Is it possible to grow a tech company organically?
I was just at a meeting with a tech company that grew from a sophistated VAR/SI to a developer of hardware/software products that are OEM’d to others. After several years, some pain, a lot of hard work, being opportunistic and tenacious, they are poised to cross the chasm. I don’t run in to too many of these in the tech sector.
I spoke with a bunch of Angel investors last week. In the old days, angels invested in people they believed in, often in technology or markets they knew. They knew they’d get rewarded. It didn’t have to be huge money through an acquisition or IPO. Today, angels seem to only invest in companies with these exit strategies.
Both M&A and IPO paths are fraught with constraints; decisions are made that help the company get to this goal. They are often mutually exclusive from decisions that would be beneficial longer-term. Let’s face it: the stock market rewards short term thinking.
So, are there still companies that can develop a product and get it to market using customers (sales) to fund growth? What are some of the parameters?
Tags: angel, crossing the chasm, IPO, M&A, organic growth, VC
May 28th, 2009 at 10:28 pm
Great topic for discussion. I think the crux of the question is, is there room to
start a tech company, if traditional modes of VC and Angel funding are tight.
A tech company can still be seeded - with personal time and motivation. There
are many iPhone developers developing software this way.
What the above example exposes is “how big a problem is the company trying to solve and by means of what”. A big problem does not necessarily always require
a lot of initial capital. Scaling the operation later might, but great scalable
ideas jump out to good investors even in difficult times.
Then again, company valuations are based on perceived value in a number
of cases.
- prem