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How to Start Your Own Private Equity Fund

private equity fund business plan

Private equity firms have been a historically successful asset class and the field continues to grow as more would-be portfolio managers join the industry. Many investment bankers have made the switch from public to private equity because the latter has significantly outperformed the Standard & Poor's 500 Index over the last few decades, fueling greater demand for private equity funds from institutional and individual accredited investors . As demand continues to swell for alternative investments in the private equity space, new managers will need to emerge and provide investors with new opportunities to generate alpha.

Key Takeaways

  • Private equity firms are growing thanks to their outperformance of the S&P 500. 
  • Starting a private equity fund means laying out a strategy, which means picking which sectors to target.  
  • A business plan and setting up the operations are also key steps, as well as picking a business structure and establishing a fee structure. 
  • Arguably the toughest step is raising capital, where fund managers will be expected to contribute 1% to 3% of the fund’s capital. 

Today's many successful private equity firms include Blackstone Group, Apollo Global Management, TPG Capital, Goldman Sachs Capital Partners, and the Carlyle Group. However, most firms are small to midsize shops and can range from just two employees to several hundred workers. Here are several steps managers should follow to launch a private equity fund .

Define the Business Strategy

First, outline your business strategy and differentiate your financial plan from those of competitors and benchmarks. Establishing a business strategy requires significant research into a defined market or individual sector. Some funds focus on energy development, while others may focus on early-stage biotech companies. Ultimately, investors want to know more about your fund's goals.

As you articulate your investment strategy , consider whether you will have a geographic focus. Will the fund focus on one region of the United States? Will it focus on an industry in a certain country? Or will it emphasize a specific strategy in similar emerging markets? Meanwhile, there are several business focuses you could adopt. Will your fund aim to improve your portfolio companies' operational or strategic focus, or will this center entirely on cleaning up their balance sheets ?

Remember, private equity typically hinges on investment in companies that are not traded on the public market. It's critical that you determine the purpose of each investment. For example, is the aim of the investment to grow capital for mergers and acquisitions activity? Or is the goal to raise capital that will allow existing owners to sell their positions in the firm?

Business Plan, Operations Setup

The second step is to write a business plan, which calculates cash flow expectations, establishes your private equity fund's timeline, including the period to raise capital and exit from portfolio investments . Each fund typically has a life of 10 years, although ultimately timelines are up to the manager's discretion. A sound business plan contains a strategy on how the fund will grow over time, a marketing plan to target future investors, and an executive summary, which ties all of these sections and goals together.

Following the establishment of the business plan, set up an external team of consultants that includes independent accountants, attorneys and industry consultants who can provide insight into the industries of the companies in your portfolio. It's also wise to establish an advisory board and explore disaster recovery strategies in case of cyberattacks, steep market downturns, or other portfolio-related threats to the individual fund.

Another important step is to establish a firm and fund name. Additionally, the manager must decide on the roles and titles of the firm's leaders, such as the role of partner or portfolio manager. From there, establish the management team, including the CEO, CFO, chief information security officer, and chief compliance officer . First-time managers are more likely to raise more money if they are part of a team that spins out of a previously successful firm.

On the back end, it's essential to establish in-house operations. These tasks include the rent or purchase office space, furniture, technology requirements, and hiring staff. There are several things to consider when hiring staff, such as profit-sharing programs , bonus structures, compensation protocols, health insurance plans, and retirement plans.

Establish the Investment Vehicle

After early operations are in order, establish the fund’s legal structure. In the U.S., a fund typically assumes the structure of a limited partnership or a limited liability firm. As a founder of the fund, you will be a general partner, meaning that you will have the right to decide the investments that compose the fund.

Your investors will be limited partners who don't have the right to decide which companies are part of your fund. Limited partners are only accountable for losses tied to their individual investment, while general partners handle any additional losses within the fund and liabilities to the broader market.

Ultimately, your lawyer will draft a private placement memorandum and any other operating agreements such as a limited partnership agreement or articles of association .

Determine a Fee Structure

The fund manager should determine provisions related to management fees, carried interest and any hurdle rate for performance. Typically, private equity managers receive an annual management fee of 2% of committed capital from investors. So, for every $10 million the fundraises from investors, the manager will collect $200,000 in management fees annually. However, fund managers with less experience may receive a smaller management fee to attract new capital.

Carried interest is commonly set at 20% above an expected return level. Should the hurdle rate be 5% for the fund, you and your investors would split returns at a rate of 20 to 80. During this period, it is also important to establish compliance, risk and valuation guidelines for the fund.

Raise Capital

Next, you will want to have your offering memorandum, subscription agreement , partnership terms, custodial agreement , and due diligence questionnaires prepared. Also, marketing material will be needed prior to the process of raising capital. New managers will also want to ensure that they have obtained a proper severance letter from previous employers. A severance letter is important because employees require permission to boast about their previous experience and track record.

All of this leads ultimately leads you to the biggest challenge of starting a private equity fund, which is convincing others to invest in your fund. Firstly, prepare to invest your own fund. Fund managers who had had success during their careers will likely be expected to provide at least 2% to 3% of their money to the fund's total capital commitments . New managers with less capital can likely succeed with a commitment of 1% to 2% for their first fund.

In addition to your investment track record and investment strategy, your marketing strategy will be central to raising capital. Due to regulations on who can invest and the unregistered nature of private equity investments, the government says that only institutional investors and accredited investors can provide capital to these funds.

Institutional investors include insurance firms, sovereign wealth funds , financial institutions, pension programs , and university endowments. Accredited investors are limited to individuals who meet a specified annual income threshold for two years or maintain a net worth (less the value of their primary residence) of $1 million or more. Additional criteria for other groups that represent accredited investors are discussed in the Securities Act of 1933 .

Once a private equity fund has been established, portfolio managers have the capacity to begin building their portfolio. At this point, managers will start to select the companies and assets that fit their investment strategy.

The Bottom Line 

Private equity investments have outperformed the broader U.S. markets over the last few decades. That has generated increased demand from investors seeking new ways to generate superior returns . The above steps can be used as a roadmap for establishing a successful fund.

Bain & Company. " Public vs. Private Equity Returns: Is PE Losing Its Advantage? "

United States Office of Government Ethics. " Capital Commitment ."

U.S. Securities and Exchange Commission. "' Accredited Investor' Net Worth Standard ."

private equity fund business plan

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What do I need to know before starting a private fund?

What is a private fund.

A private fund is an entity created to pool money from multiple investors that is not required to be registered or regulated as an investment company under the Investment Company Act . Private funds can differ, however, in how they pool money and how they deploy that money. Let’s consider a few general approaches.

How do private funds pool money from investors and what are some common investment approaches?

Investors provide capital icon

When do investors provide capital?

  • Private funds are not required to be registered or regulated as investment companies under the federal securities laws.  A private fund cannot publicly offer its securities. 
  • Private funds are structured to qualify for one of the following exclusions from the definition of investment company:

Venture Capital Funds

Venture capital funds typically

  • accept capital commitments from investors
  • “call down” capital from investors as needed over time for the fund to make investments

Private Equity Funds

Private equity funds typically

Hedge Funds

Hedge funds typically

  • require capital contributions from investors up front to enable the fund to deploy that capital quickly

Companies private funds invest icon

The Adviser

In what types of companies do private funds invest.

  • invest in illiquid, private assets—such as startups and other early-stage private companies
  • take minority interests in their portfolio companies
  • limit investors’ rights to withdraw their investments from the fund
  • invest in illiquid, private assets—including growing and later-stage private companies—or in public companies that they intend to take private
  • take controlling interests in their portfolio companies and often use leverage, or borrowing, to do so
  • invest in liquid assets—such as publicly-traded securities —and often use investment practices such as short selling and leverage
  • provide their investors flexible withdrawal rights from the fund

Interact portfolio companies icon

The Capital Raise

How do private funds interact with their portfolio companies.

  • serve as advisors to their portfolio companies, providing, for example, operational and/or strategic advice and connections, and may serve on a portfolio company’s board
  • are engaged in the management of their portfolio companies, particularly when they acquire a controlling interest in a company
  • do not directly engage in the management of the specific assets in which they invest (with the exception of certain specialized strategies such as shareholder activism)

Did you know?

Antifraud provisions of the federal securities laws broadly apply to all funds and advisers, whether or not they are otherwise subject to or required to register under other provisions of the federal securities laws.

In addition to these examples, there are other types of private funds and hybrid investment approaches. A new fund manager should consult with legal counsel as to the type of fund that makes the most sense for them, keeping in mind that whatever approach is selected will have further implications than are discussed here, including the determination of performance fees and the timing of distributions to investors.

What else do I need to consider as I start my private fund?

The following considerations may help guide you.

capital raising faq-private funds

Fund Considerations

Legal Structure . A private fund and any management entities require legal formation. For example, some private funds are structured as limited partnerships, in which case, the partnership will have a general partner and investors will participate as limited partners . Other legal structures include limited liability companies and corporations.

Documentation . Private funds are structured to reflect an arrangement between the fund’s manager(s) and its investors. Fund documents govern the relationships among those parties. For example, if you structure your private fund as a limited partnership, a limited partnership agreement, or LPA, will document the fund’s key legal terms and mechanics. This may include how the general partner may call for capital commitments, how profits are split between the general partner and the limited partners, any management fees , and the extent to which limited partners may withdraw from the fund.

investment adviser considerations icon

Investment Adviser Considerations

Firm Organization . A private fund is more than just the fund itself. The fund may have a separate investment adviser that provides investment advice. The investment adviser and any other “management” entities are each separate legal entities that will need to be formed and will have their own underlying partners or members.

One or more of the management entities will be an investment adviser . An investment adviser is required to register with either the SEC or its applicable state securities regulator as a registered investment adviser unless it is exempt or prohibited from applicable registration requirements. For example, exempt reporting advisers are exempt from registering with the SEC but are still subject to certain reporting requirements.

Documentation . Documentation often includes an investment management agreement governing the responsibilities of the investment adviser. If the investment adviser comprises more than one person, consider documenting the arrangements between the applicable parties, such as how to split management responsibilities and compensation between those persons and/or any employees.

Capital raising faq money icon

Capital Raise Considerations

Capital Raising . How—and from whom—do new fund managers raise capital? Consider your investment focus: what types of assets or companies do you plan to invest in? Do you have a geographic focus? Do you or any co-founders have a personal track record that you can point to?

As you seek to raise capital, keep in mind that your fundraise will be subject to federal and state securities laws . Private funds raise capital from investors through exempt offerings , which means any offering must fall within an exemption from registration under the Securities Act : Rule 506(b) and Rule 506(c) of Regulation D are two common offering types.

Documentation . Documentation for your capital raise may include, among other things:

  • an offering document—frequently called a private placement memorandum—that acts as a detailed disclosure document for potential investors; and
  • a subscription agreement through which investors contract to invest in the private fund.

These are only a handful of items that you may want to consider as you establish your private fund. The right advisors, including legal counsel, can help guide you through your options and advise you on the best course of action for your private fund. This resource represents the views of the staff of the Office of the Advocate for Small Business Capital Formation . It is not a rule, regulation, or statement of the Securities and Exchange Commission (“Commission”). The Commission has neither approved nor disapproved its content. This resource, like all staff statements, has no legal force or effect: it does not alter or amend applicable law, and it creates no new or additional obligations for any person. This resource does not provide legal advice. This resource was produced and disseminated at U.S. taxpayer expense.

