Tech & Growth sector
Structure growth. Assess technology economically.
Tech & Growth brings together growth companies and technology-driven markets. The sector looks at business model, product, recurring revenue, customer retention, sales, unit economics, scaling and financing, as well as building platforms, software, data and automation. The aim is a basis for decisions by founders, management, advisory boards and investors: which growth step is viable, what it costs in capital and time, and which dependencies it creates.
Scope
What this sector covers and what it does not
The Tech & Growth sector describes growing technology companies as a market. AI consulting is a service and belongs to AI & Digitalization. The sector includes companies whose product is itself software, a platform or a data-based service, such as subscription B2B software, marketplaces, AI-native providers and companies with recurring revenue, as well as investors who invest in such companies. A traditional company that digitalises its processes does not become part of the sector as a result: its questions remain in its own sector, and the use of technology is handled through the AI & Digitalization service. Tech & Growth only comes into play when digitalisation gives rise to a separate digital business model with its own revenue, its own customers and its own capital requirements. The sector is not a catch-all for every company that uses software.
Industry reality
Growth companies often decide faster than their structures can grow. Growth is pre-financed, revenue flows back over months and years, and the value of the company depends less on one year's revenue than on the quality, duration and expandability of its customer relationships.
Technology companies and digitalisation are two different questions
A technology company sells software, a platform or a data-based service; its core questions concern business model, scaling and capital. A traditional company that digitalises improves an existing business; its core question is the economic viability of a project within its own sector. Mixing the two leads to digitalisation projects being assessed like growth companies, or growth companies like cost projects.
Review business model and growth
Revenue model, customer segments and cost structure determine which growth step is viable. Subscriptions, usage-based pricing, transaction fees and licences lead to different cash flows, retention mechanisms and metrics.
Recurring revenue changes the valuation
With recurring revenue, what matters is how much revenue is contractually secured, how long customers stay and how strongly existing contracts grow. Churn by customers and by revenue, the expansion of existing contracts and the development of individual customer cohorts say more about value than a revenue figure at year end.
Growth is pre-financed
Acquisition costs, product development and infrastructure are incurred before the related revenue comes in. The faster a company grows, the more liquidity it ties up at first. The pace and financing of a growth step therefore have to be planned together.
Structure capital and transaction options
Organic growth, partnership and acquisition have different prerequisites. Equity rounds, convertible instruments, debt, strategic investments and company sales differ in dilution, control rights, cost and time required.
The valuation logic follows the financing route
Bootstrapped companies are usually valued more on cash efficiency and profitability, for example via a ratio of enterprise value to EBITDA. Venture-backed companies are valued more on growth and market potential, for example via a ratio of enterprise value to annual recurring revenue. The choice of valuation model often shapes the result more than the timing; comparative values are only used with a source, period and peer group.
Platforms and marketplaces follow their own logic
For marketplaces, what counts is the transaction volume brokered, the share retained (take rate), network effects and the liquidity of both sides of the market. Simple comparisons based on recurring revenue fall short here.
Technology, data and rights are value drivers and risks at the same time
Code quality, architecture, dependencies on open-source components and their licences, patents and, for AI-native companies, training data, models and compute costs determine how far a product can scale. Undocumented rights to code, data or models can delay or jeopardise a financing round or transaction.
Organisation and key people do not grow automatically
In early phases, knowledge often sits with the founders and a few developers. With growth, roles, processes, metrics and decision rights become necessary, and in acquisitions start-up culture meets corporate processes.
Six segments with their own valuation logic
Subscription B2B software (quality of recurring revenue, expansion revenue, customer concentration, sales efficiency), platforms and marketplaces (transaction volume, take rate, network effects), bootstrapped and venture-backed companies (cash efficiency versus growth), AI-native providers (model rights, data advantages, compute costs, requirements of the EU AI Act), subscription and recurring revenue models (churn decomposition, pricing power, cohort forecasts) and investment targets of corporate venture units (strategic fit, integration effort, autonomy).
Interfaces with the other sectors
PropTech, EnergyTech, HealthTech and EdTech link technology business models with user markets. PropTech providers often combine software, hardware and building data, and their demand depends on construction and refurbishment cycles as well as regulation. Tech & Growth looks at business model, scaling and capital, while the respective user sector looks at market, regulation and customers.
