How to Prepare for a Private Equity Investment

January 20, 2015

private equity investment

Once businesses move from a start-up phase to having proven value, they often need additional funding to make investments that will really help them scale their business model to accommodate growth. They may also need a partner to help manage the growth, someone they are comfortable working with over the life of the investment. Raising capital and finding a true partner – while critical – can be an especially daunting task, particularly with due diligence taking almost as much time and effort as does the full-time job of leading your company.

Just ask John Wilson, the CEO of WilsonHCG, who was pursued by dozens of investment firms before making a choice. “Making sure you have that right partner, one you are comfortable accepting capital – and strategic advice – from for years to come, is extremely important and worth all the effort,” he reminded me recently.

Are You Ready?

Not everyone has private equity firms knocking down their doors. Most will have to do more to pursue private equity firms and convince them that they are worth the investment in both capital and time.

Consider these additional tips to help prepare your company to be an attractive investment opportunity during your company’s growth phase:

  1. Learn the Good & the Bad: To really get a good idea of who the firm is, don’t just talk to the most successful portfolio companies. Also talk to the companies that are not quite as successful. Doing that bit of due diligence at the beginning will save you from spending a lot of time digging into a firm with whom you would not want to work.
  2. Know your market: You should know your market better than anyone else, even the investment firm you’re courting. Know the anticipated growth, current and expected trends, competitors, etc. Invest in analyst research, if financially possible, to fully understand where the industry is going and how you should best articulate this story.
  3. Be able to articulate and execute your plan. If they’re like my investment firm, they’ll be watching you for quite some time to see whether you meet or exceed the expectations set forth in your plans. There is nothing more challenging for a company than to come up short on their goals. The most important thing you can do is to deliver on your plan.
  4. Get your financial house in order. Being organized financially will provide you with greater visibility into your own business and will help the diligence process go more smoothly once you decide to move forward with an investment. The ability to accurately forecast revenue growth helps you demonstrate, not just explain, why your company is a sound investment.
  5. Have strong legal counsel. Your legal counsel can make or break a deal. Strong counsel who knows your industry, has experience with private equity transactions, and is able to help prepare you for all the necessary legal questions will help ensure a smooth transaction and successful start to a long-term relationship.

What questions do you have as you prepare for your investment?

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Preparation for an investment begins long before your business is valuable. Learn more financial skills with these AMA resources and seminars.

About The Author

Seth Harward is a principal at Frontier Capital, a growth equity investor in software and technology-enabled business services companies. Harward joined Frontier Capital in 2008. He is responsible for leading the firm’s sourcing and marketing strategies, developing strategic relationships, and identifying attractive growth stage companies. Prior to joining Frontier, Seth led fundraising efforts for the Research Triangle’s Council for Entrepreneurial Development and sales for a high growth entrepreneurial company. For more, visit

One Comment »

  1. avatar

    I have a friend who is in this situation that I will have to share this article with because it has great points to consider if you are preparing for a private equity investment. I like the tip you give of learning the difference between a good company and a bad company. I imagine that having a great private equity company on your side is going to be one of the major steps towards success. Thanks for sharing this!

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