Investing in Innovation: Private Equity Firm Lotus Innovations Provides Capital Beyond Start Up
For post start-up companies, private equity is an excellent alternative for working capital and resources. Lotus Innovations looks for specific qualities in a LMM post startup firm. Potential investments are tested against 9 criteria including factors like business model, scalability, target market, competitiveness, and market readiness. But there are innate qualities too that not only define a company’s culture, but help determine whether there is a good fit between the fund and the prospective client. First, post startups must still be nimble. They have grown from a core, dedicated team that has learned to wear multiple hats and approach their roles with a can-do attitude. Second, the post startup firm should be unique in their competitive space; either because of a solution, a service, or a way of delivering support. Finally, a post startup should have customers who can be converted to loyal advocates and future product testers. These partner-customers likely have been nurtured for years and have a long-standing relationship with company founders or C-Level executives.
Beyond size and startup phase, one of the most telling qualities of a poised for growth is its passion for new ideas. When a company has a high innovation IQ, many other qualities seem to fall into place.
How Lotus Defines Innovation
A common misconception in technology is that innovation is cold-pressed and organically grown only by startup hipsters. The reality is that there are a lot of unique approaches to problem solving in tenured companies. Lotus builds value for its investors both by being an innovator and by acquiring, then growing, and exiting a portfolio of innovative companies. Lotus sees opportunity in the growth potential of original ideas and approaches to problems facing the technology and telecommunications industry.
Innovation can be a better way to service a telecommunications company network and its customers. Innovation can be a way to help companies cut costs and improve productivity. It can be a way to help executives make intelligent business decisions through dashboards and reports. Most importantly, innovation isn’t a one-hit wonder; new ways of doing things and fresh approaches to problems are embedded into the culture of the organization.
When Lotus Innovations acquired portfolio company gen-E, it saw in the small consulting and services firm, innovative solutions to problems facing the mature telecom and enterprise networking industries. Launched in 1999 as a provider of network service assurance software and consulting for telecom and enterprise, gen-E experts saw the exploding growth of networking and knew that as more data and voice traffic hit the communication service provider and enterprise networks, performance and speed degradation would soon follow. The company expanded its offerings, deploying highly-trained networking engineers and architects in the field with their top global telecommunications customers. It began offering training on the use of best-in-class network service assurance software, and offered pricing strategies and plans that were more in line with how telecommunications companies did business. But as it expanded, it needed capital to shed its startup persona.
Lotus Innovations acquired gen-E in early 2014. Lotus immediately embedded executives with deep knowledge of the telecommunications industry and applied the Lotus formula for growth including shared services. With the added infrastructure and back-office support, experienced technology industry guidance, and growth capital, gen-E has been able to significantly expand its product portfolio as well as its customer base. Its first software product, launched within a year of acquisition, was designed to help network operations and IT managers understand and predict network performance problems. In 2016, the company will launch the next generation of that software, which positions them in the advanced analytics market which is growing at a 33 percent CAGR between 2014 and 2019. Since the acquisition by Lotus, gen-E revenue has doubled year over year and the company is well positioned to hit its next growth target.
Four Ways Lotus Innovations Helps Tech Firms Scale Up
Innovation is critical to the success of a startup but often times, innovative financing can be the key to growth. Lotus Innovations was founded by a small team of telecom and IT technology entrepreneurs who had started firms, built companies and exited. They pooled their passion for technology, direct experience in financing and capital building, and the desire to help growing firms achieve a new level of success with capital and resources. The disruptive model they created – called the Lotus Methodology™ – is unique in the alternative investments industry. Lotus provides growth and leadership in four key areas that help lower mid-market, post startup firms scale up.