Have suggestions on additional educational resources? Email [email protected] .

Modified: June 23, 2023

Articles & Alerts

Key considerations for starting a private equity fund: what you need to know – part 1.

As private equity firms continue to succeed and become ever prevalent in the alternative investment space, more aspiring portfolio managers are joining the race to launch their own private equity fund. The following summarizes the foundational steps that managers should follow to launch a private equity fund.

Outline Your Business Strategy

Establishing a business strategy requires a significant investment of time, effort, and research to determine, and includes your answers to many key questions to establish your private equity fund successfully. For example, will your fund focus on a specific sector or industry? Will you have a geographic focus, such as one region of the United States, an individual foreign country, or certain emerging markets? Ultimately, potential investors will want to know more about your fund’s strategy, so being prepared to address these and other relevant questions will go a long way in helping you to raise capital for your new fund.

Setting up Operations and a Business Plan

Starting your own private equity fund is in many ways not that different from starting any other business. You’re going to need a business plan which, among other things, calculates expected cash flow and establishes your fund’s timeline, including the capital-raising period. Private equity funds generally have an average life of 7 to 10 years, although it is usually up to the manager’s discretion and the execution of a solid business plan. A sound business plan contains growth strategies, a marketing plan, and a detailed executive summary with a conclusive section tying all these areas together.

Once a business plan has been completed, you should begin to meet with external service providers and consultants, such as accountants, attorneys, and other industry specialists, who can assist you with effectively and efficiently refining and executing your business plan.

Another important step is to form a firm to manage the fund and determine a fund name. The fund manager must decide on the roles and titles of the firm’s leaders, such as the role of partner or portfolio manager as well as the establishment of a management team, including the CEO, CFO, CIO, and CCO. At launch, however, it may be wise to outsource some of these functions to allow you time to execute your business plan while keeping costs in check.

Legal Needs

If you plan to raise a fund in the U.S., you may already know that fundraising is heavily regulated and that there are numerous legal and regulatory requirements that a fund manager must adhere to in order to comply with securities laws. The Securities & Exchange Commission (SEC) takes this compliance very seriously and a qualified attorney must be involved in the process early to make you aware of the rules and regulations associated with fundraising, investing, and managing the fund.

Here are some key questions to discuss with your attorney:

  • Who will I be able to raise money from? Regulations offer various options for a fund manager raising money, primarily depending on, and related to, the type of investors, the type of marketing, and the amounts being raised.
  • How can I raise the money? In addition to understanding which investors can participate in a fund, a fund manager should understand how those investors may be approached to invest. The fund manager will need to think carefully about what the message to investors will be and how it will be delivered.
  • What kind of money can be invested? Another concern is the type of money that a fund or fund manager can accept. There are a variety of restrictions in this area, but the two most common are investments from retirement accounts and investments from foreign accounts. Each of these areas creates potential issues regarding how a fund manager can invest, manage and report results to investors.
  • How much will the legal work cost? Every fund and every attorney is different, but you can expect start-up legal costs to run from $50,000 to more than $100,000.

By limiting the fact-finding phase of fund formation, a fund manager can focus their attorney’s time and effort on key compliance questions and avoid expensive discussions and rewrites. Having your fund’s marketing materials and a draft of its investment strategy and fee structure ready for review as you begin the legal process will also help to control legal costs as you look to launch your private equity fund.

Starting a private equity fund can be challenging, especially for those who don’t have any experience in doing so. It requires partnering with experienced accountants and other professionals, a tremendous effort to  refine your business strategy, setting up operations, a business plan, and legal considerations. The above steps can be used as a foundational roadmap to establish a successful fund.

For more information about what is involved in launching and operating a private equity fund, please contact a member of Anchin’s  Emerging Manager Platform  or your Anchin Relationship Partner.

Keep Reading – Key Considerations for Starting a Private Equity Fund: What You Need to Know – Part 2

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A Fund Managers’ business plan

Avoid the pitfalls of under-predicting expenses & over-predicting raising capital

Launching and running a hedge fund is a huge responsibility for any investment manager, requiring a significant amount of oversight for their investors. Making the right strategic decisions upfront is an essential component to a fund manager’s future success. Addressing the major decisions to be made:

  • What is the appropriate business plan?
  • Do we have the right strategy, structure and jurisdiction?
  • How will we raise capital?
  • Do we have the resources and technology needed to be scalable?  
  • How do we eliminate unforeseen expenses?

Fund managers can get into trouble by having an overly optimistic view. Under-predicting expenses and over-predicting raising capital is the common pitfall, so always take the conservative approach. Based upon the complexity of the investments, expenses may vary from 35K to 100K USD (€27K – €81K) and usually include legal cost, audit and tax and fund administration. Budgets should reflect whether the investors or the investment manager bear the burden. In all cases, creating a methodical business plan – from pre-launch through the fund lifecycle – will help eliminate a significant amount of unforeseen expenses, involve regulatory requirements and tackle investor concerns. 

For most emerging managers, the first year running cost are their primary concern along with raising capital. So opt for a cost-effective ramp up solution as your fund scales. Other factors to consider: 

  • Timely and accurate reporting to meet your investor needs;
  • Connect with local offices;
  • The appropriate technology for your strategy;
  • Streamlined execution.

Creating the appropriate structure will be based upon your investment strategy and location of your investors. The most common structure in the US for emerging managers is a Delaware Limited Partnership. These structures are: 

  • commonly formed;
  • open ended (not limited to the number of US investors);
  • non-regulated by the security and exchange committee (SEC);
  • cost effective.

Private equity funds are closed-ended (limiting the number of investors), have a typical life span of seven to ten years and are generally more complex than a typical open-ended fund. A significant amount of planning is needed to predict running costs and investment duration throughout the fund lifecycle. These are generally disclosed in the funds formation documents. Raising enough capital is always a key driver, as well as limitation of startup, management and personal expenses.

To successfully grow your fund, you need to have formulated an appropriate business plan and you should have a personal stake in the fund (the ‘Skin in the Game’): why would an investor invest, if you won’t? One of the mistakes emerging managers make is trying to raise capital before drafting their legal documents. This could give the impression that you are not serious about your fund. Most start-up funds raise initial capital from friends and family to develop a track-record, while others focus on institutional and high net worth investors. Considering the right sector, appropriate fees and the right business partner can dramatically improve your results.   

When selecting the right business partner:

  • Always consider a firm with a longstanding presence across the globe;
  • Find proven expertise, resources and knowledge to stay informed and involved on the appropriate jurisdiction and compliant structures;
  • Limit expenses and position yourself in the best possible light to raise capital;
  • Check for the option of turnkey solutions if you need them; it helps streamline funds to market while reducing costs;
  • Cutting edge technology is a critical component in successful fund administration and corporate services. We advise to select and invest in top class technology.

Just ask yourself: will you be the big fish in a small pond, or a small fish in a big pond? It is extremely important to align yourself with partners that are large enough to provide a comprehensive and seamless service level, yet small enough to offer you partnership and dedication needed. Choose service providers who have your best interest in mind and truly act as an extension of your business. Regardless of your fund size and scope.

Need to know more? The Bolder Group (formerly Circle Partners and AMS Financial) has been working with emerging and established fund manager since the year 2000, playing an essential role in fund structuring, ongoing corporate and legal support, fund accounting and administrations services, register and transfer agency services, financial, regulatory and tax reporting services. We create partnerships with clients and create a customized solution to fit individual needs.

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Start » strategy, how to attract a private equity firm to invest in your business.

Learn how to make your business attractive to private equity firms with this how-to guide.

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For a small business eager to grow in capacity and reach, private equity firms can provide the necessary support and capital to reach key organizational goals. Here is a brief overview of how to find and connect with private equity firms and ultimately get them to invest in your business.

What is a private equity firm?

Private equity is a form of capital investment that entrepreneurs can use to grow their businesses. Private equity is a viable pathway for small business owners wanting to access capital and funding by providing the opportunity for investors to directly invest in their companies. Private equity firms can contribute to businesses with investments, seed funding, loans, and other support systems. Growing businesses can benefit from private equity firms because they provide a safety net, capacity for growth, and opportunity for experimentation.

Private equity investors are institutional and accredited investors with the capacity to delegate a large amount of money to smaller companies, so small business owners without an initial public offering (IPO) often consider this type of funding.

[Read more: How to Choose the Right Private Equity Firm for Your Business ]

How to attract private equity investors

If you’re interested in private equity to fund your business, here are a few ways to make your business attractive to potential investors.

Create a detailed business plan

Having an effective business plan is the best way to communicate with potential investors and funders about your company’s goals, current operational structures, and capacity for return on investments. Your business plan should answer any initial questions investors may have and outline the next steps.

There are many types of business plans to consider when writing yours. The most common business plan types are:

  • A traditional business plan: The traditional business plan offers a thorough and in-depth view of your company. The plan typically includes an executive summary, company description, market analysis, organization and management outline, service or product line, marketing and sales information, funding requests, and financial projections, and it usually closes with an appendix. This detailed overview allows investors to understand the goals for your business and how you will achieve them.
  • A lean business plan: The lean business plan is usually an outline or one-pager that businesses use as an overview of their company. Leveraging charts and graphics, these types of business plans touch on key partnerships, activities, resources, value propositions, customer relationships, and more.

[Read more: How to Write a Startup Business Plan ]

Growing businesses can benefit from private equity firms because they provide a safety net, capacity for growth, and opportunity for experimentation.

Protect your intellectual property (IP)

As you're building and innovating your business, you must secure its value by protecting your intellectual property, which includes intangible creations like domain names and company designs. Protecting your IP with trademarks, patents, copyrights, and the right internal operations will reassure private equity firms that you’ve taken the proper steps to secure your business assets.

Demonstrate your market potential

Attract investors by demonstrating your competitive advantage, market potential, and opportunity for financial returns. Investors evaluate a business’s market potential through its potential revenue of $300 to $500 million, its edge over competitors, its business model with profit margins of at least 50%, and its reputable and effective CEO.

Maintain detailed records

Keeping and maintaining detailed records of your business is essential for the business’s growth as well as appealing to investors. This can be information regarding business inception, operations, finances, organizational history, and more. By updating and keeping track of these records, you’ll attract investors by showing commitment, reliability, and strong management. Keep track of these records through databases, archives, and other online tools.

Outline an exit plan

Private equity firms usually support businesses for an average of five years. This is to provide the business with enough capital either to prepare for an IPO or to be purchased by another company. By providing investors with an exit plan pathway, businesses are able to take that next step.

Such steps may include:

  • Selling shares as part of the IPO.
  • Securing a strategic acquisition or, in other words, selling your business to another suitable company.
  • Allowing private investors to sell their stakes in the business to another private equity firm.
  • Repurchasing equity states from private investors.
  • Liquidizing company assets (typically as a last resort).

To learn more about how to successfully pitch investors, read our complete checklist for startups.

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How we did it: Implementing a private-equity strategic vision

Established organizations are mostly structured to do yesterday’s work. To meet the changing needs of today’s and tomorrow’s customers, businesses must constantly reinvent their structure, human capital, processes, and technology.

