29 Nov The 8 Best Indicators of Future Startup Success
Beauhurst has recently created an article outlining how you can spot future startup success. And whilst they note that 90% of most startups fail in year 1, this is significantly reduced when the business showcases one of these high-growth triggers.
Indicators of startup success
1) Equity Investment
The most prolific investors (PE and VC) persue businesses which are ‘climbing towards an increasingly large valuation’. Their hope is significant ROI within 5 -10 years.
“Whilst equity investment is a great indicator that a company has excellent foundations and innovative ideas, it can also point towards the beginnings of a fast-paced future. Securing funding is often for the purpose of activities that naturally spearhead growth, such as research and development and increasing job creation.”
2) Debt Investment
Fundraising via debt financing vs equity investment “allows businesses to raise money through loans, with the expectation that these will be repaid in the future with added interest”.
Debt investment is more often lower in value but can have larger tax deductions – a benefit to seed-stage companies wanting to increase profits.
3) Accelerator Programmes
These programmes elevate ambitious companies to scale up and build business models through access to “knowledge, resources and networking opportunities.”
4) ScaleUp Status
To achieve Scaleup Status a business must have shown consistent YoY growth in “either turnover or headcount”.
5) Academic Spinouts
This is where world leading universities/institutions turn their innovative IP into businesses known as spinouts and are most common in health, AI and life sciences.
6) Management Buyouts or buy-ins
Beauhurst define an MBO/MBI as a transaction where the incoming, or incumbent, management takes a majority stake in the company. Both of which indicate that “management are looking to increase the pace of expansion”.
– MBO is is when an “external group takes a controlling stake in a business”.
– MBI is when a “company’s management team takes a controlling stake in the business”.
Both of these options look to push the company towards a higher valuation.
7) Large Innovation Grants
These are awarded to “those companies with promising, and often quite specific, projects in the pipeline by entities hoping to boost the UK’s business sector.”
8) High-Growth Lists
These lists feature startups with huge potential and showcase ambition and signs of growth.