84. Frog Capital's playbook to purposeful growth

Dom Hawes:
00:00

If you came across a business with a marketing and business management system that consistently produced growth, that had created a virtuous circle between purpose and performance, that fed and enabled the whole business with brilliantly conceived systems, templates and toolkits, what would you do? I know what I'd do. I'd invite their CMO onto this podcast to dig into the way they work. Well, that's exactly what we're doing. Because in a minute, you're going to meet Dominic Rogers, head of marketing at Frog Capital, and he is going to share the secret sauce that drives their portfolio company's success. Spoiler alert. This is a business that makes purpose pay. Don't go away. You're listening to Unicorny. And I'm your host, Dom Hawes. We don't normally dig too deep into companies own practices on this podcast.

Dom Hawes:
00:56

We spend most of our time at a conceptual level, talking about the business of marketing or hearing personal stories of people like you and people like me. Stories that the production team thinks we can all learn from. Well, today is different. Today, with the help of head of marketing, Dominic Rogers, we're going to explore how Frog capital makes purpose pay. For us, Frog Capital is the ideal study candidate because, firstly, it exists in the space between private equity and venture capital. So if you are going to reimagine your marketing business in the manner we discussed with Andrew Davies in episodes 70 and 71, well, here's a business that lives in that space. What I'm saying is that wasn't a flight of fancy.

Dom Hawes:
01:40

Secondly, because purpose in this case means they back businesses, European scale ups that make a positive difference, well, it means purpose isn't a badge, it's not jargon, it's not some kind of fancy movement to Frog. It's about the impact their businesses have on the world. And thirdly, because while you may say, yeah, hang on, this is an investment house, it's not like our business at all. Be under no illusion. Frog Capital, at its heart, to me at least, is a marketing business. And by the end of this episode, I think you'll see why. Now we're going to reference models, diagrams and toolkits a lot today. You can find those linked on the show notes at Unicorny.co.uk But speaking of business, let's get down to it and meet Dominic. Dominic is head of marketing at Frog Capital.

Dom Hawes:
02:28

Frog invests in European software scale ups that are purpose driven. And the purpose element of it is really important. And it focuses on those businesses that make a positive difference in society, whether that is making a very specific difference to people's lives or for example, increasing productivity in legacy industries.

Dom Hawes:
02:48

To kick off with, I'm keen to look at a little bit about Frog's methodology because one of the things I absolutely love your website, by the way, I don't often say this about websites, but your website's fabulous. I love the UI, it's so intuitive and it's very clear that you have a methodology for what you do and that's brought together years and years of experience to create it. So I just wanted to explore that. There's a diagram in front of me which I'd quite like to publish online. When we make this episode live, which encapsulates your methodology, there are three core components to it and then some sub bits. Can you maybe just talk us through the model that you have a little bit for your methodology?

Dominic Rodgers:
03:26

Yeah, absolutely. Just to give a bit of context to the methodology. We are investing in businesses at the scale up stage. They have reached product market fit and they are making around about €3 million ARR to ten to 20 over the course of our investments. The challenges that scale ups face are significantly different from those that startups are facing as an investor. We know that the teams that we're investing in need extra support because more than anything, the scale up challenges are not unique to each company and they're not completely out of the box. Who'd have thought this would happen? They are challenges that businesses have faced for years. We have a scale up methodology that looks at the short, medium, long term decisions. So that's day to day, month to month, year to year.

Dominic Rodgers:
04:28

And we categorize that with this scale up wheel that is focused on the senior leadership team of scale up software scale ups. So the day to day is the execution, the month to month, medium term is planning and then the longer term is sustainability. And then each of those three components are split into three again. So day to day challenges of execution are things like customer acquisition. No surprises there, delivery of product or service. We specialize in software. So that's software products that's making sure that the platform can cope with the number of users as it scales, that customer success is really there.

Dominic Rodgers:
05:18

So you're delivering that product effectively and then applied analytics to really understand not only the product usage, but also how the business is working, forecasting, making sure that from analytics perspective, that's really adding value to the business rather than reporting what's happened. So then you go into planning and you're looking at things more strategically. So we've got strategy. You're looking at the people in the business, the talent, but you're also looking at how those people interact and the teams that they are, you know, they're part of. And you're looking at things from an organizational perspective as well. And so that not only looks at getting the best talent, but also making sure you're developing the talent and you're creating organizational strategies and so on. Then from a long term perspective, we look at things like purpose. We look at resilience and ultimately value.

