Beginners Guide to Private Equity

Private equity is an investment class which refers to investment of funds, organized as limited partnerships that take charge of companies that are not publicly traded to restructure them. The primary function of private equity is to create or generate profit for its investors in any business. Private equity funding firms pool money from a bunch of investors to collect millions or even billions of dollars that are used to acquire stakes in the companies. Private equity firms accomplish this by starting with smaller companies, increasing their values and selling them at a profit.

HOW DOES IT WORK?

Private equity firms, sometimes buyout a company outright and in such cases, the funder may stay to run on the business or maybe not. Some other private equity strategies include cashing out the existing investors, buying out the founders, providing capital for expansion, or providing recapitalization for a falling business. Sometimes, private equity is also associated with leveraged buyouts in a company or business, in which funding borrows additional money to enrich and enhance its buying power by collaterally using the acquisition target’s assets.

ADVANTAGES

• The private equity funding could easily have genuine professional experts who involve in sourcing the prospects of a business or a company which otherwise becomes unavailable to many for investments.
• Outcomes or results can be mind-blowing sometimes. Though minimum profit is guaranteed, there is also a possibility of scoring a home run and making a return many times greater than the capital.
• Sometimes, there could be too many tax advantages.
• If it is a friend’s business, he/she can be really onto something big with some help by private equity.

DISADVANTAGES

• Sometimes, the business which you invested may try to raise capital when you cannot or do not want to invest or participate. This may lead to disturbances in the firm especially if it is a friend’s business.
• The data to analyze is not always the same as that of a public company.
• The management generally has interesting and useful information advantages.
• The variability of results can be very high which no one can guarantee. Sometimes, many investments become total losses in private equity.

PRIVATE EQUITY SERVICES IN INDIA

Private equity firms in India manage private companies’ investments and portfolios with accuracy. With lots of research and analysis, they help the private companies to strategize in the long run of their business. The services of private equity firms in India are the following and is bound to change in the future.

1. Fundraising and Setup
2. Tax and Regulatory Services
3. Risk, Governance, and Compliance
4. Forensics
5. Corporate Finances

 

 

 

Why It Is Important To Impress The Angel Investors

Securing a private equity investment is a huge thing for any company. All that hard work and sweat that was put into the company gets finally recognized and for most companies securing the investment is a lifelong dream. However, a lot of people fail in securing any kind of funding because of their ill-preparedness or because they might not be the correct fit for the firm which they have approached. The decision of funding a new project or company is mostly finalized by the angel investor who is willing to take the risk and help the company build an empire. A lot of concentration might be given to a pitch but the most important person to impress is the angel investor himself.

What Are Angel Investors?

Angel investors are usually the ones who provide the capital and approve the funding after a pitch. While they could be known as high flying lenders, the investors are more focused on the entrepreneurs’ vision rather than the business’ viability. While some investors engage in crowdfunding platforms using their influences, other investors build internal networks to raise capital. They are also known by angel funders, private investors, business angels, and seed investors.

Tips to Impress Angel Investors

Angel investors are trickier to crack than venture capitalists as they use their own money, unlike the latter that are in charge of their firms’ money. Most private equity firms in India are operated by angel investors in lieu with international venture capital firms.

One of the most important things for an angel investor is the feasibility of the business opportunity. Convincing an angel investor that the product or startup can be a force in its sector can work wonders for your funding. That, coupled with market research is a sure-shot means of securing your funding. The other thing that is very important in a pitch to an angel investor is the oratory skills of the entrepreneur. Convincing the angel investor that your dream needs to be a reality and the passion you bring in your pitch can make or break your chance of securing money for your venture. All these tips can help you provide the perfect pitch and get your preferred angel investor on board.

5 Venture Capital Market Trends in India

India is the hub of private equity (PE) and venture capital (VC) investments owing to the technology sector that is progressing at neck breaking speeds. In the past 3 years or so, India has seen more than seventy percent of the total PE and VC activity across the globe. Logically, venture capital and PE funds in India are big. Here are the top 5 venture capital trends in India:

1. Technological is Growing

Most sectors that contribute to the economy of India function extensively on technology, which has changed the way organizations and institutions operate. The services sector requires innovations in cloud, mobile, and social technologies to reduce operational costs and satisfy the customers. This presents an opportunity for investment via venture capital funds. Publishing, advertising, marketing, logistics, travel healthcare, education and the financial services industries are subject to these investments.

