In the past five years, the number of deals featuring corporate investment has risen 76%. Image from Both Sides of the Table.
The Correction Is Inevitable, The Timing Is Uncertain
At some point, whether their investment was purely financial or partially strategic, these companies, funds, and investors will come looking for their returns. Organizations will find that the public markets demand business models that can support themselves, rather than growth on the back of a financial model that pushes them further into the red.
Software as a Service organizations in particular, with their heavily front-loaded cost structure and customer acquisition cost, need to pay particular attention to this fact. The growth of their business depends on being able to regularly attract new capital to keep growing. Businesses that pursue growth without a functional model may end up looking more like Homejoy than Google.