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Getting Cash in Choppy Economy

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Paul Albright is chief revenue officer at Marketo, a provider of marketing automation software.

The capital landscape is changing rapidly. Emerging companies are taking longer to come public, secondary venture capital markets are increasing dramatically and late-stage private equity options are vast in number. In short, companies are thinking and long and hard about the paths they choose.

Yes, recent IPOs from LinkedInPandoraGrouponand Angie’s List – and Zynga, Yelp and Jive soon to follow suit – show that you can still take a big Internet company public. But what’s more interesting is the chronic shortage of young companies tapping public capital markets to fuel growth. Though 45 venture-backed companies have raised $8.26 billion through IPOs on U.S. exchanges this year, many emerging companies are opting to stay private longer rather than dangle an S-1, due to fluctuating markets.

Take Dropbox’s whopping $250 million in recent funding, Workday’s $85 million or Box.net’s cool $81 million last month. It’s clear that, if you’ve got the right business model and a good amount of momentum in the market, large late-series amounts are as easy and cheap to get as real-estate in metropolitan Detroit.

This is a new era in capital strategy. Private money is abundant and creating the opportunity for more innovation and faster company growth than ever before – at a fraction of the risk and energy that comes with public markets. And because of all that, there’s a unique opportunity for executives to differentiate their organizations and think about company growth in terms ofcapital strategy. But keep in mind that the best money is reserved for those organizations that are already winning.

Cash is King

My colleague wrote here that turmoil breeds opportunity – and I wholeheartedly agree. In the economic climate we’re experiencing, the companies that embrace uncertainty, double down on taking market share and truly delight customers come out on top. They’re also the ones that will have access to more attractive capital. That means investors will be better partners, investing for the long term and at more attractive rates. This adds up to increased speed and flexibility, as well as fuel to grow faster than your competition.

Even on the public side there are great examples of companies demonstrating the impact of cash: VMware and Google, to name two big players. In uncertain times, they’ve deployed their capital to acquire and ultimately build out their offering much faster than developing such new technology in-house.

These thriving companies have made more than a handful of impactful purchases of emerging technology companies. Google has made 23 of them to date in 2011, and will likely surpass 2010’s record of 25. VMWare has announced a total of eight purchases to date, including Digital Fuel, Socialcast, Shavlik and SlideRocket – just in the past seven months.

Read more here…


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