• LinkedIn
  • Facebook
  • Instagram
  • (619) 541-5110
  • info@growthpathpartners.com
GrowthPath Partners
  • What We Do
  • How We Help
  • Who We Are
    • The Team
  • Careers
  • Contact
  • Search
  • Menu Menu
Fundraise Advisory, High Growth, News

What are Growth-Focused Private Equity Investors Looking For?

What do PE investors look for

Private Equity investors are highly selective of the companies in which they invest. The focus of a PE firm is on a 5–7 year exit that will yield returns. Private Equity is an active investor who will take a majority stakeholder position in the business to accelerate growth in order to optimize their ROI. PE investors are likely to take an active role in restructuring the company from a process and finance perspective. Don’t mistake this level of interaction and involvement for a desire to gut your company; Private Equity will look closely at the existing teams to ensure that the implementation of their recommendations will go smoothly. A good PE investor will want strong leadership, reliable middle management, low employee turnover, and a motivated workforce to ensure that their vision for the company will be executed.

I am fond of quoting that about 70% of my investment decision of an early-stage company is the team. My rationale is simple: everything goes wrong and only great teams can respond to competitors, markets, funding environments, staff departures, PR disasters, and the like.

— Mark Suster, Upfront Ventures

Let’s review some of the most important factors considered by PE firms as they weigh the investment in your firm.

Table of Contents

  • 1. Stable, Recurring Cash Flow
  • 2. A Competitive Advantage
  • 3. A Track Record
  • 4. Strong Leadership and Management
  • 5. Room in the Market

1. Stable, Recurring Cash Flow

A PE firm keeps an eye on operating costs, overhead, and the cost of doing business as it applies to human capital, as well as those costs for upgrades of processes, software, or office space. In order to manage all of those costs, PE firms look for recurring revenue models. With a stable cashflow, they can be sure that there will be revenue to support current business operations while their investment ramps up future growth.

2. A Competitive Advantage

Be unique and visionary within the industry. If you’re looking for someone to invest money in your blue sky vision for the future, you’d better be sure that what you do is unique and unrivaled in your industry. Asking the question, “What are we the best in the world at?” can bring to the forefront how your company provides a unique product, excels at service or is revolutionizing a sector that is underserved. Articulate this clearly and well and you’ll have your choice of funding opportunities.

3. A Track Record

Private Equity Firms invest in stable companies that need a single injection of capital to accelerate their growth into a new or newly vulnerable area of the market. A Private Equity company will look at how your model has proven itself out over time, your revenue, your margins, how you have improved operationally, and how all of those factors may contribute to this next phase of growth. A track record doesn’t mean you have to be the same year-over-year, it does, however, it means that when you show losses or declines in revenue and decreased margins, it is followed by course correction and marked improvement.

4. Strong Leadership and Management

While most PE investors will take an active role in optimizing existing processes, they are not looking to raise the current structures and start from scratch. PE’s will look for evidence that ownership has invested in strong leaders and that management is performing at a high level. Articulating the internal structures that drive growth, innovation, and productivity in your company will help a PE firm know that their ideas will have an engine to bring them to fruition.

5. Room in the Market

As PE investors examine the companies seeking funding, they also look at the market trends to determine whether there is room to take on more of the market share or whether there is a coming disruption in the industry of the company in which they are interested in investing.

Businesses that are seeking PE investment are high-growth, mature companies with a clear vision for their future. Bringing in Private Equity money is the start of a new and exciting stage in your company’s lifecycle. With the right Private Equity partnership, the vision you have for your company’s future comes within reach. Experienced PE firms know how to bring the right amount of change to an organization to ignite the kind of exponential growth that will take you to the next level.

Ready to put together a pitch deck that will get you funding? Read on…

July 23, 2021/by Amanda Rogers
Share this entry
  • Share on Facebook
  • Share on Twitter
  • Share on LinkedIn
  • Share by Mail
https://growthpathpartners.com/wp-content/uploads/2021/07/iStock-1208998478.jpg 1414 2121 Amanda Rogers https://growthpathpartners.com/wp-content/uploads/2021/07/GPP_brand-identity_final_CMYK_signature_horizontal_color-1030x440.png Amanda Rogers2021-07-23 09:46:122021-10-01 11:41:08What are Growth-Focused Private Equity Investors Looking For?

Connect With Us

Read More Articles

  • Your Guide to Merging Two Company Cultures
  • What are Growth-Focused Private Equity Investors Looking For?
  • What is the difference between Venture Capital and Private Equity?
  • How to build a pitch deck that will get you funding

CONNECT WITH US

LOCATION

2011 Palomar Airport Rd Suite 101,
Carlsbad, CA 92011

(619) 541-5110

info@growthpathpartners.com

GPP brand identity final RGB signature horizontal white 1

© GrowthPath Partners 2021 – all rights reserved

site design by digitalstoryteller.io

© GrowthPath Partners 2021 – all rights reserved
site design by digitalstoryteller.io

What is the difference between Venture Capital and Private Equity? PE Vs VC whats the difference Merging two company cultures Your Guide to Merging Two Company Cultures Scroll to top

This site uses cookies. By continuing to browse the site, you are agreeing to our use of cookies.

Accept settings

Cookie and Privacy Settings



How we use cookies

We may request cookies to be set on your device. We use cookies to let us know when you visit our websites, how you interact with us, to enrich your user experience, and to customize your relationship with our website.

Click on the different category headings to find out more. You can also change some of your preferences. Note that blocking some types of cookies may impact your experience on our websites and the services we are able to offer.

Essential Website Cookies

These cookies are strictly necessary to provide you with services available through our website and to use some of its features.

Because these cookies are strictly necessary to deliver the website, refuseing them will have impact how our site functions. You always can block or delete cookies by changing your browser settings and force blocking all cookies on this website. But this will always prompt you to accept/refuse cookies when revisiting our site.

We fully respect if you want to refuse cookies but to avoid asking you again and again kindly allow us to store a cookie for that. You are free to opt out any time or opt in for other cookies to get a better experience. If you refuse cookies we will remove all set cookies in our domain.

We provide you with a list of stored cookies on your computer in our domain so you can check what we stored. Due to security reasons we are not able to show or modify cookies from other domains. You can check these in your browser security settings.

Other external services

We also use different external services like Google Webfonts, Google Maps, and external Video providers. Since these providers may collect personal data like your IP address we allow you to block them here. Please be aware that this might heavily reduce the functionality and appearance of our site. Changes will take effect once you reload the page.

Google Webfont Settings:

Google Map Settings:

Google reCaptcha Settings:

Vimeo and Youtube video embeds:

Privacy Policy

You can read about our cookies and privacy settings in detail on our Privacy Policy Page.