Rapid business growth has long been treated as shorthand for success. Bigger revenues, more staff, another funding round, another expansion plan. All of it signals momentum. None of it, on its own, makes a business successful.
Writing in LBC, LemonEdge CEO David O'Malley argues that the same test now applies to the funds backing those companies. For years, rising paper valuations were often enough. Investors and buyers now want evidence that growth will translate into real value, and the funds face that same pressure from their own investors. LPs want cash returned rather than higher marks, and that is harder to deliver as exits slow and buyers become more selective.
The industry has responded with continuation funds and evergreen vehicles, allowing investors to hold businesses for longer. The underlying question does not go away. Every fund has to demonstrate to its own investors how operational progress will translate into stronger returns.
His conclusion: capital is not proof of progress. Britain should keep backing ambitious businesses and the funds behind them, but the ambition now has to be backed by evidence.
Read the full article on LBC.
https://www.lbc.co.uk/article/stop-mistaking-momentum-for-strength-investing-opinion-5HjdhyC_2/
