# The 10-year model and beyond – why you should take a long-term outlook to investment strategy
Author:  Pal Sinha, Barnali 
Author URL: https://financedigest.com/author/pal-sinha-barnali
Published: 2021-07-15
Category: INVESTING
Category URL: https://financedigest.com/category/investing
Meta Title: ECI Partners: Long-Term View on Private Market Investing
Meta Description: Learn from Tom Wrenn, Managing Partner at ECI Partners, about the importance of long-term views and sustainable growth in private market investing. Discover
URL: https://financedigest.com/the-10-year-model-and-beyond-why-you-should-take-a-long-term-outlook-to-investment-strategyhtml

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_By **Tom Wrenn,** Managing Partner, at_ [_ECI Partners_](https://www.ecipartners.com/) _, the leading growth-focused mid-market private equity firm_

With the unprecedented shocks that the last 15 months have presented, it’s become increasingly important that investors need to take a long-term view when it comes to private market investing. When we try to assess the potential of any growth business, it’s important to understand how sustainable its competitive position is and the headroom for growth over a minimum of the next 5-10 years.

A successful ECI investment is one that allows our team to partner with market-leading businesses with clear and sustainable growth trajectories, targeting sub-sectors that we know well and which demonstrate good revenue visibility and predictability of earnings. Inevitably this focus is on long-term growth from businesses with the capacity for [organic](https://www.financedigest.com/the-pharmaceutical-isolators-market-to-get-filtered-through-organic-digitized-growth.html "The Pharmaceutical Isolators Market to get filtered through organic digitized growth") and – where relevant – acquisitive growth, with sufficient headroom and market capacity to be relevant for the next owner or investor.

**The drivers of** [sustainable growth](https://www.financedigest.com/medical-device-cleaning-market-expected-to-witness-a-sustainable-growth-over-2019-2027.html "Medical Device Cleaning Market expected to Witness a Sustainable Growth over 2019 – 2027")

ECI has a focused [investment strategy](https://www.financedigest.com/2018-it-security-predictions-methods-for-attacks-investment-areas-cybersecurity-strategies.html "2018 IT Security Predictions-Methods For Attacks, Investment Areas & Cybersecurity Strategies") with a clear vision of the growth drivers we are looking for. We can afford to be highly selective as we are only making 3-4 platform transactions per annum.  Some of the criteria we are looking may include:

1. [Business model](https://www.financedigest.com/7-factors-to-consider-before-your-business-moves-to-a-subscription-model.html "7 Factors to Consider Before Your Business Moves to a Subscription Model")

Operating subscription-based or high recurring revenue [models will provide a solid platform](https://www.financedigest.com/aon-empowers-cat-modellers-to-run-any-model-on-its-enhanced-elements-10-platform.html "AON EMPOWERS CAT MODELLERS TO RUN ANY MODEL ON ITS ENHANCED ELEMENTS 10 PLATFORM") for further growth if client retention or renewals are high. Many tech businesses, for example, are subscription-based, with long-term customer agreements or other high levels of recurring revenues, which means they have strong visibility of predicted [future revenues](https://www.financedigest.com/title-n95-mask-market-future-is-set-for-massive-growth-with-high-revenue.html "N95 Mask Market Future is Set for Massive Growth with High Revenue"). These factors are critical considerations, especially in an uncertain macroeconomic climate as we have seen [since March](https://www.financedigest.com/the-nasdaq-100-on-track-to-have-its-best-week-since-march-2010.html "The Nasdaq 100 On Track to Have its Best Week Since March 2010") 2020 given the impact of Covid-19.

2. **Scalability**

Whilst sustainable growth is the central metric we are assessing at entry, it’s also important to consider the capacity for [investments to become businesses](https://www.financedigest.com/investment-opportunities-for-businesses.html "Investment opportunities for businesses") of scale. There are many routes to scale, including [organic growth if the market](https://www.financedigest.com/organic-fertilizer-market-2020-outlook-current-and-future-industry-landscape-analysis-2030.html "Organic Fertilizer Market 2020 Outlook, Current and Future Industry Landscape Analysis 2030") headroom exists, through M&A, or through international growth.

The potential to diversify [revenue streams](https://www.financedigest.com/innovation-is-the-path-to-revenue-how-financial-organisations-can-open-up-alternative-revenue-streams.html "Innovation is the path to revenue: How financial organisations can open up alternative revenue streams") across different geographies is something ECI supports a lot of investments through, with 40% of the portfolio revenue being generated internationally.  For example, when ECI invested in IoT connectivity provider, _Arkessa, in July 2018_ the growth [strategy included supporting the management](https://www.financedigest.com/time-management-strategies-that-work.html "Time management strategies that work") team’s international growth ambitions. The subsequent acquisition of a Netherlands-based firm in August 2020 allowed the business to increase its market footprint in the European cellular IoT connectivity market, and [following its acquisition by former ECI investment](https://www.financedigest.com/plastic-antibody-developer-strengthens-board-following-further-investment-from-mercia-fund-management.html "“Plastic antibody” developer strengthens board following further investment from Mercia Fund Management"), _Wireless Logic_, the combined Group is now a tech-unicorn, valued at over £1billion Enterprise Value.