In my experience, private-equity (PE) firms do this—and create value—by focusing on the medium and long term, as well as on the short term. Among the best of them, this emphasis on the classic three horizons of growth shows up in their vision, investment, governance, operations, talent, and capitalization. Over my career, I’ve worked to incorporate that basic mind-set into the culture at both Aetna and Clayton, Dubilier & Rice (CD&R). Here’s how we did it.

Vision: Clearly articulate the five- to seven-year vision and plan for the company.

A successful long-term strategy requires historical or baseline products, emerging product lines, and future growth trajectories. Public companies often focus on the first two, but the third is the hardest—even though it often has the biggest impact on long-term value creation. Private-equity firms more actively explore this third horizon and are diligent about identifying and making tactical bets against it.

I served as chairman at PharMEDium, a leader in customized pharmacy sterile compounding, after it was acquired by CD&R. We identified it as a major growth opportunity, and after extensive due diligence, we developed an investment thesis. The thesis focused on enhancing penetration of current customers, launching new products, and ramping up to serve a new customer segment: the outpatient market. Our thesis was well executed by an excellent CEO in 2013. Our $900 million investment paid off to the tune of $2.6 billion when we sold it just two years later, much sooner than expected. Public companies could make similar decisions, but managers there are often hesitant to take the short-term hit to their earnings-per-share (EPS) ratio. That limits their long-term growth investments to things they can offset by cutting costs. The lesson here for public executives is to consider making a set of focused, tactical bets on the long term, and then clearly communicate the value story to the market.

We took a similar approach during my tenure as CEO of Aetna, where we made long-term vision and the innovation cycle a key focus for our management team. This was partly because of industry regulation, which required that we write down every new product we created and file it with public agencies. That eventually allowed competitors to launch copycat products, so we had to innovate constantly to stay ahead of our peers. As a result, we emphasized a three-year planning horizon, devoting significant management attention to “white space” brainstorming on the likely evolution of the industry and ways to leverage technology to create new services and capabilities. Aetna’s market cap over the period grew to $15.3 billion, from $4.7 billion.

Investment: Determine the significant capital and operating investments required to achieve the vision, independent of impact on near-term earnings.

Making substantial investments in growth over the long term can be hard for a public-company CEO. Given that the average tenure of a Fortune 500 CEO is under five years, the returns on long-term investments can easily accrue outside the EPS timeline as CEO.

Managers of PE-backed companies are much more likely to invest in change early, particularly within the first one or two years of acquiring a portfolio company, if it will increase earnings or change the trajectory of the business at the time of exit. The new expenses of PharMEDium’s investment in the outpatient market did not have to be covered by cuts elsewhere, as they might have in an EPS environment. Instead, the board and management agreed on the costs and benefits of investment and were comfortable sacrificing short-term earnings to a tactical bet that it would drive long-term value.

Governance: Ensure alignment and cooperation in the strategic-planning process among the chairman, board, CEO, and executive team.

Public boards tend to focus on key strategic and compliance questions, such as risk management, and often come from a range of industries and backgrounds. A private-equity board, by contrast, will usually be filled with a combination of private-equity professionals and experienced former executives from the industry in which the company operates. A board chair may meet with a CEO several times a week, offering counsel on how to achieve the strategic plan, helping to assess and sponsor growth opportunities, and supervising key operational challenges. This level of board involvement and relevant experience makes it easier to reach alignment on vision, horizons, and investments.

Envision Healthcare is one good example of this. Soon after CD&R acquired Envision in 2011, the board and I approved the rollout of an ambitious revenue-growth expansion plan. Under the implementation of CEO Bill Sanger, the company eventually almost doubled its revenue to $5.45 billion, from $2.90 billion. Because of this successful growth, CD&R took Envision public two years later, in 2013. Board alignment has allowed the expansion plan to continue, with CD&R returning a fivefold multiple of capital on its investment.

Operational improvement: Assess restructuring needs with a fresh eye.

The quarterly timing of earnings that matters so much in a public company doesn’t matter in private equity, as long as earnings at exit meet or exceed the original investment. As a result, PE-backed companies are much more willing to take a restructuring charge in the near term or to weather midterm earnings volatility. This, along with different approaches to governance, also allows PE-backed companies to recover more quickly than public companies during periods of distress.

Restructuring a company in the public market is still feasible if managers clearly articulate a plan and the pathway to long-term value, similar to private equity’s approach. For example, at Aetna in 2002, Jack Rowe and I set out to transform the business and improve performance. Knowing that would take time, we made the decision to withdraw EPS guidance. This, we believed, would minimize distraction and focus the market on the turnaround story. I then did a listening tour with all of our customers to understand their preferences and unmet needs. Those conversations led to the most fundamental component of the restructuring: refocusing the business on all fronts—from product development to sales and finance—to serve customers vertically, by industry segment, rather than horizontally, by geography. This required a significant redesign and streamlining of the organization, as well as extensive value-chain analysis to break apart each segment and assess potential profit pools. It was also crucial to the long-term growth that followed, as Aetna focused on developing new products, services, and capabilities for each customer segment. In addition, it formed the basis of a compelling value-creation story for our investors.

Talent management and incentives: Tie management-performance incentives to long-term shareholder equity returns, focusing on value at exit rather than near-term liquidity.

Public companies often tie executive compensation to shares or options. Executives receive grants annually that vest at a given level of performance or length of time—usually a year. Not surprisingly, this can encourage a focus on near-term earnings.

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Perspectives on the long term

In contrast, private equity typically ties executive compensation to a five- to seven-year view. The entire executive team and board receive the standard cash compensation, but their incentives have little connection to near-term liquidity. They do receive one-time equity grants at the outset of a deal, but must usually hold them for the duration of the holding of the company. That compensation structure enables them to focus on investing in and building toward value at the eventual sale or exit from a business. That, in turn, is a key element of private-equity success, because it encourages managers to act as owners, with a focus on cost efficiency, cash flow, and long-term value.

Public management teams should explore tying compensation to longer-term performance metrics and liquidity milestones. Aetna, for example, made several key changes to its compensation structure. First, the company created profit-and-loss statements for each of the end-to-end customer segments. Then it tied incentives not just to running the day-to-day business but also to a specific set of innovation metrics around expanding the products, services, and interactions with that customer segment.

Capitalization: Optimize the capital structure of the business, basing debt load on interest coverage and enterprise value rather than on EPS impact.

In contrast to the public market’s focus on post-interest EPS and retaining an investment-grade credit rating, private-equity firms often choose to utilize more leverage. This gives them increased flexibility with respect to, for example, more earnings potential for acquisitions, without equity dilution.

In fact, as McKinsey research shows, almost a third of the value created by private equity comes from the appreciation of market or sector value, plus financial leverage independent of company outperformance. For instance, CD&R purchased Envision Healthcare in 2011 for $3.2 billion, with $915 million of equity. In addition to the company’s significant operational outperformance, its use of leverage multiplied its equity return. Today, Envision Healthcare has an enterprise value of $6.7 billion, with $3.8 billion of equity.

Ron Williams is the former chairman and CEO of Aetna; a director on the boards of American Express, Boeing, and Johnson & Johnson; and an adviser to the private-equity firm Clayton, Dubilier & Rice.

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Private Equity Firm Business Plan [Sample Template]

By: Author Tony Martins Ajaero

Home » Business Plans » Financial Services

Are you about starting a private equity firm ? If YES, here is a complete sample private equity firm business plan template & feasibility report you can use for FREE .

If you are an investment banker or you have been able to grow through the ladder of the business world with a niche in investment, then you should consider starting your own private equity firm. Private equity firms make use of their available funds or raised funds from investors with the aim of investing in underperforming companies with potentials, with the aim of repositioning the companies.

Starting this type of business does not only require huge capital base but also relevant experience in the industry. If you have not cut your teeth in the industry, you are likely not going to get investors to commit their cash in your business. Investors only invest their hard earned money with those who have track records in investment.

If you have decided to start a private equity firm, then you should must make sure that you carry out thorough feasibility studies and market survey.

Business plan is yet another very important business document that you should not take for granted when launching your own business. Below is a sample private equity firm business plan template that will help you to successfully write your own.

A Sample Private Equity Firm Business Plan Template

1. industry overview.

The Private Equity, Hedge Funds & Investment Vehicles industry is made up of Private equity funds, hedge funds, closed-end funds and unit investment trusts. This firms basically raise capital to invest in various asset classes. Industry assets have become increasingly integral to institutional investors’ portfolios and the larger asset-management market.

Institutional investors are individuals or organizations that trade securities in such substantial volumes that they qualify for lower commissions and fewer protective regulations since they are assumed to be knowledgeable enough to protect themselves.

Increasing demand from institutional investors has contributed to the surge in the industry’s assets under management (AUM) and revenue over the past five years.

It is a fact that the Private Equity, Hedge Funds & Investment Vehicles industry is growing faster than most industries in the financial services sector not only in the united states but across the global market. Industry value added (IVA), a measure of the industry’s contribution to the overall economy, is projected to increase at a 6.9 percent annualized rate over the next 10 years.

Without a doubt, the Private Equity, Hedge Funds & Investment Vehicles industry is a very large and thriving not only in the developed nations, but also in developing and under developing countries of the world. Statistics has it that the Private Equity, Hedge Funds & Investment Vehicles industry in the United States of America is worth $229 billion, with an estimated growth rate of 7.3 percent between 2013 and 2018.

There are about 20,647 registered and licensed private equity firms in the United States and they are responsible for employing about 80,298 people. It is important to state that there is no company with a dominant market share in this industry.

A recent report published by IBISWorld shows that over the past five years, the Private Equity, Hedge Funds & Investment Vehicles in the US industry has grown by 7.2 percent to reach revenue of $229bn in 2018. In the same time frame, the number of businesses has grown by 2.4 percent and the number of employees has grown by 8.8 percent.

The report also shows that an increase in the regulation and taxation of private equity, hedge funds or other investment vehicles may raise their compliance costs, reduce their returns and limit the number of investment activities companies can undertake.

Regulation for the Investment Management industries is expected to increase in 2018, posing a potential threat to the industry.

So also, institutional investors such as retirement and pension plans, are the largest contributors to alternative investment vehicles, such as private equity and hedge funds due to their low liquidity and high-return needs. As pension plans increase their asset levels to fund future retirement benefits, they will invest in private equity and hedge funds and boost industry revenue through asset-management fees.

Demand from retirement and pension plans is expected to increase in 2018, representing a potential opportunity for the industry. The truth is that with the rate at which private equity firms and similar businesses are growing in the United States, it means it is a business that is worth starting most especially if you have the expertise and capital.

2. Executive Summary

Thomas McKenzie® Private Equity Firm, Inc. is a registered, licensed and accredited private equity firm that will be based in Medford – Oregon.

We are well equipped to operate in the Private Equity, Hedge Funds & Investment Vehicles industry and carry out key functions that revolve around raising capital to invest in various asset classes in the United States of America. We are aware that to run a standard private equity firm can be demanding which is why we are well trained, certified and fortified.

Thomas McKenzie® Private Equity Firm, Inc. is a client – focused and result driven private equity firm that provides broad – based services. We will offer trusted and profitable services to all our clients. We will ensure that we work hard to meet and surpass our clients’ expectations whenever they invest their funds with us.

