In the first six months of 2025, U.S. and Canada-based startups through the seed to growth stages received $145 billion in investments. While this is good news for tech entrepreneurs, you may be wondering exactly how to position your business to appeal to investors so you can continue to scale.
Following the venture stage, the growth stage of a tech startup is often characterized by product expansion, optimized operations and increased market penetration. As you continue to leverage your existing customer base to open new market opportunities, growth equity becomes a vital source of funding to sustain momentum. The strategies below will help you prepare for all this stage holds, from pursuing additional capital raises to scaling your infrastructure.
Understanding where your company fits along the startup lifecycle and identifying the main concerns and goals for each stage can help you strategize for success.
Growth Equity Stage Key Elements
- Typically occurs when the company has hit $8M in annual recurring revenue (ARR), and can last up to $200M ARR
- Priorities include scaling operations, growing into new markets and maintaining long-term profitability
- Will continue to raise funds from diverse sources
Key Considerations for Tech Startups in the Growth Equity Stage
Expanding Your Market Reach
At this point, you have a commercially viable product and an established customer base. Scaling is now the priority and is often achieved by launching additional product lines that complement your core offering. Your startup may look toward expanding geographically and targeting new customer segments.
Additionally, market expansion requires investments in sales and marketing teams to strengthen brand presence and recognition. You will need to recruit specialized talent to reinforce this expanded reach, including experienced sales and marketing leaders.
To support these efforts, research:
- Customer acquisition trends
- Data behind customer behavior
- Buyer profiles
- Successful market segments
Tech companies can also drive growth by leveraging their existing customer base. Strategies include upselling, cross-selling, pursuing partnerships, and enhancing customer engagement through personalized experiences and loyalty programs.
Scaling Operations
To sustain a growing market share and long-term profitability, you will need to continue prioritizing a stable, efficient operational infrastructure. The growth equity stage requires continual improvement in your company’s infrastructure, as minor inefficiencies can quickly become significant roadblocks as you scale and hire more employees. Startups should focus on streamlining processes, optimizing supply chains and investing in technology to enhance productivity and reduce costs.
During the venture stage, you likely invested in the tax and finance arm of your business. Continue to work toward operational efficiency in order to more effectively navigate financial complexities, such as research and development (R&D) tax credits and multi-state income tax. Optimizing business structure will also be critical as you invest in the sales and marketing departments to help fuel expansion.
Utilizing advanced analytics tools can help you scale your operations and have a more comprehensive view of the business performance. Implementing or updating your enterprise resource planning (ERP) system can also enhance visibility into financials and offer real-time data.
Securing Additional Investments
It goes without saying that as you grow your product line and scale your operations, your company will need more cash. Raising capital continues to be a priority during the growth stage, and startups often move to Series B and C rounds. Funding may come from venture capital, private equity (PE) firms, growth equity or corporate investors.
Securing growth equity is common during this stage, as it’s a form of PE investment focused on providing capital to mature startups poised for significant expansion. Unlike venture capital, which targets early-stage companies, growth equity supports businesses with established revenue streams and proven business models.
Preparing for the Later Stage
As you continue to expand and scale, your business will move toward the later stage, the final phase of the startup lifecycle. A strong leadership team is vital for navigating a company through rapid growth. To prepare for the later stage and a potential exit, prioritize hiring experienced executives who can drive strategic initiatives and foster a culture of innovation.
Common Challenges and Solutions in the Growth Equity Stage
Challenge 1: Managing Rapid Growth
Rapid growth can strain your resources and infrastructure. At this stage, your operation is more complex, with more employees and expanded teams. The company is no longer a founder-led business, meaning a greater level of professionalism and infrastructure is required to support growth. Startups should invest in scalable systems and processes to accommodate increased demand and maintain service quality.
Challenge 2: Balancing Innovation and Stability
Maintaining a balance between innovation and stability is crucial. Tech companies are expected to continually innovate while protecting, and building upon, their existing customer base. Startups should foster a culture of continuous improvement while ensuring operational stability to support growth initiatives.
Challenge 3: Navigating Competitive Markets
Tech startups often face intense competition. During the growth stage, it becomes critical to know how you set yourself apart in the market. Narrowing down your go-to-market and sales strategies, as well as carving out a market niche, can help you effectively navigate this phase. Differentiation through unique value propositions, superior customer service and innovative products is key to gaining a competitive edge.
Your Guide Forward
Regardless of your tech company's current stage, Cherry Bekaert provides a comprehensive suite of solutions for your digital, tax and accounting needs. Our Technology Industry practice professionals have extensive experience supporting companies through their lifecycle — from initial funding to exit planning.
Beyond attest and compliance services, we support technology companies by developing profitability strategies, preparing for exits and addressing cybersecurity needs. No matter your stage of growth, our Outsourced Accounting Services offer placement, outsourcing and co-sourcing to streamline your accounting processes.
Our professionals can also help leverage tax incentives, like the R&D tax credit, to enhance your bottom line. For businesses eyeing international expansion, our International Tax team provides valuable guidance on global tax matters.
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