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Expansion-stage tech: Growth remains paramount but new challenges emerge

Maximize value while prepping for exit, IPO or other late-stage goals

Jun 02, 2023

Key takeaways

You need to do much more at a significantly lower cost. 

More specialized leadership is needed, particularly on the financial and technological fronts. 

Partner models become more important as you go global. 

Technology industry

Your company is still growing, but in new and bigger ways. The complexities of your customers, markets and even your offerings are increasing, demanding that you make improvements and take new steps to secure a stable future while increasing the profit margin.

Customer retention is key, even as a company pursues larger customers. Leadership teams may think, ‘We are okay losing smaller customers that helped us get to this stage.’ But retention numbers are often a primary factor of the company’s valuation.
David Van Wert, M&A partner for middle market private equity investors, RSM US LLP

Key considerations for tech company success in the expansion stage

Much of what you need to do now involves having more specialized people and infrastructure in place while figuring out how to do much more at proportionately lower cost. Some of the key considerations are:

Earlier-stage growth focuses on sales and market penetration. By this expanded growth stage, it’s about how to scale the business up operationally and in terms of infrastructure, how to do more things at less cost and how best to allocate resources.
Kim Susko, Principal, Management Consulting, RSM US LLP

Additional considerations

While it may still be too early to begin planning for going public and undergoing the long and arduous preparations for an IPO, it should be something you’re thinking about, along with other late-stage and exit-oriented goals that lie ahead.

  • Does the corporate culture that helped you get from early growth to expansion serve the needs of the company as it becomes more mature?
  • What endgame is envisioned for the company? Going public? Being acquired by another company?
  • As you think about an exit, work backward based on how you expect to be valued. If you think EBITDA will be an important factor in how you’ll be valued, consider small tuck-in acquisitions that have good products but not a lot of overhead. If you expect to be valued based on ARR or MRR, find ways to bolster your recurring revenue through complementary products or new markets.

Explore the four stages of the technology company lifecycle

Focusing on core functions while prepping for growth.

Build stature in the market with sales, scaling and automation.

Maximize value while prepping for exit, IPO or other late-stage goals.

Effectively manage your gross margin, access, and supply.

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