Who typically faces these questions
Founders of software and platform companies before a growth step, financing round or sale, bootstrapped founders considering an exit, private equity funds with software portfolios, strategic buyers looking for technology acquisitions, corporate venture units and family offices with an allocation to growth companies.
Growth chain of a technology company
- Stage 01
Demand
Customer segments, the problem to be solved, willingness to pay and revenue model.
Levers
- Recurring revenue
- Choice and sequence of target segments
- Pricing and packaging model
- Stage 02
Product and platform
Development, architecture, data and interfaces as the company's technical capacity.
Levers
- Product focus and prioritised roadmap
- Scalable architecture and handling of technical debt
- Documented rights to code, data and models
- Stage 03
Sales and customer acquisition
Direct sales, partners, resellers or self-service, each with its own sales cycle.
Levers
- Channel choice per segment
- Acquisition cost per new customer
- Length of the sales cycle
- Stage 04
Delivery and operations
Onboarding, hosting, support and billing as operational capacity that has to grow with the number of customers.
Levers
- Scalable processes
- Automation of onboarding, billing and provisioning
- Delivery cost per customer
- Stage 05
Retention and expansion
Usage, renewal, cancellation and expansion of existing contracts.
Levers
- Cancellation reasons per cohort
- Expansion revenue from upselling and cross-selling
- Contract term and payment frequency
- Stage 06
Capital
Liquidity, financing and ownership structure.
Levers
- Cash runway
- Financing instrument and dilution
- Timing of the financing round
- Stage 07
Execution and management
Implementation with checkpoints, roles, reporting and decision rights.
Levers
- Delivery capability
- Metric system with fixed definitions
- Deputies and succession for key people
- Stage 08
Partnerships and transactions
Partnership, investment, acquisition, sale and integration.
Levers
- Prepared documents and data room
- Suitable valuation model
- Integration plan with autonomy boundaries
Typical decisions
Which growth steps can be financed and sustained by the organisation?
A growth step ties up liquidity before it brings in revenue and requires additional leadership, processes and staff. What matters is the cash runway in the adverse case and whether the organisation can carry the step.
Options
- Growth from own cash flow
- Growth financing with equity
- Debt or convertible instruments
- Slow the pace and strengthen profitability first
When do partnership, acquisition or organic growth fit?
The choice depends on capital, time and dependencies in product and customers. An acquisition shortens the path to a product or market, but brings integration effort and questions of culture.
Options
- Organic growth
- Partnership
- Minority investment
- Acquisition
Which segment or market comes next?
Each new segment requires adjustments to product, sales and support. The sequence determines how much capital is tied up before the step delivers contribution margins.
Options
- Deeper into the existing segment
- New customer segment
- New country or language
- New product line for existing customers
How should the revenue model be designed?
The revenue model determines payment timing, predictability and customer retention. It also changes which metrics are meaningful.
Options
- Subscription with fixed packages
- Usage-based pricing
- Transaction fee on a platform
- Licence with maintenance contract
Which form of sales can carry the growth?
Direct sales, partners and self-service differ in acquisition cost, sales cycle and control over the customer relationship. A different form often fits each segment.
Options
- Direct sales
- Partners and resellers
- Self-service
- Combination per segment
Build, buy or combine platform and infrastructure?
In-house development creates differentiation and proprietary rights but ties up development capacity. Third-party services speed things up but create dependencies on prices, availability and terms of use.
Options
- In-house development
- Standard software or cloud service
- Combination with clear interfaces
- Acquisition of a provider
When and how should a change of shareholders or a sale be prepared?
Buyers and investors review rights, cohorts, normalised EBITDA and key people. Reliable metrics over several periods and a valuation model that suits the business model cannot be produced at short notice.
Options
- Sale to a strategic buyer
- Sale to a financial investor
- Partial sale or minority investment
- Continuation with management participation
How does a traditional company organise a new digital business?
As long as digitalisation improves the existing business, it remains a project within the company's own sector. If a separate digital product with its own customers emerges, the questions of this sector arise.
Options
- Integration into the core business
- Separate unit with its own profit responsibility
- Spin-off with external investors
- Investment in a start-up through a corporate venture unit
Value levers and metrics
Quality of recurring revenue
- Metric
- Annual recurring revenue (ARR) in EUR at the reporting date, broken down by contract term, payment frequency and customer segment; share of recurring revenue in total revenue in per cent
- Effect
- Shows which part of revenue is contractually secured and which has to be won anew every year.
