When you have a large business, and you need a substantial amount of funding to move things forward, it’s highly likely that you’ll need the support of a private equity firm. How do you get private equity for your startup? In this article, we’ll explain what private equity is, as well as share the list of the best private equity firms to reach out to.
If you’re looking for a multi-million dollar investment to take your business to the next level, this type of funding is most definitely an option. Be warned though, that private equity firms are only interested in startups with a clear USP, the most innovative tech, and a proven track record.
In our last article, we looked at venture capital and how to increase the odds of a successful investment. Now it’s the turn of private equity. We’ll list some of the world’s most prolific investors and ways you can get noticed when it comes to funding.
And don’t forget, if you need help developing your custom MVP app or support making a standout pitch deck, we’re here to help. We’re the experts at helping your startup stand out!
What is private equity for your startup?
When you want to expand your business and get money to hire new staff, carry out product research, and move into new markets, you need funding.
There are typically three different types of funding available to you, and private equity is one of them.
Private equity firms specialize in financing mature private companies – by ‘private’ companies, we mean businesses that aren’t ‘public’ on the stock exchange. They invest money in return for equity – a share of your business. This money comes from a collection of wealthy individuals and affluent investors, in a similar way to venture capital. Many large banks specialize in private equity investments.
The difference between private equity for your startup and other types of investment
At this point, you might be thinking that private equity sounds remarkably similar to venture capital and angel investing. However, there are some key differences that set the list of private equity apart from other funding options.
Private equity firms focus on ‘mature’ companies that are well-established, whilst venture capitalists and angel investors focus on younger and newer startups. This means they have the expertise and contacts needed to maximize the odds of success;
Private equity firms concentrate on series C and up funding, meaning they are there if you are looking for funding of over $100 million – even billions. Some private equity companies will partner together if there is a multi-billion-dollar deal on the table;
Private equity firms typically focus on ‘buyouts ‘ – this means they will want 51% ownership or possibly more. This gives them the power to do what they want to drive the company forward to success;
Depending on where you are in the world, private equity companies are heavily regulated. For example in the UK, private equity firms are regulated by the Financial Conduct Authority. This means they have to be transparent and adhere to the rules; this is vital when there is so much funding up for grabs;
Private equity firms for custom MVP funding generally are used for three significant purposes. Firstly, if you are looking for a lot of money to significantly expand your business or prepare to launch on the stock market – this is known as an Initial Public Offering or IPO. Secondly, if your business is struggling and you are looking for an investor to help put things right. Finally, if you were bought out by one private equity firm and they are looking to sell to another.
Find out more differences between angel investing, private equity, and VC firms
Private equity buyout sample
Here’s an example of a private equity buyout that you might find motivational. In 2013 Dell Computers was a public company on the stock market, but it wasn’t doing very well.
A private equity firm called Silver Lake (more on them later) bought out the business, forcing out most of the company’s board of directors. Silver Lake made significant changes to Dell, including taking them off the stock market and making them a private company again. As a result, the company thrived. Dell might not be around today if it wasn’t for private equity.
According to the BDO, private equity can help grow revenue by 12% and grow the average workforce by 8.5%. So while private equity is not the right solution for every startup, when done right, it can put you at a significant advantage.
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