Fast growth technology start-ups are requiring more investment capital than ever to succeed. However, exit values have not increased according. Furthermore, the more venture capital a company needs, the stronger negative effect it has on exit valuations. This flies in the face of conventional thinking that CEOs should raise as much private equity as possible when it’s offered because they might need it later. Instead, optimally raising capital then spending it efficiently will maximize exit values.
Spending efficiency has a lot to do with timing. Building up a big infrastructure too early or investing in a technology concept before its time can become a big cash burden. Additionally, the public markets demands more mature companies today, so the venture capital raised needs to be focused on the long-run.
The venture capital challenges faced by fast growth companies are best met with the help of PwC. We help young companies bring their vision to reality. We excel at helping entrepreneurs identify financing sources, develop the right capital spending strategies, ensure the proper controls are in place, and help prepare for the right exit strategy — either IPO or acquisition.