The financial development path of a company typically progresses in stages, depending on the company’s growth, capital needs, and maturity. A common path adapted to industry and market conditions follows the steps below. Tech startups, for example, often rely heavily on VC, while companies in traditional industries may use debt earlier in their lifecycle:
- Self-funding / Bootstrapping
- Angel Investors
- Venture Capital / Private Equity
- Bank Loans / Debt Financing
- Initial Public Offering (IPO)
- Secondary Offerings / Additional Rounds of Funding
- Mergers & Acquisitions (M&A)
- Alternative Funding Sources (e.g., Crowdfunding, Convertible Notes)
The private or public choice has become less pressing as several alternative funding sources have developed and adapted to the flexibility needed by the technology sector and asset light companies. Before reaching the public market (referred above at 5.) a company can access alternative options such as: Crowdfunding, SAFE agreements (Simple Agreement for Future Equity), Revenue-Based Financing and Grants. In US, the Special Purpose Acquisition Companies (SPAC) have been steadily growing in number and size. A SPAC would provide a private company with funding and access to the public market without the IPO process.
A few industries and publicly available data allow us to have a view on the intersection of these markets for years 2015, 2016, 2017. Are high growth private companies (voluntarily included in inc5000 list) accessing a high risk industry (by Beta measure) if listed? What is the industry risk profile and what is the average growth of leading private companies?
Segmenting the chart by beta = 1 horizontally and by average growth for selected industries (average = 497%) vertically illustrates the risk / growth profile. Bubble size represents sales growth.
The top left square locates industries with higher risk and higher growth such as Energy. Computers HW and B&C services are sectors with average growth throughout the period. Software industry shows average growth but more risky returns. Sector analysis shows that Financial services and Healthcare are less volatile than than the market.
Romanian-American Chamber of Commerce – IT Alliance Chapter (RACC-IT) has been hosting monthly events where entrepreneurs present their endeavors and ecosystems in US and most recently UK are introduced to try to bridge the financing and growth needs of start-ups.
Context charts explanations: key words used to describe the business model, total revenue for 2007-2017, company representation by state and growth rate.
Word cloud for inc5000 business model description. What are the most common words use to describe the business model of the highest growing companies ?
Total revenue of “inc5000” companies (in billions of dollars) from 2007 to 2017 shows a rapid growth in 2007-2011, followed by decline in 2011-2015 and steady total revenue of $2 trillion during 2015-2017. US GDP had a decline in 2009, a fast recovery in 2010 and variable growth above 1.5% until 2017.
Industries included in the inc5000 USA lists for 2007-2017:
Advertising & Marketing, Business Products & Services, Computer Hardware, Construction, Consumer Products & Services, Education, Energy, Engineering, Environmental Services, Financial Services, Food & Beverage, Government Services, Health, Human Resources, Insurance, IT Services, Logistics & Transportation, Manufacturing, Media, Real Estate, Retail, Security, Software, Telecommunications, Travel & Hospitality
Company representation by state and growth rates in inc5000 list for 2024.
High Company Representation:
- California (CA): Largest number of companies (~700), with moderate average growth.
- Florida (FL) and Texas (TX): Follow closely (~500 companies each), showing similar average growth rates.
Highest Growth Rates:
- New Jersey (NJ): Stands out with the highest growth (~1,100%), but a lower number of companies compared to larger states.
- Wisconsin (WI): Also exhibits high growth (~1,000%) with a smaller number of companies.
Other Notable States:
- New York (NY): A large number of companies (~300) with moderate growth.
- Arizona (AZ) and North Carolina (NC): Combine relatively high growth (~800%) with a mid-range number of companies
States with the largest number of companies (CA, TX, FL) have moderate growth, whereas smaller states (e.g., NJ, WI) tend to showcase exceptional growth rates.
The average number of companies by state a national level is 96 and average growth rate is 536%.Bubble size represents number of companies.
efield solutions – enhancing operational and financial efficiency
Notes:
Average sales growth by company and sector data source: inc.5000
- Companies included in the inc5000 list must have been founded and generated revenue at least four years before the year of being included in the list. They had to be U.S.-based, privately held, for profit, and independent—not subsidiaries or divisions of other companies. Revenue criteria include at least $100,000 in revenue four years before its inclusion, at least $2 million in revenue in the previous year.
Levered beta data source: Aswath Damodaran / NYU Stern
- Beta is a measure of a stock’s volatility or systematic risk relative to the overall market.
- It indicates how sensitive a stock’s returns are to the returns of the market. A beta of 1 suggests the stock moves with the market; a beta greater than 1 means it’s more volatile than the market, while less than 1 indicates it’s less volatile.