At Thomas McKenzie® Private Equity Firm, Inc., our client’s best interest would always come first, and everything we do is guided by our values and professional ethics. We will ensure that we hire professionals who are well experienced in this line of business with good track record of return on investments.

Thomas McKenzie® Private Equity Firm, Inc. will at all times demonstrate her commitment to sustainability, both individually and as a firm, by actively participating in our communities and integrating sustainable business practices wherever possible.

We will ensure that we hold ourselves accountable to the highest standards by meeting our client’s needs precisely and completely.

Our plan is to position the business to become one of the leading brands in the Private Equity, Hedge Funds & Investment Vehicles industry in the whole of Medford, and also to be amongst the top 20 private equity firms in the United States of America within the first 10 years of operation.

This might look too tall a dream but we are optimistic that this will surely be realized because we have done our research and feasibility studies and we are confident that Oregon is the right place to launch our business before expanding to other cities in the United States of America.

Thomas McKenzie® Private Equity Firm, Inc. is owned and managed by Thomas McKenzie. Thomas McKenzie has a Degree in Business Administration from Northern Michigan University; MBA in Economics from Columbia Business School. Investing is a family trait that Thomas McKenzie inherited from his father, a stockbroker and U.S. congressman.

At the age of 13, Thomas McKenzie made his first investment, and by the age of 13 he was selling horse racing tip sheets and operating a paper delivery service. Thomas McKenzie has over 18 years’ experience working at various capacities in the Private Equity, Hedge Funds & Investment Vehicles industry in the United States of America.

3. Our Products and Services

Thomas McKenzie® Private Equity Firm, Inc. is going to offer varieties of services within the Private Equity, Hedge Funds & Investment Vehicles industry in the United States of America. We are prepared to make profits from the industry and we will do all that is permitted by the law in the United States to achieve our business goals. Our business offerings are listed below;

  • Private equity funds
  • Hedge funds
  • Closed-end funds
  • Unit investment trusts
  • Trade in financial products
  • Related investment consulting and advisory services

4. Our Mission and Vision Statement

  • Our vision is to build a private equity brand that will become one of the top choices for investors in the whole of Medford – Oregon. We want to be known for professionalism and outstanding results.
  • Our mission is to position the business to become one of the leading brands in the Private Equity, Hedge Funds & Investment Vehicles industry in the whole of Medford, and also to be amongst the top 20 private equity firms in the United States of America within the first 10 years of operation.

Our Business Structure

The truth is that it won’t be out of place if we decide to settled for two or three staff members, but as part of our plan to build a standard private equity firm, we have perfected plans to get it right from the beginning which is why we are going to hire qualified, competent, honest and hardworking employees to occupy all the available positions in our firm.

The picture of the kind of the private equity firm we intend building and the business goals we want to achieve is what informed the amount we are ready to pay for the best hands in Oregon and environs as long as they are willing to work with us. Below is the business structure that we will build Thomas McKenzie® Private Equity Firm, Inc.;

  • Chief Executive Officer
  • Private Equity Consultants/Investor Specialists

Admin and HR Manager

Risk Manager

  • Marketing and Sales Executive
  • Chief Financial Officer (CFO)/Chief Accounting Officer (CAO).
  • Customer Care Executive/Front Desk Officer

5. Job Roles and Responsibilities

Chief Executive Office:

  • Increases management’s effectiveness by recruiting, selecting, orienting, training, coaching, counseling, and disciplining managers; communicating values, strategies, and objectives; assigning accountabilities; planning, monitoring, and appraising job results
  • Responsible for fixing prices and signing business deals
  • Responsible for providing direction for the business
  • Creates, communicates, and implementing the organization’s vision, mission, and overall direction – i.e. leading the development and implementation of the overall organization’s strategy.
  • Responsible for signing checks and documents on behalf of the company
  • Evaluates the success of the organization

Private Equity Consultants/Investor Specialist

  • Provides market research and implementing new investment product and strategies
  • Create research and review platforms for new, existing and potential investment products
  • Exceed client expectations with returns on investments
  • Works closely with analysts and traders to ensure trading strategy is carried out correctly
  • Construct and review performance reports to show to investors
  • Performs due diligence visits and assessing investment management firms and quantitatively analyzing investment pools
  • Plans, designs and implements an overall risk management process for the organization
  • Performs risk evaluation which involves comparing estimated risks with criteria established by the organization such as costs, legal requirements and environmental factors, and evaluating the organization’s previous handling of risks;
  • Establishes and quantifies the organization’s ‘risk appetite’, i.e. the level of risk they are prepared to accept;
  • Performs risks reporting in an appropriate way for different audiences, for example, to the board of directors so they understand the most significant risks
  • Carries out processes such as purchasing insurance, implementing health and safety measures and making business continuity plans to limit risks and prepare for eventualities
  • Conducts audits of policy and compliance to standards, including liaison with internal and external auditors;
  • Provides support, education and training to staff to build risk awareness within the organization.
  • Responsible for overseeing the smooth running of HR and administrative tasks for the organization
  • Designs job descriptions with KPI to drive performance management for clients
  • Maintains office supplies by checking stocks; placing and expediting orders; evaluating new products.
  • Ensures operation of equipment by completing preventive maintenance requirements; calling for repairs.
  • Defines job positions for recruitment and managing interviewing process
  • Carries out induction for new team members
  • Responsible for training, evaluation and assessment of employees
  • Responsible for arranging travel, meetings and appointments
  • Oversees the smooth running of the daily office activities.

Marketing/Investor Relations Officer

  • Identifies prioritizes, and reaches out to new partners, and business opportunities et al
  • Identifies development opportunities; follows up on development leads and contacts
  • Responsible for handling business research, marker surveys and feasibility studies
  • Documents all customer contact and information
  • Represents the company in strategic meetings
  • Help to increase growth for the company

Chief Financial Officer (CFO)/Chief Accounting Officer (CAO)

  • Responsible for preparing financial reports, budgets, and financial statements for the organization
  • Prepares the income statement and balance sheet using the trial balance and ledgers prepared by the bookkeeper.
  • Provides managements with financial analyses, development budgets, and accounting reports
  • Responsible for financial forecasting and risks analysis
  • Performs cash management, general ledger accounting, and financial reporting for one or more properties
  • Responsible for developing and managing financial systems and policies
  • Responsible for administering payrolls
  • Ensures compliance with taxation legislation
  • Handles all financial transactions for the company
  • Serves as internal auditor for the company

Client Service Executive/Front Desk Officer

  • Welcomes guests and clients by greeting them in person or on the telephone; answering or directing inquiries.
  • Ensures that all contacts with clients (e-mail, walk-In center, SMS or phone) provides the client with a personalized customer service experience of the highest level
  • Through interaction with clients on the phone, uses every opportunity to build client’s interest in the company’s services
  • Consistently stays abreast of any new information on the company’s products, promotional campaigns etc. to ensure accurate and helpful information is supplied to clients
  • Receives parcels/documents for the company
  • Distribute mails in the organization
  • Handles any other duties as assigned by the line manager

6. SWOT Analysis

Thomas McKenzie® Private Equity Firm, Inc. engaged the services of a professional in the area of business structuring to assist our organization in building a well – structured private equity firm that can favorably compete in the industry.

Part of what the business consultant did was to work with the management of our organization in conducting a SWOT analysis for Thomas McKenzie® Private Equity Firm, Inc. Here is a summary from the result of the SWOT analysis that was conducted on behalf of Thomas McKenzie® Private Equity Firm, Inc.;

Our core strength lies in the power of our team; our workforce. We have a team that can give our clients good returns on their investment; a team that are trained and equipped to pay attention to details and to deliver excellent jobs. We are well positioned and we know we will attract loads of clients from the first day we open our doors for business.

As a new private equity firm, it might take some time for our organization to break into the market and gain acceptance especially from corporate clients in the already saturated Private Equity, Hedge Funds & Investment Vehicles industry, that is perhaps our major weakness. So also we may not have the required cash to give our business the kind of publicity we would have loved to.

  • Opportunities:

The opportunities in the Private Equity, Hedge Funds & Investment Vehicles industry is massive considering the number of investors and small businesses who would need investment support from private equity firms to grow their businesses and increase their profits. As a standard and accredited private equity firm, we are ready to take advantage of any opportunity that comes our way.

Private equity services involve a large amount of cash and it is known to be a very high risk venture, hence whoever chooses to manage it must not just have solid investment background, but must also know how to handle risks and discover potential thriving businesses and opportunities.

The truth is that if you are not grounded in risks management as a private equity, you may likely throw away peoples’ monies. Just as in any other business and investment vehicles, regulations, tax, economic downturn, unstable financial market and unfavorable government economic policies can hamper the growth and profitability of private equity firms.

7. MARKET ANALYSIS

  • Market Trends

A close observation of happenings in the industry shows that in the dawn of recessionary declines, the industry is expected to continue on a path to growth, but not without a few ups and downs. As a result of this trend, Private Equity, Hedge Funds & Investment Vehicles industry revenue is expected to grow over the five-year period at an annualized rate of 7.3 percent.

The revenue growth for the industry was restrained in the early part of the period as the industry was reluctant to bounce back from the financial crisis and subsequent recession of the prior period that caused stock markets and business activity to dramatically contract in the United States.

The nature of private equity investment requires the services of core investment professionals. As a matter of fact, before any investor can commit their hard earned money under your care as a hedge fund manager, they usually would want to know your profile.

On the average, private equity firms employ strategies that can help them reduce market risk specifically by shorting equities or through the use of derivatives.

This is why many investment strategies, mostly arbitrage strategies, are limited as to how much capital they can successfully employ before returns starts diminishing. Little wonder most successful fund managers place limit on the amount of capital they will accept per time.

8. Our Target Market

Private equity is simply an investment medium that enables big time accredited investors pool cash or capital together to be able to invest in securities and any other form of investment opportunity that requires large initial capital to invest.

The fact that hedge funds requires large capital makes it easier for only the rich and accredited investors to cash in on it. Hedge funds are only open to limited partners with the required cash for investing in capital intensive business portfolios.

Our target market cuts across businesses and investors that are willing to invest. We are coming into the industry with a business concept that will enable us produce good returns on investment for our clients. Below is a list of the individuals and organizations that we have specifically designed our services for;

  • Accredited Investors
  • Wealthy People in the Society
  • Investment Clubs
  • Top corporate executives
  • Corporate Organizations / Blue Chip Companies
  • Small and medium scales businesses

Our competitive advantage

Despite the fact that private equity investment strategies give huge returns on investment, it is indeed risky venture. For you to survival as a private equity firm, you should be able to come up with workable investment strategies; strategies that will help you attract the required cash/capital and above all you should be a good risk manager and one that can spot a potential thriving business from afar.

We are quite aware that to be highly competitive in the industry means that we should be able to give good returns on investments to our clients, turn around the fortunes of a dying company for good , spot potential successful business ideas and invest in them, deliver consistent quality service, our clients should be satisfied with our investment strategies and we should be able to meet the expectations of our clients.

Thomas McKenzie® Private Equity Firm, Inc. might be a new entrant into the Private Equity, Hedge Funds & Investment Vehicles industry in the United States of America, but their management staff are highly qualified portfolio management experts in the United States. These are part of what will count as a competitive advantage for us.

Lastly, our employees will be well taken care of, and their welfare package will be among the best within our category in the industry, meaning that they will be more than willing to build the business with us and help deliver our set goals and achieve all our aims and objectives.

