The Ultimate Guide to Navigating Post-Transaction Waters

If you’ve just completed a major milestone for your business, your first thought is probably to take a hard earned breath. However, as any founder knows, access to fresh capital signifies a new (and exciting) stage in your company’s journey.

The post-transaction phase for scaling companies can be like navigating uncharted waters. Breaking down key challenges can help you steer through these crucial moments with confidence. By following the below tips you can safeguard your business against potential risks and also maximise the opportunities for growth.

Compliance and Due Diligence:

Before diving headlong into growth mode it’s worth checking the post-completion obligations you’ve just agreed to. Don’t delay in getting into motion any new processes needed to ensure you can comply. Tackling these issues upfront will help protect your relationship with your new investors.

Effective Capital Management:

If you haven’t already, develop a strategic plan for utilising your newly acquired capital. Balance between immediate operational needs and long-term investment in growth and innovation. Given how hard it can be to raise money (certainly at the right price!), it’s key that your runway will comfortably last until you’ve taken your business to the next milestone.

For some companies the budget should be allocated for R&D and for others it may be time to consider strategic M&A to accelerate growth. Whatever it is that your business does, make sure you plan carefully and track your burn rate against your budget.

Employee and Employment Matters:

The intensity of working through a funding cycle will have had an impact on your employees. It’s a good time to reevaluate your current organisational structure and ensure it’s right for your next stage of growth. An injection of fresh capital will also have impacted employees’ options. It’s important to ensure that key employees remain incentivised for the next leg of the growth journey and that new talent can be attracted to join to help build the rocket ship.

Corporate Governance and Structure:

Post-transaction, it may be time to reevaluate your board’s composition – new investors may be entitled to a seat and it’s important to ensure it remains manageable. In any event, it’s important to ensure you have a Board that includes members with the right stage specific experience who can provide impactful strategic guidance to supercharge your growth.

Internal Controls, Processes and Reporting:

It’s never too early to start planning for the next funding round (or simply focus on maintaining good business hygiene!). Invariably, the fundraising process is likely to have raised or highlighted existing business risks. Post round is a good time to strengthen internal controls and enhance reporting mechanisms and mitigate the issues you’ve identified. Building these structures and controls is vital for investor confidence and regulatory compliance. On top of that, fixing broken processes and improving reporting will enable you to scale faster and more safely, whilst giving you better access to clean business data that will drive improved decision making.

Managing Investor Relations:

Now you have shiny new investors, it’s important to foster and maintain a healthy long term relationship based on trust. To do this you should develop a clear communication strategy with your investors to ensure transparency. Good investor relations will not only help you face challenges constructively but will also help you maximise and leverage their expertise and experience.

International Expansion:

If your growth strategy involves international expansion, it’s important not to underestimate the challenges involved in navigating new markets. New territories may have different competitors, unexpected customer behaviours, cultural differences and will have a new set of laws and regulations. You need to understand and adapt to all these new challenges to succeed in a new market. Don’t always expect to be able to copy and paste into a new country and expect immediate revenue returns. It’s also worth thinking about some of the other implications of cross-border transactions, such as tax implications, employment law challenges and any changes needed to your corporate structure.

What does this all mean?

Navigating post-transaction investment requires a careful balance between legal compliance, strategic planning, and growth management. As specialists in tech scale-ups, our firm is dedicated to providing legal guidance that is not only compliant but also strategically astute and forward-thinking. Remember, for ambitious tech companies, the right legal approach can be a significant enabler for sustainable growth and success.

We hope this guide offers valuable insights and practical tips for your journey ahead. For personalised legal advice tailored to your specific needs, feel free to contact our expert team.

Written by Saman Harris – Head of Fractional GC @ Seven Legal