Mature Stage Funding
Ann Arbor SPARK can help mature stage businesses locate and continue to grow in the Ann Arbor region. SPARK’s business development team helps companies find talent and office space, build and expand facilities, and leverage state and local incentive programs. In addition, SPARK’s entrepreneurial services team can help you plug into Ann Arbor’s startup ecosystem to find technology and talent to help your business grow.
For aspiring younger companies, Ann Arbor SPARK can guide you through refining your idea, launching a business, and reaching the mature stage. The entrepreneurial services team has multiple programs and resources to help you get started, as well as affordable office space. Complete this form to get started.
Company Lifecycle and Funding Sources
Mature stage companies have successfully navigated the idea, startup, and growth stages of their lifecycle. They often started out by taking a new product to market, achieving product-market fit and business model fit, then scaled into a larger company with many employees, dedicated functions and departments, consistent processes, and predictable cash flow and profit. Their original market has matured and may have more competitors, slowing continued growth. The goal of this stage is to stay relevant, expand your existing market, and find new ways to grow. New growth often comes from acquisitions of other companies and launching new products and services targeting new markets.
Operating a large and growing company requires a lot of capital. Fortunately, healthy companies at this stage have numerous options:
- Bank Financing: Banks love the predictable cash flow and assets of mature stage companies. Banks lend for a variety of uses including working capital, real estate and equipment purchases, and market expansion and usually at very competitive rates.
- Mezzanine Loans: Unsecured (meaning no collateral) loans used for growth, based exclusively on the cash flow of the business, with interest rates ranging 12 – 20 percent and equity ‘kickers’ usually in the form of warrants. While more expensive than traditional bank loans, mezzanine funding is cheaper than equity and less dilutive to business owners. Mezzanine lenders typically lend to mature businesses with a minimum EBITDA of $3 – 5 million.
- Private Equity: Institutional investors that typically invest in larger, mature companies often take a majority stake (buyout) and work actively within the company to increase profitable growth. They then seek to exit within a few years at an above-market return. Institutional investors typically invest in more traditional industries but sometimes invest in larger tech companies as well.
- Public Markets: going through an IPO and listing your company on a public market, like the Nasdaq or NYSE, allows you to raise money through a stock (equity) or bond (debt) offering to the public, with the ability to raise significant capital and provide liquidity to investors. Most companies that list on the exchanges are larger, more mature companies, but there are smaller and mid-sized companies as well, and even startups, particularly in the life sciences, that are sometimes able to raise money through a public offering. For some entrepreneurs, this is the dream and culmination of a long journey.
Michigan, and specifically the Ann Arbor region, is a great place for mature companies to thrive and grow. Among other U.S. regions, it is considered one of the best places to live, do business, and find talent — and do so affordably. Ann Arbor is home to the University of Michigan, the leading public research institution in the world. This contributes significantly to the region’s status as one of the most rapidly growing technology hubs in the country. Please contact our business development and entrepreneurial services teams to learn more about doing business here.