9. SALES AND MARKETING STRATEGY

Sources of Income

Thomas McKenzie® Private Equity Firm, Inc. is established with the aim of maximizing profits in the Private Equity, Hedge Funds & Investment industry and we are going to ensure that we do all it takes to attract clients on a regular basis. Thomas McKenzie® Private Equity Firm, Inc. will generate income by offering the following investment related services;

10. Sales Forecast

One thing is certain, there would always be accredited investors, small and medium scale businesses and wealthy individuals who would need the services of tested and trusted private equity firms.

We are well positioned to take on the available market in Medford and other key cities in the United States of America and we are quite optimistic that we will meet our set target of generating enough profits from our first six months of operation and grow the business and our clientele base.

We have been able to examine the Private Equity, Hedge Funds & Investment industry, and we have analyzed our chances in the industry and we have been able to come up with the following sales forecast. Below is the sales projection for Thomas McKenzie® Private Equity Firm, Inc., it is based on the location of our business and the wide range of investment management services that we will be offering;

  • First Fiscal Year: $750,000
  • Second Year: $ 1.5 Million
  • Third Year: $3 Million

N.B : This projection was done based on what is obtainable in the industry and with the assumption that there won’t be any major economic meltdown and there won’t be any major competitor offering same services as we do within same location. Please note that the above projection might be lower and at the same time it might be higher.

  • Marketing Strategy and Sales Strategy

As a business that aims to stay at the top of our game and generate consistent income, our sales and marketing team will be recruited base on their vast experience in the industry and they will be trained on a regular basis so as to be equipped to meet the overall goal of the organization.

We will also ensure that our return on investment and excellent job deliveries speaks for us in the marketplace. Our goal is to grow our private equity firm to become one of the top 20 private equity firms in the United States of America.

Which is why we have mapped out strategies that will help us take advantage of the available market and grow to become a major force to reckon with not only in the Medford but also in other cities in the United States of America. Thomas McKenzie® Private Equity Firm, Inc. is set to make use of the following marketing and sales strategies to attract clients;

  • Introduce our business by sending introductory letters alongside our brochure to corporate organizations, startups, accredited investors, entrepreneurs and key stake holders in Medford and other cities in the United States
  • Advertise our business in relevant financial and business related magazines, newspapers, TV and radio stations.
  • List our business on yellow pages’ ads (local directories)
  • Attend relevant international and local finance and business expos, seminars, and business fairs et al
  • Create different packages for different category of clients in order to work with their budgets and still deliver good returns on investment
  • Leverage on the internet to promote our business
  • Engage direct marketing approach
  • Encourage word of mouth marketing from loyal and satisfied clients

11. Publicity and Advertising Strategy

The uniqueness of this industry is such that it is the result they produce that helps boost their awareness. Private equity firms are strategic when it comes to inviting investors to invest in a project or when it comes to acquiring a struggling company.

It will be out of place to boost your private equity firm if you have not proven your worth in the industry. If you have successfully proven that you have what it takes to operate a successful private equity firm, then you next port of call is to strategically engage the media to help you promote your brand and also create a positive corporate identity.

We have been able to work with our brand and publicity consultants to help us map out publicity and advertising strategies that will help us walk our way into the heart of our target market. We are set to take the industry by storm which is why we have made provisions for effective publicity and advertisement of our private equity firm.

Below are the platforms we intend to leverage on to promote and advertise Thomas McKenzie® Private Equity Firm, Inc.;

  • Place adverts on both print (community based newspapers and magazines) and electronic media platforms
  • Sponsor relevant community based events/programs
  • Leverage on the internet and social media platforms like; Instagram, Facebook, twitter, YouTube, Google + et al to promote our brand
  • Install our billboards on strategic locations all around Medford.
  • Distribute our fliers and handbills in target areas
  • Ensure that all our workers wear our branded shirts and all our vehicles are well branded with our company’s logo.

12. Our Pricing Strategy

Private equity firms are known to generate income from various investment portfolios hence there are no pricing models for this type of business . But on the other hand, they tend to negotiate with their financial partners on percentage whenever they invest their hard earned money in an investment vehicle handled by a private equity firm.

At Thomas McKenzie® Private Equity Firm, Inc. we will ensure that we give good returns on investment (ROI) and always maximize profits for the business.

  • Payment Options

At Thomas McKenzie® Private Equity Firm, Inc. our payment policy is going to be all inclusive because we are quite aware that different members prefer different payment options as it suits them but at the same time, we will ensure that we abide by the financial rules and regulation of the United States of America.

Here are the payment options that Thomas McKenzie® Private Equity Firm, Inc. will make available to her members;

  • Payment via bank transfer
  • Payment via online bank transfer
  • Payment via mobile money
  • Payment via check
  • Payment via bank draft

In view of the above, we have chosen banking platforms that will enable our members make payment for their service charges monthly and investment stake without any stress on their part. Our bank account numbers will be made available on our website and promotional materials.

13. Startup Expenditure (Budget)

The cost of starting a private equity firm is in the two fold; the cost of setting up the office structure and the capital meant for investment. The amount required to invest in this line of business can range from 1 million US dollars to even multiple millions of dollars. So you must employ aggressive strategies to pool such cash together.

As regards the cost of setting up the office structure, your concern should be to secure a good office facility in a busy business district; it can be expensive though, but that is one of the factors that will help you position your firm to attract the kind of investors you would need. This is the financial projection and costing for starting Thomas McKenzie® Private Equity Firm, Inc.;

  • The total fee for incorporating the Business – $750.
  • The budget for basic insurance policy covers, permits and business license – $2,500
  • The Amount needed to acquire a suitable office facility in a business district 6 months (Re – construction of the facility inclusive) – $40,000.
  • The cost for equipping the office (computers, software applications, printers, fax machines, furniture, telephones, filing cabins, safety gadgets and electronics et al) – $5,000
  • The cost for purchase of the required software applications (CRM software, Accounting and Bookkeeping software and Payroll software et al) – $10,500
  • The Cost of Launching your official Website – $600
  • Budget for paying at least three employees for 3 months plus utility bills – $10,000
  • Additional Expenditure (Business cards, Signage, Adverts and Promotions et al) – $2,500
  • Investment fund – $1 Million Dollars
  • Miscellaneous: $1,000

Going by the report from the market research and feasibility studies conducted, we will need $150,000 excluding $1M investment capital to successfully set up a medium scale but standard private equity firm in the United States of America.

Generating Startup Capital for Thomas McKenzie® Private Equity Firm, Inc.

Thomas McKenzie® Private Equity Firm, Inc. is owned and managed by Thomas McKenzie. He decided to restrict the sourcing of the startup capital for the business to just three major sources.

  • Generate part of the startup capital from personal savings
  • Source for soft loans from family members and friends
  • Apply for loan from the bank

N.B: We have been able to generate about $50,000 ( Personal savings $40,000 and soft loan from family members $10,000 ) and we are at the final stages of obtaining a loan facility of $100,000 from our bank. All the papers and documents have been duly signed and submitted, the loan has been approved and any moment from now our account will be credited.

14. Sustainability and Expansion Strategy

The future of a business lies in the number of loyal customers that they have, the capacity and competence of their employees, their investment strategy and business structure. If all these factors are missing from a business, then it won’t be too long before the business close shop.

One of our major goals of starting Thomas McKenzie® Private Equity Firm, Inc. is to build a business that will survive off its own cash flow without the need for injecting finance from external sources once the business is officially running. We know that one of the ways of gaining approval and winning customers over is to give investors good returns on their investments.

We will make sure that the right foundation, structures and processes are put in place to ensure that our staff welfare are well taken of. Our company’s corporate culture is designed to drive our business to greater heights and training and retraining of our workforce is at the top burner of our business strategy.

As a matter of fact, profit-sharing arrangement will be made available to all our management staff and it will be based on their performance for a period of three years or more as determined by the board of the organization. We know that if that is put in place, we will be able to successfully hire and retain the best hands we can get in the industry; they will be more committed to help us build the business of our dreams.

Check List/Milestone

  • Business Name Availability Check : Completed
  • Business Incorporation: Completed
  • Opening of Corporate Bank Accounts: Completed
  • Opening Online Payment Platforms: Completed
  • Application and Obtaining Tax Payer’s ID: In Progress
  • Application for business license and permit: Completed
  • Purchase of Insurance for the Business: Completed
  • Securing a standard office facility in Medford – Oregon: Completed
  • Conducting Feasibility Studies: Completed
  • Generating part of the startup capital from the founder: Completed
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  • Creating Official Website for the Company: In Progress
  • Creating Awareness for the business (Business PR): In Progress
  • Health and Safety and Fire Safety Arrangement: In Progress
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The Ultimate Guide to Private Equity Real Estate Investing

By Ed Rogan, Owner, Co-Founder

Ultimate Guide to Private Equity Real Estate - COMPRESSED

Private equity real estate is a new darling of the investment world. Investors increasingly see the many benefits of private equity real estate . Those who might otherwise be locked out of investing in large commercial real estate deals can now do so via private equity real estate, which allows them to diversify their portfolios. Moreover, a single fund can provide the flexibility to invest in multiple assets instead of in one single commercial deal. 

Related: Why Multi-Family is a Good Real Estate Asset Class

Private equity real estate is also highly tax efficient. When structured as funds, private equity investments might last several years, so unless one of the fund’s assets is sold within a one-year period (which is rare), the returns are taxed at the long-term capital gains rate instead of short-term capital gains. This is before the benefits of pass-through depreciation. Combined, these tax benefits can save an investor 20% or more on the profits earned each year .

Do we have your attention yet? Great! Read on for your ultimate guide to investing in private equity real estate.

What is private equity real estate?

Private equity real estate refers to the pooling of funds, typically from institutional investors but also from others as we shall see, that are then used to purchase public and private commercial real estate assets.  Institutional investors, having to deploy hundreds of millions of dollars, if not billions of dollars , simply don’t have the bandwidth to be able to evaluate every single real estate deal that might be worthy of their investment.  

Enter private equity funds , that sit between the large institutional investors and real estate sponsors with individual deals out in the market.  These private equity funds charge a fee to their investors for managing the invested capital, usually between 1% and 2% a year , while also taking compensation based on performance.

The private equity fund’s primary role is to identify high caliber real estate sponsors, underwrite their deals, and invest in them on behalf of their institutional capital providers.

What has changed dramatically over the last few years, transforming the way to private equity world works, is that while access to the best sponsors was historically the domain only of private equity funds, it has now opened up to all accredited investors anywhere.  Sponsors on are no longer restricted to seeking capital from private equity funds but can now raise money online from anyone and this all stems from changes in the law that now permit general solicitation.  Put another way, sponsors can now come to individual investors directly whereas before this was prohibited.

The impact of these changes is primarily at the lower to midrange of the investment scale i.e.  up to around $50 million in deal size. Anything larger than that still remains typically in the private equity fund world, but even there so there are exceptions.

In short, private equity real estate is less about the real estate itself, and more about the way that real estate is financed.

