Understanding the worth of private equity funds is invaluable, especially if you are looking for sources for additional financing. Investments of private equity play an important role in the sustaining of entrepreneurship, funding more than 50,000 deals every year.
The impact and contribution of private equity funds in today economy is undeniable. Nevertheless, In order to understand the worth of private equity funds, you have to make several things clear in your mind.
What is private equity ?
As the name suggests, private sources only provide private equity funds, which are usually pension funds, financial institutions and rich individuals. The funds are invested as private equity only for a limited period of time and the companies into which the money is invested are chosen on the basis of really stringent criteria. Usually, these private equity funds last around 10 years.
Investors of private equity are always on the lookout for companies which can deliver them significant returns. But this also means that they have to be ready to take risks. It is a fact that all investments do not turn into profits, and therefore, the investors should be prepared to bear some losses also. They can also hire fund managers to whom they will need to give a percentage of their profits as their fees.
If you believe that private equity investors are only sources of the risk capital, then you are very wrong in your approach. Being a strategic investor, they will not only provide you finance but will also take keen interest in your business, as their money has been involved in it.
This can be for your advantage too as private equity partners usually bring their experience to your business, and may be helpful in adding value to it in terms of forging strategic business alliances, bringing new customers and building a long term business strategy.
How to attract private equity funds ?
Private equity investments have to run through several proposals before some of them are short-listed to be invested in. Therefore, understand the worth of private equity funds is very important, if you want to be chosen among the few. If you are not in contact with any investors, then you need to talk to some agencies which will bring investors to your contact.
Typically, the criteria to invest in a company involves market potential, long term sustainability, growth opportunity, quality of management and exit opportunities. If you want to attract private equity funds, then you will need to present a details and wise thought out business plan, outlining your idea for the future of your business.
It is a well known fact that investors usually fund a company which has brilliant team of management and great future prospects. Now, you know why it is so important to understand the worth of private equity funds.