A VC or PE investor will start building a growth strategy for the company in order to increase its value. All actions undertaken will happen with this objective in mind. For early-stage companies, the guidance can be very concrete and take place on a daily basis, whereas in cases of more established companies strategic guidance is often emphasized. A growth strategy is typically built for 3 to 7 years, or in other words, for one strategic growth phase.
Refining the strategy
During the investment process, the investor will go through the company’s strategy and, if need be, make changes to it in cooperation with the company’s management and other owners. The strategy will be finalized at the beginning of the investment process, yet it can be revised later during the investment period.
Validating the organization’s ability to grow
To start out, the private equity investor will make sure the organization has what is needed to carry out the strategy. The investor can also help with necessary recruitments so as to ensure the company has the required expertise.
Bringing reporting up to par
The company may not have a clear and coherent reporting system. This is vital to the investor: achieved results are constantly monitored to ensure the company is moving in the right direction. Clear reporting relationships also enhance the quality of the company’s administration and management.
While organic growth often plays a leading role, growth can also be accelerated through acquisitions. Acquisitions can be made at any point of the investment period, but significant effort is usually put into analyzing competitors and other potential acquisition targets at the beginning of the investment period. If need be, an investor can make an additional investment into the company to finance the acquisitions.
A seat on the board
An active venture capital or private equity investor will normally want a seat on the board. In general, a venture capital or private equity investment will increase the importance of the board and diversify its members’ range of expertise.