire at a cloud data company through to its acquisition by one of the world's largest technology companies. The conversation about your architecture, your support load and your technical debt will be a real one.

What we look for

Recurring revenue with real retention

Subscription, licence and maintenance, or long term contracts. What matters most is how many customers left last year and why, which tells us more than growth rate.

Software that is genuinely embedded

Products customers run their operations on, where switching means retraining people and migrating history. Difficulty of replacement is the moat.

A specific industry served properly

Vertical software that understands one sector deeply usually beats horizontal software that partly fits everyone. Domain knowledge is hard to copy.

A team that can ship without the founder

Someone other than you can make a release happen. If the founder is still the only person who fully understands the core of the system, that is worth discussing early.

Profitable, or a decision away from it

We are not looking to fund years of losses toward a growth story. Profitable, or close enough that profitability is a choice rather than a hope.

What happens to the product and the team

Most of what makes a small software company work is knowledge that is not written down anywhere.

What we would do

Keep investing in the product, because a software business that stops shipping starts dying quietly
Take support and operational load off the engineering team so they can build
Invest in the parts customers feel: reliability, performance, the things support tickets are actually about
Bring adjacent products together where customers benefit from it, not for the sake of a group
Keep investing in support rather than treating it as a cost, because most customers judge a software vendor by the quality and timeliness of their support interactions

What we would not do

Stop development, raise prices and manage the decline
Force a rewrite onto a platform that suits a slide rather than your customers
Promise that nothing changes, because no honest buyer can

A software company that stops shipping does not fail quickly. It fails slowly, and by the time it shows in the numbers the engineers who could have fixed it have gone.

Common questions

Our growth is slow. Does that rule us out?

No. Steady and profitable with customers who stay is the profile we are looking for. It is a problem for an investor who needs a growth multiple. It is not a problem for a buyer who intends to own and run the business.

We have a lot of technical debt. Is that a problem?

Every software business of any age has it. We would rather hear about it early and accurately than discover it in diligence. It affects what the plan looks like, rarely whether there is one.

What happens to the engineering team?

They stay, and the aim is to give them more time on the product rather than less. In a business of this size the team holds knowledge of the system that exists nowhere else, which is a large part of what we would be buying.

Do you buy software businesses that also do services?

Yes, and the services are often part of why customers stay rather than a dilution of the software. We do not require a particular revenue mix.

Start a conversation

If any of this sounds like your situation, let us buy you a coffee. We would like to hear where you are, what you are thinking, and work out together whether we are any use to you.

Get in touch