Growth strategies : how software start-ups can leverage alliances, acquisitions, IPOs and venture capital

Abstract

The identification of the different factors impacting a software start-up company's decision to pursue an alliance, acquisition, IPO or venture capital to sustain growth is the main objective of this research study. First and foremost on a software start-up company's list of reasons to pursue and engage in alliances is to leverage the incumbent's tangible and intangible assets. Other factors impacting their decision to leverage alliances include the opportunity to enhance stability and profitability and the opportunity to acquire key customers. Another key factor that encourages start-up company alliance or strategic partnership formation is the need for the start-up company to establish platform leadership. Like the pursuit of alliances, foremost on a software start-up company's list of reasons to pursue and engage in acquisitions is to leverage the incumbent's or the acquirer's tangible and intangible assets. Other factors impacting their decision to get acquired include the boost such an acquisition will provide in helping them establish platform leadership. Acquisitions are also pursued by start-up companies when the founders want to exit. Start-up companies also pursue to get acquired to survive, when no other option are available. Lastly, they would opt to get acquired to penetrate new markets. Given optimal economic conditions, IPOs capture the best liquidity and valuation. It is advantageous versus getting acquired in that one gets to sustain growth while retaining control of the software start-up company. Software start-up companies seek venture capital funding for a number of factors. This includes getting help in business development, leveraging the VC network, obtaining a certification effect, diversifying net worth and reducing risk, and pursuing and engaging in alliances successfully.

(cont.) There is no one universal paradigm to help a software start-up company determine when it is best to pursue an alliance, an acquisition, an IPO or venture capital. A myriad of factors specific to one's situation impacts the decision to choose the right growth strategy. To make the most informed decision, the executive team must consider all these factors.