Dominic Rodgers:
06:20

Purpose is a really core part of Frog's focus as a business itself, but also from an investment perspective. We're looking for businesses that take it really seriously. Resilience is where you're looking at things like funding, making sure the business is well funded. We obviously play a strong part in that, you hope. Yes, absolutely. But it's also resilience from a perspective of long term sustainability with regards to profitability. So we are investing in businesses that are on a path to profitability, and that comes on to, ultimately to value founders, especially purpose driven founders. They're looking to make sure that they can make as much of an impact as possible. Part of that often is handing over the business from the founder to, whether it's private equity or a strategic buyer, that you want to be acquired, you want people to want to buy your business.

Dominic Rodgers:
07:21

And so we are helping businesses to make sure that on a strategic basis, that they're finding those value points.

Dom Hawes:
07:29

Yeah, that transition. I mean, obviously in my day job, the business I've been in for a little while now, finding entrepreneurs that have created, built an agency, and then they want to transition it, or they want to help it get onto that next level by joining something that's a little bit larger, often because they want to continue. It's their legacy, I suppose, but they set the agency up for purpose. They then want to see that grow. So, look, I think that model's awesome. We're quite conceptual on this podcast, as you may know.

Dom Hawes:
07:54

We often look at different frameworks of.

Dom Hawes:
07:56

Managing businesses and managing growth, and we have several academics on here talking about those. I mean, this is obviously your scale up methodology, but this is a methodology that could be applied at department level, at company level. Our audience is predominantly marketers. This would absolutely be a perfect model for listeners to look at and be inspired by, I think, in their day jobs. Tell me about managing the businesses, though, because obviously you have a portfolio, and those are all run by individual people thinking about execution in particular, and customer acquisition, particularly because that's where the growth part is where our listeners are interested. How do you go about supporting your portfolio as executive to grow businesses?

Dominic Rodgers:
08:37

Part of the scale up methodology is for us to actually provide support to the companies we invest in. We're not just setting up this framework and saying, here you go, you've got to meet these objectives, hit these metrics, etcetera. It's a partnership, and as such, we have a team of operating partners across finance, go to market, talent, technology, as you think for a software investor. And our operating partners are part of the core Frog team. So when we make an investment, the operating partners are actually part of assessing opportunities, meeting founders and the senior leadership team, because part of scaling up is taking it from that kind of founder focus to the senior leadership team and scaling the business itself as much as the impact, etcetera. So the operating partners work in the space that's sort of between exec and non exec.

Dominic Rodgers:
09:41

It's not a kind of monthly or quarterly conversation. How are you doing? Do you need any advice? But it's not an executive role where we're actually in the business, we tend to have minority stakes. And as such, our relationship with our portfolio companies is absolutely based on trust. So our operating partners have all been there, done that across their own particular functions. And so they are, and so far so good, really, actually adding value to the businesses. They're not going in there stirring things up and changing things around for the sake of it, working with senior leadership teams on their objectives, setting their objectives together.

Dominic Rodgers:
10:28

So we're assessing the businesses, our operating partners conduct due diligence to dot the I's, cross the t's, and ultimately come up with a plan for how to scale the business and coming up with priorities, and then helping to execute those priorities at the top level.

Dom Hawes:
10:46

You've got your scale up methodology and your wheel. You've got the people element then to support in developing exec teams and helping manage the process of doing that. And that's all supported by the extraordinary toolkits that you've developed to support each of the various different elements within the.

Dom Hawes:
11:05

Wheel I saw online, you've got some extraordinary toolkits. Talk to me about the toolkits a little bit.

Dominic Rodgers:
11:10

None of the content's gated. It's a series of toolkits, podcasts, articles, videos, really. It's a way of scaling our operating partner program. When we invest in a business, our operating partners work in an incredibly tailored way, directly with their counterparts. But when it comes to actually adding value to scale, that we want to help businesses scale whether we're investing in them or not. And obviously from a marketing perspective, we want to convince businesses that we're hoping to invest in that we really know what we're talking about. And we've been there, we've done that. And so documenting our operating partners expertise through toolkits and podcasts and videos and articles is a really great way of doing that.

Dom Hawes:
11:56

Yeah. So I thought one of the bits I particularly liked is there's almost like a form based approach, fill in the gaps to help people sort of take information and make deductions from it. It's a bit ethereal here, I'm going to put some links on the show notes. I think it's a really good way of harnessing knowledge within a team, the approach that you've got on your site.