Customer retention
- Metric
- Gross and net revenue retention (GRR, NRR) in per cent per customer cohort over 12 months; churn rate by number of customers and by revenue in per cent per month or year
- Effect
- Separates the loss of customers from the expansion of existing contracts and shows whether growth comes from the existing base or only from new business.
Unit economics
- Metric
- Contribution margin per customer in EUR per month after delivery costs; customer acquisition cost (CAC) in EUR per new customer; payback period of acquisition costs in months; customer lifetime value to acquisition cost as a ratio with a disclosed churn assumption
- Effect
- Shows whether each additional customer relationship creates value or consumes capital.
Sales efficiency
- Metric
- Newly won annual recurring revenue in EUR per EUR of sales and marketing expense in the same period; sales cycle in days per segment
- Effect
- Shows whether additional sales budget brings proportionate additional revenue.
Quality of earnings
- Metric
- EBITDA in EUR per year, reported and normalised, with founder salaries, one-off costs, capitalised development costs and share-based compensation shown separately; Rule of 40 as the sum of revenue growth and EBITDA margin in percentage points with the definition of both measures stated
- Effect
- Makes growth and profitability comparable and separates recurring from one-off effects.
Operating cash flow and cash runway
- Metric
- Operating cash flow and net cash outflow (burn) in EUR per month; cash runway in months under defined scenarios (base case, delayed growth, stress)
- Effect
- Shows how much time a growth step needs to buy and by when a decision on financing or a change of course should be made at the latest.
Capital commitment
- Metric
- Capital tied up in EUR in receivables, prepaid acquisition costs and capitalised development; share of contracts paid annually in advance in recurring revenue in per cent
- Effect
- Shows how strongly growth pre-finances liquidity before revenue comes in, and how the payment frequency changes this burden.
Investment requirement
- Metric
- Investment in EUR per project with a payment profile per quarter, broken down into product development, platform and infrastructure, sales expansion and acquisitions; ongoing costs for cloud services and licences shown separately in EUR per year
- Effect
- Separates one-off from ongoing burdens and makes the amount and timing of financing needs plannable.
Time to implementation
- Metric
- Months from the decision to market readiness of a product, to full productivity of new sales staff and to the first recurring revenue from a new segment
- Effect
- Shows when a growth step brings in revenue and how long it has to be pre-financed.
Customer concentration and risk concentration
- Metric
- Share of the largest customers in recurring revenue in per cent, stating the number of customers considered; share of a single sales channel, platform partner, cloud or model provider in critical functions; number of key functions without a deputy
- Effect
- Makes dependencies visible before a single customer, partner or employee determines the result.
Controllability and scalability
- Metric
- Gross margin in per cent and delivery cost per customer in EUR per month over time; share of automated core processes in per cent; working days between month end and available metrics report
- Effect
- Shows whether costs grow more slowly than revenue and whether management has its figures in time for decisions.
Technical viability
- Metric
- Share of development capacity spent on maintenance and bug fixing in per cent; number of critical components with unclear licences or without maintenance; share of rights to code, data and models with a documented basis in per cent
- Effect
- Shows whether product and platform can carry further growth or whether technical debt and open rights slow down expansion.
