How to Build a Successful Tech-Driven Company in 2021

At Scandia Partners, our founders specialize in successfully growing and scaling tech-enabled businesses. We understand the unique challenges facing tech-driven companies and know what it takes to succeed in this competitive and ever-changing landscape. We have put together some insights from our years of experience in successfully building strong tech companies while consistently achieving high rates of return.

Establish your core values & mission

At the heart of any successful company, regardless of the industry, is a well thought out mission statement and a strong set of core values. Establish your company’s core values early on and stick to them. Honestly assess the key principles that are at the heart of your company and detail them out in a way that is easy for you and your team to remember and understand. Once you have thoughtfully identified your core values, don’t just put them on your wall and forget about them. Use them as the yardstick for every single decision and interaction with customers, vendors, partners, and your own team members.

Understand your customer’s needs 

Many tech companies start with a big idea -- an innovation that will disrupt the industry. The most successful tech-enabled companies, however, begin by looking at their customer’s needs and how they can fix a specific problem. For example, with Smart Rain, our founders recognized the need for a better way for property owners and municipalities to manage their irrigation systems and water usage. Rather than starting with a revolutionary technology that may not have an applicable use in their customer’s daily lives, they started with a key pain point and creatively utilized the intersection of technology and their irrigation system to radically change the way property owners approached and controlled their water usage. Sleek code, a flashy UI, or groundbreaking way to use an emerging technology will ultimately end in a failed business venture if all of those elements are not built upon a deep understanding of your customer’s needs and how your specific software or tech-enabled solution meets those needs.

Never stop innovating

As the owner of a tech-driven company, you must commit yourself to constant innovation. Technology is ever-evolving at a rapid pace. Once you have developed your disruptive technology, you cannot rest on your laurels and think your work is done. In order to maintain your competitive edge, the software or technology you have built your business on must continue to adapt and improve to meet the changing needs of your customers, any new operating system and device requirements, and enhanced security protocols as cybersecurity threats evolve and expand.

Surround yourself with the right people

As with any business, you will be your most successful when you surround yourself with the right people for the right jobs. Focus your early stage efforts on building a team of people who are skilled in areas where you are weak or where you might not have the capacity to focus your energy and efforts. Consider areas like front- and back-end development, IT security, customer service, accounting, and daily operations. Each of these team members, regardless of their position, need to be steeped your company’s mission and core values and need to have a strong understanding of who your customer is, what their specific pain points are, and how they can use their position to ease these pain points and make your tech-enabled product or service invaluable to your customer base. 

Invest in security

If your tech-enabled company collects any data whatsoever from your customers, including information as simple as their login credentials or basic contact information, it is vital that you invest in strong security protocols that will protect that data. If your business is cloud-based or is built upon the Internet of Things, artificial intelligence (AI) or machine learning, your security needs will be more complex and more vulnerable to increasingly complex cybersecurity threats. Investing in strong information security early can save you and your business in hefty fines and penalties as well as potential lost revenue if failure to protect your customer’s data results in loyal customers abandoning your business in droves.

Communication is key

Consistent, clear communication is fundamental to building and growing any successful business, but it is particularly important for tech companies in our increasingly privacy sensitive digital world. Proactive, transparent communication with your customers, employees and investors is crucial to gaining and maintaining trust. From new product features and software upgrades to known system glitches or downtown for scheduled maintenance, regular internal and external communication allows you to keep both your team and your customers up-to-date on any pertinent information while simultaneously serving as an opportunity to foster your relationship, build brand loyalty and prevent any potential frustration. Now more than ever, if your tech company encounters a security breach, it is imperative that you communicate that breach and any implications immediately to all those impacted. In our proven track record of building and scaling high growth tech companies, we have learned that it is best to not only communicate, but to overcommunicate.If you are in the process of starting or growing your tech-enabled business and are interested in learning more about how the founders at Scandia Partners can put our proven track record to work for you, reach out to us. We’d love to talk.

Four Types of Startup Funding Investors

If you are looking for startup capital for your new business, there are a variety of funding opportunities available to you -- each with their own benefits and potential pitfalls. By thoroughly understanding your options, you can make an informed decision to find the investment partner who is the ideal fit for you and your business.

Private Equity 

Private equity is a broad term used to describe capital invested in a company that is not publicly listed or traded. For many companies, private equity firms provide an alternative to capital loans. Unlike loans, funding through private equity does not have the expectation that the investment will be repaid when structured as true equity funding. Equity funding is particularly beneficial to those starting new businesses or needing to scale quickly, especially during uncertain economic conditions when traditional financing and loan approvals are more difficult to obtain. 