Dominic Rodgers:
12:16

Ultimately, when it comes to creating content, it's quite easy just to communicate the value that we add without actually adding any value. So we really focus on making sure that our toolkits have practical elements to them where people can actually download templates so that you don't read something and then have to go and do loads of work yourself. You read about it and you can actually then download a spreadsheet and fill in the spreadsheet and think, oh, this is brilliant. I've had a massive shortcut here. Same with the podcasts. It's not just an opportunity for us to show how clever we are for 20 minutes. It's really trying to get to the crux of senior leadership teams challenges and answer those problems.

Dom Hawes:
13:12

That's Frog capital, and what an organization it is. I particularly like Frog because I think they've done a great job of seeing sustainability as a way to grow business. For so long that word's been associated with cost. Being more sustainable meant using more expensive parts, facilities, production methods and the rest. But what I really like about Frog's approach is their focus on resilience, business resilience. And at its core, I think that's a really good way of thinking about Esggest. I think it's often been thought of merely as the new CSR, corporate and social responsibility. But ESG, environmental, social and governance gives us a way to value a business beyond what we can see on their balance sheet.

Dom Hawes:
13:53

It gives us the ability to see who is well set up for the future, whose supply chain is capable of withstanding the next environmental disaster, who's helping the community around them to prosper, who's board is diverse, so it's tapping into all of the talent available that is ESG. Sometimes things like this aren't immediately obvious. As I said, the word sustainable can lead us down a certain path towards environment and cost. But what makes a business sustainable is its resilience. And, you know, these kinds of things, or they will have an impact on it. But where does it all stem from? Where does that kind of approach begin? That's where I want to go next. Because Frog capital only invests in businesses that are purpose led. And that's a word that gets bandied about a lot these days, purpose. And it often gets misinterpreted.

Dom Hawes:
14:44

But it's a really big deal for Frog, and I suspect it's a big deal because it gives them insight on how sustainable or how resilient a business is going to be. Let's ask Dominic. Dominic, you touched on this earlier. I want to understand why purpose is so important to you. So first of all, could you tell me what it means to you as a business and how you define it?

Dominic Rodgers:
15:03

So there are two parts of Frog's purpose in itself is to invest in purpose driven european software scale ups, and to help support them. We use the scale up methodology to do that with our operating partner program to add real value. That's Frog's kind of core purpose. Then obviously there's investing in purpose and making sure that the businesses that we invest in are purpose driven. And we do that by using the IMP framework. So that actually looks into things in a significantly more serious way. So we are looking at the outcomes that arise from a business's purpose, how they contribute to the sustainable development goals, what their contribution to society is, who benefits from that, and whether they are an underserved community or nothing. We've really integrated purpose into our investment approach in terms of, you know, who we are going to invest in.

Dominic Rodgers:
16:04

But it's also from the process that we have. We've brought the purpose debate into our investment papers. And our investment team have to write about who benefits from the businesses that we're looking to invest in. But we also have a real culture of contending at Frog. So the team are talking about purpose and to what extent a business is purpose driven as part of our investment process. These businesses are making a positive difference in society. I'll give you some examples. Clue software, for example, who investigation and intelligence software. So they help create a safer society. They are plugged into different governmental or commercial businesses to help them to investigate crimes. Their software is making a real difference really directly.

Dom Hawes:
17:00

I get that. Yeah.

Dominic Rodgers:
17:01

Then you've also got a business like modular. They have payment software, which isn't as directly purpose driven, you'd think. But actually, from a productivity perspective, payments take up a huge amount of time in business. Payroll is a massive part of any business, and the bigger the business, the more administration and modulars. Payment software helps cut that down dramatically. Almost more importantly, it helps to disrupt the status quo, the kind of the control that legacy systems have had. And that's a really important part of innovation and productivity that we invest in.

Dom Hawes:
17:42

Thank you very much, Dominic. Great to have some real examples that people can go and check out. I think that, you know the word purpose, it's good to get a very clear idea of what you mean by it. I would consider our company to be purpose led. We help businesses we believe in win the future. So we're trying to identify those businesses that we think are important in the future, and we're trying to use our special skills to help them win. Our purpose is built into those companies that we try and align ourselves with. So hopefully they are living the same ideals as the sort of stuff you've just been talking about. And look, modular, increasing productivity, for me, that's a fabulous thing to do. Partly we're in P Eleven D season and it's enormously labor intensive and it's not work that anyone enjoys.

Dom Hawes:
18:27

So a software that takes away work that people don't enjoy, I think it's fabulous. Purpose sometimes I think it can be thought that you have purpose or growth, but I think your thesis as an organization is that actually if you have purpose, sometimes it can be easier to scale. Is that correct?

