In the ever-evolving world of private equity and venture capital, founder-led businesses have emerged as a compelling investment opportunity.

These companies often bring a unique blend of passion, vision, and agility that can drive significant value creation. At the forefront of this investment philosophy is Tern Capital, known for its strategic focus on scaling founder-led businesses while preserving their entrepreneurial spirit.

To explore this investment strategy and its impact, we sat down with Karthik Dasari, Managing Director of Tern Capital, a UK investor in founder owned businesses.

While Tern Capital drives growth through active ownership and strategic investments, at Marble Hill Partners we specialise in executive search, placing transformational leaders who are crucial for scaling high-growth companies.

Together, we have formed a strategic partnership that bridges visionary founders with the right leadership to accelerate growth and value creation.

The purpose of this conversation is to delve into Tern Capital’s investment philosophy, their approach to supporting founder-led businesses, and the role we here at Marble Hill Partners have played in ensuring these businesses have the leadership talent they need to succeed.

The Origins of Tern Capital

Ok Karthik, let’s start with the origins Tern Capital. What inspired you to found it, and how has its mission evolved over the years?

The vision has certainly evolved over time, but some key aspects have remained unchanged. From the outset, our goal was to play a highly hands-on role in our portfolio companies. We put ourselves in the shoes of the management team—whether it's the MD, founder, or CEO—to figure out how to exponentially increase the business's value over a four-to-six-year holding period. We’ve always maintained a strong in-house value creation team instead of relying solely on non-executive directors. We believe in fostering open dialogues with management teams to collaboratively determine the best course of action. What has changed, however, is our investment focus. Initially, we invested in software companies that sells into multiple sectors (what we call ‘horizontal market software’), However, today we prioritise businesses that dominate a specific vertical. We target companies that are top players in their niche, even if their total addressable market (TAM) isn’t enormous, as long as they are highly effective within that market. Our approach is centered around identifying companies with clear differentiation and competitive advantages. Another significant shift is the way we assess leadership within our portfolio companies. Early on, we were focused on finding companies with stable, long-term employees who had deep institutional knowledge. While that is still important, we now place a much stronger emphasis on a team’s adaptability and willingness to embrace change. Markets evolve quickly, and businesses need leaders who can pivot effectively when needed.

Standing Out

In what is a crowded market in the UK, how do you differentiate yourselves from other investors?

We always place ourselves in the shoes of the MD, founder, or CEO, thinking as if we were running the business. Most of our competitors are excellent at deal sourcing, deal execution, and selling businesses. But I think we differentiate ourselves is in the operational value-add during the holding period. We take the growth and transformation of the business very seriously, acting as strategic partners who are deeply involved in helping our management teams create value. We're not passive investors who simply appoint non-executives and let the management team run things on their own. Instead, we have a strong in-house value creation team, working closely with management to collaboratively arrive at the best possible strategies. This hands-on vision hasn’t changed from the outset, although we've certainly learned from both our successes and mistakes along the way.

The Strategy Behind Tern Capital’s Investments

You have a track record of investing in founder-led businesses. What is it about these companies that you find particularly appealing?

Founder-led businesses, especially in vertical markets, typically exhibit low customer churn because founders are deeply invested in customer satisfaction. When we acquire these businesses, we often see teams of 10–25 employees, sometimes even as small as six. In such small teams, every employee wears multiple hats, and performance is highly visible. Additionally, passion tends to run high in these organisations. Employees are not just filling roles—they genuinely care about the product and customers. This level of engagement is slightly harder to maintain in much larger companies. However, many founder-led businesses lack exposure to best practices. They may not know how much they should be spending on cloud infrastructure or how to optimize their sales pipeline. Our role is to help professionalise these aspects while retaining the culture and passion that made the business successful in the first place. Another reason we prefer founder-led businesses is that their teams are usually more willing to experiment and take calculated risks. Since founders have built their companies from the ground up, they understand the importance of innovation and agility. They don’t have the same rigid corporate structures that slow decision-making in larger organizations. That being said, a challenge we often see is that some founders struggle to let go of control, even when it’s in their best interest to delegate certain responsibilities. Helping them transition into a more structured leadership model while preserving their entrepreneurial spirit is a key part of what we do.

Deal Origination and Selection

How do you determine which sectors or business models to target? And how do you balance being supportive with driving growth?

We are biased towards founder-led businesses that are vertically focused and are among the top players in their niche markets. These companies typically have low churn due to the exceptional quality of service they provide. We focus on smaller businesses with around 10 to 25 employees, where every team member wears multiple hats, and the passion for customer satisfaction is palpable. Our strategy is to professionalise these businesses, bringing in best practices in sales, lead generation, technology, and financial rigour. But it’s a balance—we are very hands-on but avoid being overly directive. We believe in open debate and collaboration with management teams to find the best answers. If they’re not open to a constructive dialogue on finding the best answer, it becomes challenging, But ultimately, we see it as an interdependent relationship—our success depends on the success of the management team.

Founder-Led Businesses & Investment Trends

What trends are you seeing in investing in founder-led businesses? Has the appetite for these types of investments changed?

There’s definitely a growing focus on investing in founder-led businesses, particularly those that are cash-flow positive. Post-COVID, investors are more cautious about loss-making companies, even in the VC world. There’s a shift from the growth-at-all-costs mentality to a more balanced approach where profitability matters. This aligns perfectly with our strategy because we’ve always prioritised investing in profitable, founder-led businesses. We also see a trend in backing businesses that are ripe for professionalisation. These companies have great products and customers but lack the operational efficiencies and scalable processes. That’s where we add value, by introducing best practices in talent management, sales effectiveness, technology, financial rigour, and systems/processes.

Can you share some success stories and the impact Tern Capital has had with identifying great businesses and scaling them?