3. **Resilience**

[Successful ECI investments](https://www.financedigest.com/battling-uncertainty-is-the-key-to-property-investment-success.html "Battling uncertainty is the key to property investment success") are ones which not only have clear and sustainable growth drivers, but also a degree of revenue resilience and a secure market position. Whilst a pandemic might be a once century risk, over our 45 [years of backing businesses](https://www.financedigest.com/2018-is-a-year-of-regulation-is-your-business-ready.html "2018 is a year of regulation – is your business ready?") to grow, we’ve seen that the potential for major, unexpected shocks is much higher than any of us would like.  We therefore consider several different [aspects of a business’s](https://www.financedigest.com/addressing-the-human-aspects-of-business-transformation.html "Addressing the human aspects of business transformation") resilience including how broad and diverse its customer base is, what its cash generation profile looks like and the ability to withstand bumps in the road ahead.

4. **High quality management teams**

At ECI, we want to [work in partnership with management teams](https://www.financedigest.com/keeping-your-team-connected-and-beating-work-from-home-fatigue-in-lockdown.html "Keeping your team connected and beating work from home fatigue in lockdown"), and we look for high quality, ambitious teams to collaborate with. We have over our investment history developed capabilities and [invested in people who can work together](https://www.financedigest.com/10-ways-to-put-together-a-killer-investment-pitch.html "10 WAYS TO PUT TOGETHER A KILLER INVESTMENT PITCH") with management teams to unlock growth opportunities. Through developing a deep understanding of their business and sharing the experience we’ve [learned over 250+ investments](https://www.financedigest.com/3-investing-lessons-you-can-learn-from-still-evolving-pandemic.html "3 Investing lessons you can learn from still-evolving pandemic"), we believe we can deliver value to management teams who are receptive to that partnership.

**[Understanding sector](https://www.financedigest.com/how-data-visualisation-is-helping-the-insurance-sector-understand-environmental-risks.html "How data visualisation is helping the insurance sector understand environmental risks") nuances**

Whilst all these factors are important, it’s vital for any investor to really understand the marketplace that the target business operates in. At ECI, the approach is centered around sub-sectors where we have a [wealth of experience and have invested](https://www.financedigest.com/norway-wealth-fund-to-consider-investing-in-unlisted-equities.html "Norway wealth fund to consider investing in unlisted equities") over different cycles.

Take the ‘Internet of Things’ as an example – the market which encompasses an increasing number of applications is [seeing +20% annual growth](https://www.financedigest.com/russias-rosatom-sees-2022-exports-growth-at-15-report.html "Russia’s Rosatom sees 2022 exports growth at 15% – report"). The ‘always on’ operationality of IoT businesses, prevalence of subscription-based [models and smart investment](https://www.financedigest.com/nissan-renault-to-invest-600-million-to-make-6-new-models-in-india.html "Nissan, Renault to invest 0 million to make 6 new models in India") in technology have all contributed to the growth and resilience of this sub sector over the course of the last decade since ECI first invested in Wireless Logic in 2011.

Since then ECI has [invested in three other IoT businesses](https://www.financedigest.com/why-investing-in-employee-health-can-be-good-for-business.html "Why investing in employee health can be good for business") and has a deep understanding of this sub-sector. A current [portfolio example is ECI’s investment](https://www.financedigest.com/three-fundamental-tips-to-enhance-your-investment-portfolio-performance.html "Three fundamental tips to enhance your investment portfolio performance") in CSL, which operates in the fast-growing critical connectivity market. _CSL_ is a supplier of critical [connectivity managed services](https://www.financedigest.com/sacyr-shortlists-four-bidders-for-its-service-waste-management-unit-expansion.html "Sacyr shortlists four bidders for its service, waste management unit – Expansion") that includes the provision of proprietary modules for M2M and IoT applications. Through [expansion into new international](https://www.financedigest.com/managing-trade-credit-and-insurance-in-the-context-of-international-commerce-expansion.html "Managing trade credit and insurance in the context of international commerce expansion ") markets, CSL has been able to further cement its market-leading position across the fire and security and more recently the telehealth verticals.

Ultimately, ECI is excited about opportunities that will [continue to demonstrate sustainable growth](https://www.financedigest.com/how-a-british-tech-brand-can-maintain-category-leading-position-and-continued-growth-by-investing-in-the-uk-people-and-infrastructure.html "How a British tech brand can maintain category leading position and continued growth by investing in the UK people and infrastructure") over the next decade and beyond. Having this longer-term perspective means that we are highly selective, and having that [understanding at a sub-sector level](https://www.financedigest.com/understanding-the-different-levels-of-maturity-in-travel-and-expense-management.html "Understanding the different levels of maturity in travel and expense management"), allows us to truly support management teams make the most of opportunities available.


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