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What it means

Private equity capital is generally raised through funds, rather than into individual deals , that are typically restricted in terms of which types of assets in which they can invest. Some funds are highly targeted, for instance, they may only invest in value-add multifamily apartment buildings. Other funds may be more flexible, allowing the fund manager to invest in an array of product types , such as office, retail, hospitality or industrial. Regardless of the fund’s target investment type, the fund is generally responsible for identifying competent sponsors and then for ensuring that all real estate activities, including acquisition, financing, redevelopment, repositioning, stabilization, ongoing asset management, and eventually, disposition of the property, are conducted as originally promised.  

Private equity funds will often invest with multiple sponsors, sometimes creating programmatic relationships with sponsors they have particularly high confidence in.  This means that a private equity fund might agree to finance multiple deals with one sponsor that fall within a predefined type of investment.

When it became popular

Commercial real estate has historically been considered an “alternative investment,” and as a result, institutional investors would typically only invest a small portion (if any) of their portfolio in this asset class. The sentiment toward commercial real estate really began to change in the mid-1990s as commercial property values began to fall. Many private equity real estate funds were established during this time as a way of deploying capital into undervalued and underperforming properties so they could capture untapped value for institutional investors who wanted to capitalize on market dislocation.

Want to learn how to invest in alternative investments like CRE and enhance your portfolio?

Download and read Penn Capital’s guide .

Who can invest in private equity real estate?

Investing in private equity real estate funds has generally been limited to private investors, institutions and select other third parties, as outlined below:

Private investors

Private equity real estate is generally only open to a select group of private investors, usually extremely high-net worth individuals though this has changed in recent years, as mentioned above, and now mere mortal accredited investors can also invest. To be an accredited investor, a person must have at least $1 million in assets (excluding their primary residence) or have consistent annual income of at least $200,000. Couples with a combined income of $300,000 or more over the past two years are also eligible to invest in most private equity real estate funds. 

The expectation among private investors has historically been that they will be able to contribute significant capital (e.g., $100,000 to $250,000 or more) in a single deal or fund, but in recent years, with the advent of new regulations, these requirements have been reduced substantially. Here at Penn Capital , for example, our minimum investment requirement is only $25,000 .

Institutions

Institutions tend to be the most prominent investors in private equity real estate. Institutional investors include hedge funds, pension funds, mutual funds, endowments, banks and insurance companies.

Third parties

Select third parties, such as asset managers, are generally able to invest in private equity real estate on behalf of institutions such as those listed above. Another group of individuals fall into this category, though they could equally be at home in both the private investor or institutional categories – the group of ultra-high-net-worth individuals or family offices.  

Family offices comprise of professionals who are hired to manage the wealth of families, as the name suggests, who have come into their wealth through either inheritance or through having made money in an industry other than real estate.  These teams of professionals look to create diversified portfolios for the families whose wealth they manage, in much the same way as the professionals who work for pension funds or insurance companies, for example, look to diversify portfolios for their beneficiaries and members. 

Best types of investments for private equity real estate

The overwhelming majority of capital deployed by private equity real estate funds is into commercial projects. Historically, very few private equity funds invested in residential real estate . However, since the last downturn, a new asset class has been born – that of the large-scale single-family home for rent portfolio.  Although traditionally not considered commercial real estate, when pooled into portfolios and run with economies of scale and financed by lending institutions, even this asset class has come to be recognized as a form of commercial real estate.

Related: The Tax Benefits of Investing in Multi-Family Real Estate

Commercial real estate

Contemporary commercial real estate building with grey and red walls

Private equity real estate is almost exclusively concentrated in the commercial sector, i.e. multifamily apartment buildings, office buildings, retail, hospitality, industrial, self-storage, land development and the like. There are several reasons for this, including the barriers to entry to these property types. Few individuals are able to invest in commercial projects of any scale, which is where private equity funds have traditionally filled the gap. Often, private equity real estate funds will invest in both the debt and/or equity needed to finance a commercial real estate development.

Residential real estate

Private equity is much less likely to invest in residential real estate – with the exception of the new asset class of single-family homes for rent, given above. Simply put, most funds do not want to be in the business of owning an individual’s home. Owning hundreds of single-family rentals is also much more operationally complex than owning a single, larger asset such as a 200+ apartment building or office tower. As mentioned, however, there are occasions where private equity will invest in residential real estate. Blackstone and Starwood are two of the most notable players in this space.

Private equity real estate vs. REITs

There’s an important distinction to be made between private equity real estate and public real estate investment trusts (REITs). Public REITs are essentially publicly-traded stocks of existing real estate companies. Shares of REITs can be purchased and sold with the click of a button. Private equity real estate is much more illiquid. It can often take years to return initial capital contributions and profit to private equity real estate investors. 

This is one of the reasons why private equity real estate limits those who can invest. Compare this to REITs, that allow any investor with a brokerage account to buy or sell shares. REITs are continuously raising capital whereas funds tend to be more limited in when they are open, usually with a specific fundraising goal outlined in advance and deadlines for when funds can be accepted. Another key differentiator is that private equity real estate funds tend to be less highly regulated than public REITs . For example, REITs must comply with strict requirements regarding the percentage of real estate-related assets they own, how they pool capital and from whom, how and when dividends are distributed to investors, etc., whereas private equity funds are free to decide entirely for themselves how they will be operated – provided their investors are in agreement.

One exception to the above: private equity real estate investments can be pooled and structured in many different ways, including as private REITs, though this tends to be less common than structuring as an LLC, S-corp or other legal structure.  

Should you invest in private equity real estate?

Let’s say you’re an accredited investor and are considering investing in private equity real estate. What factors should you be considering before making that decision? Typically, you’ll want to consider three basic factors: the amount of upfront capital required, level of risk, and potential returns.

Related: Active vs Passive Real Estate Investing

Upfront capital

Before investing in private equity real estate, gauge how much upfront capital will be required. Some private equity real estate funds require a minimum investment, such as $25,000, $50,000 or $100,000. Others have an initial contribution of at least $250,000. That is not an insignificant amount, regardless of how wealthy the investor. This is also why private equity real estate tends to be limited to accredited investors, institutions and related third parties. The assumption is that these parties have the capital needed to make that initial investment and understand the risks associated with doing so. It is important to remember that, unlike a REIT or other investment, the upfront capital investment in private equity real estate is illiquid. It could take years for that money to be returned to investors. It is important, therefore, not to invest money in a private equity deal that you may need for any other purpose before the deal matures and you get your money back.

One of the reasons commercial real estate has long been considered an “alternative investment” is due to the risk associated with these projects. The industry has matured greatly over the past few decades, but it is still risky enough that investors can lose their entire investment if the fund or individual investment fails to meet expectations. That said, there are certainly ways to mitigate risk . You’ll want to carefully vet the fund’s sponsor – what level of experience do they have? How long have they been investing in private equity real estate? What is this fund’s business model? What is their intended exit strategy? Knowing the ins- and outs of how a fund is structured and how capital will be deployed is critical for any investor looking to minimize potential risk.

Although returns are rarely guaranteed, private equity real estate has the potential to generate significant returns for investors. The annual rate of return largely depends on the structure and nature of the deal. For example, investments in Class A properties in core markets may be able to generate 6-8% returns annually . 

Core-plus strategies , which include Class A/B properties located in secondary markets, or Class B buildings in Class A locations, are considered slightly riskier but will usually generate annual returns of upwards of 10%. Value-add and opportunistic real estate deals can have double-digit or more returns, but again, these initiatives tend to carry the most risk. Any investor will want to carefully consider their risk tolerance before investing in a private equity real estate deal.

Strategies for successful private equity real estate

Commercial real estate can become distressed for several reasons, some of which are harder to overcome than others. With strong project management and oversight, an adept sponsor will find creative ways for turning these properties around. Yet that process can take time and is usually far from a slam dunk. Anyone contemplating investing in distressed real estate should be sure to go in eyes wide open. The five considerations outlined above will help you do just that.

Market sector

As noted above, private equity real estate is generally concentrated across a few commercial property types: multifamily, office, retail, hospitality, industrial and land development. Before investing in a fund, an investor will want to understand the basic differences between these sectors. They will also want to understand a fund’s business model and what property type the fund intends to invest in. Be sure you have confidence in that market sector prior to investing.

Related: Single Family vs Multi Family Real Estate Investing

Geographic location

Philadelphia, a popular geographical location for commercial real estate

The commercial real estate industry is hyper-local, and therefore, geographic location is important to the success of a private equity real estate deal. Some funds will only invest in specific locations, such as core markets (e.g., New York, Los Angeles, San Francisco) whereas others target submarkets within a market (e.g., inner-urban cities and towns outside of major metropolitan areas). 

You’ll want to understand the dynamics of the local market prior to investing in any private equity real estate there. Specifically, look at what would be driving demand for this product type in that region and examine the sponsor’s analysis of the market.

Capital structure

Commercial real estate deals can be structured in a number of ways to allow for the intake of capital at inception, and the distribution of profits at conclusion. That structure is often known as the “waterfall.” Typically, private equity real estate funds invest equity into a deal, but that’s not always the case. 

These funds, despite their name, may also invest in debt, including senior loans, bridge loans, preferred equity and mezzanine debt. Be sure to know how the fund intends to deploy capital. Where your money falls in the capital stack will influence where you land in the waterfall, i.e. how much you’ll be repaid and when.

Private equity is usually just one of many sources of funding that goes into a large commercial real estate project. A private equity real estate fund might comprise the LP (limited partner) equity, whereas the project sponsor might be responsible for a major chunk of the GP (general partner) equity. It’s important to know who has which capital in any given deal, including the debt-to-equity ratio and sources of bank or other financing.

Number of investments

Most private equity real estate funds are structured to allow for investment in a certain number of deals (usually a range, e.g., 8-10) during the lifetime of that fund. You will typically want the fund to have multiple holdings so as not to put all of investors’ eggs in one basket, so to speak.

When to invest

You’d have to have a magic 8-ball to predict with any certainty exactly when to invest. That said, some real estate funds have lock-up periods that last for a decade or more, which means that the fund may inevitably have to weather ebbs and flows in the market. Be sure to investigate the sponsor’s history to evaluate how well funds have performed previously, and how the sponsor has managed to endure during downturns or other periods of economic uncertainty.

Private equity real estate is a great way for high-net-worth individuals and accredited investors to generate passive income . They also provide a unique opportunity to diversify one’s portfolio without taking on the day-to-day management of direct ownership. 

Yet, as is the case with any significant investment, you’ll want to understand the nuances of any fund. In addition to learning about the fund’s sponsor and the fund’s business plan, you’ll want to probe to better understand things like whether you’ll be able to get out of the fund early and on what terms. For example, some funds will allow investors to exit early for a 1-3% exit fee. This type of provision gives some investors the comfort they need to invest in a fund where their money may otherwise be tied up for years.

Be sure to consult with your professional investment advisor before investing in private equity real estate. You may also want to have a real estate attorney comb through the fund’s offering before making any capital contribution. These two steps will help safeguard your equity in what will hopefully be a highly lucrative investment.

Find out more about our team at Penn Capital here .

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The Marketing Plan for Private Equity Firms

Strategies, tactics & templates.

private equity fund business plan

Click the link below for a step-by-step marketing plan for a private equity firm. Make a copy of the Google Sheet and if you have questions about the various marketing strategies or marketing materials, click the info icon next to the item for a quick explanation.

*Note, any marketing materials/tactics listed in blue are private equity marketing services we provide at Jack Vawdrey LLC. In any other area, we can make a referral.

