Software Due Diligence Shifts as Investors Demand Profitability Over Growth in Post-ZIRP Era

The software investment landscape has undergone a dramatic transformation as the era of zero interest rate policies gives way to tighter capital markets and rising borrowing costs. Where software companies once prioritized rapid market share gains and aggressive growth spending during the ZIRP period, investors now demand clear paths to profitability and sustainable business models.

Faisal Siddiqui, Director at CohnReznick, noted the significant shift in investor priorities. "Nowadays, more and more investors are prioritizing software companies that can scale, meet ever-evolving compliance requirements, and offer a resilient tech stack," Siddiqui said. This represents a fundamental departure from the "grow at all costs" mentality that characterized the previous era of cheap capital.

The changing investment climate has created new challenges for software companies seeking funding. Investors are increasingly focused on companies that demonstrate the ability to grow at manageable and profitable rates without excessive cash burn. This shift has made it more difficult for smaller software companies to survive on continuous capital infusions, even as larger technology firms continue to expand their market dominance.

In response to these market changes, many software companies are turning to consulting firms like CohnReznick for assistance in navigating the post-ZIRP environment. The firm provides comprehensive services including accounting, risk management, and digital transformation aimed at helping software companies optimize performance and maximize value.

CohnReznick's technology practice leverages advanced technologies including artificial intelligence, machine learning, and cloud computing to support companies through various growth stages. The firm assists with everything from operational streamlining to AI implementation, focusing on areas where technology can deliver tangible business value. The company's approach includes internal innovation, such as running AI hackathons to identify efficiency improvements that can benefit clients.

Digital advisory services form a critical component of CohnReznick's offerings, helping technology companies develop digital strategies and select appropriate technologies, data systems, and talent to enhance profitability. The firm evaluates existing technology infrastructure to identify inefficiencies and creates improvement roadmaps aimed at helping companies become leaner and more profitable more quickly.

Monetization challenges represent another area where software companies are seeking assistance. CohnReznick provides data analytics and automation services to help companies better monetize their offerings, while robust cybersecurity offerings help secure networks and systems. The firm's Digital Forensics Lab serves as a central hub for cyber incident response, enabling professionals to assess incidents, secure digital evidence, and establish protections against future threats.

The lab utilizes advanced tools to quickly identify the nature and extent of security incidents, whether involving data breaches, malware infections, or unauthorized access attempts. Beyond incident response, the lab provides security assessments to identify vulnerabilities, monitors networks for threats, and prepares companies for potential cyberattacks through testing and simulation exercises.

This comprehensive approach to technology consulting comes at a critical time for the software industry. The transition away from zero interest rate policies has fundamentally altered investment criteria, with controlled growth, streamlined operations, and profitability becoming the new benchmarks for success. Companies that adapt to these changing expectations while maintaining technological innovation and security will be best positioned to thrive in the current market environment.