In 2021, Driv Kapital, a Nordic private equity fund, made its breakthrough investment in Sri Lanka with $20 million for a 60% stake in 99x. At the time, both parties expressed confidence in the initiative reaching greater heights going forward. Less than two years later, this belief has proven true as 99x’s valuation has grown two and a half times from $30 million to $75 million. Yet, this is only the beginning. By harnessing world-class Sri Lankan talent and acquiring companies with complementary capabilities, both parties envision 99x becoming a $150 million software firm.
A shortage of technical talent in Scandinavia and Europe and rapid digitalization by SMEs are poised to drive the growth of Sri Lankan software companies. Commenting on these trends, Founder and CEO of 99x, Mano Sekaram, shared that Sri Lankans today are accepted as global consultants in the IT industry. Hence, Nordic markets are a perfect fit for local companies. Returning to Sri Lanka for the first time since the investment, Co-Founder of Driv Kapital, Fredrik Bysveen, stated to the media, “Despite the global COVID-19 pandemic and the economic crisis in Sri Lanka, our investment and 99x have continued to do well. With a strong management team led by Mano Sekaram, 99x has exceeded our expectations considering the challenges.”
A Partnership Built on Growth: Why Driv Kapital Invested in 99x
As a leader in the technology sector, 99x has become known as a technology leader, co-creating innovative digital products for the Scandinavian market. Over the past 15 years, the company has expanded organically without a direct presence in Europe and built 150+ digital products for a global clientele. The initial conversations between Driv Kapital and 99x started in 2020 and continued virtually through the worst pandemic until July 2021.
The Nordic fund had a strong knowledge of the business models of Norwegian software companies and was aware Nordic companies needed more technical talent. Meanwhile, 99x offered abundant technical talent, equipped with successful experience working with several Scandinavian companies. These were important factors that convinced Driv Kapital to invest in 99x. The investment paved the way for the company to establish a direct presence in Europe and attract larger European customers who expect a strong local presence in the EU.
Looking back, Fredrik stated, “We saw in 99x exceptionally great talent in abundance as well as successful experience and expertise in working with several Nordic companies professionally. Before the investment, we spoke to several 99x customers in Norway who gave a high rating.” Since then, the company has expanded its digital service offerings, enabling the company to broaden its reach in the Nordic and European markets. Additionally, the company plans to acquire companies that have a local market presence in the Nordics. The first such acquisition was Seeds Consulting AS in Norway, which specializes in building digital and web-based solutions for private and public organizations.
Riding the wave of Digitization: 99x is Meeting Europe’s Changing Tech Needs
During the pandemic, European organizations of all sizes (including SMEs) had to digitize, which led to an exponential growth in the demand for digital products and solutions. But despite this phenomenon, there remains a shortage of technical talent to meet this demand in Europe. The Nordic region and Europe are ideal markets for 99x as it has several years of experience operating in these regions and is now rich in SMEs. Mano adds the phenomenon during COVID and the ability to serve global customers offers an excellent opportunity for Sri Lanka to claim a significant stake in the worldwide IT industry.
In fact, at the height of the pandemic, 99x onboarded one-third of its new customers digitally. Further, when dealing with the high-value intellectual properties of organizations – trust, credibility, reliability, and ethics are critical. These factors are vital to 99x, and Sri Lanka’s technical talent is improving to be on par with the rest of the world. Reaffirming that Sri Lankans are now accepted as global consultants in the IT industry, he said, “The new wave is Sri Lanka proving it has management capabilities and competence as well. This ensures Sri Lanka going up in the value chain.”
Driv Kapital’s Ongoing Support for 99x
Looking at the company’s progress thus far, Fredrik states the strong management team at 99x led by Mano Sekaram has ensured business continuity, notwithstanding domestic challenges. “99x has exceeded our expectations considering the challenges. Financially and operationally, the company has performed as planned,” he noted. The company’s leading technical talent, as well as professional management, are what makes the company stand out from the rest. Moving forward, Driv Kapital is committed to the technology firm’s long-term success as it is a growth-oriented investor.
Driv Kapital has raised Norwegian Krone (NOK) 1.5 billion or $ 150 million across three funds since mid-2020. In addition, the company plans to continue leveraging 99x’s capabilities through inorganic strategies, including acquiring companies that are complementary to its core business and have market access in Norway, leveraging the company’s talent pool. Intending to achieve a valuation of $150 million in the medium term, Fredrik and Mano are confident that 99x will continue to grow and expand its reach in the Nordic and European markets.
99x Leads the Way as Sri Lanka is Poised for Growth
As Driv Kapital and 99x continue to collaborate, the success of their partnership will continue to strengthen Sri Lanka’s reputation in the global IT industry. The success of 99x is also an inspiration for other businesses in Sri Lanka to think globally and expand their services internationally. The pandemic has shown that companies can operate and grow digitally and exploit this new reality by exploring opportunities beyond domestic markets. Realizing this potential requires regulatory authorities to extend all possible assistance, including enabling access to global private equity, for Lankan software firms to succeed.
“The new wave is Sri Lanka proving it also has management capabilities and competence. This ensures Sri Lanka is going up in the value chain. However, indigenous companies like 99x, at some point in time, reach a tipping point where we need private equity to take us to the next level. The Government and relevant regulatory authorities need to recognize this and extend all assistance possible or ensure an enabling environment for such Lankan companies to succeed,” Mano pointed out.
As it moves forward, 99x is on a growth path with its strategic plan to expand its services through acquisitions. Its acquisition-based growth trajectory, complemented by the talent pool of Sri Lanka, a time zone advantage, and the pandemic-induced digitization of SMEs in Europe, is enabling 99x to position itself as a critical player in the global IT industry. With a valuation of $150 million in the medium term and a focus on acquisitions, the company aims to enhance its capabilities, expand its market presence in Nordics and Sri Lanka, and offer new and innovative solutions to its customers.