Software Due Diligence in the Post-ZIRP Era: Key Investor and Founder Considerations
Summary
The software industry has shifted from growth-at-all-costs to prioritizing profitability and sustainable scaling in the post-ZIRP environment, requiring companies to demonstrate clear paths to profitability and resilient business models.
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What is the main focus of software due diligence in the post-ZIRP world?
Investors are now prioritizing software companies that can demonstrate a clear path to profitability, have sound business models, operate in growing markets, and can scale profitably without excessive cash burn.
Why has the software investment landscape changed so dramatically?
Rising interest rates and tighter capital markets ended the era of cheap borrowing under Zero Interest Rate Policy (ZIRP), shifting investor focus from rapid growth at all costs to sustainable, profitable growth.
What specific qualities are investors looking for in software companies now?
Investors seek companies that can scale profitably, meet evolving compliance requirements, offer resilient tech stacks, grow at manageable rates without burning through cash, and avoid putting unnecessary pressure on company resources.
How is CohnReznick helping software companies navigate this new environment?
CohnReznick provides accounting, risk management, and digital transformation services to help software companies optimize business performance, manage risk, maximize value, and strengthen businesses in advance of deals or capital transactions.
What technologies does CohnReznick leverage to assist software companies?
They utilize advanced technologies including AI, machine learning, cloud computing, and data analytics to help companies navigate all stages of business growth and improve their technology infrastructure.
Who is most affected by these changes in software investment criteria?
Smaller software companies and startups are particularly affected as they can no longer rely on endless capital infusions, while Big Tech continues to grow larger in this challenging funding environment.
What services does CohnReznick offer specifically for deal preparation?
They guide companies through each phase of the deal process, including strategic assessment of targets, structuring, due diligence, valuation, and integration to strengthen businesses before capital transactions.
How does CohnReznick help with digital transformation?
They help craft digital plans, choose appropriate technologies, data, and talent, evaluate existing technology infrastructure for inefficiencies, and create improvement roadmaps focused on becoming leaner and more profitable.
Where can I learn more about CohnReznick’s services for software companies?
Click here to learn how this consulting firm is helping software companies in the post-ZIRP world.
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