Private Equity Markets - Growing More Complex than Ever
One of the greatest challenges the experienced CEO faces is finding "smart money" best-fit investors who understand the space and
can add value. Since the market correction in April 2000, there are more sources of capital than ever, but fewer investors.
Many of these investors prefer to remain anonymous.
NVCA estimates corporate VC (CVC) growth of 45% CAGR over the past 3 years, with more than 900 firms worldwide. This adds to
the growing number of institutional venture firms (2,000+) and private equity investors (50k+).
Investment Bankers Provide Similar Services in Public Markets
In public markets, investment bankers employ armies of research analysts to distill complex market information, investor profiles,
and the competitive intelligence necessary to make critical valuation decisions very quickly. Of course, investment bankers
extract significant fees for their services, typically geared towards the IPO candidate.
Private equity markets are not so fortunate. CEO's are on their own to raise capital, often enlisting their investor or a broker
dealer firm when time is short. Investors often are too busy to identify best-fit sources and send the deal to their existing
syndication partners. Many broker dealers provide simple refinements to the investor presentation and send the deal off to their
existing stable of investors. Little if any investor market research is performed, leaving the equity sale and fate of the
company often in the hands of parties less capable of telling the company's story.
The Ultimate Test of the CEO
Success depends on the ability of the CEO to find the right gatekeeper, to provide trusted personal introductions to the
right investor, with the right story before cash runs out.
The best investors are so busy these days they only have time to hear the story once - so it needs to be perfect the first time.
They don't take kindly to others selling the deal either. Of course, Darwin is lurking everywhere and accurate market intelligence is mandatory. Selling to the wrong investor can cost valuable time-to-market, or other competitive advantages that the company may have spent months developing.
CEOs who do not properly execute equity marketing do so at the company's peril. Investors do not respond to randomly targeted
(i.e. 'spammed deals'). Success depends on intensely accurate relevance and alignment to the investor's fund strategy objectives.