Hard thing about hard things

January 2022

In the history of Livonia Partners, 2021 was one that probably provided the most learning. We made fewer investments than in previous years, yet we learnt important lessons working with our portfolio, our investors, and with our team. At times we took some steps back in order to take more steps forward. Baltic investment field continues to transform. Our first regional fund is on track for great performance and our investment ambitions have not changed. Our second fund, double the size of first fund, has a much wider mandate with eyes on climate as an important added investment consideration.

Investment strategies towards the climate

We started debating environment as a key factor of investment theses years ago. This led us to a promise for our second fund to invest a minimum 10% of fund size into environment-benefitting causes. This means investing in teams and industries that have the opportunity for reduction of carbon or another direct advancement of climate change. To us this does not mean simply refocusing more on investments in the technology sector. Our first two investments of the second fund, CSUB, a manufacturer of underwater composite solutions, and, soon-to-be-announced, northern Europe focused heat pumps energy services company, fit our environmental aims well. Together with Freor and Thermory from our first fund, we feel we are conscious and proactive about managing the change taking place globally. We are making actual climate-positive investments.

Role change for Rain Lõhmus

From second fund onward Rain Lõhmus transitions into an advisor and investor role at Livonia. Like the K in KKR or H in LHV, never can the impact of a founding partner be underestimated. We borrowed a lot from Rain’s achievements and playbooks building Hansapank and LHV. His original genius is well cemented in the Estonian business folklore. Equality and incessant debate are cornerstones to our success and Rain plays a key role in their advocacy. Yet evolving partnerships is never straightforward. Investment environments shift into new paradigms and operational needs change, and with that teams have to adjust. Sustaining proven organisational resilience is as important as reacting to that change. Whilst in a new role, Rain’s contribution to Livonia will remain.

Onwards with Mindaugas and Ernests

Ambitious partnerships are delicate organisms. To jointly achieve great outcomes, its culture needs to be reinforced, its members nurtured, and performance measured in constant brutal honesty. And managing succession is where most funds get it wrong and fund performance dips. That is why we have advanced to partnership positions Mindaugas Rapolas and Ernests Bordans. If we rank the largest and best performing investments in our first fund, Mindaugas has been involved in most of them. With Ernests we progress Livonia with natural talent for investing. He played an integral role in Livonia’s best exit to date and returns to the Baltics having completed his INSEAD MBA studies with distinction. Investing requires hustle and they both have it. Along with the rest of our consciously small-sized investment team, it is hard not to be excited about this next chapter.

Going again, and again, and again

Few things feel better in the investing world than arriving at a successful end with an investment and returning capital to investors. Most in our team have now experienced that and more great exits are only a short bit of patience away. Just as with any repeat win, it fuels the fire to arrive at a similar landing strip again and again. “Hard Thing About Hard Things” by Ben Horowitz happens to be one of my favourite books. In 2021 at Livonia we metaphorically went through many paragraphs of the book. What does not kill you, …

Published by Kaido Veske