Myths and misconceptions about private equity

1

‘I need an introduction to a PE house before approaching them’

Just pick up the phone – the team at Panoramic love to hear directly from management teams who are looking to raise funding. In some Private Equity (PE) houses you may not get to a senior investment team member straight away but your proposal will still be considered.

2

‘I have to give up control of my business’

There are plenty of investors who specialise in taking minority stakes (e.g. Angels, VCTs and development capital houses) that leave the entrepreneur or management team with a majority share ownership.

3

‘I need to be the next Google 
or Facebook to attract investment’

This is a myth based on the US experience – one of our success stories involved an investment in a lamppost manufacturer! Others have made money from restaurants, clothes shops and scientific instruments. Strong growth prospects, a driven entrepreneur and a compelling USP are a good basis for discussion with a PE House.

4

‘The second last slide of your presentation needs to say 
‘Exit – Trade Sale or IPO in 3-5 years’

It is far more important to show you realise an investor needs to return their capital and have thought about how that might happen rather than producing the standard slide that you think an investor wants to see.

5

‘I need a full IM/Business plan before I approach you’

An executive summary is often enough to assess interest from an investor. This, coupled with a discussion around your business, is often enough to have a meeting where you will present the opportunity in more detail. A plan will be needed but please remember ‘quality not quantity’ is good. HOWEVER, the better prepared you are the higher chance of securing investment.

6

‘All PE investors are arrogant, money hungry and ready to stab you in the back at the first chance’

You don’t start a business, work all the hours available and give up most of your life to then welcome the person described in the heading into your business for 5+ years. Make sure you think you can get on with the investor and importantly that the investor adds more than just money.

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