If a company requires the capital to survive, the rate at which it is burning through cash could be a negative signal that the market demand is just not there or management is misallocating the funds. This signifies that the company has enough funding and/or cash flows to finance its expansion strategy. By further cleaning up its business model, the company should be able to achieve profitability if it were to focus its efforts on the bottom line (profits) instead of just the top line (sales).Ĭompanies that do not necessarily “require” the growth capital to continue operating (and thus the decision to accept the investment was discretionary) are ideal targets. The difference is that the product/service has already been determined to be potentially feasible, the target market has been identified, and a business plan has been formulated – albeit there remains much room for improvements.īecause the company has raised capital (and can raise more if deemed necessary), the priority tends to become growth and capturing market share, often at the expense of profitability. Similar to early-stage start-ups, these high-growth companies are in the process of disrupting existing products/services in established markets. Growth equity firms invest in companies with proven business models that need the capital to fund a specified expansion strategy as outlined in their business plan. Growth Equity: Target Investment Criteria Investment Attributesįirst and foremost, at the growth equity stage, the target company has already proven its value proposition as well as the existence of a product-market fit. With a growth equity investment, growth-stage companies can sustain or accelerate their growth trends by further disrupting and establishing defensible market positions. PRIVATE EQUITY VS VENTURE CAPITAL FULLThe reluctance to accept external guidance or capital can prevent a company from realizing its full potential or capitalizing on opportunities that lie ahead. These targeted companies have moved past the early-stage classification, yet retain substantial upside potential in terms of “top-line” revenue growth, obtainable market share, and scalability. Growth equity firms invest in companies that have already obtained traction in their respective markets but still need additional capital to reach the next level. Growth equity is intended to provide expansion capital for companies exhibiting positive growth trends.įor the most part, all early-stage companies, at some point in their development process, eventually need assistance either in the form of an equity investment or operational guidance. Growth Equity – Expansion Capital Investment Strategy Product, Execution & Default Risk Considerations.Growth Equity: Target Investment Criteria.Growth Equity – Expansion Capital Investment Strategy.
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