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At Hexa, we’ve been building tech companies for the last decade. Some thrive and become leaders of their categories, some close, and others keep going, create sound businesses, and grow linearly. Venture Capital financing works for the first two outcomes but is inapt for the third. Private Equity can finance the third category, but will not offer the strategic shift they need.
That’s where Hexa Scale comes in. Acting as a late co-founder, we provide capital and hands-on involvement to create a new trajectory. We create a divergence, from linear growth to exponential growth.
The narrow Venture Capital model
When a company is not yet experiencing exponential growth, VCs and founders can quickly have different interests. This is purely natural: Venture Capital operates on a power law. It is a game of home runs. What is the power law? Only 5% of companies invested by VCs are outliers driving 80% of the total return.
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So for VCs, it is fully rational to aim at having fund returners, focusing their capital and energy on them, and focusing less on the rest of their portfolio. It is therefore also fully rational to encourage you to go on the boldest path, all-in. As Paul Graham puts it: “Kill-or-cure strategies are optimal for VCs because they're protected by the portfolio effect. VCs want to blow you up, in one sense of the phrase or the other.”
So for the vast majority of startups, the VC path will not give you a good shot at becoming a category leader in your market.
The linear Private Equity model
This path is only accessible to a share of the startups that end in a “VC dead-end”: those that have grown well and are profitable.
If that’s your case, you can take the Private Equity route. As VCs, these investors will provide you with capital and advice, but not much more — unless you exit your company to a PE that takes majority stakes and hires new management.
Private Equity doesn’t work on power laws: on the contrary, they work hard to gain a significant return on most, if not all, participations.
They work on linear returns and trajectories: growing steadily and creating cash flow. It’s all great — but it’s not a second shot at becoming a leader in your market, the initial aim of any startup. And there’s an opportunity cost here: someone else might be building that category leader while you cash in linear returns.
So how can you get back on the exponential path?
Hexa Scale: from linear to exponential
To reach hypergrowth, some areas of a company might still need to be cracked: a fit between cofounders, a Go-To-Market strategy that needs to target a different audience, a product that hasn’t yet realized its full value, a management team that would benefit from senior hirings… That’s where we come in. With Hexa Scale, we act as a late cofounder by:
- Defining a new strategic path for the company with you
- Designing the plan to get there together
- Providing the capital and all the hands-on involvement to make it happen.
For the B2B software companies that have understood their Product-Market-Fit and demonstrate it with €1-10M revenues, but haven’t completely nailed their model, that grow but linearly, that are efficient and could become profitable on a visible horizon, that sit on a huge market to be conquered: we bring the expertise, hands-on involvement and capital to give you another shot at becoming a market leader.
Not a fund: we’re a late co-founder
Once we’ve defined a strategic path for this new phase of your company, our approach is built around three pillars: financing and cap-table structuring, operational involvement, and M&A help.
- Capital injection: We help you rebuild your cap table and incentives around that new trajectory: offering liquidity to those who need it, injecting cash for growth, and incentivizing the team for this new phase.
- Hands-on execution: Day-in day-out, for 12 to 18 months, we work side-by-side with you to put your company back on an exponential path. We’ll select and bring on board the right senior executives to execute the plan. We’ll address the remaining parts of your model that need to be cracked, leveraging the Hexa team of experts in Hiring, Product, Go-to-Market, and international expansion.
- M&A: Then, we’ll prepare the next equity round or exit according to your ambitions and the market, continuing the vision you had when you first incorporated the company.
Hexa Scale offers a third path. No longer do companies have to choose between one-shot, rapid growth or a slow, linear trajectory. We're here to help you make that leap to become a category leader.
If you’re interested, reach out to us here.
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