How Can A Company Get Private Equity Funding?
What are the conditions that lead to a new company getting a boost from private equity funding? Even if there’s no completely ideal candidate, what aspects are most likely to intrigue an investor? There are many possibilities, and all kinds of companies have a shot. Let’s take a look at some of the best ways to gain an advantage here.
Keep it Simple
Investor Andrew Chen points out the virtue of offering a product that is as streamlined as possible:
Every product lives and dies based on how well new users are able to sign up and get oriented with the product’s core value. High signup and onboarding rates depend on a large % of users completing each step.
As a result, it’s important for each page to be as simple and directed as possible, so it’s constantly obvious what to do next. If each page gives the user too many options, thus distracting from the primary goal of the funnel, then the %s will decrease. As a result, some of the best landing pages and funnels fundamentally depend on extremely simple, stripped down designs. Here, removing things like navigation chrome, extraneous links, etc is not only simpler, but also better performing from a metrics standpoint.
Chen writes specifically with software in mind, but the principle holds true with any kind of product. Investors have learned a lot about marketing and sales over the years, and the company that’s trying to promote an Edsel is unlikely to secure private equity funding.
Know the Game and Have a Solid Business Plan
You better know what you’re getting yourself into when you apply for private equity funding. It’s obviously not as simple as asking a buddy for a loan.
There’s no substitute for a solid, well thought-out business plan. Such a plan gives investors an idea not only of a company’s vision, but also of the likelihood that they’ll be able to execute on it. If the plan inspires confidence and reflects wise business goals, it’s a better shot to invest in.
The folks at 5th Avenue Capital offer this urgent recommendation:
Be ready to answer the question on exit strategies where necessary. Be sure to have more than one possible exit strategy. Also, be sure you can show the investor through proforma and industry comparables and regional demographics, exactly how they will receive their ROI with realistic margins. If you are able, hire specialists or specialists who have expertise with the accounting, business modeling and tax structures with projects similar to yours. Have them put your plan through the “grinder” and allow them to help you refine your plan so that it is structured as a sound investment vehicle for the private investor. Then, be able to show the investor how your business project will be structured to address their best interests as the major bearer of risk.
Cover all the bases, in other words.
Reconciling Contradictions to Secure Private Equity Funding
At first glance, it may seem like design simplicity and solid strategy are mutually exclusive. They’re not, but you have to look at the problem from the right angle. Let’s use a popular product as an example. An iPhone is a machine of astonishing technical complexity and power. Yet it has a very simple and streamlined user interface. The result is elegance, and mass market appeal.
That elegance is the sort of thing that catches investors’ eyes, and that’s why Apple is worth a trillion dollars.
Boomsourcing helps private equity portfolio companies achieve this elegance. Our services do more than make business operations more efficient and easy to scale. They also strengthen the bottom line by being more cost-effective, which boosts ROI.
If you’re looking to strengthen your portfolio, contact us. We’ll make it happen with elegance.