”First we take Manhattan…” – from spin-off to international success story

”Let’s go to the US! Large markets await there.” These kinds of suggestions are such one can hear in company strategy seminars when it’s time to go to the sauna. The next morning, the great idea might not feel so good anymore, as in addition of being a large market, the competition in the US is fierce. Conquering North America is expensive. Some have been bold enough to try, and many have returned after making losses.

Cloudpermit didn’t allow these facts to interfere with their plans.

The Finnish SaaS company has created a footprint in North America only in few years and managed to turn profitable despite an aggressive growth strategy.

Cloudpermit provides municipalities an online service to efficiently manage building permits and other permits for their built environment. In Finland, the company is known as Lupapiste, and more than two thirds of municipalities in Finland are customers of the company.

The company’s market position in Finland was strong already in 2019, when Cloudpermit and its majority shareholder Vaaka were contemplating the company’s strategy. Growth prospects in Finland were limited, so the company had to expand somewhere. A globe was spun and about 20 potential markets were analyzed.

When it comes to building permitting, the general process turned out to be similar in the Western countries. Experience had taught that the biggest clients were not the best clients for off-the-shelf, packaged SaaS offering. They want to acquire an army of system integration specialists to tailor a solution for them. The same applies for countries where building permitting is managed by the state. Hence many of the Asian markets were ruled out.

It turned out that entering any new regulatory environment was subject to some additional work – roughly to the same extent regardless of country.

Cloudpermit had had a successful pilot project in Canada. Much like in Finland, permitting in Canada is managed by municipalities, but there are ten times more municipalities in Canada compared to Finland. Perhaps this would warrant further investigation? And what about the country south of the border, the US?

In the US, building permitting is the responsibility of municipalities and other smaller public organizations – and the number of municipalities is ten times bigger than in Canada, and hundred times the number of municipalities in Finland.

While the software in any case would require adaption to local requirements, why go to Sweden when you can go to the US?

A bold roadmap was created. First Cloudpermit would conquer Canada, then the US.

In the fall of 2021, a one-way flight ticket was bought to Jan Pawli who had been brought on as the CEO. ”You can’t conquer a new market, if the management is not on the front line”, says Pawli.

There have also been changes in the management team over the years to align with the target market. Today about 70% of the company’s employees are based in North America. ”We are no longer a Finnish company, but a U.S. company managed with Scandinavian transparency”, Pawli describes.

In Finland, Cloudpermit pursues growth through new technology and related additional services, whereas the North American focus is on getting municipalities to use the company’s core products. ”The US is a promised land for consumers, but the digitalization of public administration is behind Finland. In many cases, our competitor is pen and paper.”

Cloudpermit ended up under Vaakas’s ownership almost by a coincident. Lupapiste, at the time, was part of Vaaka’s portfolio company Solita. When the IT consultancy company was prepared for sale, Lupapiste was set up as its own entity to highlight its value. ”A consulting company is valued with an EBITDA multiple. In the worst case, this kind of an early-stage loss making software business could have brought down the purchase price for Solita”, says Panu Vuorela, the responsible partner for Cloudpermit at Vaaka.

Eventually, a decision was made to spin off Lupapiste from Solita before the sale. A growth strategy was created for Lupapiste and the company’s independent development started.

”Vaaka brings a structured way of working to Cloudpermit. We operate like a listed company with board calendar and frameworks to drive actions”, Jan Pawli praises.

The focused execution of strategy has paid off. The company now has more customers in the new continent than there are municipalities in Finland. "We aim for market leadership in our target segments in North America”, concludes Pawli.