2. Indian firms are expanding overseas

Indian B2C companies are expanding overseas to increase their customer base and bring in more profits. This has been possible with the increasing use of internet and national boundaries breaking. With the help of social media, companies are reaching out to potential customers across the globe. As the demand for products increases, venture capital fund investments opportunities also grow. Investors are looking towards companies hoping to widen their horizons.

3. Growth of digital currencies

Indian markets have finally begun to accept digital currencies like Bitcoin, which will transform the modes of payments in the next decade. The blockchain technology behind Bitcoin is a great warehouse of venture capital funding. This is happening in tandem with demonetization in India that has already digitized currency.

4. Innovations in hardware

The demand for gadgets and accessories has witnessed an exponential rise. The Indian youth is tech-savvy and connects invariably over social media platforms via electronic gadgets, especially the smartphone. This is where VC investments are subject to a rise amongst interested investors since these gadgets create a universal chain. Gadgets such as GoPro cameras, smart watches, smart speakers and like are quite popular in India. These gadgets yield high returns with minimal investment.

5. Real estate opportunities

Real estate has been at the forefront of investment for a long time now. It has its ups and downs but relatively recent options like Systematic Investment Plans (SIP) have made investing in real estate funds a rising trend on a rise in India. Moreover, Make in India has made it simpler for construction companies and investors alike to reap its benefits. Finally, real estate funds offer a sizeable investment option for VC funds.

Types Of Investors In Private Equity Sector

The field of private equity investment is an elaborate one which requires extensive knowledge and experience to effectively navigate without losing the way and vision. Primarily, every investor needs to know about the two asset classes that exist within the market—public sector and the private sector. The public sector is openly available to the general public and open to investments from all, and if an investor has the right amount of money, they can invest their money to a certain limit in a company. The private sector, on the other hand, is not openly available to a common man. Commonly known as the alternative asset class, private sector includes various kinds of assets within it, namely private equity.

India has a huge private equity sector for investments. The primary reason why these assets are held in such high regard is the fact that they generate high returns in less time. In order to cope with their expenses and expansion plans, every business requires investors from both the asset classes. Each of these classes works in a unique way, but more importantly, there are also various kinds of investors working in this area. Here are a few of the investors that one should know about:

Institutional Investors:

Institutional investors work for a private equity firm that invests in equity and various different kinds of funds. These types of investors do not invest money from their own pocket, but they do not restrict themselves to just providing the capital. Along with that, these investors are also involved in the management, administration and general overhaul of how the company works.

Leveraged buyout investors

They typically buy the controlling stakes alone or in partnership with other PE firms. Most Private equity funds in India find it the most secure method to invest money as they usually invest in companies with a stable cash flow. Yes, this does involve, taking up the little bit of loan but it is worth it as the risk factor is reduced due to the involvement of multiple parties.

Angel Investors:

The name is self-explanatory. It tells us what kind of investors they are, that is, like angels for a businessman. Unlike institutional investors who invest the firm’s funds, angel investors invest their own funds into a company. These are usually wealthy individuals who are looking to make profits by investing in companies with the huge potential to succeed but don’t have the funds to function efficiently and generate revenue.

Finding The Perfect Private Equity Fund

There are many top companies out there providing private equity funding around the country. Some of them bring international funding, while others provide a more management and strategic approach. For founders and asset owners, the problem becomes multi-fold when they’re pitching to multiple organizations and they have deals that are structured in multiple ways.

Private equity fund pitching is an arduous process involving multiple meetings and sit-downs. The strategy may need to be edited, and other times the pitch may need to be completely customized. That’s why finding the perfect private equity fund depends on what’s right for you. Whether that’s having the right international partners, or providing a constant cash flow, what works for you may not work for others.

Companies like Everstone work with entrepreneurs and private fund applicants, to determine the best way forward. This approach works best for all parties involved, making it important for entrepreneurs to be clear about why they require funding. That’s the best approach when finding the perfect private equity funding option.

Another aspect to remember is what you require apart from funding. Maybe its access to different networks, or maybe it’s finding the right mentor. If you’re unsure about what you need, then figuring out the secondary needs from a private equity fund is key. Whether you’re looking for assistance with business expansion or want to get guidance from their industry experience, that should play an important role when deciding.

If you have multiple offers on the table, then the last aspect to consider is relationship development. If one PE fund was more welcoming than another, that’s a good factor to add into your decision matrix. The level of communication and advice you receive now, may continue for the duration of the relationship.