![]() 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. Target Market and Customer Profile Identifiedīecause 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.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 improvement.Ĭonceptually, growth equity firms prioritize future growth and expansion potential, above all else. 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. How Does Growth Equity Investing Work?įirst 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. The reluctance to accept external guidance or capital can prevent a company from realizing its full potential or capitalizing on opportunities 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, practically 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. Often referred to as “growth capital” or “expansion capital”, growth equity firms seek to invest in companies with established business models and repeatable customer acquisition strategies. Growth Equity is an investment strategy oriented around acquiring minority stakes in late-stage companies exhibiting high growth with significant upside potential in expansion, in an effort to fund their plans for continued expansion.
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