In the PE space, the term “marketing” often refers to any activity intended to promote a given fund, such as business development emails, deal announcements, portfolio highlights on social media, and so on. Overall, the goal of marketing is to close more deals (ideally proprietary) and build a brand that LPs will be attracted to.

While any marketing effort is good, the best overall marketing strategy to build your firm’s brand will incorporate to varying degrees the following PE marketing sub-strategies:

  • Business development (e.g. cold emails, cold-calling, in-person meetings)
  • Content marketing , (e.g. articles, videos, webinars, podcasts)
  • Public relations (PR) , (e.g. deal announcements, portfolio news, expert contributions to the press)

The below table summarizes how each sub-strategy contributes to an overall marketing strategy, with more details below.

private equity fund business plan

Business Development for Private Equity

Business development for private equity is the default marketing strategy for a PE fund, and more and more firms are investing resources to build out the biz dev function .

The fundamental objective of biz dev is to have a conversation with prospective portfolio companies and begin building the relationship. The primary tactics for business development include:

  • LinkedIn outreach
  • In-person meetings/events
  • Working through intermediaries

Special note about cold email

Cold emails are an essential channel through which a firm markets itself. Ultimately, a prospect has to make contact and get on a call to move the relationship forward. Email is the best way to coordinate this contact because this channel is asynchronous—no one has to pick up the phone or be available in person to learn more about your company.

Automation is key to reaching scalability with your cold email efforts. 

Example of a cold email flow

A basic automated email flow might look like the following:

  • An introductory email talking through your investment criteria and portfolio success stories, with an invitation for a call
  • A follow up email
  • An email with a piece of content clarifying what it’s like to work with a private equity firm
  • An email with another piece of content discussing trends in the prospect’s industry

Once you’ve successfully made contact with a prospect, you can then take a bespoke approach, in many cases conducting a quarterly follow up and lending support where possible.

Biz dev is essential, but it’s not enough

If you’re not employing the above biz dev strategies, then proprietary deal origination will be difficult for you. Unless you’re hoping to rely solely on intermediaries to fund deal flow, you can’t not do biz dev and hope to succeed as a fund.

That being said, less and less are funds able to rely on biz dev alone to build their pipeline. When your cold email is one among 20+, you need to have some other way to differentiate your firm. You can do so by investing in content marketing and PR.

Content Marketing for Private Equity

Content marketing, as you likely know, is a marketing strategy wherein a company creates content to educate prospects and build trust for a future relationship. Content marketing is highly valuable for complex business transactions, and there’s no more complicated transaction than partnering with a private equity firm..

The objectives of a content marketing program are threefold:

  • Differentiate your firm so a prospect is more likely to agree to a call
  • Educate prospects about the process so they know what to expect and see you as helpful
  • Anchor with prospects by placing helpful material in front of them over time

While much of these activities could also happen on a call with a prospect, think about how hard it is to get someone on a call. Prospects are much more likely to engage with a piece of content than they are to agree to a call. While a call will certainly be necessary at some point, you want to give your prospects as much opportunity as possible to learn about your firm on their own.

Content marketing vs. digital marketing for private equity

Generally, digital marketing (also called internet marketing) is the umbrella term under which content marketing lives, alongside disciplines like paid advertising and social media marketing. 

In the private equity space, the terms digital marketing and content marketing are almost synonymous, since you almost always share content with prospects as you market to them on the various channels.

What does content marketing for private equity look like?

A content marketing program for a private equity firm has three parts:

  • Content creation
  • Content promotion
  • Content intelligence

Content creation involves identifying and explaining topics that either 1) demonstrate expertise as a capital partner, 2) showcase success with past portfolio companies, or 3) demonstrate your understanding of a given industry/sector. These pieces of content can take the form of articles, videos, webinars, podcasts, and more.

Content promotion involves placing that content in front of your prospects, specifically prospects within your database. The primary channels for promoting content include:

  • Biz dev email
  • Marketing newsletters
  • Paid & organic social posts (LinkedIn)
  • Organic search or SEO (but only to a small degree)

Content intelligence involves using web analytics tracking integrated with your CRM to answer the following questions:

  • Which of my prospects are viewing content on my site?
  • What content are they viewing?
  • What content do prospects tend to look at before they have a conversation with me?
  • How much does it cost for me to attract a minute of a prospect’s attention?

See the below examples of a content marketing strategy in action:

Your firm creates an article about what companies should look for in a private equity partner. You share the article organically on social media and also boost the post with paid advertising to an audience of your prospects. Your analytics reporting shows whether that post is more likely to result in a conversation compared to other articles.

Your firm records a testimonial video with a portfolio company. You run a YouTube retargeting campaign to any prospect who visits your site. Your reporting shows how much of the video your prospect watched relative to the advertising cost.

You create a research piece covering trends in a given industry. You share the material via biz dev email and a marketing newsletter to your prospects. Your reporting shows who clicks through the link and what other resources they view on your site.

When should you start content marketing as a private equity firm?

Your first priority should be to implement a basic biz dev function, but once you do you should start investing in content marketing. Doing so will make your biz dev efforts more effective because:

  • You’ll have more material to share and therefore more reasons to reach out to prospects with greater frequency.
  • You’ll be able to keep prospects engaged via channels other than biz dev email so that you don’t rely on that channel alone to market yourself to prospects.

Similarly, you should also begin PR efforts fairly early in the lifetime of your firm.

Public Relations for Private Equity

While content marketing focuses on educating and building trust with prospects, public relations focuses on showcasing your firm’s success to build social proof for future portfolio companies as well as for intermediaries and LPs.

The most common PR tactics include the following:

  • Investment & exit announcements
  • Fund announcements
  • Portfolio news
  • Hiring & promotion announcements
  • Media appearances

Investment & exit announcements . When you bring on a new portfolio company or exit an existing investment, you’ll want to publish a press release (on your site and on a major syndicate) then share that press release across your various channels.

Fund announcements . Fund announcements are press releases reporting any recently raised funds.

Portfolio news . As your portfolio companies achieve important milestones, you’ll want to share their successes on your various channels. These announcements may come in the form of a press release on your own site, a press release on the port co’s site, or a simple social media announcement.

Hiring & promotion announcements . A common PR tactic in the PE space is to publish a release any time you hire or promote key individuals at the firm. These announcements signal the growth of your firm.

Media appearances . In cases where your firm or a partner at your firm makes an appearance in the media as an expert contributor or otherwise, you will want to publicize that appearance on your various channels where appropriate.

Public Relations: Hire a Contractor or an Agency?

Creating and publishing announcements like the ones mentioned above could be done fairly easily by an outside contractor. As your marketing efforts mature, you’ll want to consider bringing on a PR agency who can not only shoulder the basic PR work but also introduce you to media correspondents as an expert contributor.

Private Equity Firm Marketing Materials and Priorities [Checklist]

In what order should you deploy the above strategies and which specific tactics should you use? While you’ll want to adjust your strategy to your circumstances and goals, below is a checklist with specifics that should direct you along a good path. These tasks aren’t purely sequential—some you will be doing simultaneously and others you can wait to do until necessary.

If you have questions about a specific list item, click on it for more details.

For an interactive version of the checklist, feel free to copy this Google Sheet so you can better plan out who will be responsible for which tasks.

Preliminaries

Create a prospect list, launch a website, set up social media accounts (linkedin), begin business development, design an outreach program that includes cold email, messaging on linkedin, and cold calling, begin executing your outreach program (ideally using automation), create and publish 2-4 pieces of content to beef up your outreach, design basic pr resources, write boilerplate copy to include in future press releases, design investment & exit announcement templates for social media, design hiring & promotion announcement templates for social media, set up a process for sharing portfolio news on your social channels, draft press releases for announcements as they occur, create and launch a content editorial calendar, brainstorm content topics, hire a writer.

  • Begin publishing 2-3 pieces of content per month

Promote content organically on social media as it is published

Create a biz dev email template for each newly published piece.

  • Work with a copy editor to refine content language & structure

Implement LinkedIn paid social promotion for content

  • Create an advertising account on LinkedIn
  • Upload a CSV of your prospects as a matched audience in LinkedIn
  • Run paid campaigns promoting each new piece of content you create to your prospect database
  • Cross-reference engagement with your social posts with your prospect database

Implement non-opt-in email marketing (cold email marketing)

  • Design investment & exit announcement template for email marketing
  • Adopt a non-opt-in email marketing platform (like Clickback)
  • Upload a CSV of your prospects into your email marketing platform
  • Send email campaigns of new investments/exits as they happen

Implement opt-in email marketing (warm email marketing)

  • Adopt an opt-in email marketing platform (like Sendinblue or Mailchimp)
  • Implement a subscription form on your site
  • Send a monthly content newsletter of your best performing content

Optimize business development with analytics

  • Implement link tracking to determine which prospects click through to your site
  • Build attribution reporting that determines which content prospects engage with before having a conversation with you
  • Implement email alerts notifying a prospect’s owner when the prospects subscribes to the email newsletter
  • Review performance and realign content strategy to focus on best topics and channels

Hire and work with a PR agency

  • Hire an agency
  • Design a PR outreach strategy
  • Make appearances and contributions to the press

Building a Brand for a Private Equity Fund Requires Consistency

Building a strong brand requires not only the right strategy and tactics but also a severe amount of consistency. If you are consistent in promoting your firm over time using the above tactics, your brand will gain the recognition you need to influence more prospects, close more deals, and impress more LPs.

The best way to achieve consistency in marketing is to have a dedicated resource to oversee execution. To learn more about how I can help you achieve that consistency, connect with me on LinkedIn .

As a PE firm, you have a pretty clear idea of what kinds of companies you want to work with. You likely have a CRM full of prospects that match your criteria. The best way to market your firm is to target those prospects directly.  Platforms like LinkedIn Advertising and of course email allow you to upload a list of contacts and share marketing materials with the prospects on your list, so you know every dollar you spend in outreach is going to someone you care about.

Your website is the first place your prospects will go to get to know your firm. In fact, your prospects will visit your website many, many times before they ever respond to your emails.

The standard resources of a private equity site include:

  • A home page with details about the firm (such as investment focus, average check size, etc.)
  • A portfolio page of current and past port cos
  • A team page introducing the GPs and other team members
  • At least one resources archive page (like a blog or press release archive)

If you don't have a website or it doesn't contain the above resources, then you'll want to hire a web developer to assist you in making updates.

We don't offer web development services at Jack Vawdrey LLC, but we're happy to refer you to someone in our network.

In the private equity world, there's really only one social media platform that you need to worry about, and that's LinkedIn. (Once your marketing program becomes more mature, you can begin considering YouTube as well.)

Setting up social media accounts involves creating or updating a company page to include:

  • An high quality logo and banner artwork
  • An accurate description of your firm
  • A link back to your website

Your outreach program is both a hunting and a harvesting action—hunting because you're actively pursuing relationships with prospects, and harvesting because you're reaching out to prospects who have already spent significant time getting to know your firm through your other marketing efforts.

Your outreach should span several channels, including cold email, cold calls, and optionally LinkedIn messaging, which some firms avoid because they feel it negatively reflects on their brand.

