The Private Equity Explained

Written by VentureXchange

January 13, 2020

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It’s no secret that venture companies are staying private longer. The consequences of this trend are not going away. Some of the companies have decided to take a slower pace before they make a big decision. The question is are these companies familiar with private equity funds? More importantly, how can you get private equity investment funds?

What is Private Equity?

Private equity offers a scope of benefits for private companies and startups. It gives them a source of liquidity instead of traditional financial mechanisms including a public listing or bank loans. Private equity in venture capital can help companies at an early stage to adopt innovative growth strategies without the stress of traditional public market scheme.

Additionally, private equity ownership provides the opportunity to focus on long-term performance outcomes. Besides, companies can attract private equity at different stages to improve their offering. Private equity is a truly effective investment method for a company in early-stage or late-stage development.

Know your product

There are many private companies out there like Stripe in payments or Slack in communication systems. These companies offer high quality and user-friendly software solutions.

With easy integration that helps you to keep track of on-going projects and communicate ideas.

The question is, how come these companies are still private? If you look back, you’ll notice how companies were forced to go public, because they were too big to support their growth. Take Zappos for example, the company that started small but grow big over the night.

Above all, the greatest advantage of going public is the amount of capital you will raise in a short time from prospective investors.

Therefore, our advice to private companies out there is to think about your product and your customers. Try to imagine how your product will become a scalable solution to your customers.

Once you have imagined your scalable solution, you have to dig dipper and know your processes within the company. If you are ready to go, read below on what are the stages of negotiation in private equity.

What Are The Stages of Negotiation in Private Equity? 

Once you have decided your company is ready to scale, you need to be aware that the process could take up to 6 months. That is a very long process for people in your organisation. They will need to move from operative daily tasks. However, each company has its objectives set and decision-makers during the process. Every stage of the process needs to be communicated with the team members. You need to keep in mind that your project needs to stand out from the crowd to be successful.

1. Initial contact

When starting with this process, it is important to leave a good first impression. This is your first step to reaching your goal, so you have to be well prepared. In practice, there are several ways to make the first initial contact in private equity and venture capital. The best way is to meet people at conferences or seminars and over partner references. The next step is to meet the interest in representatives of private equity. The best way to do this is by sending a short introduction as a teaser for your business.

2. First meeting and presentation 

In the first meeting, you have to properly introduce your business and add the information from your teaser. The easiest way to visually present your business is by preparing a short presentation with relevant data. The presentation consists of a maximum of 20 slides with products, market segmentation, and production process details.

3. Second meeting

To this point, you have successfully convinced your investment fund in the future of your business. Once you present your idea, you will need to further evaluate a business plan. You will need to provide your profits, expenses, level of profitability and cash flow. The main goal here is to give representatives of the fund as much as relevant information you can. After that, investors will have enough information to decide whether your business is profitable and ready for investment.

4. Due diligence

Congratulations, you have created an outstanding presentation! You have convinced your representatives of the fund that you are unique in your industry and your business deserves the reward. In this stage, you will go through due diligence with a clear goal of confirming everything you have communicated in previous steps.

Stages in private equity and venture capital require a professional in finance and accounting. Accordingly, it is suggested to find the right financial advisory consultant to help you with your business plan.

Your project or business is special and unique to you and your team, however, it is yet one of many other projects. Your project or business is special and unique to you and your team. however, it is yet one of many other projects. There is always a risk of someone presenting the same idea as yours. Besides, you should clarify what makes your idea unique.

Pro tips for to get private equity funds! 

Be patient to your investors after the realization, each side needs to be sure they made the right choice. In every business deal, you need to be patient to earn trust from people around you.

Take the chance you got and learn from the process. In every new venture capital negotiation, you should be proactive.

Don’t give up on your project or business idea! In the entrepreneurial world, it is recommended to consider advice from the representatives of the funds in venture capital to become professional to future associates.

To sum up, we recommend you to take your business plan and rethink your strategy of how you can improve your scale strategy. To help you with preparation for your big move, consider a professional financial advisory for your business.

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