Private Equity Match - Entrepreneur FAQ

What Is Private Equity Match?
Does It Cost Anything To Register A Project?
Can A Project Be Amended?
Who Is The Private Equity Match?
What Is Angel Investing?
Who are Angel Investors?
What Is Venture Capital?
What Are The Investments Stages?
What Do Private Investors Find Attractive In An Investment?
What Hedging Strategies Do Investors Use To Limit Their Downside Risk?

What Is Private Equity Match?
It is no secret that there is a void for funding early and expansion stage pre-IPO ventures. Private Equity Match (“PEM”) was founded to create a powerful method to match entrepreneurial ventures with qualified, accredited and experienced business high net-worth individuals (angels) and professional investors while avoiding the high fees charged by traditional investment bankers. This allows PEM to match Investor Profiles with Companies with pre-IPO financing needs and facilitate introductions and information sharing.

Does It Cost Anything To Register A Project?
No - Nothing, Zero, Nada. It costs nothing but time to register a project. Once there are one or more investors who express interest in your project and request additional information, you will be asked to pay a small one-time matching fee of $299.00. This small fee provides Entrepreneurs with numerous benefits resulting in large cost savings over traditional methods:

Entrepreneurs benefit from the traffic generated from high profile advertising campaigns for Investors.
Avoid the high fees charged by traditional investment bankers and lawyers to conduct investment searches.
Immediate notification of Investors whose criteria matches and who have requested more information.
Assists Entrepreneurs in providing information that Investors want.
Screens out “tire-kickers” and/or hobbyists and verifies that the registered Investors are serious about investing.

Can A Project Be Amended?
Yes – Simply login and request that we set-up your Edit Window. Make and enter your changes. The changes will be reviewed by our staff and you will be notified by email when approved.

Who Is The Private Equity Match?
The founder and principal of the Private Equity Match was the founding partner of a boutique investment banking and financial consulting firm. In 1999 the firm became associated with an international angel investment network that is responsible for investing over $250 million in early and expansion-stage companies. During the last few years it became quite evident that the firm did not have the human resources to assist all of the worthy entrepreneurial projects that it was presented. In order to assist more of these very deserving early and expansion stage projects, we have developed this confidential matching service. The system confidentially matches investor profiles with entrepreneurial projects, allowing the exchange of information and contact information to facilitate discussion between investors and entrepreneurs.

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What Is Angel Investing?
When Entrepreneurs with start-ups and expansion-stage companies have used up their own money, spent money from family and friends, and cannot qualify for any or additional bank loans or funds from venture capital firms. They need funding from private individuals or equity firms (Angels) to remain in business. The angel investor market is approximately $40 billion a year.

Who are Angel Investors?
Angel investors are wealthy individuals and families willing to invest in high-risk deals offered by people they admire and with whom they seek to be associated. Angels are also financially sophisticated private investors willing to provide seed, start-up and expansion capital for the higher-risk ventures. Angel investors possess the discretionary income needed for such risky ventures. In fact, a portion of their private equity portfolio is often set-aside for this purpose. Angel investors also possess a healthy appetite for self-arranged private deals. Such direct investment serves to maintain the self-confidence of these high-net-worth investors and demonstrates their continuing ability to make money. These investors have amassed wealth precisely because they know how to invest. Currently there are about 300,000 active angel investors, but the potential pool is much larger. About 2 million individuals possess the discretionary net worth to make angel investments.

The private investor typically has a postgraduate education and extensive previous management experience. They probably owned their own companies. They are very interested in earlier-stage and expansion companies because they can aggressively negotiate strong discounts, and they find the potential for high returns through capital appreciation is best realized through these pre-IPO deals.

What Is Venture Capital?
Financial capital supplied to young, innovative and expansive ventures, where both the risk and the potential returns are high. The Venture Capital offered by Angels tends to be more speculative and early-stage than that traditionally provided by the formal venture capital industry. Venture Capital firms have become more like money management firms and tend to gather larger pools of money. As a result, the size of their investments has increased, leaving seed and start-up stage companies to be funded by private equity.

What Are The Investments Stages?

Seed - means that a company is in the idea stage when the process is being organized;
R&D - is typical of the financing of product development for early stage or more developed companies.
Start-up - designates a venture completing its product development, initial marketing and in business less than 2 years.
First Stage – Working prototype, which has gone through beta testing and is beginning commercialization.
Expansion Stage – Expanding commercialization and is in need of growth capital.
Mezzanine – Increasing sales volume and is breaking even or is profitable. Funds are to be used for further expansion, marketing or working capital.
Bridge - designates a venture requiring short-term capital to reach stability.
Acquisition/Merger - refers to a company in need of capital to finance an acquisition or merger.
Turnaround - denotes a venture in need of capital to change from unprofitable to profitability.

What Do Private Investors Find Attractive In An Investment?
A recent study of investors tells us that they are looking for something they can identify with. They are looking for something that provides fun. Everyone seems to imagine that these investors are looking only at a return on investment. Return on investment is important, but these investors are looking for much more. Having already displayed their ability to make money–which has positioned them to be able to invest again–they are looking for something they can get involved in, something that excites them, something they can understand, and identify with. And, as we have said, it is fun to make money.

Real excitement occurs with what we call the pre-IPO (pre-initial public offering of stock). The only way to make $1 million to $5 million with $100,000 is to get involved in a pre-IPO project. A lot of people do not because they worry about the risk, but there are ways to manage and hedge against the risk to about 25 percent. And if you hit a home run two out of ten times, the returns can be significant and more than enough to make up for those risks.

In addition, investors are looking for deals that have a proprietary advantage or unique technology that positions that venture ahead of any competition. Investors are looking at recipients of capital who can articulate that competitive advantage in their documentation. The financial statements must spell out the potential and promise for ROI and must offer multiple scenarios supporting the figures. The argument and potential for return on investment must be strong. And where there is no history of profitability, entrepreneurs need to have a track record elsewhere in the industry.

The key to investment are the people. Business plans do not get funded, people get funded. Investors prefer a superior management team with a mediocre product over a superior product and a mediocre management team.

What Hedging Strategies do Investors Use To Limit Their Downside Risk?Hedging strategies begin by conducting thorough due diligence and by being thorough in all investigation related to due diligence. It is much more important to avoid a bad investment than to try to hit a home run. After all, angel investors are making an average of between one and three investments per year. So their ability to diversify risk becomes limited. They can manage only so many value-added investments, which take huge chunks of time to administer.

Hedging strategies begin with due diligence, but they continue by negotiating steep discounts very early on in the negotiating process for the risk being taken by these early stage investors. These investors rarely invest at the price valuation suggested by the entrepreneur.

Another way to hedge is by syndicating as early as possible. Bring other investors into the deal, backing off what you might have planned as your investment amount. Say an investor plans to put in $250,000. The investor backs off to $125,000 and attracts other investors who come in and do a couple of things. One, they carry on due diligence. Two, they confirm–or fail to confirm–the original investor's opinion. And three, if the additional investors do confirm, they share the financial risk.

Another strategy involves individuals using other people's money as soon as possible in the transaction. For example, rather than investing in the venture directly, an individual may provide a guaranteed line of credit as a part of the transaction. This saves the investor from touching current cash flow but guarantees his or her participation while using other financial capabilities that he or she possesses.