Risks and early indicators
| Risk | Early indicator | Countermeasure |
|---|---|---|
| RiskCapital needs are underestimated | Early indicatorPlanning without scenarios, falling cash runway despite revenue plans being met, postponement of a planned financing round | CountermeasureLiquidity planning with scenarios, a minimum runway as a fixed decision trigger and financing prepared in good time |
| RiskDependence on key people | Early indicatorKnowledge sits with a few people, resignation in a key function, no deputies in development or sales | CountermeasureDocument processes and responsibilities, arrange deputies and succession, review retention programmes |
| RiskCustomer concentration | Early indicatorRising revenue share of a few customers, open renewal of a large contract, special terms for individual customers | CountermeasurePlan segment diversification, prepare renewals early and calculate the loss of the largest customer as a scenario |
| RiskDeclining customer retention | Early indicatorFalling usage in individual cohorts, more support requests per customer, downgrades to smaller packages | CountermeasureRecord cancellation reasons systematically, strengthen onboarding and customer success, adjust product priorities |
| RiskGrowth without viable unit economics | Early indicatorRising acquisition cost per new customer, longer payback period, discounts used to close deals | CountermeasureManage segments and channels by contribution margin, review the pricing and packaging model, tie sales budget to checkpoints |
| RiskTechnical debt and scaling limits | Early indicatorGrowing maintenance share, more frequent incidents, slower releases, rising delivery cost per customer | CountermeasureArchitecture review, a fixed budget for reducing technical debt, automation of recurring processes |
| RiskUnclear rights to code, data and models | Early indicatorMissing documentation of usage rights, unclear open-source licences, contributions by third parties without a regulated transfer of rights | CountermeasureSet up a rights inventory and licence review and clarify contractual questions with legal advisers |
| RiskDependence on platform, cloud and model providers | Early indicatorPrice changes by a provider, compute and cloud costs growing faster than revenue, changed terms of use | CountermeasureMonitor cost per customer, prepare fallback options and interfaces, negotiate contract terms |
| RiskRegulatory requirements for product and data | Early indicatorCustomer requests for evidence on data protection and information security, open points from security reviews, new obligations for the company's product category | CountermeasureKeep an inventory of obligations with dates and owners and build up the evidence with the relevant specialist advisers |
| RiskIntegration and culture risk in an acquisition or investment | Early indicatorDepartures of key developers after the announcement, unclear autonomy boundaries, delayed merging of products | CountermeasureAnalyse retention risks in advance, agree a 100-day plan with clear autonomy boundaries and steer the integration by checkpoints |
| RiskGap between valuation expectations and verifiable metrics | Early indicatorValuation expectations without a peer group and source, results that are not normalised, metrics with changing definitions | CountermeasureChoose a valuation model that suits the business model, prepare an EBITDA bridge and show ranges instead of point values |
Links to the services
- Go to topic: Strategy & TransformationGrowth strategy and implementation plan: sequence of segments and markets, operating model for the next growth stage, governance and value creation plans with checkpoints.
- Go to topic: M&A & SuccessionAcquisition, investment and integration: technology-specific review of rights, cohorts and normalised EBITDA, choice of valuation model, preparation of a sale and integration after closing.
- Go to topic: Wealth & RiskHoldings in growth companies are placed in the overall picture of a portfolio of wealth, for example in their effect on concentration risks, liquidity and control rights, without investment advice or brokerage.
- Go to topic: AI & DigitalizationProduct, data and operating processes, without equating the sector with the service: data quality, automation and the use of AI are handled there as a service, for technology companies as well as traditional companies.
Approach
- Step 1
Clarify the growth question
We review the revenue model, planning, customer segments and known dependencies, and record which decision is due by when and who takes it.
Result: Growth and capital decision brief
- Step 2
Prepare metrics and data
Revenue, cohort, sales, cost and liquidity data are brought together, the definitions of the metrics are fixed and gaps are named rather than estimated.
Result: Metric set with definitions and a list of data gaps
- Step 3
Review scaling
Dependencies in product, customers, data and technology are assessed, including rights to code, data and models, key people and the development of costs per customer.
Result: Scaling and dependency review
- Step 4
Calculate options and scenarios
Growth paths, financing routes and, where relevant, partnership or acquisition are calculated with separate assumptions, with a base case, a delayed-growth case and a stress case for liquidity.
Result: Scenario comparison with cash runway and sensitivities, marked as a model
- Step 5
Prepare the decision
Earnings contribution, cash flow, capital commitment, investment requirement, time to implementation and risk concentration are compared for each option, with assumptions and limits shown openly.
Result: Decision paper for shareholders, advisory board or investors
- Step 6
Plan implementation with checkpoints
For the chosen option, a plan is drawn up with owners, milestones, early indicators and decision points at which the assumptions are reviewed again.
Result: Implementation plan with checkpoints
Worked example: growth step, acquisition cost and cash runway
Hypothetical example with round model values, not related to any company, engagement or market value
- Method
- Monthly contribution margin calculation per customer and a simple roll-forward of the cash balance without discounting. The cash runway without and with a twelve-month sales expansion is compared.
