In a year defined by market uncertainty, tech founders have been under a lot of financial strain. With private capital markets contracting, growth-stage companies face a sluggish fundraising environment, forcing them to find new ways to meet their operating needs.
When you’re a high-growth company, it’s difficult to throttle the burn rate without losing momentum. Working at CIBC Innovation Banking gives me a unique perspective on today’s ecosystem. Our team has been funding tech and life science companies for 25 years through changing market conditions. We can anticipate the unique needs of high-growth companies in all economic climates thanks to our multi-decade experience. And right now, what many of these companies need is support to extend their runway.
Debt Financing: Non-Dilutive Growth Capital
Debt financing is one way an innovation startup can extend its runway. It’s non-dilutive, which means it doesn’t require giving up equity. Plus, it enhances liquidity, giving companies the working capital they need to help fund their operating budget.
Companies can also use debt to fuel their growth. Software companies, for example, often grow by acquiring smaller software providers whose products will augment their own. CIBC Innovation Banking has helped clients like Azalea fund these types of acquisitions through growth financing.
But are banks willing to lend in times of market uncertainty? Growth-stage software companies can burn through cash quickly, in part because they require a much longer (and more expensive) period of product development before they begin to turn a profit.
The companies we work with don’t follow the standard slow-and-steady growth model that most banks like to see. That’s why we use a different set of metrics to assess a company’s qualifications. We look for companies with scalable business models and a well-articulated product-market fit. We also look at the equity they have raised to date and the relationships they have with their existing investors, because that helps us see a fuller picture of the work they’ve put in to date and their viability going forward.
Private Markets: Finding the Right Investor
Of course, while private capital market activity is slowing, that doesn’t mean venture capital or private equity aren’t valuable resources. The challenge is finding the right investor – and knowing where to start your search. CIBC Innovation Banking has over two decades of experience specializing in growth-stage tech and software companies across North America – a longer track record than most banks. We’ve established broad industry connections over that time. So, when one of my clients is looking to raise equity, I can leverage my network to connect them with investors who might be interested. This network is invaluable for niche innovation companies whose business models may not be as well understood by mainstream investors.
Why Your Banking Partner Matters
Our expertise in the innovation economy sets us apart – and it gives our clients a competitive edge. Because we understand the innovation lifecycle, our team is better equipped to provide solutions that help these companies supplement their equity with non-dilutive capital. We can quickly assess what a company needs, and then provide tailored, flexible solutions to support their growth. That includes connecting them with industry peers, helping them squeeze more value out of their funding and supporting them all the way to IPO and beyond. And we’re backed by the strength and resources of CIBC, a leading financial institution with a $30BN market cap and 150 years of stable lending history, which means clients can count on our stability in times of market uncertainty.
When will the fundraising market improve? There’s no definitive answer, which is why, more than ever, growth-stage companies need a banking partner who understands the innovation economy.
