Private equity is the money which popular investment management companies provide to high-growth start-up businesses. In return for such funds, these corporate enterprises seek a majority stake in the equity of such businesses. Unlike other financial companies, private equity firms do not deal with shares on the stock exchange. These investment management companies raise the capital they need from other sources. These include pension funds, insurance companies, wealthy individuals, and endowments.
Tyler Tysdal – How do private equity firm help promising start-up entrepreneurs?
Tyler Tysdal is a masters graduate in business administration from Harvard Business School with years of valuable experience in investments. He specializes in areas such as venture capital, hedge funds, private equity investments, corporate buyouts, internal reconstruction, and real estate. Throughout his illustrious career, he has held the posts of managing director, CFO, and CEO in many companies. He is also the founder and managing partner of 2 popular private equity firms in America. They are TitleCard Capital and TIVIS Capital.
What benefits do private equity firms offer start-up companies?
Tyler Tysdal says the entrepreneurs of lucrative start-up companies may show interest in private equity firms. Unfortunately, most of these owners are not sure of the benefits of working with such investment companies for their businesses. He explains professionals of private equity firms do not just provide money to start-up companies. They take on the role of advisors to entrepreneurs of such businesses. They help the owners identify with new avenues to increase their profits and instill better leadership skills in them. Private equity specialists even introduce proprietors to new processes and technology. Moreover, they assist entrepreneurs in streamlining their internal operations. In return for the service, private equity firms provide they seek a majority share in the entrepreneurs’ businesses.
How do private equity firms evaluate the start-up companies they invest in?
Private equity firms consider the following six factors when determining the value of start-up companies:
- The potential growth prospects of such lucrative businesses;
- The quality and experience of the managerial team these owners lead;
- The strategies the entrepreneurs implement to outperform their competitors in the marketplace;
- The attractiveness of the present markets where the start-up businesses conduct their commercial activities;
- The kind of customers these businesses cater to in the market; and
- The present profits margin of the start-up businesses
Tyler Tysdal says it is a misconception that private equity firms simply take over a start-up business. These investment companies actually help the owners improve the growth prospects of their businesses. The professionals of such corporate enterprises offer them cash, expertise, and valuable connections. When evaluating such businesses, the professionals of private equity assess the quality of its managers. They also take into account the kind of markets these start-up companies should conduct their activities and the customers they cater to. The experts even scrutinize the strategies these proprietors execute to stay one step ahead of their competitors. Above all, they look into the profit margins of such businesses. In return of the services their experts provide, the private equity firms simply seek a majority stake in their businesses to improve profits and encourage business development.