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How do Private Equity investors evaluate investment opportunities? (Introduction)
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How do Private Equity investors evaluate investment opportunities? (Introduction)

Published on 18/08/2022
Contributor(s): Nicolas Roberti de Winghe

Entrepreneur view

The Entrepreneur often wonders what happens behind the doors. He receives many questions from investors, either through an organised and structured process (a due diligence) or through informal conversations. This Q&A process will vary greatly depending on the complexity of the investor (from business angels to specialised later-stage funds). It is really important that the entrepreneur understands the investor perspective. What in particular do they want to know? Those questions need to be answered quickly with transparent and relevant information. Set aside time for those tasks. The best advice we can give an entrepreneur before launching a capital increase is: prepare, prepare, prepare! This means having the figures from the past ready, preparing a thorough and well thought-out business plan, etc.

Investor view

What is the investor looking for? The Investor will focus on two categories of investment criteria. First, the quantitative criteria. These are based on financial and operational KPIs.

The investor will try to best estimate the past to understand the key assumptions on which the forecasts are based by analysing:

  • financial figures
  • sales trends
  • type of customers,

The second set of criteria are qualitative:

  • quality of the team
  • market entry barriers
  • quality of patents of a biotech company
  • scalability of a SaaS platform

There is subjectivity in many of these topics and industry specialist advice is needed here. At the end of the selection process, the investor has filled in his notes highlighting the plus and minus points of a dossier.

At TheClubDeal

At TheClubDeal we have two complementary approaches to selecting investment opportunities. Either we engage with the entrepreneur at an early stage and work together to develop a plan, a strategy and a transaction perimeter – or we take a more reactive approach by evaluating investment opportunities that are ready to be funded.
For your information: TheClubDeal uses a set of 11 criteria (presented in the following articles/videos) and for each specific case we check all assumptions with sector specialists we call Sherpas.

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Other articles by Nicolas Roberti de Winghe

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What are Sherpas and lead investors?

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What is at stake for the entrepreneur and the investor with regards to valuation?

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What is a shareholders’ agreement?

What is a shareholders’ agreement?

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How do Private Equity investors evaluate investment opportunities? The entrepreneur, the team, and existing investors (Part II)

How do Private Equity investors evaluate investment opportunities? The entrepreneur, the team, and existing investors (Part II)

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How do Private Equity investors evaluate investment opportunities? The entrepreneur, the team, and existing investors (Part I)

How do Private Equity investors evaluate investment opportunities? The entrepreneur, the team, and existing investors (Part I)

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