SILA recently announced an investment from Norwest Venture Partners, a global Private Equity firm. With this investment, we are glad to have delivered on our seed investor’s capital by giving them a 30x exit. We are grateful to all of our stakeholders who supported us along the way – employees, clients, vendors, and other associates in the business.
While this investment marks the next phase at SILA, we firmly believe, in the words of Mark Cuban (from Shark Tank) - that raising money is an obligation, not an achievement! SILA has managed to maintain strong growth over the last few years, however scaling from here is a different challenge that we will need to gear ourselves for.
There are a few things to keep in mind to do justice to the capital that is invested in the company.
A sudden inflated bank balance can cause disillusion. For companies who have raised capital, it’s very easy to start being reckless with spends on things which are frivolous — such as fancy offices, free beer, offsites, and so on. Stay prudent about capital expenditure and keep a check on minor spends too – it adds up quickly!
Equity capital comes at a cost – notionally at a 25%+ IRR (Internal Rate of Return, which is used to evaluate the attractiveness of a project or investment). Companies that raise capital need to know that they must make investments that are going to get their investors this return, whether it’s in acquiring new companies, investing in new geographies, or just adding additional salespeople to spur growth.
When you get backed by a Private Equity fund, you must realize that fund has raised money from other global institutions and everyone along the chain is answerable for decisions made with their money. It’s important to realize the fiduciary responsibility management teams have in order to ensure that compliances are in place and strengthened. All company rules, practices and processes should align with the bigger picture and be revisited regularly to ensure that all stakeholders are on the same page.
Capital is required in order to scale a business; however, you need more than just capital to add value. Do not throw capital to solve problems – make sure that the organization is thinking innovatively and efficiently about processes and systems. Complacency shouldn’t set in just because there is money in the bank.
As a company that believes in building an institution, we’re appreciative that our investors have faith in our strategy and vision. Having said that, we know that this comes with additional responsibility, and it is time to roll up our sleeves and get to work!
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