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Hey everyone, we’re excited to share our first investor interview of 2025 with John Messer of Copilot Capital.

As always, here’s links to: Resource guides (built from over 100 hours of interviews with founders), or if you’d be interested in sponsoring Scale.

Battle tested

Before founding Copilot Capital, John had already seen the full spectrum of investing both as an investor and as a consultant.

Previously, John was at Tenzing Private Equity and Alchemy Partners, a special situations investor. John’s experience in special situations (which means investing in distressed or otherwise unorthodox opportunities) played a key role in his determination to re-invent software investing. 

By 2021-22, Messer was noticing a paradox, some of the most promising software companies were the hardest to back:

Messer grew tired of seeing fundamentally fantastic businesses that he was not able to back because of rigid frameworks, and above all, mindsets. Copilot and John want to bring back a focus on fundamentals through their €200M inaugural fund, in a sector they believe has become too bifurcated for it’s own good.

Right strategy, right time?

The timing of Copilot's thesis couldn't be more relevant. With the global central banks signalling "higher for longer" interest rates and maintaining their hawkish stance through 2024, the market dynamics that defined the last decade of software investing are fundamentally changing.

This shift is already visible in the public markets.

Thoma Bravo's Holden Spaht points out that "the public markets are now paying a premium for profitable growth versus growth at all costs."

Companies like Snowflake and UiPath have seen their valuations drop significantly (down nearly 20% in the last year) as investors demand clearer paths to profitability.

The private markets are following suit. Many software businesses in the private market have been accused of sellling dollar bills for 80 cents, or put simply, not growing as efficiently as they should for the amount of capital that’s being invested in them.

Sequoia's Managing Partner, Roelof Botha, noted in their 2024 outlook: The next decade will belong to companies that can grow their top-line efficiently. The key word being “efficiently”, i.e. without requiring significant amounts of capital.

This aligns perfectly with Copilot's focus on businesses that are already near break-even while maintaining strong growth.

Sweet spot, and strategy

Copilot's sweet spot? Companies with:

• €5-15M ARR (with 90%+ recurring revenue)

• 40-70% revenue growth

• Break-even or close to it

• Strong product-market fit

The typical Copilot founder faces what is commonly referred to as the "the founder's dilemma" - they've built something valuable but almost all of their net worth is tied up in the business, making them increasingly risk-averse just when they need to scale aggressively.

Copilot's strategy is threefold:

1. Clean up the cap table: Buy out early investors, friends, and family

2. De-risk the founders: Buy off some shares from the founders, give them liquidity whilst still keeping them invested

3. Provide growth capital: Fund strategic initiatives to get to the next level 

Unlike traditional VCs spreading bets across 30+ companies or PE firms requiring immediate profitability, Copilot takes a different approach:

• Only 6-8 portfolio companies

• Maximum 3 board seats per investor

• Focus on influence over control

If you, or someone you know, is building something that might be a good fit for Copilot’s strategy, get in touch at [email protected].

If you enjoyed this issue, please share it with fellow founders, operators, & investors and fill out our feedback form below:

See you next week!

Rahul & Aryaman