Private equity firms most often buy companies that are already established, not in the startup stage. They streamline operations to maximize revenues. VC firms are traditionally more the sort to invest in startups they perceive as having high growth potential. Some Private Equity firms have branched out into the startup realm. This is a relatively new development. Unlike Angel Investors who provide “get started money” for early stage startups, Private Equity firms seek startups that are beyond early stage and already have revenue and enough history to justify the investment.
With both VC and PE firms the equity percentage and voting controls surrendered in return for the funding can be steep. A valid fear is that the startup, if it fails to meet standard sorts of milestones, will find the VC firm replacing key players (read: the CEO) and pivoting the business model. Pivot is the polite way of saying change everything and abandon the original idea, go with something that might make money to fit one of our other investments or that this new CEO knows how to do. Then the startup becomes a low performing asset in the VC’s portfolio, but not one of the 10X winners.
Where does Digital Strategy fit in with all this? It comes in the form of research, tools, outreach and testing. There’s also crowdfunding, but that’s a different column. There’s the Angel List, a great source of funding and assistance for early stage companies. GitHub is a repository for code, open source add-ons or widgets for operations or to supplement a site-build. It’s also a job board for startups. Teams can be joined, developed or emerge from GitHub activity.
LinkedIn might be a source of team building or a place to locate info from groups on whatever category the startup fits. Does your startup conduct retail sales? If yes, Square is a POS (Point of Sale) tool to run credit or debit card transactions by smartphone. Buffer, the social media manager that offers control over posts plus excellent scheduling and analytical tools, put together an excellent resource: The $0 Marketing Stack: 41 Free Options to Popular Paid Services and Tools. It offers alternatives to services and tools that would otherwise cost the startup some significant money. And startups by nature must run on a tight budget.
Creativity and innovation are the hallmarks of successful startups, along with a strong dose of commitment, perseverance and fortune. Networking and a dash of bullheadedness also contribute to startup success. It’s a tough road, but the payoffs are extremely rewarding.