BRITEside Chat is our monthly event series where we sit down with entrepreneurs, industry experts, executives and government personnel to talk about the philosophy of entrepreneurship, while introducing founders in our network to new ways of thinking & giving everyone in attendance the opportunity to connect and grow their networks.
This week at the BRITEside Chat we hosted Wiley Runnestrand. Runnestrand is our close friend and the Vice President of Cleveland-based private equity firm ScaleCo. Focusing its attention on sub middle market companies (with annual cash flows less than two million dollars and a sweet spot around $500 thousand), ScaleCo has transformed more than 20 companies with investments totalling over $100 million.
A collaborator with BRITE on several occasions, Runnestrand – a native of the Mahoning Valley – always brings the same question to the table: “what can I do to help startups in the Valley?” This question harkens back to Runnestrand’s experience out of college when he launched a startup working with YBI as a way to continue living in & give back to Youngstown and the region. The experiences he took away from that startup have served him well in his time at ScaleCo.
The bulk of Runnestrand’s role at ScaleCo is focusing on the organic revenue growth of the businesses ScaleCo invests in. To this extent, he employs several techniques: implementing better systems, creating more effective team strategies, improving the sales and marketing functions, and deploying data across the business to drive growth. When looking at data specifically, Runnestrand has a few different strategies: using data from the company to fuel growth; and bringing better data in to find new customers, create a better sales pipeline and improve product delivery.
Despite the wealth of knowledge Runnestrand has in driving revenue growth, there’s one ideology that ScaleCo gravitates towards more than any other: acquisition entrepreneurship. Runnestrand says when an entrepreneur has a great idea, there are two ways to go about turning it into a successful business. The first, is to develop a product, enter the market and build a customer base over time. This path is the one typically thought of when talking about what it means to be an entrepreneur or to launch a startup.
But there’s another path, based on a “hybrid” model. In acquisition entrepreneurship founders still turn their idea into a product, but after doing so they find and acquire a legacy company in the market. This newer approach carries a couple benefits. The first is that entrepreneurs taking this approach get access to the existing company’s cash flows. This makes the process of bringing a new product to market much less burdensome. The second main benefit to this method is access to intangible assets, the essential infrastructure put in place that allows an established company to operate.
This leaves entrepreneurs more time to focus on the product they want to create and introduce to the market, rather than having to focus on the nuances of building a company from the ground up. This hybrid model is the approach that ScaleCo takes with most of the companies it invests in, because it offers a quicker path to market for the entrepreneur and creates a more reliable vehicle for investment, by utilizing an already established player in the market.
In all, acquisition entrepreneurship offers a path to market different from “traditional” entrepreneurship. While it may not be optimal or accessible for all startups, some founders’ innovative ideas can benefit from this unique approach. To learn more about entrepreneurship and the energy industry, join us for the BRITEside Chat on the last Thursday of every month.