Growth capital enables a startup in an acceleration phase to reach new milestones without necessarily relinquishing control. Dimitri Bernard, Investment Director at the management company Altaroc, outlines the advantages of this financing model.
Many scale-ups face the challenge of finding capital suited to their development. Growth equity, or growth capital, aims to cover this intermediate stage of financing. In Switzerland, asset managers currently manage around 8 billion Swiss francs in growth capital investments, according to a report published last year by the Asset Management Association Switzerland (AMAS). Dimitri Bernard, Investment Director at the asset management firm Altaroc, explains the value of this solution for ambitious companies whose profitability is still too low to attract leveraged buyout (LBO) funds.
Can you explain what "growth equity" is?
Dimitri Bernard: There are several stages in a company’s life. During the startup phase, high-growth but not yet profitable companies are supported by venture capital funds. Growth equity, or growth capital, corresponds to the next stage. It targets companies whose business model has already been proven, that generate significant revenue, and that are approaching or have reached break-even. At this stage, the objective is to accelerate.
What is the difference compared to bank financing?
Bernard: Banks provide capital in the form of debt but do not offer strategic support. A growth equity fund is a committed shareholder who shares the risks and actively contributes to development. In addition, for a growing company whose profitability remains somewhat low, it may be better not to take on additional bank debt, which could weigh on its financial health, as it requires regular interest payments and repayment when due.
Beyond financing, what does growth equity enable in concrete terms?
Bernard: A growth equity fund provides capital as well as operational expertise in exchange for a generally minority stake. The fund supports companies across several key areas: team structuring, recruitment of experienced profiles, improvement of offerings or products, geographic expansion, and acceleration of growth through mergers and acquisitions.
How do companies and funds connect?
Bernard: Some entrepreneurs approach funds directly, while others are identified by the funds. Today, funds have highly advanced sourcing tools to identify companies of interest. Each fund has its own criteria in terms of revenue, growth, sector, or geography. This is why it is important for a company to meet several investors in order to find the right partner.
How long does a growth equity transaction last?
Bernard: The initial approach phase can take several months or even several years. Once the investment is made, the support typically follows a medium-term horizon of around five years. This is the time required to deploy an effective strategy and generate results through the implementation of a growth plan.
What should an entrepreneur pay attention to?
Bernard: Beyond financial aspects, growth equity is, above all, based on a strong working relationship. At a certain stage, a business leader may become aware of their limits and choose to surround themselves with an experienced partner to go further. In this respect, a growth equity fund acts as a "sparring partner." It challenges, brings sector expertise, and supports strategy while leaving management in control. The success of the operation depends on trust and alignment of visions. When the relationship works, it can significantly accelerate growth, open new markets, or help structure the company. Unlike a bank chosen for its financial terms, a fund is selected above all for its team, its experience, and its ability to provide long-term support.
What are the potential risks, and do you have any advice for a business leader considering working with a growth equity fund?
Bernard: The entrepreneur must ensure they retain financial and operational control of their company by avoiding prematurely giving up a majority stake, which is generally the case in growth equity. It is also essential to take the necessary time to choose the right partner. As in a recruitment process, references should be checked, discussions held with other supported leaders, and genuine compatibility on a human level ensured. Giving up a share of one’s company can sometimes create hesitation, but it often allows growth to accelerate significantly. It is better to hold a slightly smaller stake in a stronger, more developed company.
