Good Advice for Young Companies

Investors and young companies increasingly recognize that the bubble days are over (Click here and here).

Many IPOs are trading below their initial prices. There’s discussion of down rounds even for unicorns.

In this sobering environment, Ajay Agarwal, a Bain Cap partner, penned a useful article in TechCrunch (Click here) about how the management of younger companies, specifically startups in the article, need to respond.

At MBS, I work more with growth capital companies than with startups but the advice in the article rang true for my clients as well.

  • Valuation – Valuations have come down, get over it to get a deal done.
  • Accelerate profitability – In essentially all situations, companies need to figure out how to become profitable more quickly.
  • Expect Existing Investors to Step Up – The financing market is volatile; external capital isn’t always available. There may be periods when existing investors simply have to carry the company.
  • Be Open to Investors – We’re seeing high net worth family offices and Asian investors with both interest and capital. Companies should be open to these less conventional sources.

Please contact us at Monarch Bay to discuss your capital market goals.