Deloitte Private released the findings of a survey, “Private Company Outlook: Raising Capital,” asking C-level private business leaders in the U.S. about their near term strategies for navigating financial risks and opportunities.

Key Findings:

• Private companies expect to heavily rely on raising capital as a source of funding. Private company leaders surveyed say they intend to raise capital to fund growth initiatives — talent (93%), technology (88%), productivity (87%) to name a few — and are primarily looking to equity financing (88%) and existing investors (80%) as sources as compared to debt financing (48%) and bank loans (48%).

• The majority (88%) of private companies surveyed are facing issues accessing capital. Respondents indicated investors’ valuations (52%), interest rates (51%), and liquidity challenges (48%) as top barriers, with only 12% indicating they have no barriers.

• Raising capital is critical to smaller private companies looking to expand — but they anticipate more challenges acquiring it. Leaders surveyed from businesses with $100 to under $200 million in annual revenue are two times or more likely than those earning $200 million and above to expect difficulty raising capital for the remainder of 2023. These smaller organizations also report being more likely to rely on bank loans as a source of funding.

• Declining valuations can compound issues like talent shortages and interest rates — potentially fueling a wave of acquisitions in the near term. Nearly half (48%) of private company leaders surveyed say their organization’s valuation has declined and rank external factors as significantly high risks to their organizations, such as inflation (87%), rising interest rates (85%), and talent shortages (85%). A majority (91%) of these executives say their business is strongly considering being acquired in the next six months.

“Private companies are an extraordinarily important cross section of the U.S. economy,” said Wolfe Tone, vice chair, and U.S. and Global Deloitte Private leader. “As their leadership teams navigate the impact of financial headwinds, the hybrid work environment, and the pace of digitization, capital needs appear to remain high. The survey results indicate private companies are looking for capital solutions that allow them to manage near term needs while remaining focused on long-term stability and growth.”

“The findings also suggest selling or finding a minority investor or investors may be an attractive exit strategy for companies that believe they have reached a growth plateau,” said Kevan Flanigan, U.S. Deloitte Private Risk & Financial Advisory leader. “In addition to inflation and rising interest rates, these companies are also likely feeling the pressure from the pace of digital transformation, talent shortages, and increased market competition, as a result we may see more companies assessing their readiness for acquisition in the next several months.”

Deloitte Private’s pulse survey, “Private Company Outlook,” is intended to gauge private company leaders’ perspectives on opportunities and risks to business now and in the near future.

The survey of 100 private company executives was conducted online by an independent research company between June 19 and 30, 2023. Respondents represented C-level, president, board member, partner/owner roles at private companies in the U.S. with annual revenues of $100 million to $1 billion+. One-third of respondents were CEOs and one-fifth partners/owners of their organizations.