As Strategist we provide you Corporate Development & Transaction Advisory Services along your company life-cycle from inception to exit.
Entrepreneurial ventures are often seen as going through four stages of a life cycle: start-up, growth, maturity and exit. Of course, most ventures do not make it through all the stages – the estimated failure rate of new businesses in their ﬁrst year is more than one-ﬁfth, with two-thirds going out of business within six years. We provide you with strategic and operational support along the company life-cycle:
Start-up: There are many challenges at this stage, but one key question with implications for both survival and growth is sources of capital. Loans from family and friends are common sources of funds, but these are typically limited and, given the new business failure rate, likely to lead to embarrassment. Bank loans and credit cards can provide funding too, but often they are too rigid in their requirement for interest and repayment to ﬁt the irregular revenue streams of a start-up. Venture capitalists or VC's are specialized investors in new ventures. They usually insist on a seat on the venture’s board of directors and may install their preferred managers. Venture capitalist backing has been shown to increase signiﬁcantly the chances of a venture’s success, but venture capitalists typically accept only about 1 in 400 propositions put to them.
Growth: A key challenge for growth ventures is management. Entrepreneurs have to be ready to move from doing to managing. Typically this transition occurs as the venture grows beyond about 20 employees. Many entrepreneurs make poor managers: if they had wanted to be managers, they would probably be working in a large corporation in the ﬁrst place. The choice entrepreneurs have to make is whether to rely on their own managerial skills or to bring in professional managers.
Typically during growth phases growing ventures will seek to enter new markets. Joint-Ventures or JV's work very well when the competitive advantage is narrow but local licensees or franchises cannot be trusted for intellectual property or long-term performance.
Maturity: The challenge for entrepreneurs at this stage is retaining their enthusiasm and commitment and generating new growth. This is a period when entrepreneurship changes to intrapreneurship, the generation of new ventures from inside the organisation. An important option is usually diversiﬁcation into new business areas. When generating new ventures at this stage, it is critical to recall the odds on success. Research suggests that many small high-tech ﬁrms fail to manage the transition to a second generation of technology, and that it is often better at this point simply to look for exit
Exit: This refers to departure from the venture, either by the founding entrepreneurs or by the original investors, or both. At the point of exit, entrepreneurs and venture capitalists will seek to release capital as a reward for their input and risk taking. Entrepreneurs may consider three prime routes to exit. A simple trade sale of the venture to another company is a common route. Some entrepreneurs may sell to their own managers, in the form of a Management Buy-Out. Another exit route for highly successful enterprises is an Initial Public Offering (IPO), the sale of shares to the public, for instance on the Hong Kong Stock Exchange. IPOs usually involve just a portion of the total shares available, and may thus allow entrepreneurs to continue in the business and provide funds for further growth. It is often said that good entrepreneurs plan for their exit right from start-up, and certainly venture capitalists will insist on this.