- Period
- 12 months of sales expansion, then roll-forward until cash is mathematically exhausted
| Item | Value | Unit |
|---|---|---|
| Contribution margin per customer (1,000 × 80 %) | 800 | EUR per month |
| Acquisition cost per new customer | 9,600 | EUR |
| Payback period of acquisition cost (9,600 / 800) | 12 | months |
| Cash runway without growth step (3,000,000 / 150,000) | 20 | months |
| Additional customers after 12 months (10 × 12) | 120 | customers |
| Additional acquisition cost over 12 months (120 × 9,600) | 1,152,000 | EUR |
| Additional contribution margin over the same 12 months (660 customer months × 800) | 528,000 | EUR |
| Additional cash outflow in the first year (1,152,000 - 528,000) | 624,000 | EUR |
| Cash balance after 12 months with growth step (3,000,000 - 1,800,000 - 624,000) | 576,000 | EUR |
| Mathematical runway at the low point after month 12 without contribution margins (576,000 / 150,000) | 3.8 | months |
| Net cash outflow from month 13 (150,000 - 120 × 800) | 54,000 | EUR per month |
| Cash runway with growth step (12 + 576,000 / 54,000) | approx. 22.7 | months |
Assumptions
- A software provider with a subscription model has a cash balance of EUR 3,000,000 and, without a growth step, a constant net cash outflow of EUR 150,000 per month.
- A new customer pays EUR 1,000 per month; after hosting, support and licences, 80 per cent remains, i.e. a contribution margin of EUR 800 per month.
- Acquisition cost per new customer is EUR 9,600 and is paid in the month the contract is signed.
- The sales expansion wins 10 additional customers per month for 12 months; each customer pays from the following month.
- The sales expansion ends after month 12. There is no churn, no payment terms, no price changes and no additional fixed costs.
Limits
The example only shows the calculation logic: a growth step can extend the runway overall while pushing the cash balance considerably lower in the meantime, which shapes the decision on financing and pace. Churn, payment terms, discounts, rising delivery and staff costs, financing costs and taxes are not included, and even low churn rates lengthen the payback period. No statement is made about typical market acquisition costs, margins or the situation of any particular company.
Further topics in the Tech & Growth sector
Existing pages related to growth companies, grouped into transactions, interfaces with other sectors, growth strategy and operating model, capital, and data and technology risks. All pages remain available at their existing addresses. Calculators and terminals work with model values and are tools for orientation, not evidence of a scope of services.
- Tech & Growth M&ATransactions with technology companies: six verticals and a technology-specific review process covering rights, cohorts, EBITDA normalisation and cultural integration.Open page
- Due diligence processProcess and review areas of a company due diligence, on which the technology-specific part builds.Open page
- Valuation methodsDiscounted cash flow, multiples and capitalised earnings compared, as a basis for choosing the valuation model.Open page
- Earn-out structuresVariable purchase price components that can bridge valuation gaps for growth companies.Open page
- Post-merger integration100-day plan, cultural integration and customer retention after closing.Open page
- PropTech M&AInterface with real estate: transactions with property technology providers.Open page
- PropTech: strategy and scalingTarget group page for PropTech companies on market entry and scaling in the real estate market.Open page
- PropTech companies: valuationSecond entry point for PropTech companies with a focus on hybrid business models combining software, hardware and data.Open page
- EnergyTech M&AInterface with energy: transactions with technology companies in the energy industry.Open page
- EnergyTech companiesTarget group page for growth companies in the energy market.Open page
- EnergyTech deal readiness checkQuestionnaire on the transaction readiness of EnergyTech companies.Open page
- Healthcare sectorHealthTech interface: market, regulation and customers of digital health offerings.Open page
- MedTech regulatory terminalModel calculator for the costs and lead times of medical device approval, interface with healthcare.Open page
- Education sectorEdTech interface: education markets in which digital offerings are growing.Open page
- Value creation planDefine value drivers, set metrics and steer implementation.Open page
- Operating model designAlign organisation, processes and technology for the next growth stage.Open page
- Governance frameworkDecision structures and advisory board work for growing companies.Open page
- Cap table and exit waterfall simulatorTool on dilution, liquidation preferences, employee participation and the distribution of proceeds in a sale.Open page
- SAFE and convertible note simulatorTool on convertible financing instruments, valuation caps and their effect on the ownership structure.Open page
- Multiple voting rights and governanceTool on multiple voting rights and control rights in capital measures.Open page
- Deal Readiness ScoreShort questionnaire on transaction readiness covering finance, contracts, management and compliance.Open page
- EBITDA multiple comparisonTool for placing a purchase price range using model values.Open page
- Data qualityData quality as a prerequisite for data and AI products, handled within the AI & Digitalization service.Open page
- AI & DigitalizationThe service for the use of AI, data and automation, for technology companies as well as traditional companies.Open page
- Post-quantum cryptographyModel calculator for migrating cryptographic methods, as an example of a technology risk with investment needs.Open page
- Data centre and GPU costsModel calculator for the total cost of compute capacity, relevant to the compute costs of AI-native providers.Open page
Method and evidence
Only pages that have already been published and explain method, review process and approach are linked; they are not evidence of impact. Published, verifiable case studies for the Tech & Growth sector are not currently available, and knowledge articles on technology transactions have not yet been released. Market trends, multiples and industry metrics only appear with a source, period and peer group, and values from calculators on this website are modelled.
