Hey there,

I hope you are doing great.

About the investors - there are some thoughts I would like to share with you.

There are two types of investors: strategic and financial investors. At first, it might not look like there is a difference, but in fact, there is. And there is another party, that is rarely visible: the financing bank.

Often, banks ask buyers to conduct a due diligence for assurance. Even when there is no bank involved, strategic and financial investors conduct a due diligence. This helps be aware of any risks and opportunities.

Now, you might think, it doesn’t matter, which potential investors are looking at your firm. But it does. It makes all the difference. Each investor group has its individual focus. Not to forget that in the end, each investor has its own preferences. So, let's look at them.

Financial investors

Financial investors cover private equity, venture capital, family offices, and other types of funds. Financial investors follow different strategies, like the buy-and-build and the turnaround strategies. With both strategies, financial investors want to create value. Financial investors hold their targets on average five to seven years. In this time, measures are implemented to sell the company at a higher price thereafter.

The focus of venture capitalists is somewhat different. This is due to the early stage of the company and the related lack of data. Their focus is not fully covered here.

Financial investors are looking for growth potential. Typically, the market, the company’s market share, and past revenue growth are analyzed. In a buy-and-build scenario, also the company’s track record of acquisitions matters. This indicates whether the company has already managed to integrate another firm successfully. In turnaround scenarios, a detailed cost analysis is conducted. This helps understand how to restructure the firm.

In any case, investors want to understand the firm’s growth case, including associated revenues and costs or investments. Ideally, the company has already launched new products or services in the past. This would also help assess the growth case.

Finally, key employees matter. How can they contribute to the success and the firm and what has been their track record in the past?

Key takeaways and outlook for future messages

1. Strategic investors analyze the fit and technical capabilities. Also, they look at the employees as a whole and want to assess the cultural fit.
2. Financial investors focus on growth and a successful track record in the past. This also includes an experienced management team.
3. Financing banks need proof of the ability to convert earnings into cash.

Further articles?

Check out my content page with many more articles here.

I hope this provides some insights and as always feel free to reach out if you have any questions.

Best,

Jan