Managing around key inflection points for late-stage tech startups

Running a successful startup doesn’t happen on accident, and managing one into a late stage is an exercise in fast, smart decision-making.

While every day brings new choices, some decisions are more critical than others, particularly as startups move through various stages. These key moments — or “inflection points” — can have a profound impact on the trajectory of a company and determine its ability to achieve sustained success over the long term.

The Chicago area is teeming with late-stage tech startups whose long-term success is a case study in managing around key inflection points. What they’ve demonstrated is that, in a startup’s early days, a boots-on-the-ground approach to business and product development is paramount, while in the later stages, the focus shifts toward sustaining growth over the long term.

Within this foundation, here are three inflection points for late-stage startups to consider.

Embracing new growth opportunities

A late-stage tech startup may find it challenging to adopt a growth culture, which involves thinking bigger and investing in business systems and processes that are critical to the next growth phase, not just the current stage. This inflection point is significant because it can be unforgiving of companies that wait too long to make that shift.

One of the smartest things a company can do during its growth stage is to evaluate its financial, consulting, and systems partners. For example, if a company were to generate $100 million-plus in revenue, it shouldn’t be using accounting software designed for small businesses (yet it’s common).

Transitioning to enterprise systems is still possible at a later stage, but it takes more effort and capital to upgrade operations infrastructure when a company has 3,000 employees versus 300. In the hypercompetitive tech space, delaying upgrades could be the difference between being the acquirer and the acquired.

Going global

Some startups are in a better position than others to go global. Still, many companies will need some sort of global footprint, and engaging in a new country often requires operational adjustments. With each new region, companies must also evaluate whether they have the right people, partners, and systems in place.

A key best practice is to consolidate accounts with a single partner so that finance executives have visibility into all assets and capital. For every bank account that’s not part of an integrated platform, companies risk losing line of sight and process efficiencies.

International expansion means working across different regulatory landscapes, currencies, cultures, and languages, and the systematic integration of accounts, regardless of geography, is key to gaining 360-degree visibility. This provides clarity for payments, receipts, liquidity, investments, the foreign exchange market, global trade, and supply chain finance.

Preparing for the public markets

After a landmark year for initial public offerings (IPO) in 2021 and 2022’s significant slowdown, the 2023 market found the middle ground. The third quarter of 2023 alone contained 26 IPOs, raising a combined $7.7 billion — a number equal to the total proceeds raised in all of 2022.

Market forecasts predicted an increase in IPO activity in 2024 as a backlog of IPO-ready companies take that final step onto the public stage, and steady IPO activity through Q1 has created a sense of optimism in the market.

Late-stage startups debuting in today’s uncertain market may need to adjust their valuation expectations and prove profitability. As they begin to test the IPO waters, they should review their financial, operational, and supply chain infrastructure to determine whether they can support growth and scale expectations. Leadership teams should ensure their company has the right foundation and the best team of advisers to help achieve a successful market debut.

Each late-stage tech startup has its unique life cycle and trajectory, and understanding when your company is approaching an inflection point is key to preparing your team for the changes necessary for continued growth. These inflection points are universal crossroads that, when properly considered and addressed, can give organizations the best chance of success.

• Jamie Paul is a senior vice president and senior relationship manager with Bank of America Chicago supporting technology commercial banking.