Dominic Rodgers:
18:44

Yeah, absolutely. A lot of people believe that there are challenges to aligning purpose and business growth, whereas I feel like the challenges are the benefits. The obstacle is the way, if you like. I believe purpose forces you to act intentionally and sometimes to exclude. But that's actually very similar to setting and following a strategy.

Dom Hawes:
19:08

I was going to say that sounds very like strategy.

Dominic Rodgers:
19:11

The difference being is that strategy changes depending on what's happening. You try it, if it doesn't work, you try something else. Purpose is much more of a north star. It's ingrained, embedded on a kind of a company level. We invest in businesses where purpose is really important. And one of the businesses we invested in, called Evitik, summed this up really well. They provide health and safety software to businesses to help them deliver safe working environments. When they succeed, when they get new business, they fulfill their purpose. And equally, when they fulfill their purpose, they succeed as a business. When you look at it from that perspective, you see the kind of the really close alignment between purpose and business growth.

Dom Hawes:
20:00

So they're symbiotic, basically.

Dominic Rodgers:
20:02

Absolutely.

Dom Hawes:
20:02

So when purpose is embedded at the core of your business.

Dom Hawes:
20:05

So again, I'm trying to relate that back to the job of a marketer. It's part of their brand and part of their being, in that case, completely from a classical marketer through the P's. Right. If it's a product or service, how do we live that purpose? In the product or service we deliver totally.

Dominic Rodgers:
20:19

It's at the product level. Rather than looking at things tactically, having that overt purpose gives you an advantage in very competitive markets, I believe.

Dominic Rodgers:
20:30

So. We invest in purpose, so it's.

Dom Hawes:
20:32

You would hope so.

Dominic Rodgers:
20:33

I guess. We think it's an essential advantage that spans across focus, attitude, sustainability. And the team. Purpose really fosters brand enthusiasm. It's helping to garner that extra effort, the motivation to deliver your best work. And then from a sustainability perspective, you want to create as much impact as possible. You're thinking, how do we actually make sure that the more we grow, the more we fulfill our purpose, the more impact we make? And then on a team basis, we've seen time and time again, businesses with purpose are able to attract top talent in an effective way. Increasingly, people want to work for businesses that make a difference.

Dom Hawes:
21:22

I love that thought from Dominic. Purpose is an essential advantage that spans across focus, attitude and sustainability. Now that, to me, is what purpose is all about. I think the misinterpretation often lies in the nature of a purpose, that somehow a purpose needs to be lofty, environmentally impactful, socially beneficial, or world changing. And of course, there are some purposes that can do all of that. I'm thinking about maybe Patagonia, a company built by climbers who want to create products for the outdoors and use the money to protect the outdoors. But the patagonias of this world are very few and far between. And to be effective, purposes don't have to be that enormous. For instance, helping keep people safe at work. That's a pretty good purpose to me.

Dom Hawes:
22:09

The danger lies when we in marketing either take it upon ourselves or are asked to define or redefine a company's purpose. Because the temptation is to make it as big as possible, to have some kind of holy impact. Whereas the truth might be that our company might just make people's jobs easier. And when we try to force fit it or reverse a company into a purpose it was never designed to fulfill, well, I think we've come unstuck pretty fast. But when we get it right, wow, it's brilliant. And as Dominic said, it's the North Star, the ever present, that keeps us going straight, even when our strategy needs to shift. A few pods back, we talked about the role of the CMO, and I made the point that it's actually pretty simple.

Dom Hawes:
22:50

Well, okay, it's highly complex and difficult in practice, but in principle, it's about identifying a north star, a constant objective, and then viewing everything we do as either taking us towards that North Star or away from it. If you've recently tried to define your purpose or you're about to do it, don't be afraid of the truth. It might just bring stellar results for your company. And that brings us to the end of part one of this two part pod. In part two, we're going to move from theory into action. We've heard about what Frog believes makes a business grow. Now we're going to ask what they do to help it scale, and we're going to look at the practical tools and resources it uses. So join us next time to find out.

Dom Hawes:
23:31

Please do make sure you subscribe to the show because then part two, well, it's just going to pop up in your pod feed like magic. See ya. You have been listening to Unicorny. I'm your host, Dom Hawes. Nichola Fairley is the series producer, Laura Taylor McAllister is the production assistant, Pete Allen is the editor, and Peter Powell is our scriptwriter.