To preface, the most important takeaway from this entire post needs to be that there is no ‘one size fits all’ approach to transitioning to and operating a growth stage company. Suggesting otherwise would be negligent and would fly directly in the face of the value-add component we strive to bring with every check. In fact, if there was such a cookie cutter approach to growing a company, we would just distribute a handbook with each check we write instead of putting the blood, sweat, and tears of our internal team as well as the over 300+ members in our Edison Director Network behind each check.
The fact of the matter is that growing a company is really damn hard and the unexpected will happen…repeatedly.
While I am still new to the game, I have had the pleasure and unique opportunity to fail on my own once, work underneath two outstanding CEOs, and gain experience on the investment side for a handful of other companies. Two things that have been reinforced through these experiences time after time:
- Things don’t go according to plan…often.
- No two companies traverse the same path. Or similarly, what worked for one company isn’t always what’s right for another.
Do common themes exist and can you utilize the experiences of other companies to guide your own decisions? Absolutely.
With that being said, my plan initially with this post had been to outline a number of common practices and themes around successful growth stage companies (I changed my mind after about two sentences). You should really be asking:
What happens when things don’t go according to plan and all of a sudden you’re left with no common themes or instances to draw from?
Which is why I couldn’t justify a list of best practices to share; because no single playbook is right for two companies. However, there are two important things that every company needs to make it to and through the growth stage:
Some companies are lucky enough that they can fund their own growth but adding more to the war chest will always enable you to expedite that growth even more. Even if you feel you’re growing fast enough, additional capital can enable you to bring in the resources necessary to manage and repair some of the side effects of rapid growth, such as technical or organizational debt.
While we target companies with a $5mm to $20mm run rate, their needs differ significantly. For example:
- Some companies are profitable, yet they’re not growing fast enough and a cash infusion and some guidance around their sales and marketing efforts can bring them to a whole new level.
- Others are already growing at the rate they need to, yet they need capital to float interim losses while they truly reach scale and cement their position in the market.
- And some companies are both growing rapidly and have reached profitability, yet they could benefit from the comfort of taking some money off of the table now so that they can continue to grow aggressively without the accompanying risk.
So regardless of how unique your company’s opportunity or predicament may seem, smart growth capital can strengthen your expected outcome tenfold, as long as that capital comes from the right partner.
2. The right partner
Every firm will preach that they’re value-add investors and that they’ve been there before, blah blah…so do your due diligence. One of the many lessons I learned in my first stint in VC was that it’s even more important for entrepreneurs to do their due diligence on their prospective investors than the other way around.
So the next time you’re talking to VCs about a growth equity infusion, reach out to the past founders and executives they’ve backed (preferably those that’ve already exited or those that ultimately failed so that you can be sure their feedback is candid). Ask them how the firm responded when the going got hard, what additional and unexpected resources they brought to the table, ask them if they would raise money from them again.
“Funding alone will not ensure the future today.” Sound familiar? We take a great deal of pride in providing an inimitable level of support to our companies through our Edison Edge platform. So while we’ll be the first to say that we don’t know exactly what you’re going to encounter in your hyper-growth stages, we can tell you that we do know exactly how to respond when the unexpected inevitably happens.