An Inside Look into Private Equity Firms

Often in the AceTech Community, we hear CEOs discussing avenues for acquiring additional capital.  One of the common ways this is done is through Private Equity firms.  So, we thought we would get the inside scoop into a private equity firm and hear about their role from their perspective.

Yong Kwon, Partner at Novacap and AceTech Ontario sponsor, sat down with us to give us the inside track as to what they’re looking for and what advice they have for companies looking to acquire capital.

Before you even look at which private equity firm you want to partner with, unless you’re planning on outright selling your company, you need a detailed plan of what it is that you want to gain out of the partnership.  Knowing what direction you’re looking to take the company with this equity will help you better determine which firm is right for your company.  “Do existing shareholders want to take some cash off the table?  How much capital is needed to grow the business, either organically or through M&A?  How and in what time horizon are shareholders planning to exit?”  These are just a few of the important questions founders and management should consider, explains Yong.

It’s also important to know what you want the firm’s involvement to be, especially as not all firms take the same stance with regards to their participation.  Novacap, for instance, takes a very hands-on, operationally- focused role.  This is because they have partners who have formally been c-level executives and who don’t just have a financial background.  However, many other firms are not as hands on.

Of course, track record is also very important.  What is the PE firm’s history and reputation investing in your sector?  Yong suggests asking colleagues or industry peers about their experiences dealing with specific PE firms and the people within those firms.  Many will have impressive backgrounds and past results they can point to, but ultimately you will want to feel comfortable that the people who are partnering with.  How much attention will you get from your PE partner and how important is your success to their overall portfolio?

There’s a common misconception entrepreneurs have about private equity firms – that they’re all the same.  They are not. Partnering with a PE firm is a long-term commitment and finding the right fit is critical.  Taking the time to do your research into all the different options available will help you ensure you find the right partnership between your company and a private equity firm.



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