EP188 · Economy · first published 2023-04-16
Growth Company Success and Financing | Olli Sirkiä | Negotiator 188
Olli Sirkiä, founder of Trado Capital, works through how growth companies are chosen and financed. The sharpest content is his criticism of the Rule of 40: it is fine for internal steering but too crude for an investor, because it treats all costs as equal — a company burning 60 per cent of its budget on sales scores the same as one spending it on the product. Also the venture debt structure used when the only collateral is receivables and equity; why the reseller model does not work in software; and why Finland has excellent teams but too often a business built to Finland's size. Published 16 April 2023.
Growth Company Success and Financing | Olli Sirkiä
Summary: In episode 188 Sami Miettinen interviews Olli Sirkiä, founder of Trado Capital, about selecting, financing and internationalising growth companies. Published 16 April 2023.
Why the Rule of 40 is a poor investor’s metric
This is the episode’s most valuable single passage, because it criticises a metric the SaaS world uses almost uncritically.
Miettinen sets it out: growth percentage plus profitability percentage; if the sum exceeds forty, the company passes. Growth of 35 with profitability of 5 is as good as the reverse.
Sirkiä accepts it as an internal steering tool. The logic there is clear: set growth to zero and the cost structure has to settle somewhere — roughly 10 per cent of sales spend to patch churn, 10 on administration, 20 on R&D — and you can make deliberate trades between profitability and growth.
But for an investor it is too crude, and his reason is precise:
The costs get equalised too much in this Rule of 40 model.
The metric treats all costs as equivalent. A company spending 60 per cent of its budget on sales scores the same as one spending that money on the product — though from an investor’s point of view these are entirely different companies. Sirkiä would rather have the one whose spending sits in the product.
Miettinen adds the metrics he uses himself: gross margin, where above 80 per cent is a good showing, and churn. Sirkiä notes that a CAC/LTV ratio alone is not enough either, because it does not reveal the churn profile:
They onboard customers who are not even ready to use the product yet.
Two companies can look identical on simple numbers while one has a structurally more fragile customer base.
And his summary of why sales efficiency deserves the closest look is the best line in the episode:
It contains not only how well the sales machine works, but also how good the product is. These are very tightly bound to each other.
Venture debt when there is no collateral
A concrete financing structure, described more precisely than usual.
Sirkiä’s premise is realistic: companies this size simply have no collateral. In practice there are only receivables and the company’s equity — personal guarantees no longer work at this scale.
Miettinen compares Round2 Capital’s model, where the customer base acts as a form of collateral. Trado does it differently:
- Receivables are not taken as security.
- The loan is meant to be repaid.
- If it is not, it converts to equity on pre-agreed terms.
- Those terms are deliberately harsh, so that nobody wants the conversion.
The benefit to the founder is that in a normal growth scenario there is no dilution — the interest is paid, the ownership stays. Miettinen’s description of the other scenario is apt: a negative incentive to run faster so as not to end up converting.
Sirkiä draws the limits himself, which is honest:
We don’t actually want those companies in our lap.
If a conversion would hand over 60 per cent and leave the founders with almost nothing, then in his view either the loan is too large or the terms too brutal — and a crippled company is no good to the investor either. He notes no forced conversion has yet been needed.
Timma, and an unusual combination
The best single explanation of a business model in the episode.
Timma is software for hairdressers and salons: booking, point of sale, marketing. But it is also a consumer marketplace — B2B and B2C in the same product.
Sirkiä explains why the order has to be this way round. The B2B side requires local presence: someone has to come and show people how the system works. That is why competitors relying on pure online selling have not succeeded — and why Finland is not top of an American firm’s list when country operations are set up.
The B2C side is of no use at the start. Only once market position — ideally dominance — has been reached does the marketplace become valuable.
Miettinen’s analogy sharpens it: this would be Uber with the taxi operators’ own ERP included. Sirkiä’s answer is that an Uber driver’s job is simpler — customer from A to B, job closed — whereas a salon has bookings, cancellations and marketing, so the software is far broader.
Miettinen adds his own experience from training: usually in SaaS people confuse consulting with recurring subscription revenue. Here something rarer gets confused — a transaction platform and a recurring software service.
Paying salespeople: activity before outcome
A short but practical passage, which Sirkiä credits to sales professional Vesa Honkanen.
A pure commission model is bad, because it pays only on closed sales. Better to pay also on activities, because activities lead to sales — and because salespeople look too far ahead instead of making today’s calls.
Miettinen’s summary is blunt and accurate: just raw funnel. And Sirkiä’s proverb on top:
A mouse does not walk into a sleeping cat’s mouth.
Both also agree that being product-led does not remove the need to sell: in Miettinen’s image, if the running is going well, you still put the spikes on.
The therapy business, and the part of it that is not therapy
Sirkiä is an entrepreneur in a group that owns Terapiatalo Noste, focused on mental health services, and Äännekoulu, focused on speech therapy.
