Guest commentary: Key Inflection Points for a Late-Stage Tech Startup
By Scott Olmsted & Gabriel Simon
The Central Coast is a thriving tech hub, home to some of the world’s leading companies with operations in Santa Barbara and San Luis Obispo counties.
It’s an exciting entrepreneurial ecosystem, dubbed the “Silicon Coast,” for good reason, especially when you include the region also being home to two top STEM-focused universities.
For Central Coast businesses, much goes into running a successful startup — especially a tech startup — but distilled down to the simplest terms, managing one is an exercise in efficient, smart decision-making. Every day brings new choices, big and small. However, some decisions are more critical than others as tech startups move through various stages, and markets change. These key moments or “inflection points” can have a profound impact on the trajectory of a tech company’s long-term success.
In a late-stage tech startup’s early days, taking a boots-on-the-ground approach to building the business may have helped the founder gain critical insights. Usually, in the later stages, the company has found its footing and already has a product in the market. A bigger focus on growth — rather than product development — is key.
With that foundation established, here are three inflection points for late-stage startups to consider.
Embracing New Growth Opportunities
A late-state tech startup may be challenged to find additional growth drivers. The company will need to think bigger and invest in business systems and processes that are critical to the next growth phase, which often means bringing in a board or other executives to share in the decision-making process.
This stage is also significant because it can be unforgiving of companies that wait too long to make that shift. One of the smartest things a company can do at this stage is evaluate its financial, consulting and systems partners.
For example, if a company were to generate $100 million-plus in revenue, it shouldn’t be using accounting software designed for small businesses, yet it’s not unheard of.
Transitioning to enterprise systems is still possible at a later stage — but it takes more effort and capital to upgrade operations infrastructure when a company has 3,000 employees versus 100. In the hypercompetitive tech space, delaying could be the difference between being the acquirer and the acquired.
Going Global
Some startups are in a better position than others to go global. Still, many companies will need some sort of global footprint and must make operational adjustments when engaging in a new country.
With each new region, companies must also reevaluate whether they have the right people, partners, and systems in place.
One best practice is to consolidate accounts with a single partner so that finance executives have visibility into all assets and capital.
For every bank account that’s not part of an integrated platform, companies may be losing efficiencies: international expansion means working across different regulatory landscapes, currencies, cultures, and languages.
Integration of accounts, regardless of geography, is key to gaining 360-degree visibility. This provides clarity for payments, receipts, liquidity, investments, the foreign exchange market, global trade, and supply chain finance.
Preparing for the Public Markets
After a landmark year for initial public offerings (IPO) in 2021 and 2022’s significant slowdown, the 2023 market seems to have found the middle ground.
The third quarter of 2023 alone contained 26 IPOs, which, combined, raised $7.7 billion — a number that equals the total proceeds raised in all of 2022.
Market forecasts predict an increase in IPO activity in 2024 as a backlog of IPO-ready companies take that final step onto the public stage.
Along the Central Coast, experts also predict that 2024 could see more activity in terms of VC, initial public offerings (IPOs), and mergers and acquisitions (M&A).
However, debuting in an uncertain market means companies may have to adjust their valuation expectations or show a path to profitability.
As late-stage tech startups begin to test the IPO waters, a review of their financial, operational, and supply chain infrastructure is critically important.
Doing so will help determine whether they can support that next level of growth and scale.
Leadership teams should ensure their company has the right foundation and the best team of advisors to help achieve a successful market debut.
Each late-stage tech startup has its unique life and trajectory.
Understanding when your company is approaching an inflection point and preparing your team for the necessary changes is vital for continued growth. While these changes may require changes to processes and systems, the outcomes help position the company for a new stage of growth.
From small scrappy startups and mid-size companies attracting M&A deals all leading to the success of the “Silicon Coast,” these inflection points are universal crossroads that, when properly considered and addressed, can give organizations the best possible chances of success.
Scott Olmsted is a technology & green economy industry executive, global commercial banking at Bank of America and Gabriel Simon is a senior vice president of Central Coast Technology Commercial Banking.
