From Plateau to Profit: Key Takeaways from our panel with leaders from Bolt, Lightyear and Pipedrive

Over the past two decades, Estonia has developed a reputation for cultivating successful startups. So much so that the country now holds the title for the most unicorns per capita in Europe.

Now, however, things are changing. Last year, investment in Estonian startups fell a significant 23% and with less capital, fewer deals and a general slowing down of growth, founders and their teams are creating new plans to remain competitive.

To bring light to some of these strategies and how Wise Business can help startups scale in 160+ countries, we hosted an event at our office in Tallinn last week to showcase some of these strategies.

To kick the evening off, we hosted a panel discussion with Estonian business leaders, including Lars Trunin, Head of Europe and UK at Wise, David Gardner, VP Corporate Finance at Bolt, Tuuliki Poom, Global People Partners Director at Wise, Uku Lember, Head of Finance at Lightyear and Agur Jõgi, CTO at Pipedrive.

The panel, titled ‘From Plateau to Profit: How to maintain momentum as your startup grows,’ covered everything from navigating fundraising painpoints to building a successful workplace culture and powering international growth.

We’ve compiled their key takeaways from the conversation below.

Is profit an effective growth metric?

Lars kicked off the conversation by questioning the importance of profit as a north star metric of business growth. After all, no metric is one size fits all and every startup has to define what success means to them.

Agur says profit is not the be all and end all for Pipedrive.

“It's important but as a goal, I think it's one of the most useless goals you can ever set for your company or your team.” For Agur, “Profit is an outcome of smart cooking. If you do the right thing, in the right way, in the right place, at the right time, then there will be a lot of profit.”

For Tuuliki, customer centricity should be central to any north star metric. Getting clear on what the customer needs from you will “help a business deliver what they want to deliver and enable them to move towards their mission.”

The stage of growth your business is at can also play a key role in how you measure growth. Agur noted, “If you start as a startup, the first thing you have to do is acquire your first customers. When you scale-up, you’ll need some paying customers and to show that there is growth of paying customers. If you become even bigger, like Pipedrive, where we are now VC fund-owned, we look at profit, but we still talk about the growth elements, like decreasing churn, growing the monthly revenue or the accruing number of customers in different segments.”

While profit may not be the most effective metric for every startup, using it as a motivating factor can help keep your team on track as you grow. Tuuliki noted that including your employees in your profit can even accelerate your business’ growth, “If employees can actually get some part of your profit, for example, if their bonus schemes or stock programs are linked to the profits, then they are more likely to be motivated to figure out innovative solutions and move in the right direction.” This could be incentivising your employees with a share of company profits, like the Restricted Stock Units (RSUs) granted in Wise employees’ compensation packages.

Fundraising in a changing environment

Since the peak of VC investment in 2021, startups have had a harder time raising capital and last year, the median seed round valuation in the Baltics nearly halved.

Uku experienced this trend firsthand at Lightyear. He remembers when Lightyear fundraised in 2021, “We did multiple fundraises in rapid succession because money was just so abundant at the time. To be honest, it was a little bit opportunistic — we raised a Seed round, then a Seed Plus round, then a Series A, all within the span of 9 or 10 months.”

Things changed shortly after though, “the chairs were pulled, so to speak.” Uku and his team found themselves in a new environment, “It was a very different fundraising experience back then. I would call it storytelling fundraising, because there was a lot of FOMO in the market.”

Nowadays, the milestone metrics for being ready to raise a particular round have moved earlier. In practice, Uku says that means “the expectations for your Series B round in 2021 and 2022, are now set for you in a Series A.” But in his opinion, it may not be all bad, “We're actually returning to some sort of normalcy that we had before that period.”

These growing investor expectations mean it’s harder for many startups to raise capital, even as interest ramps up in certain sectors like AI. For one, proving growth metrics is now a prerequisite for investment.

Uku remembered, “There wasn't this formulaic approach back in 2022. It wasn't, show us 5 million ARR or we won't talk to you. We had almost no ARR when we raised our Series A — we had really good growth, traction, leading indicators were really good, customers were joining, assets on the platform were exploding. But now it's very focused on finance, what does your unit economics look like? How does your retention look? When are you going to be profitable? Questions like this come up quite a bit.”

At Bolt, being opportunistic is important in a challenging capital environment. David said, “when you can raise capital, raise it. When you need capital, capital won't be there and by the time you need it, it's too late.”

When possible, being selective about who invests in your business can also help to see the hard times through. David notes that “different investors bring different value to the table. Yes, there is value in the big brand names but some of our most helpful and useful investors are actually investors you'll never have heard of. They're the people who'll be sending you employee referrals, they'll be sending you other investor referrals and their own strategy analysis to help you.”

He also acknowledges, however, that “not everyone will have the luxury of picking an investor.” For David, “capital is the priority. Who it comes from is secondary”. Where being selective becomes useful is in the long term, “In an ideal world, you're looking for someone who's got long-term capital because it reduces the pressure on an exit. You look for someone who's not maxing out their position size day one, because that then means there's someone you can tap for follow-ons or secondaries.”

David attributes Bolt’s capital success in some part to their investment in these relationships, after all, “Once you get the capital, you have to nurture it, because if you don't, you won't be able to tap it again in the future.”

