- Monterro, a €3.1 billion Nordic software investor, has decided to open its first office in the UK.
- Over 10% of the 60 additional acquisitions made by Monterro have been in the UK, including the allergen data platform Erudus, based in Newcastle.
- The London group, now composed of two individuals and headed by Erik Knutsson, as well as Maxwell Starkie, a UK native, intends to increase its membership to five or six within a year.
Gustav Lagercrantz set up his very first software company when he was 16 and has since gone on to build, manage or invest in a number of software businesses. He cites this experience as the reason why Monterro, a hands-on B2B software investor with €3.1 billion in assets, just opened its first office in the UK.
During his interview with Tech Funding News, Lagercrantz notes, “How can we be the kind of owners that I myself once had wished to be?” when describing Monterro’s method of handling its portfolio companies, and points out that this question is the main reason for setting up a London office in such a competitive market.
Over 10% of Monterro’s deals are already in the UK
When entering the UK market, Monterro had a well-defined strategy. Since its foundation in 2012, it has made 40 platform investments and more than 60 add-on acquisitions, and, according to Lagercrantz, over 10% of these add-on acquisitions have been in Britain.
For example, last year Monterro acquired Erudus, an allergen and nutrition data platform based in Newcastle, as an addition to Matilda FoodTech. At that time, Erudus was generating about €1.6 million in annual recurring revenue.
It is Monterro’s strong track record that has led to their decision to open the office.
“We never begin from scratch. Since we have been involved in the UK and Europe markets, we have had a number of exciting conversations going on,” Lagercrantz says, adding that the new office will help to strengthen these relationships and make Monterro more relevant through having a local presence.
At the moment, Monterro is ensuring that the office remains focused. Erik Knutsson, who is one of the co-leaders of inorganic growth, and Maxwell Starkie, a British citizen and transactions manager, are leaving Stockholm.
Lagercrantz believes the team will reach five or six members within a year. He made it clear that the office’s purpose is currently to source deals and provide portfolio support, not to manage a fund based solely in the UK.
After looking at around 25 different locations, Monterro decided on Soho as they prioritised easy commutes and proximity to London’s software and tech cluster over the financial district.
Vertical software and no majority buyouts
Monterro makes investments in a number of sectors, but Lagercrantz stated that the company steers clear of generic, horizontal software solutions.
“AI is squeezing value out of horizontal software, but it can be a force multiplier for vertical software. For software that is deeply embedded in an industry, tailored to specific workflows and underpinned by proprietary data, AI makes the software even more valuable. We see that across areas such as construction tech, foodtech and other specialist verticals,” he explains.
According to Lagercrantz, the UK add-on deals have ranged from about €1 million to €20 million, with the amount determined on the basis of strategic fit rather than set in advance. Monterro does not opt to buy out the founders altogether and instead chooses rollover deals that keep management involved.
Two Nordic and Dutch peers are also taking the same steps. Main Capital Partners, which has never before entered the UK, is now doing so after raising €5.25 billion through two funds. At the same time, Endeit Capital has opened an office in Stockholm to pursue deals in that region.
Lagercrantz believes that Monterro’s advantage lies in its hands-on approach: “We know their language, we understand their problems, and we understand their opportunities. That is precisely why we’re there.”
