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M&A Science: Growth Equity vs. PE vs. VC: What Founders Need to Know

📌Key Takeaways

🚀Surprising Insights

Stew Campbell emphasizes that growth equity is not just about providing capital; it's about rolling up sleeves and working alongside founders to drive growth. This partnership approach can lead to more meaningful outcomes than simply funding a business. ▶ 00:01:00

Stew points out that a board should not merely serve as a reporting mechanism but should actively govern and support the company. A collaborative board can help navigate challenges and seize opportunities, making it a vital asset for any growing business. ▶ 00:07:27

💡Main Discussion Points

Stew defines growth equity as a blend of supporting rapid growth while maintaining a healthy respect for profitability and strategic direction. This unique positioning allows growth equity firms to help founders scale effectively without losing sight of financial health. ▶ 00:05:46

Stew highlights that building relationships with investors is not just about securing funding; it's about creating a partnership that can evolve over time. This long-term perspective can lead to better alignment and support for the founder's vision. ▶ 00:18:00

Stew explains that a minority recap allows founders to take some chips off the table while still retaining control of their business. This can provide liquidity and reduce risk, making it an attractive option for many entrepreneurs. ▶ 00:40:30

Stew advocates for board meetings to prioritize strategic discussions over financial metrics. This approach fosters a more collaborative environment where board members can contribute to the company's growth strategy rather than just reviewing past performance. ▶ 00:07:50

Stew advises founders to conduct thorough due diligence on potential investors, focusing on their track record and how they align with the founder's goals. This vetting process can help ensure a successful partnership that benefits both parties. ▶ 00:10:00

🔑Actionable Advice

Stew encourages founders to build relationships with investors before they need capital. This proactive approach allows for better alignment and understanding of each other's goals, making future transactions smoother. ▶ 00:21:40

Stew suggests that founders should prioritize assembling a board that not only has expertise but also shares the company's vision. This alignment can lead to more effective governance and strategic decision-making. ▶ 00:07:50

Stew advises founders to articulate their long-term goals and how they plan to achieve them when engaging with investors. This clarity can help attract the right partners who are aligned with the founder's vision. ▶ 00:10:00

🔮Future Implications

As the demand for growth equity increases, more firms are likely to emerge, leading to greater competition and potentially better terms for founders. This evolution could reshape how businesses approach funding and scaling. ▶ 00:19:20

The trend towards valuing strategic partnerships suggests that founders will prioritize investors who can offer more than just capital, such as industry expertise and connections. This shift could lead to more collaborative growth strategies. ▶ 00:18:00

As founders look for ways to balance growth with personal financial security, minority recaps could gain traction as a viable option for accessing liquidity while maintaining control of their businesses. ▶ 00:40:30

🐎 Quotes from the Horsy's Mouth