Don’t Pitch to the Wrong Investor

Hey, it’s David

At BoardSpire, we're diving deep into the latest trends and strategies to help you stay ahead in business growth and acquisitions.

In this newsletter, content from the world of private equity, M&A, and business growth all hand-picked to keep you informed including:

• Maximizing Debt Flexibility in M&A. The ability to unlock hidden debt capacity can make or break an acquisition

• Maximize Your Deal Potential - Master lead frameworks, optimizing earnouts, and structuring PIPE investments for quick wins. Learn how to make smarter, faster decisions that put you ahead of the competition.

• Navigating Earnouts to Close Deals – In an uncertain market, earnouts are bridging the gap between buyer and seller expectations.

• M&A From the Plane… Are you pitching to the right type of investor?

• And much more...

My Favorite Finds This Week

Investment Banks, Accounting, Legal & M&A Advisors

• Debt’s in the Details: Unlocking borrowers' true debt capacity in M&A deals (White & Case)

• Close But No Cigar: Even with strong controls, SEC scrutiny can hit. Here’s how to avoid It. (JD Supra)

• Earnouts: The key to closing deals in a win-win fashion in an uncertain market (Womble Bond Dickinson)

• Navigating Executive Compensation in M&A: Key steps for deal success (Cooley)

Private Equity & Financing

• The Power of Preferred Stock in VC and PE Deals: A primer for why preferred stock is the investor’s secret weapon (DarrowEverett)

• The CFO’s Role in Powering PE-Backed Exits: A CFO can be a game-changer during private equity exits. Here’s how they can unlock hidden value in the process. (Middle Market Growth)

• Mastering Value Creation in Private Equity: Insights from a fireside chat (Podcast) (ION Analytics)

• PIPE Investments: A private equity strategy for public market bargains . (Private Equiteer)

Business Growth

• Stop Chasing Dead Leads: Qualify and convert faster with this logical framework (Solve to Scale)

• 7 Brutal Truths for LinkedIn Success: Are you ready to face what’s holding your client growth back? (Naim Ahmed)

• Three Best Practices for Getting Your Audience to Act: Tips that drive action and boost engagement. (Sadanun Wiangin)

Navigating the Key Differences Between Private Equity and Venture Capital in M&A

M&A From the plane…Is this airplane a jet or a turboprop?
 
Very often in my many conversations with people who are thinking of buying a company or selling one, the term private equity and venture capital, or VC, are used interchangeably.

The confusion is understandable given both groups raise money from outside investors and “pool” that capital to make investments in mostly private companies. 

𝐇𝐨𝐰𝐞𝐯𝐞𝐫, 𝐭𝐡𝐢𝐬 𝐢𝐬 𝐰𝐡𝐞𝐫𝐞 𝐞𝐯𝐞𝐫𝐲𝐭𝐡𝐢𝐧𝐠 𝐛𝐞𝐜𝐨𝐦𝐞𝐬 𝐪𝐮𝐢𝐭𝐞 𝐝𝐢𝐟𝐟𝐞𝐫𝐞𝐧𝐭.
 
I once listened to a CEO who was eager to raise capital for his mid-sized manufacturing company. He wanted to grow through acquisitions and through new product development. He told me he had spent the better part of the previous year reaching out to various venture capital groups and traveling to venture capital conferences in the hope of meeting potential investors in person.
 
Sadly, after all his efforts, he told me he had not raised one dollar of capital. He then looked at me and asked, “Why would no venture capitalist be interested in my very profitable company?”
 
The most basic answer to the CEO’s question is 99% of venture capitalists are not interested in mature, “bread & butter” type businesses.

VC’s investors are looking for start-ups, (think high risk), very early stage, or somewhat early stage companies that need capital to grow rapidly and more often than not, they are not growing through acquisition.

Private equity, on the other hand, loves to grow by acquisition, but hates to invest in risky, early stage companies whereby the company’s business model has not been proven out over the long term.
 
Basically, private equity typically involves investing in mature companies that are already established and generating revenue.

Private equity firms typically acquire a controlling stake in these companies and work to improve their operations and profitability before selling them at a higher valuation.

By contrast, venture capital funds typically involve investing in early-stage companies that are still in the startup phase and may not yet be generating revenue.

Venture capitalists typically provide funding to help these companies develop and bring their products or services to market. Venture capital firms typically invest in high-growth industries, such as technology, biotech, and renewable energy.
 
In order to be efficient in the capital raising process, make sure you know the type of investing you need to approach.

𝐃𝐨𝐧’𝐭 𝐰𝐚𝐬𝐭𝐞 𝐭𝐨𝐧𝐬 𝐨𝐟 𝐭𝐢𝐦𝐞 𝐩𝐢𝐭𝐜𝐡𝐢𝐧𝐠 𝐲𝐨𝐮𝐫 𝐢𝐧𝐯𝐞𝐬𝐭𝐦𝐞𝐧𝐭 𝐢𝐝𝐞𝐚 𝐭𝐨 𝐭𝐡𝐞 𝐰𝐫𝐨𝐧𝐠 𝐭𝐲𝐩𝐞 𝐨𝐟 𝐢𝐧𝐯𝐞𝐬𝐭𝐨𝐫.

Raising capital is hard enough.

Don’t make the process even more difficult by chasing investors who really don’t care about your investment opportunity.

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Thank you!

David