How to get out of a growth plateau

Most businesses will experience some sort of plateau or slowdown in their growth journey, especially in our fast-changing global economy. Agur says that “faking it till you make it” can help. Experimenting with new channels, new softwares and new strategies can unlock new potential and opportunities to spark growth.

The important thing is to ensure you don’t lose sight of your core product. “We left our core service in operations for quite a while and customers started to tell us that those ‘are the nice add-ons’ and ‘nice extra features’, ‘but I can't log in to your service’, or ‘I can't create the next sales ledger.’ We realized that we needed to make our core product perfect, and then we can go on to the next adventure again.”

Knowing how to spot a plateau before it happens can also help to keep your business on track. Uku says “at Lightyear, we look at revenue, gross margin, and things like that for good financial housekeeping. But in terms of growth, there are other better indicators.”

With a north star metric of assets under management (AUM), Lightyear tracks growth by their net promoter score (NPS) asking, “Are customers trusting us with more of their money? Are customers happy using the product? Would they recommend it to others to use as well?” These metrics enable them to “start seeing dips well before those problems start showing up on your profit & loss (P&L) statements. When you spot them on P&L, it's already too late.”

Uku noted that a plateau may not always be something to stress about, “Growth doesn't really look that linear month to month.” In certain industries, seasonality can play a significant role in your trajectory, “so what may actually look like a plateau is just the market taking a breather.” Knowing how to differentiate between stagnation and natural market lulls is key.

To avoid plateaus, it’s important to maintain a growth culture that can maintain momentum. Tuuliki notes that despite Wise’s public listing in the UK, it “still has a startup mindset, startup ways of working. The mission itself has remained exactly the same. The DNA is the same, but of course, what changes and has to change are the ways of working and the decision-making process.”

Similarly, though Pipedrive is now VC-led, they’ve maintained their high-growth culture. Agur says “We are not founders-driven anymore, but we are still founders created, values-driven. Pipedrive has 6 values, which we orthodoxically still follow, and challenge our people to meet.” This strict adherence to core principles ensures the team doesn't lose motivation as they scale.

Tapping into international growth

Lars pointed out that “if you contain growth to a small country like Estonia, it's quite hard to grow beyond a certain point” and inevitably, many businesses will set their sights overseas.

David noted that Bolt is now “in over 50 countries worldwide, over 600 cities. We operate everywhere from Nigeria to Norway to DC to Thailand. So, there is a huge diversity of markets.” But that doesn’t mean entering new markets was easy, “the biggest challenge with geographic expansion as a growth lever relative to other levers you can pull is, frankly, uncertainty.”

David highlighted that uncertainty can come from a number of factors, “It can be regulatory, it can be FX volatility, it can just be customer behavior.” The key to minimising negative outcomes is to “de-risk it as much as possible. First of all, when you think about allocating capital to geographic expansion you have to use a different hurdle rate.”

At Bolt, they do this during the capital allocation process, “there are modifiers for the target return that you need for an investment project. If we're launching a new country with a new product, that will be one of the highest return hurdles, because it's the most uncertain.”

Successful international expansion can be an attractive indicator of long-term growth for investors. David says they’re “willing to put capital behind geographic expansion, but what they want to see is copy-paste. I've done it before, and I'll do it again, and here are the KPIs and metrics that prove that.”

Uku and his team at Lightyear have approached international growth somewhat differently. “Our playbook is such that we have a broadly useful product and an investment platform that there's things that you can do in terms of localising. We launched 19 countries all at once in the Eurozone with a very light touch, no localisation.” This method enabled them to “let the customers tell us the right market to really double down on. It showed us where the traction was.”

Uku reinforced that customer behavior is often the best indicator of where to expand next. And sometimes, it may surprise you. He remembered, “ Hungary, a place we would not have been first pick or second pick, started growing like gangbusters with zero localisation so we doubled down on localisation, added some tax-efficient accounts, and local currency support.”

When’s the right time to exit?

Every startup will consider exit opportunities throughout their growth journey. Lars asked the group, “What would you say to a founder, especially in a fundraising stage, to think about now that would make the thought process of a future exit simpler and easier?”

David noted that “everyone gets excited about IPO but the reality is very, very few companies go public. The vast majority of startups and companies exit through other means, whether that's a trade sale, whether that's a sale to private equity, whether that's a combination with another business, there are 3-4 different ways you can exit a business.”

Setting your expectations internally and with your investors is crucial, “I think it's a hard pitch to go in a Series A, Series B, and tell a VC that you're going to IPO, because they're going to look at that and say. 2 out of our 100 companies in our portfolio have done that.”

For David, the right way to think about it is to consider “what your business could look like in 4 or 5 years' time. Are there obvious buyers for your business? To go public, you need to be of a certain scale. In Europe, that's about a $5 billion valuation. In the US, it's closer to $20 billion. Very few companies are able to achieve that.”

If you are planning to go public, you should have an understanding of what it takes to make it happen. “Going public, as you all know, is a lot of work, governance, compliance, and regulation; it's a distraction from running the business.” David notes that for a lot of investors and founders, “trade sales are a much, much easier exit than an IPO, but it also comes down to what you want to achieve. Are you here to create a company, sell it, monetize it, move on and do the next? Or do you want to try and create a lasting legacy in the public markets?”

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