The Danish Startup Ecosystem Guide - Magasin - Side 63
Sustained growth
requires deep pockets
(IPO). The amount of funding provided
in late-stage capital is substantial, often
ranging from tens of millions to hundreds of millions of euros.
If you have created a machine that
spits out €5 every time to put €1 into
it, you obviously want to feed the
machine as many coins as possible.
That is essentially what successful,
fast-growing companies are. However,
it usually takes time for their successful
products and marketing funnels to turn
the €1 into €5. This means they need investors with big wallets to keep growing
at a high pace - even after establishing
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revenue and gaining unicorn status.
Huge investments into established,
fast-growing companies like this is often
referred to as late-stage capital. A company has already achieved significant
growth and has established itself as a
leader in its industry.
Late-stage capital is used to fund the
next stage of growth for a company,
which often involves expanding into new
markets, acquiring other companies, or
preparing for an initial public offering
More opportunities than ever
Late-stage capital allows companies to
continue to grow and expand beyond
their current revenue, even after they
have exhausted their early-stage funding.
This can be especially important for companies that are operating in highly competitive markets, are facing significant
regulatory or technological challenges or
simply want to corner the market before
their competitors do it.
Because late-stage companies have
already established a track record of
success and are often generating significant revenue, the risk associated with
investing in these companies is lower
than it is for early-stage investment.
Oftentimes it’s not a question of failure
or success, but rather how big the success will be.
Larger and more established companies
with more predictable revenue streams
make late-stage companies attractive to
investors, as they are more likely to provide steady returns on investment.
Late-stage capital can be structured
as equity deals or loans and is typically
provided by institutional investors, such
as private equity firms, hedge funds, or
large venture capital firms. Additionally,
investors typically provide competencies
and networks to the companies they
invest in. Therefore, some investors
focus on specific industries and typically
invest to help with growth activities, internationalisation, generational change,
management buyout, turn-around, etc.
While the amount of traditional latestage capital has grown with the startup
ecosystem, new opportunities are also
on the rise. Opportunities like an IPO
at growth or venture stock markets or
secondary investors like Nordic Secondary Fund.
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