1. Primed for growth?
The venture capital and private equity world is a constantly changing landscape with consolidation occurring in the market plus the frequent creation of new funds. What this means is that there is plenty of capital to deploy. Given these potential headwinds, it is more important than ever that entrepreneurs prime their business for growth. A few key tips in this regard: investors bring different layers of value; only raise what you need; create desire and demonstrate scalability.
Never underestimate the depth of analysis that investors will look to carry out, even if you have only been trading for a couple of years. Getting the basics right in keeping the financial records of the business up to date, business contracts regularly refreshed, clarity over asset ownership and well thought through financial forecasts and sensitivity analysis maintained will stand you in good stead. Ensuring the business share ownership structure is fit for purpose to make it easy for new investors to come in is also essential.
2. Will your business structure help you grow?
Investors will look to confirm that the business structure will support growth and allow for the business developing in to new services lines, expanding overseas and incentivising key employees. Simplicity is most often the best strategy with investors frequently backing businesses with streamlined structures. Whilst there may be merit in setting up a new company for a new business opportunity to protect the existing business, doing so creates another mouth to feed in terms of compliance costs. A balance therefore needs to be found.
3. Retaining top talent
Finding and retaining top talent is a major challenge in the technology sector. Fast growing technology businesses tend to succeed when they have a team that buys in to the founders vision for the business, understands their role in fulfilling that vision and are rewarded for executing on their part. Developing reward plans for key team members where the reward is aligned to achieving the objectives for the business will lock in and motivate the team.
4. Going global
When expanding internationally a business must carefully consider how it goes about it. Entering a new territory can create a tax and corporate compliance burden which if not addressed in a timely manner can prove costly in the long run. Pro-active consideration of the business structure for the new territory, the need to register for taxes and how the activities in the new territory will be staffed is a must. Experience tells us that badly planned entries in to new territories can absorb valuable management time and cost to rectify.
5. Successfully navigating a succession event
Times change and they can change fast, particularly for fast growing technology businesses. Sometimes founder shareholders get to the end of their journey with the business and fresh blood is required to push through in to the next phase of growth. Exiting a shareholder requires delicate handling.
One wrong move can absorb significant cost, inhibit growth and risk the loss of extremely valuable intellectual property. With time and open communication, there is always a solution which is right for the exiting shareholder and the business to be found.
6. Protecting your Intellectual Property
The intellectual property of a fast-growing tech business is often vital to its ongoing success. Robust steps should be taken where a shareholder or key employee departs to ensure that valuable IP does not disappear out of the door.
Ensuring that ownership of the IP is aligned with the practical exploitation of the IP within the corporate structure is also key and often overlooked. Clarity of ownership over intellectual property tends to be a key focus area for due diligence performed on behalf of investors.