The Ins and Outs of Growth Equity

All companies strive for success, and for a dominant presence in the marketplace. It takes more than a bright idea, though, to pull it off. In-depth business plans must be developed and then employed effectively and the company must continue to find new markets and new potential clients. When a company reaches a point in its life cycle in which it has proven itself to be effective and profitable in the marketplace, but before it is ready for a leveraged buyout, it may be looking for an infusion of capital and other resources to continue performing in its desired manner.

What Is Growth Equity?

Peter Comisar knows a thing or two about growth equity. It is the practice of a firm providing an influx of capital to a company that has shown itself to be profitable and marketplace-effective and that also has a vision for continued success written into its business plan.

Usually occurring when a company is in the late stage of its life cycle, growth equity capital injections can provide not just the money but also the momentum required to allow it to arrive at its mature stage as a proven commodity that is ready for a leveraged buyout.

How Does Growth Equity Affect Companies?

Growth equity firms offer more than just capital to the companies in which they invest. As they buy in usually as minority investors, these firms cannot simply take the reigns and begin their own decision-making process. Rather, they seek to become theoretical partners in the sense that they work together to continue the company’s success and expansion.

Besides the money offered, a growth equity firms offer its management team to help with operational and strategic decisions. It also brings its own operational resources to the table, ready to be marshaled for the betterment of the company.

Traditionally, growth equity firms can offer expertise in areas related to professionalization of internal processes, market expansion, business development, relationships with banks and other institutional investors, IPOs, and capital structure optimization.

At this point, the company and the firm are looking for sustained revenue growth, operating margin expansion, and revenue-based expansion.

Growth equity firms offer to finance and so much more when they couple with other companies. It’s rather like a two-heads-are-better-than-one scenario or one in which resources are magnified. When management teams join forces with the joint intention of ensuring continued growth and success to the company, there is a greater chance for success.

Also Read: The Role of the HR Department in Sustaining the Growth of a Company