His observation is the episode’s most surprising business insight:
A really large share of our feedback comes from something other than the therapy work itself — how easy it is to book, how easy the clinic is to find, what happens while you wait and as you leave.
Customer experience decides matters even where the service itself is professional clinical work — and he says this is where he has applied lessons from the software business.
His argument for the private sector’s role is about labour rather than ideology: the public sector cannot compete on salaries, and a private operator can organise the work so that the therapist does only therapy, which is what they trained for and generally want to do.
The most concrete example is an online therapy platform with a couple of hundred municipalities as customers, which he says has produced strong results at lower cost. His point: this is what a private operator can bring, rather than simply providing the same services the municipality would anyway.
On demand for mental health services he makes a careful observation: the great majority of clients are women — but he is wary of reading that as prevalence, since it may be about who dares to seek help. And demand has grown so much that the economic cycle barely shows:
There is so much excess demand that small bumps in the world economy don’t really affect it.
Miettinen recounts his own childhood rhotacism here, and how his older brother taught him the sound in half an hour after no progress with a professional. Sirkiä’s answer is matter-of-fact: the clientele is largely children with a speech-sound disorder or other difficulty, and the work is rewarding because the problem does get solved.
Why the reseller model does not work in SaaS
A directly applicable answer to a question every internationalising software company asks.
Sirkiä is unambiguous: in software it does not work. The reason is incentives — if a reseller carries your product and a competitor’s, it sells whichever interests it, and you are too dependent on others.
He names the exceptions precisely: markets with a very limited number of customers and pre-existing sales relationships.
And he describes when distribution actually appears — as a consequence, not a starting method: Workday, Salesforce, Monday and Pipedrive all have local partners now, but none of them began that way. The partner network forms only once there are customers demanding integrations and better service.
Miettinen’s follow-up on the VAR model gets the same answer from another angle: it can be valuable if you spot software that takes off and do the first large integrations, because the fifth customer picks the partner who has done it twice rather than never. But in general “you are someone else’s hired hand.”
Finland’s problem is not the team
The episode’s most tightly formulated conclusion, and it is encouraging and merciless at once.
It isn’t that there aren’t good enough teams doing this. But in Finland it feels like these ideas have often been built such that the whole market isn’t big enough.
If a company is built with a Finland dependency, it can do everything right and still end up at a few million in revenue — fine for the entrepreneur, not for the investor.
Sirkiä invests avowedly in the “wimp category” — 10x rather than 100x — but the condition is the same: the market has to allow going abroad.
Going abroad isn’t that hard. But the business has to be one where not everything has been built on Finland from the start.
And the image the passage ends on:
When you look at the world through a small hole from here, plenty of companies run aground on it.
Of the routes abroad he regards building your own country organisation as best in software, and answers Miettinen’s question about founders relocating briefly: “on a one-way ticket.”
When an investor should join the board
A practical and counter-intuitive answer.
In significant investments the time is worth spending, and if you feel you have something to offer, joining the board makes sense. But not in early-stage startups — and the reasoning has two parts:
- They take more time than a more mature company.
- If you need twenty investments to find one or two stars, you cannot sit on twenty boards.
And a third, sharper reason: at that stage the matters discussed are mundane, so the company does not even benefit from someone who could help with internationalisation. Trado says so to startups in advance.
On incentives Sirkiä raises OKRs, which he says he encountered only through Lyyti and which appear to work, without claiming expertise. Miettinen prefers Must Win Battles, as used at Fredman, and suspects OKRs of setting too many targets. Both favour a bonus model, because targets then stay in mind.
How investment targets are found
Sirkiä’s account of his own process is unglamorous in a way that is useful to founders.
At the start every deal came through acquaintances. Now the work is systematic: going through newly founded and two-year-old companies for which no figures exist yet — checking the website to see whether the market is interesting at all, and LinkedIn to see whether the founders have achieved anything before.
It’s pretty raw work, and the hit rate is not high. Wanting even to have a conversation might be one company in five hundred.
And the real filter comes in that conversation, which asks what the entrepreneur actually wants: a livelihood or a large business — or something in between.
What stays with you
Three things.
The Rule of 40 measures the sum, not the structure. Sirkiä’s criticism is precise and transferable: two companies can score identically while one burns its money on sales and the other on product. The metric is fine for internal steering; it is not enough for an investment decision.
Venture debt’s value is that it does not dilute — and its terms exist to repel. A structure in which conversion is a punishment rather than an objective is designed not to be used. The investor does not want a crippled company either.
In Finland the constraint is market size, not team quality. Building a company on Finland from the start is a choice made before anyone notices making it — and afterwards everything can go right and the outcome still be too small.
A note on the source
The MacWhisper transcription of this episode contains one gap of roughly 30 seconds at 17:33–18:02. It falls in the middle of the Rule of 40 argument: the preceding line ends “and they scale”, and after the gap the speech resumes from the second half of a comparison whose opening is not preserved. This article is written only from what the transcript contains, and the missing passage has not been filled in by guesswork. The rest of the transcription is continuous.