Annual Recurring Revenue (ARR) is the lifeblood of a software business. It drives investment, underpins valuations, and provides the foundation for sustainable growth.

For investors, identifying where a business is on the ARR curve, and how best to build on that, is key to value creation - and supporting management growth ambitions.

At Copilot Capital, our ARR sweet spot is €5 to €15 million, where ARR is at least 50% of revenues (ideally more). We’re looking to back software businesses capable of hitting €50m ARR within a few years - and giving them the support they need to get there.

By focusing on Europe’s lower mid-market, we avoid fighting for deals with VC investors chasing unicorns, or generalist local PE players who are looking for current profitability over future potential.

In fact, we aim to take our portfolio companies to a point where they are an ideal investment for mid-market buyout investors. A key milestone for us is pushing past the €10m ARR threshold within the first 12 months - as this tends to be the minimum entry point for prospective buyers.

Beyond that, it’s about showing founders that we’re proactive and committed to delivering on the promises we made at the point of investment. The first year of a private equity partnership should feel transformational for the company - confirmation that the risk they’ve taken is paying off.

That doesn’t mean rushing to make big changes quickly. At Copilot we live by the concepts of ‘evolution, not revolution’ and ‘go slow to go fast’, which means identifying targeted, gradual improvements, which add up to a large compound gain by the end of the year. Here are three examples:

• Go-to-market strategy: At €5 to €10 million ARR, most founders have built a sales engine that works, but not always one that scales. It’s frequently dependent on them personally or on inbound leads. One of the first things we do is support them in bringing in dedicated sales leadership to professionalise the GTM function. That often starts with a Sales Head who’s done this before: built out a sales function, hired and managed reps, implemented basic forecasting, and given the founder their time back. These are changes we made at both SecureFlag and Relesys within the first six to 12 months.
• Customer success: Most early-stage software businesses spend 90% of their energy on winning new customers, and don’t focus on keeping the ones they’ve got. But if you’re losing 10 to 15% of your customers every year, you’ll never scale efficiently. At PriceShape , we helped them re-evaluate their ideal customer profile. Turns out there was too much focus on smaller customers who weren’t able to fully utilise the depth of the product. We worked with them to refocus on larger, more strategic accounts, and the impact on retention was immediate.
• AI: AI is rapidly reshaping the software landscape, but it’s also a noisy and over-hyped market. We help our portfolio companies to figure out two things early: what proprietary data they already have and how they can build products based on this, and where AI could save time in core workflows, especially in sales and support. At SecureFlag and PriceShape, that’s meant internal pilots using AI to qualify leads faster and personalise outreach. It's early days, but we’re learning fast, and building shared playbooks as we go.

In a market where capital is tighter and growth isn’t free anymore, reaching €10 million ARR really matters.

Our job in the first 12 months is to be front-footed and help our portfolio companies make substantive gains - by building out the team, targeting the right customers, and using the right tools. It’s how we build confidence, validate the model, and create the pathway towards further growth investment down the line.

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