The Tech Industry’s Guide to Building Resilience

After years of high growth and favorable market conditions, tech industry growth and financing appear to be slowing down. High inflation and rising interest rates have lowered valuations, funding opportunities are drying up as investors eye opportunities with more scrutiny, and layoffs continue to impact all companies, regardless of size or ownership.

Fortunately, this environment presents opportunities as well as challenges. By understanding their position in the resilience framework, tech companies — whether VC-backed, PE-backed, or public — can make the right moves to set themselves up for long-term success and stability. 

Persevere

Stabilize the Business

SCENARIOS IN PERSEVERE: Immediate action is needed to stabilize the business. VC-backed companies are looking at low valuations while PE-backed companies are seeing high interest rates that cause cash burn. Public companies are dealing with high infrastructure costs as growth slows.

Maintain

Balance Risk and Innovation

SCENARIOS IN MAINTAIN: The business is stable but growth has plateaued. Public companies are trying to balance meeting analyst expectations and growth expectations. VC-backed companies are looking to moderate their cash burn while PE-backed companies are trying to capitalize on their acquisitions. 

Recover

Pivot to Growth and Seize Opportunity

SCENARIOS IN RECOVER: Companies are in growth mode and have a clear picture of their top opportunities. PE-backed companies are looking to improve internal controls and processes so they can scale successfully while PE firms will be reviewing the list of strategic add-ons and determining if the enterprise value of these companies have dropped enough to take action on a select few. VC-backed companies are testing new products and services while public companies are focusing on putting the right staff in place to support their growth.

Thrive

Business Fundamentals and Growth are Strong

SCENARIOS IN THRIVE: Companies are seeing high growth and are outperforming their competitors. Public companies are exploring product expansion and acquisition targets, while VC-backed companies are developing and deploying new products and services as they get ready for a liquidity event. PE-backed companies are actively pursuing new acquisitions and continuing to build out their platform looking for the right time for their liquidity event.

Want to learn how you can position your company to withstand shocks and pivot to growth? Visit our Technology industry page to see how BDO can help.