That does not mean that equity funding is without its risks and pitfalls. These large capital infusions typically come at the price of equity in your new company and, therefore, future profits and even possibly key business decision making depending upon the dilution and ownership percentage of  your shares. In addition, many large private equity firms are backed by institutional investors who have strict and often unwavering expectations regarding return on investment. 

Private equity can also be structured as convertible debt. Unlike an equity structure, convertible notes do come with the expectation that the initial investment will be repaid with the option to convert the note into shares of the company once benchmarks are hit or the company reaches the next phase of its growth cycle. Be particularly wary of the terms of any convertible debt deals. According to Forbes, “It should never be a senior, secured note, like you would get from a bank or pure debt lender.  As any investment that has a chance to ‘strangle hold’ the company in the event of it not hitting its plans, is a recipe for disaster for all involved.  Expensive interest rates that need to be paid in cash, or restrictive financial covenants based on your balance sheet metrics are simply not reasonable in the venture world.”

According to investopedia.com, private equity traditionally tends to fund larger, more established companies that are seeking an equity infusion or a chance for company founders to transfer some of their ownership stakes. Within private equity, however, there is a subset of funding focused primarily on startups called venture capital.

Venture Capital

Venture capital has gained a solid reputation over recent years as a source of go-to funding for startups. Venture capital is funding given to startups and early stage businesses who show strong growth potential. Venture capital takes the form of “seed” stage, “early” stage, and “growth” stage funding, depending on where your company is in its growth cycle. As with other types of private equity, venture capital can be structured as either an equity investment that does not need to be repaid or a convertible debt that can be converted into shares, stocks, or equity in your company.

From an investor’s perspective, venture capital is one of the most risky investment opportunities. Because of this, venture capital funding is best suited for new businesses with a high growth trajectory and potentially significant return on investment. For the startup or young business enterprise, it comes with the same potential pitfalls as traditional private equity. Thoroughly evaluating any valuation proposal or investment offer is critical to ensuring you receive the funding needed for getting your business off the ground or scaling quickly while maintaining future profits without finding yourself in a situation where a venture capitalist has too strong of control of your business or future profits.  

Angel Investors

Angel investors, or private investors, are private individuals who invest early in startups or young businesses. Angel investors take on many forms -- from friends and family who provide initial seed money to a high net worth individual who is an experienced entrepreneur ready to help others succeed. Funding from angel investors can come as a one-time investment of capital or as an ongoing infusion of funds as needed. Angel investors are particularly desirable because, as explained by investopedia.com, they usually invest in the entrepreneur starting the business rather than the viability of the business. They typically offer more favorable terms than other lenders, private equity firms, and venture capitalists and serve as experienced mentors and guides to new entrepreneurs. Angel investors are focused on helping startups take their first steps, rather than the possible profit they may get from the business. Essentially, angel investors are the opposite of venture capitalists.

Despite the more favorable terms offered by angel investors, funding is still typically tied to equity in your newly established company. Understanding how any ownership percentages impact the future of your company -- and your role within it -- is key to negotiating an angel investment that is a good fit for your startup.

Family Office

Family offices manage the investments of high net worth individuals. For many companies seeking a flexible investor, private family offices represent the best of all worlds. Family offices are becoming an increasingly popular and sought after funding source due to their flexibility and the expertise they bring to the table. Because of their autonomous nature, family offices can make a variety of investments in any way they see fit, allowing them to act as private equity, venture capital, or angel investors depending upon the unique situation of each individual investment opportunity.

Perhaps the greatest benefit to receiving funding from a private family office is the flexibility it affords new business owners during the initial growth and scaling phases. Unlike venture capital and private equity firms, family offices have unparalleled flexibility in who they fund, how they fund them, and what they deem a successful investment. They are not limited to a handful of investment options, but instead have the latitude to invest in any project or investment opportunity that they feel aligns with their core values and will result in a mutually beneficial investor-partner relationship.

At Scandia Partners, for example, we value people over profits and understand that family and people come first. While we maintain a high standard of excellence and put our expertise to work to help our partners achieve that standard, we also understand that success is measured by more than solely monetary returns. 

If you are interested in seeing if Scandia Partners might be the right investing partners for your startup, we’d love to talk.

Building a Successful Service Company

Over the years, our founders have successfully grown and scaled a variety of service-related companies.  While every company faces its own unique challenges and obstacles, there are a few constants that are key to building a successful service company. 

Know your values

Establish your company’s core values early on and stick to them. Take an honest assessment of the key principles that are at the heart of your company and detail them out in a way that is easy for you and your team to remember and understand. Once you have thoughtfully identified your core values, don’t just put them on your wall and forget about them. Use them as the yardstick for every single decision and interaction with customers, vendors, and your own team members.

Get to know your customer. 

