Jamie Paul
Courtesy of Bank of America
Startup success doesn’t happen by chance, and running a startup to the later stages is an exercise in quick and smart decision-making.
Every day brings new choices, and as a startup moves through the different stages, some decisions will be more important than others. These critical moments, or “inflection points,” will have a profound impact on the company’s trajectory and determine whether it can achieve sustained success over the long term.
The Chicago area is home to a number of late-stage technology startups that have successfully navigated critical inflection points to achieve long-term success, demonstrating that in the early stages of a startup, a hands-on approach to business and product development is paramount, while in later stages, the emphasis shifts to long-term, sustainable growth.
Within this foundation, here are three inflection points for later-stage startups to consider.
Seizing new growth opportunities
Late-stage technology startups may find it difficult to adopt a growth culture that thinks bigger and invests in business systems and processes that are essential to the business.extension The growth stage is not just about where you are, but where you will grow in. This inflection point is important because it can be unforgiving for companies that take too long to make that change.
One of the smartest things a company can do during its growth phase is to evaluate its finance, consulting, and systems partners. For example, if a company is looking to do over $100 million in revenue, it shouldn’t use accounting software designed for small businesses (although this is common).
Migrating to an enterprise system can be done at a later stage, but upgrading your operational infrastructure takes more effort and capital when you have 3,000 employees than when you have 300. In the competitive technology industry, delaying an upgrade can be the difference between being the acquirer or being acquired.
Globalization
Some startups are in a better position than others to expand globally. Still, most companies need to have some sort of global footprint, and expanding into a new country often requires operational adjustments. For each new region, companies also need to evaluate whether they have the right people, partners, and systems in place.
A key best practice is to consolidate accounts with a single partner to give financial executives visibility into all assets and capital. With each bank account that is not part of an integrated platform, companies risk losing visibility and process efficiencies.
International expansion means operating across different regulatory environments, currencies, cultures and languages, and systematically consolidating accounts regardless of geography is key to gaining 360-degree visibility – ensuring transparency into payments, receipts, liquidity, investments, foreign exchange markets, international trade and supply chain finance.
Preparing for the Open Market
After 2021 being a landmark year for IPOs and a significant slowdown in 2022, the market has found a middle ground in 2023. In Q3 2023 alone, 26 IPOs have been launched, raising a total of $7.7 billion, matching the total IPO volume in Q3 2020. total Revenues raised throughout 2022.
Market forecasts expect IPO activity to increase in 2024 as the backlog of IPO-ready companies move into the final stages of going public, and the stability of IPO activity through the first quarter has created an optimistic atmosphere in the market.
Late-stage startups entering today’s uncertain market may need to adjust valuation expectations and prove profitability. As they begin to prepare for an IPO, they should review their financial, operational, and supply chain infrastructure to determine whether they can meet growth and scale expectations. Leadership teams need to ensure their companies have the right foundation and the best team of advisors to successfully go to market.
Every late-stage technology startup has its own life cycle and trajectory, and understanding when your company is approaching an inflection point is key to preparing your team for the changes necessary for continued growth. These inflection points are universal crossroads that, if properly considered and addressed, will give your organization the best chance of success.
• Jamie Paul is senior vice president and senior relationship manager supporting technology commercial banking at Bank of America Chicago.
