Osnabrugge, M.V. and Robinson R.J., authors of
Lifestyle firms are those ventures that provide
only a reasonable living for their founders, rather than
incurring the risks that come with prospects of high growth.
These companies have five-year revenue projections under $10
million and are the classic small businesses. Constituting
more than 90% of all start-ups, it is unlikely that these
firms will attract equity funding from venture capital
investors; instead they have to rely on internal funds.
Middle-market firms have growth prospects of more
than 20% annually and five-year revenue projections between
$10 and $50 million. These firms are attractive to
venture capital investors, but they also depend heavily
on bootstrapping to fund initial growth.
High-potential firms are those with a
vision for growth that are also
innovative, risk-taking and able to change. They
typically plan to grow into a substantial firm with 50 or
more employees within 5 to 10 years, have five-year revenue
projections in exceed of $50 million, and anticipate annual
growth rates in excess of 50%. These “big-time winning”
firms are often the primary recipients of several rounds of
equity finance, early on from
angels and later from
venture capitalists. Making up less than 1% of all
start-ups, these firms are among the
Dell Computers of the next millennium.
Financing: Key Documents
The last two growth categories
offer the greatest economic contribution of all the firm types;
some economists believe that national economic development
depends on a country’s ability to spawn a lot of high-growth,