A great example is our investment in Telsis. When we acquired it, Telsiis was providing core network software to mobile operators worldwide. We underestimated some of the challenges with the product and its fit within the market. Once we recognised the need for change, we pivoted the business to building and selling network grade cloud-based contact centers. This strategic shift enabled us to sell Telsis to a strategic buyer. The lesson learned was to be more clinical about product investment decisions. Now, we evaluate each product’s growth potential more rigorously and are quicker to pivot when necessary. It’s about focusing resources on the most promising growth opportunities while letting go of other products that may have limited market demand.

Growth Plan

You mentioned professionalizing businesses. What are the key areas you focus on when you acquire a company?

We have five core value-creation pillars: Talent & Culture – coaching existing management teams and ensuring the right people are in the right roles.. Sales Effectiveness – implementing a structured lead generation process, training sales teams on the entire sales process and setting incentive plans. Technology – implementing R&D best practices (especially the use of AI and optimising cloud infrastructure. Financial rigour – establishing and automating robust reporting of key KPIs and financials. Systems & processes – implementing tools to improve decision-making and drive operational efficiency. For example, we often find businesses spending excessively on R&D, sometimes as high as 50% of their revenue. We help them streamline development efforts to focus only on customer led product development. Similarly, many businesses lack structured lead generation processes, so we introduce automation tools and sales frameworks to ensure we are actively thinking about pipeline growth (top of the funnel), not just the qualified pipeline. One of our biggest areas of focus is to create an organisational culture that values accountability and results. We work closely with management teams to set clear expectations, establish key performance indicators (KPIs), and build incentive structures that reward high performance. At the same time, we make sure that employees understand that they are part of something bigger—our goal is to create companies that people are proud to work for and contribute to meaningfully.

Leadership

How important is leadership in scaling a business post-investment, especially when transitioning from a founder-CEO?

Leadership is absolutely crucial. Founders are typically passionate and knowledgeable but may struggle with making objective decisions, especially when it involves pivoting from their original vision. We, working with you at Marble Hill, bring in CEOs who are strategic, proactive, and have a high sense of urgency. They need to be capable of leading integrations in buy-and-build strategies, as well as driving growth through sales effectiveness and operational excellence.

We’ve had the pleasure of working with you and Tern three times now and one of the most impactful leadership placements we made was with CCube, which is now rebranded as Noveva Software Group. Tell me a bit more about that.

We were fortunate to have Alistair Eaton lead the transformation of CCube into Noveva Software Group. He brought strategic foresight, operational excellence, and a hands-on leadership style. One of his standout traits was his ‘floor sweeper mentality’—a willingness to do whatever was needed. In the early days, he personally responded to large tender documents because no one else could. That level of commitment and agility was exactly what we needed to scale. Alistair was also a perfect cultural fit. Having been part of small companies acquired by private equity, he understood post-acquisition integration and the complexities of scaling. He balanced strategic vision with operational discipline, ensuring smooth administrative processes and execution. Since his appointment, Noveva’s Annual Recurring Revenue (ARR) has grown 356%. While over half came from strategic M&A, the rest was driven by organic growth. We introduced rigorous sales processes, helping each business unit grow 10–15% year-on-year, with some exceeding 25%. Alistair’s adaptability, urgency, and ability to inspire teams have been key to Noveva’s success. He exemplifies the strategic and operational excellence we seek in a CEO—his impact proves how the right leadership can drive extraordinary growth.

This is a perfect example of how the right leadership can transform a business. Our approach isn’t just about filling a leadership gap; it’s about finding someone who can drive growth, inspire teams, and strategically navigate complex challenges. In Alistair, we found a leader who not only understood Tern Capital’s vision but also had the horsepower and agility to execute that vision at an exceptional level

It’s not just about the numbers; it’s about building a culture of performance, agility, and strategic foresight. Alistair’s leadership has set the tone for Noveva’s future growth trajectory. Marble Hill Partners played an instrumental role in making this happen by understanding our needs, identifying the right cultural fit, and strategically guiding us through the entire hiring process. This partnership is invaluable to our continued success.

Leadership is crucial to scaling founder-led businesses. Investors like Tern Capital seek CEOs who are proactive, strategic, and culturally aligned with their hands-on style. As Managing Director of Marble Hill Partners, I lead a team that specializes in executive search for high-growth businesses. We understand the unique challenges of rapid post-investment scaling and focus on aligning leadership talent with strategic goals. We don’t just fill roles—we place leaders who drive transformation and deliver sustainable growth. Our strength lies in identifying senior executives who are both highly capable and culturally aligned. We collaborate closely with founders, investors, and boards to understand their vision and priorities, tailoring each search to find leaders who can make an immediate impact and guide the next phase of growth. We have a strong track record of helping founder-led and private equity-backed businesses scale. Our team places transformational leaders who can navigate operational complexity, drive profitability, and expand into new markets. This success stems from our partnership-driven approach, staying closely aligned with clients as they grow. Looking ahead, we see increasing investor appreciation for founder vision alongside the need for experienced leadership. At Marble Hill Partners, we’re proud to bridge that gap—helping founders unlock their company’s full potential with the right leadership in place. We’re not just placing leaders—we’re building legacies of success. "It’s about placing leaders who can adapt to dynamic, high-growth environments while preserving the entrepreneurial spirit of founder-led businesses.”

About Us & Some Insights

Karthik Dasari

Founder & Managing Director Tern Capital

www.terncapital.com

Mean age of our portfolio companies

countries served by our portfolio companies

combined years of running technology businesses

average time from LOI to deal completion

James Boot

Managing Director Marble Hill Partners

james.boot@marblehillpartners.com

03333 055 119

07881 376703

Meet the Investor: An Interview with Karthik Dasari, Managing Director of Tern Capital