The only way to provide exceptional customer service is by getting to know your customer and their needs. Rather than operating your service company on autopilot, get to know your customer and their specific pain points. Talk to them and ask them what would make your service invaluable to them and how you can better help them meet their goals. Get into the weeds and learn things like the materials that work best for their specific purposes, protocols and procedures you could implement that would save them time and energy, and what specifically they look for in your type of service company. 

Put the customer first — always.

Once you have a strong understanding of the needs of your customer, it is crucial that you put your customer first. The most successful service-oriented businesses are built upon strong relationships where the customer knows they can rely on you to work in their best interest. By analyzing each interaction from your customer’s perspective and identifying ways you more effectively and efficiently meet their needs, you are laying the foundation for building a successful service company.

Invest in technology.

By investing in and efficiently utilizing technology, you can streamline the customer experience and more effectively grow and scale your business. There are a variety of tools built with service companies in mind that can help you quickly scale your business even while operating on a lean staff. Operational functions like scheduling and billing that once required an entire department can now be done through automated software and online tools like chatbots and automated email software allow you to be more responsive to customers while also taking some of the communication load off of your team. Look to technology within your specific service industry to find innovative ways to increase productivity, profitability, and customer satisfaction.

Don’t just communicate overcommunicate.

One of the guiding principles in every business we have successfully grown and scaled is communication. In a world where we have more communication tools at our fingertips than ever before, many service companies still fail to communicate with their customers. While growing our companies, we have found that communicating efficiently, effectively, and often has been key to building customer loyalty. Communicate where you are on a project regularly so that your customer knows exactly where they stand every step of the way.

Consistency is key.

Be consistent and reliable in order to become your customers’ most trusted resource. It is easy to overpromise and underdeliver, but the quality and consistency of your work will determine your longevity. If you have established any deadlines or budget, stay within them. If you run into any issues, communicate them early and often.  

Be honest and transparent.

As you are growing your service company, it’s particularly important that you know your limitations and have a solid understanding of your current capabilities. Only take on work that is a good fit for your company, your values, and your capacity. Be honest and transparent with your customers about your ability to do the work required, the realistic timeline and cost, and proactively address any obstacles that arise.

Learn when and how to say “no.”

You will inevitably be asked to take on work that is either outside of your company’s scope or capacity. While it may be tempting to take on any and every project that comes your way, learning when and how to say “no” will help you to successfully grow your business without overextending yourself and your team. There will be times that you don’t not have adequate capacity to handle the volume of work a new customer might bring or, conversely, that customer may not be a good fit for the values and goals of your company. By having a strong understanding of your company’s capacity and clearly defined ideal customers, you can quickly determine which projects to pursue and which ones you should respectfully decline. 

Begin with the end in mind.

Stephen Covey’s timeless leadership principle applies especially well to service companies. When building your business, you have the unique opportunity to determine your ultimate end goals. Once you know where you would like to end up as a company and relentlessly pursue those goals in each and every decision as a business owner. Another piece of leadership wisdom that has been integral to the success of each service company we’ve grown and scaled is this advice from Jim Collins’ book Good to Great: be rigorous, but not ruthless. In order to achieve high growth and build a loyal customer base, you must be disciplined and rigorous in pursuit of your goals, core values, and an exceptional customer experience. This, however, can not come at the expense of your people. In fact, putting people first is at the core of being rigorous, but not ruthless. By applying the same exacting standards to all people and situations, you free your employees to do their best work and your customers will know they can rely on you to make the hard decisions without sacrificing the human element that is vital to successful service companies.

No matter your specific industry, you can build and grow a successful service-related company by keeping these helpful tips at the forefront of your decision-making process. If you are interested in learning about how Scandia can help you successfully scale your service business and achieve high growth, reach out to us to see if we might be the right partner for your growing business.

Reasons to Invest Real Estate

Why should you invest in real estate? On the surface, an investment in real estate has the potential for high rates of return and substantial wealth growth. Here are a few more detailed reasons to invest in real estate.

 Real estate is a high-value tangible asset

Some investments, such as stocks or a vehicle fleet, can leave you with little to no tangible asset value because of a decrease in value over time. Investment in land, buildings, and real estate developments are things that will always have definitive value attached to them. Property insurance will protect your investment in real estate, so your asset is protected in the worst-case scenario.

Real estate investments are an excellent way to diversify your portfolio

Including real estate investments diversifies and strengthens your portfolio. Rather than relying solely on the stock market, expanding and diversifying your portfolio is key to weathering uncertain economic climates like we are currently experiencing in 2020. 

Real estate gains are deferrable

Section 1031 of IRS code provides that real property held for rental property tax deductions, investment, or use in a business can be exchanged for “like-kind” real property also held for rental, investment or use in a business, allowing the Investor to defer his or her Federal, and in most cases, state rental income tax rate liabilities.