Frequently asked questions
Is Tech & Growth the same as AI & Digitalization?
No. Tech & Growth is a client market, AI & Digitalization is a service for companies in all sectors. A technology company can touch both: its growth and capital questions belong to Tech & Growth, the use of AI in product and operations to the AI & Digitalization service.
Does every company that digitalises belong to Tech & Growth?
No. A traditional company that digitalises its processes remains in its own sector. Tech & Growth covers companies whose product is itself software, a platform or a data-based service, and digital business units with their own revenue, their own customers and their own capital requirements.
How does this sector relate to the Tech & Growth M&A page?
The sector covers the entire growth path, from business model and sales through scaling to financing. The Tech & Growth M&A page remains available as a deeper page on transactions under the M&A & Succession service.
What is the Rule of 40, and how do you use it?
The Rule of 40 states that revenue growth and EBITDA margin together should add up to at least 40 per cent. It combines growth and profitability in one measure and is frequently used for software companies. We use it as a point of orientation alongside cohorts, unit economics and liquidity, never as the sole verdict, and we define whether growth is measured on recurring revenue or total revenue and margin on EBITDA or free cash flow.
How does the valuation of bootstrapped and venture-backed companies differ?
Bootstrapped companies are usually valued more on cash efficiency and profitability, for example via a ratio of enterprise value to EBITDA. Venture-backed companies are valued more on growth and market potential, for example via a ratio of enterprise value to annual recurring revenue. Which method fits is justified for each company.
How are code, data and other rights reviewed in technology companies?
The review covers code quality, architecture and scalability, dependencies on open-source components and their licences, patents and, for AI-native companies, training data and models. Undocumented rights can jeopardise a financing round or transaction. Legal assessments are made by legal advisers; we place the results in their economic context.
When should preparation for a sale or a financing round begin?
Early enough for metrics, rights and reporting to be verifiable over several periods before talks with buyers or investors begin. There is no generally valid period; it depends on how complete data, contracts and documentation are today.
Which documents are needed for an initial conversation?
Helpful are a description of the revenue model and customer segments, the cost, staff and liquidity planning, an overview of the product, technology and data architecture, as well as the growth assumptions and key contracts including ownership and usage rights. Missing documents are recorded as data gaps in the first step.
What role do PropTech, EnergyTech, HealthTech and EdTech play?
They are interfaces between Tech & Growth and the user sectors Real Estate, Energy, Healthcare and Education. Tech & Growth looks at business model, scaling and capital, while the user sector looks at market, regulation and customers.
Do you promise valuations, financing or growth rates?
No. Valuations, financing commitments and growth depend on markets, investors and implementation. We show under which assumptions a project is viable, how sensitive it is to deviations and which prerequisites need to be put in place first.
How should the calculators and terminals on this website be understood?
They work with model values and serve as orientation. The existence of a calculator for a technology does not demonstrate a scope of services in that field. For a decision, the values are replaced with the data of the specific project and recalculated with documented assumptions.
Discuss a growth project
Describe your project, the time frame and the documents available, such as planning, metrics and key contracts. The button opens the contact form; choose the topic that comes closest to your request and mention Tech & Growth in your message. We will come back to you with a proposal for the next steps. The initial call is confidential and without obligation.