25/09/2024
Fennoa, a fast-growing Finnish software company, is a challenger in the rapidly expanding financial management software market in Finland. Its revenue and profitability have increased tenfold in the past four years. Following the CapMan Growth company investment in October 2022, Fennoa continue to develop and grow towards a market-leading position.
Unlike many growth companies, Fennoa has avoided a long road to success. The founders, Mikko Kalliovara, CEO since the company’s inception in 2014, and Lasse Elfving, CTO, had the right industry experience, a good understanding of customer needs and a skill for product development. The company also benefited from the broader societal trend of digitalisation and cloud-based software. All these attributes enabled the company to grow rapidly, becoming profitable within a couple of years.
Fennoa develops and sells cloud-based financial management software for accounting firms and their clients. This combination has been successful, as Fennoa to date has over 750 accountancy firms, and more than 38,000 of their clients, on its roster. There is still room for growth, as there are approximately 4,000 accounting firms in Finland alone.
Over the past three years, Fennoa’s sales have increased fourfold, and profitability has increased almost fivefold. These are impressive figures for a growth company in this sector. In 2023, Fennoa reported a revenue of €13 million and an EBITDA of almost 50%.
“Fennoa is experiencing significant growth, whilst simultaneously demonstrating strong profitability. This, combined with a robust underlying digitalisation trend, made it an attractive investment case for us. The company’s software has a high level of customer satisfaction and is rated market leader. As active owners, we are now supporting the management with a focus on continued growth and development from challenger to market leader,” says Heikki Juntti, Partner at CapMan Growth.
Customer and product focus
Mikko Kalliovaara, Fennoa’s CEO, has extensive industry experience having previously worked at an accounting firm as well as a financial management software provider. This experience allowed for Kalliovaara, together with the Fennoa management team, to identify the needs of accounting firms, whilst closely following the development and evolvement of the IT industry, prior to fully launching the Fennoa product.
“We knew from the beginning what accountancy firms want from their software. Because we speak the same language, we understand each other. This has enabled us to develop a product that accountancy firms and their clients really want. It is important to focus on the users and provide them with quick training and support when they need it,” he says.
The contrast with the traditional model in the sector is striking. In many cases, companies choose their own financial system and must report separately to an accounting firm whenever they need bookkeeping, tax returns, financial statements or other financial services. According to Mikko Kalliovaara, the accounting firms are so satisfied with Fennoa’s software solution and the product’s user-friendliness that they recommend it to their clients. When both the accounting firms and their clients use the same service, it benefits everyone as processes are synced and streamlined.
Early adopter of cloud-based software
One of the key factors to Fennoa’s success has been its early adoption of cloud storage. When the company started ten years ago, many accounting firms and their clients were still working with physical accounting software. Fennoa introduced a new way of working, by storing valuable data in the cloud.
“Fennoa was several years ahead of the curve in terms of cloud computing, but we were not the first. We benefited from the fact that other companies had already started selling the concept to their customers, as it was still challenging to grasp. For many, it was scary to move valuable, business-critical information into the cloud and rely on third party software vendors to make sure processes worked smoothly. We delivered on our promises and reliability became a key USP for us,” says Mikko Kalliovaara.
Virtual organisation
Fennoa operates as a virtual organisation without a physical office. Initially, this was to keep the company small and costs low; however, it soon became evident that remote working was an effective working model as the company grew. This became evident during the pandemic, when many of the industry specialists Fennoa needed became accustomed to working from home. The organisational structure and flexible way of working demonstrated Fennoa’s desire to create something new.
“When we started with a small team, we had no reason to have an office. Few years later, we wanted to see if we could make remote working work for us as we grew. And we did. Fennoa’s remote working culture became permanent when we noticed that new employees joined our team from different parts of Finland without having to move cities. Today, our entire team, consisting of about sixty people, is spread across the country. This also means, it is important to maintain the team spirit. We do this by holding weekly meetings online and holding a large, face-to-face, meeting once a month in different locations across Finland.”
From challenger to leader
Fennoa’s success was recognised a few years ago by investors as well as acquiring companies. Mikko Kalliovaara and Lasse Elfving, the duo behind Fennoa’s phenomenal growth, were not interested in being bought out by competitors and wanted to remain a domestic player.
“It was very important for us, and our customers, that we could continue our growth in line with our values as well as an independent Finnish company. After several rounds of negotiations, we chose CapMan Growth as our partner. With this team we immediately found a mutual interaction of both respect and understanding. Product development is entirely in our own hands. As the company grows and the number of employees increases, so do the demands and expectations on us. CapMan Growth gives us all the support we need to grow Fennoa and to build a strong organisation. We are grateful to have strong Finnish investment partners such as CapMan Growth and its co-investor Ilmarinen onboard, as we continue to develop and grow towards a market-leading position,” says Mikko Kalliovaara.
In this case, Fennoa and CapMan Growth are a perfect match.
“Fennoa received a lot of interest from investors and acquirers, however the founders did not want to sell the whole company. As a minority investor, CapMan Growth allowed them to realise some of the value they had built up and to have a professional investor and active owner to help develop the company further without losing majority control of the company,” says Heikki Juntti.
In general, it is difficult to name specific aspects CapMan Growth has changed or implemented in companies, as the team is involved in almost all stages of decision making and business development processes as an active owner. However, some activities are worth mentioning.
“I think some of the most important things we have helped with are recruiting key team members, professionalising the management team and structuring the organisation of the business. We have also helped developing the company’s go-to-market strategy in order to accelerate growth. All with the ultimate aim and ambition to create value.”
CapMan Growth and Fennoa
CapMan Growth is a leading Nordic growth investor that makes significant minority investments in companies with strong growth and internationalisation ambitions. CapMan Growth invested in Fennoa in October 2022 at the same time as the Finnish pension insurance company Ilmarinen. The founders of the company, Mikko Kalliowaara and Lasse Elfving, are still the majority owners today. Fennoa is a Finnish company founded in 2014 that develops and sells cloud-based financial management software for accounting firms and their clients.
