Founders must stop mistaking momentum for strength
Investors and buyers want evidence that growth will translate into real value, writes business executive David O’Malley
In the UK, rapid business growth has often been treated as shorthand for success: bigger revenues, more staff, another funding round, another expansion plan.
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These can all signal momentum, but speed alone does not make a business successful.
The same test now applies to the funds backing those companies.
For years, rising paper valuations were often enough. Now investors and buyers want evidence that growth will translate into real value, and those funds, in turn, face the same pressure from their own investors. Limited partners (LPs) want cash returned, not simply 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. Used well, they can avoid poorly timed exits and give companies more time to improve performance and build value.
Across the UK, businesses face higher costs, subdued demand and a more selective funding environment. Investors and buyers want to know whether growth is profitable, customers are staying, costs are controlled and the leadership team can scale without the founder driving each deal.
With European tech attracting renewed attention and UK companies competing hard for capital, that distinction between momentum and strength matters. Mistake one for the other and we risk building companies that look impressive from the outside but remain fragile underneath.
I've seen firsthand that sustainable value comes from operational discipline, not growth alone. Across my career, I have helped businesses tighten operations, cut overspend and improve utilisation. At Numerated, we nearly tripled annual recurring revenue (ARR), while building a stronger business before its acquisition by Moody’s.
That discipline helped the business achieve an 11x multiple, when many comparable businesses were seeing 5x to 6x.
Too many founders leave that rigour until pressure arrives. When funding is easier to secure, it is tempting to hire ahead of evidence, chase every market and treat the next investment round as the answer. But when conditions tighten, weak foundations are exposed quickly.
The best leaders ask the hard questions earlier. Which customers renew and expand? What spending actually creates value? Could the company keep selling if the founder stepped back? Can the next phase of growth be explained clearly?
These are no longer questions for founders alone. Every fund backing these businesses must answer them to its own investors, demonstrating how operational progress will translate into stronger returns.
Capital is not proof of progress. Raising money may be the right move but it is not always the best next step. For some businesses, a strategic partnership or sale may create more value, more quickly.
Regardless of the route, the goal should always be stronger performance and clearer returns.
Britain should continue backing ambitious businesses and the funds behind them. But the ambition must now be backed by evidence. Both must show that growth creates lasting value.
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David O’Malley is CEO of LemonEdge.
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