How to Build Sustainable Growth with a Longer Term Investment Approach

On this episode of the Private Equity Value Creation podcast, I sit down with George Rossolatos and discuss how Canadian Business Growth Fund (CBGF) 's investment philosophy and evergreen fund are a rewarding alternative to companies choosing rapid growth at all costs.

Learn how longer holding periods can be the basis of sustained, profitable growth and better returns for both founders and investors. Plus, hear how founders should be evaluating potential investors to build the right partnership.

Short-Term Investment Perspectives Can Limit Growth

In an era dominated by impatience and instant gratification, it is important to instill a longer-term perspective in investments. Quick flips and turnarounds may be the norm, but in today's market, building companies the old-fashioned way—over time—is often the key to lasting success.

We're building less and less big companies. It's rare that something gets built into something that goes public and is a new Fortune 500 company.

Due Diligence is Essential for Founders Too

Building a lasting business takes time and careful planning. You need the right resources, team, and infrastructure to execute effectively. VCs obsessed with short-term gains might not be the best fit for your long-term vision.

Before taking on any investor, consider these questions:

• What is their investment philosophy? Are they looking for sustainable growth or a quick exit?
• Do their expectations align with your company's goals? Can you realistically achieve their growth targets while staying true to your vision?
• What kind of support do they offer beyond funding? Do they have the experience and network to help you navigate challenges?

Navigating the Fine Line Between Too Much and Too Little

There's a delicate balance between raising too little and too much capital. Founders who raised minimal capital when the market was favorable might be in trouble if they haven't adjusted their spending habits (burn rate) to a potentially tighter market. This scenario can leave them strapped for cash when it's harder to secure additional funding.

George suggests raising the capital you need, then adding a buffer of 25-50%. This extra cushion provides breathing room for unexpected expenses, market fluctuations, or setbacks during product development.

By taking a measured approach to fundraising, prioritizing financial planning, and investing wisely, startups can significantly improve their chances of success and avoid the pitfalls of poor cash flow management.

Valuations Aren't Everything

Remember the only valuation that truly matters is the one you achieve at the point of exit. Chasing inflated valuations early on can be a distraction from building real value in your business. Focus on building a sustainable and growing company, and the exit valuation will naturally follow.

Want more?

Check out my full conversation with George.

Private Equity Value Creation is a podcast about the innovative approaches leading investors, operators, advisors and bankers employ to?drive sustainable growth?and create enterprise value. Hosted by Shiv Narayanan .

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