Real estate investments often bring tax advantages

If properly structured, you may be in a position to claim tax deductions related to depreciation, interest expense, and other items related to your real estate properties. For instance, the IRS allows commercial real estate (CRE) investors to deduct some of a property’s depreciated value to account for the cost of maintenance and upkeep. 

Real estate can be leveraged

This is one of the most important advantages of real estate investment. Once you have built up an equity position in an investment property, you can leverage that investment for cash in one of two ways: Secure a second loan against the increased equity or refinance the original loan amount plus the increased equity. This frees up money to buy another investment property.

Creates a hedge against inflation

As wages and profits increase in the larger economy, this also generally increases the amount that property owners can charge for space, as well as what tenants can afford to pay in investment properties.

Depending upon the use of the real estate holding, you can use it to establish predictable cash flow

If your investment property is rented out to others or in use for a consistent service, the payments involved go directly to you and create a very sure source of funds for you. A significant portion of the total investment return comes via current cash flows from rental income. 

Investing in real estate not only an asset to your portfolio, but it can add value, function, and beauty to your company and your surroundings.

At Scandia, we believe that real estate should be first class. Investing in properties that edify and elevate their surroundings and the people who inhabit them is our goal. Real estate is not an investment in just the physical property — it is an investment in the growth and future of your company.  

Investing in real estate on any level can cause widespread positive effects in your finances, and can also be very fulfilling as a supplement to your company and career. 

If you are interested in learning more about our approach to real estate investment, view our current real estate holdings or contact us to discuss your potential property.

What is a Family Office?

At Scandia, we are a family office working to build value through long-term, thoughtful investments.

What exactly is a family office?

According to investopedia.com, family offices offer an outsourced solution to managing the financial and investment side of an individual, single family, or multiple families. Private family offices provide a flexible funding opportunity for businesses seeking an infusion in funds and a valuable partnership. Unlike other types of funding, these offices are not beholden to the same standards as banks, finance firms, or other capital groups, and can evaluate and fund any investments they see fit with their core values. Family offices use their investment flexibility and business experience to provide essential financial management to families and partners that benefit all involved. Family offices care most about investments that meet their interests and values and would much rather have long-term, flexible relationships than one-and-done investments that are based solely upon returns.

Providing these services requires a comprehensive wealth management plan that is far beyond the capacity of any one professional advisor. Family offices exist through a well-coordinated, collaborative effort by a team of professionals from the legal, insurance, investment, estate, business, and tax disciplines. This team comes together to provide the scale of planning, advice, and resources needed for valued partners. Each team member in a family office is an essential element for addressing the pivotal issues families face when navigating the complex world of wealth management. Their expertise, in turn, is a valuable resource to each business that the family office chooses to partner with and invest in.

Sara Naison-Tarajano, head of Goldman-Sachs’ family office coverage team in the Consumer and Investment Management Division, notes that family offices are becoming a powerful force in the realm of asset management, especially in private markets. This is for a good reason: partners and families faced with succession planning, hefty operational costs, and other pressures are converting to family offices to manage their own funds and invest in partner companies in new and profitable ways. The desire to preserve family wealth and assets and create their own unique legacy based upon their core values and interests is a catalyst for this. Family offices are valuable to families and partners for their freedom to grow assets and investments as they alone see fit. Family offices are becoming increasingly popular and beneficial, but are also rising in the investment world as a new and autonomous way to both handle finances and raise capital.

Why should you partner with a family office like Scandia?

Scandia holds family at the core of our company, and our partners are an extension of that family. Family offices usually have a niche based on their interests, experience, and values, and Scandia is no different. When seeking out a family office to partner with, it’s important that you research the company's mission, vision, values, and interests to make sure your goals and vision align.

Our mission is cultivating long-term relationships with partners and projects that align with our vision and values. Scandia specializes in achieving high-growth partnerships by building scalable service companies with an emphasis on the tech and service industries as well as building value in long-term, thoughtful investments in real estate holdings. That being said, we always have the ability to invest in any project or investment opportunity that we feel aligns with our core values and will result in a mutually beneficial investor-partner relationship.

We do not approach our investments based on returns or profit margins, but rather foster environments that maximize profitability for all involved by respecting the human element that is inherent in all partnerships. As a partner-centric family office, we put our expertise to work to add value to each and every investment and help our partners conquer any obstacle in their path.

Being a family office is what makes all of this possible for Scandia. We maintain a high standard of excellence while also understanding that we are partnering with real people. Above all, we strive to be flexible and adaptable while relentlessly pursuing excellence. If these ideals align with your pursuits, reach out to us to start a conversation. We are proud of our thoughtful partnerships and investments. You can learn more about our current investments by viewing our partnership portfolio and real estate holdings.