Your outreach program might look something like the following

  • A follow up call
  • A LinkedIn message sharing the same piece of content

Once you've planned a sequence of emails, calls, and LinkedIn outreach you'd like to conduct with your prospects, you'll want to select a platform that enables you to automate sending out email messages and planning your calls. There are many, many solutions out there. Here's a short list of a few:

  • Yet Another Mail Merge (YAMM)

When you begin sending cold emails to prospects, what are you going to say? Of course you'll want to introduce yourself and your firm, but then what?

To add value and avoid pestering your prospects with too many requests for a call, you should create and send them some content that accomplishes one of the following objectives:

  • Demonstrates your expertise as a firm
  • Showcases past successes with portfolio companies
  • Reveals your experience in a given market space

Learn more about how content marketing complements biz dev.

Boilerplate copy is the text describing your firm that you'll include at the bottom of every press release you publish. Here's an example from Trivest Partners:

private equity fund business plan

Your investment & exit announcements (sometimes called "tombstones") should be visually appealing cards that show:

  • Transaction details (e.g. date, industry, transaction size, etc.)
  • Company logos

Below is an example that Fuel Ventures shared on their LinkedIn page:

private equity fund business plan

Hiring and promotion announcements are a great way to both signal the progress of your firm as well as celebrate the growth of your team members. Below is an example announcement from Insight Partners, though for a smaller firm these announcements will showcase only one or two promotions at a time.

private equity fund business plan

When your port cos hit an exciting milestone (such as a key hire or inclusion on a list like the Inc. 5000), you should publicly celebrate that win. Doing so shows how you and your port cos win together as a partnership.

The process for sharing portfolio news need not be complicated. Whoever is managing your social media accounts should:

  • Follow the social media accounts of your portfolio companies
  • Reshare noteworthy posts

Below is an example of portfolio news that Vista Equity Partners published:

private equity fund business plan

A press release is your signal to the world that your firm is doing something noteworthy. To be candid, readers are much less likely to read through your press releases than they are a piece of topical content, but press releases are still important because:

  • They signal to prospects, intermediaries, and LPs that your firm is up and doing
  • If other media pick up your release, you receive free exposure

A basic press release will include the following:

  • A descriptive headline stating exactly what happened (e.g. "Acme Capital Partners Makes Majority Investment in Widgets 'R' Us")
  • A subheadline elaborating on the story (e.g. "Widgets 'R' Us looking to capitalize on Acme's expertise for global expansion")
  • A first paragraph giving the who, what, where, when, and why of the story
  • Additional paragraphs elaborating on the story and including quotes from key individuals
  • Boilerplate copy at the end of the press release (e.g. About Acme Capital Partners)

What do you write about as a private equity firm? Content tends to fall under one of three categories: educational, expertise-focused, and testimonial.

  • Educational content helps prospects understand private equity as a whole
  • Expertise-focused content helps prospects understand why your firm is different
  • Testimonial content provides social proof of your expertise

To come up with topics in all three of these areas, here are some questions to ask yourself:

  • What concerns might someone have about working with private equity?
  • What questions do we get from prospects all the time?
  • What keeps prospects from interacting with or partnering with us?
  • How are we different and why is that important for prospects?
  • What are the key messages that we've found to resonate with prospects?

The best way to brainstorm is in a group because you'll be able to play off of each other. In your first brainstorming session, make a goal to come up with 50 topics, then narrow your list down to 25 to start.

You'll need a dedicated resource to help you execute your content strategy. A skilled writer will be able to interview your team members about the topics you've brainstormed and turn those interviews into written content.

Your writer doesn't necessarily have to come from a finance background. The best way to hire a writer is to:

  • Request a wide pool of published writing samples
  • Narrow down the candidates based on quality
  • Request a paid sample from 3-4 writers
  • Choose among the paid samples which writer you feel best meets your standards

Keep in mind that your writer should be willing and able to not only write content but also to promote it on social media, in email templates, and more. A content strategist focused on private equity can help you know what to look for.

Begin publishing 2-3 pieces of content/month

How many pieces of content do you need to publish monthly? In most cases you only need to create a couple pieces of content per month. The reason for this rule of thumb is that most of your exposure will come from paid social advertising (at least in the beginning), and a paid social campaign should have at least 2 weeks to run to reasonably reach a good portion of your audience. You don't want to spend money creating content that no one ever sees.

For each piece of content you create, create a social media post to promote that article. Some best practices to follow:

  • Write a short snippet highlighting the topic this article addresses and why that's important
  • Design a social graph image to accompany the article

Feel free to use hashtags, but just know that they're more about stylizing your post than they are about improving reach.

Content doesn't promote itself—you need to use appropriate channels to get that content in front of your target audience. Creating an email template for your biz dev people will reduce friction on their end to share this content with the prospects they've been nurturing.

The email could be something like this:

"Hi [first name],

Since a lot of the founders we engage with express concerns about [X issue], we put together an article to answer some of their questions related to this topic. You can view that article here [link to article].

Hope business is going well at [company name],"

Jack Vawdrey specializes in private equity marketing strategy (for both proprietary and intermediary deal flow), as well as marketing for services providers selling into private equity firms.

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Private Equity Firm Business Plan

MAR.20, 2017

Private Equity Firm Business Plan

A private equity firm is an organization that invests in new ventures that it sees potential in. Once these companies are fruitful, the firm gets a return on their investment. Sounds quite simple but there is a lot more to it.

Once you think of your new business idea and choose to open a private equity firm you may still find yourself thinking in actuality how to start a private investment company and an elaborate business plan can really help in this case. To help people going through the same dilemma, OGS Capital is there with the range of sample private equity firm business plan s that can aid you formulate your personal one and that can assist you with learning how to start a particular private equity firm business plan . If you want a custom plan written then the team at OGS Capital is fortunate to have a highly qualified staff that will provide you with a detailed and well-researched plan and that too in your provided deadline

How to start a private equity firm?

Private equity firm is often criticized for the fact that they make profit and formulate the firm put the amount in more beneficial areas by ending current jobs. While this may seem like a good approach, you have to realize that there are better approaches that don’t come at the cost of terminating the paid position. The most successful and established businesses produce more paid positions by re-establishing companies on the brink of collapse but that have a good premise behind them. When it comes to actually starting your equity firm to get the best out of it, you should consider the following things:

  • Form the right team: Putting the right team is crucial. Investors want to see a team that has worked together, and that too in a good way.
  • Give yourself some time: Give your best and show your full potential but do not expect to bloom to the fullest in a short time. Give it 3 to 5 years.
  • Keep Track of Balance Sheets: Keep track your balance sheets and income flow statements.
  • Give Focus to Stockholder: The center of your focus should be the stockholder, not the stock market.
  • Create a Winning formula and stick to it: Once you have come up with a good operational and advertising strategy have faith and stick to it, don’t change course midway.

How OGS Capital can help?

What sets OGS Capital apart from other private equity firm business plan consultants of its sort is the highly experienced team behind it their sole aim to help people. The OGS Capital team consists of a bunch of professionals that have the kind of knowledge that makes the sample business plans very informative and that help in getting you the right idea about whatever private equity firm business plan you seek. Our main focus is helping ambitious individuals establish their private equity firm business plan . We want to take your business idea and help you turn it into the successful venture it deserves to be.

OGS Capital does not just work to get the job done, but we want to ensure that we do it in the best possible way so that the client is happy and gets the results they are looking for.

An equity firm is a company or an private equity firm business plan that provides financial cooperation on easier terms. You can say that it helps a startup or a new venture by investing in the private equity of that business. This is done by a range of financing strategies. So basically equity enterprise is a financial sponsor that will help your firm grow and prosper by funding you.

To do all of this a private equity firm raises giant amount of wealth that supply the equity contribution for all these kinds of transactions. So, what do these equity companies get as a result? Well, private equity firm in return for all of the invested amount receive a cyclic management amount along with some share in all the monetary gain particular business that they invest in earns. The private equity firm in this way acquire substantial amount of shares in an allocation, and then they figure out ways to increase the worth of the invested amount. They receive amount on all their investments by the following ways:

  • IPO: In this situation assets of the client’s firms are offered to the public, which normally provides a partial asset to the equity firm which is sponsoring financially and along with the general citizens. More shares can later be sold too.
  • Merging or Acquiring the new firm: In this situation a company is sold to another firm in the form of cash or shares, constituting a newly merged firm you can say.
  • Recapitalization: In this situation, the earned amount is divided amongst all the firm’s shareholders, financial benefactor and the private equity funds are gotten from all the flow of income generated by the enterprise or in some cases by other securities to provide amount for the distribution.

private equity firm business plan

When you are starting private equity company, you have to look for the motivation and the reasons as to why exactly are you jumping into this equity venture? Someone who has a knack for putting in money and has a nice amount well-established connections should go ahead and start a private equity firm. Why do we suggest it? Well for someone like this, a venture of this sort can bring in a lot of economic wealth, the job can be a bit demanding, but it has a lot of benefits that make up for all the challenging work.

Starting any new venture or firm especially first requires you to think it out thoroughly and to devise a road map of each step that you are likely to encounter during the course of establishing that private equity firm business plan . Whether it is an already established practice in the industry or has an industry of its own or if it is just a brilliant completely new idea that you want to implement, you first require a blueprint. This blueprint or roadmap in industry terms is called a private equity firm business plan , and today we will be looking at how to start with your very own private equity firm business plan or your very own equity firm.

Major Guidelines on What to Research Beforehand:

So if you are wondering how to start a private investment company, then you would want to research the following:

1. Gather data about the business identified:

Now that you are done with identifying the equity industry, and you have come to learn your exact place in it, then comes the tougher but more interesting part, this step involves conducting Internet research or talking to concerned people and getting all the facts figures and statistics of the industry out of all avenues possible.

The private equity industry is growing with the passing day and has become an essential part of the possession management side of the market. With an increase in demand of organizational  investors, the need for asset and incoming money management has increased considerably. Over the next few years the investing party will enlarge their money allocation to other schemes.

So you should collect facts and stats about how is the growth occurring, at what rates and how much investment is being made and how many people are putting their earned money into private equity firms.

2. Conducting Market Feasibility Research:

Next step is checking the trading status for equity venture along with conducting research on the feasibility of the equity trade and how will this venture assist you. Following things come under this:

  • Making Demographics and Psychographics: Normally, a private equity firm forms collection of huge amount of cash and then uses that to buy different kinds of businesses. The aim here is to buy these businesses and to sell them at a profit in a matter of few years. So they often target small startups or businesses that are on the verge of breaking but have a good idea behind them or are in accordance with the industry trends. This relation to the trends in this field ensures that the very strong return on the contributed money will be made. So all the crucial most important points of the aimed firm are considered, which includes the merchandising, monetary and lawful aspects.
  • Finding all the perfect spots in the Field: A private equity firm can have a large quantity of comfortable spots in the trade. Figure out what suits the best for your interests and what is the place where you feel like you have the ability to benefit the most out of. This depends on the magnitude of your private equity firm, your investment scheme and how you have been planning to carry out transactions in the industry. This is important because concentrating on finding a place in the industry will help pinpoint your drive towards achieving it and move your firm towards success. You can go for private equity investment in healthcare, in agriculture, shipping, airlines, science, and technology, education and insurance. Pick the one that fits your particular situation perfectly.
  • Finding out potential competitors and the level of competition: Since the private equity firm industry has become a lot more famous in the past decade, quite a large number equity firms are coming into it and finding a spot. This results in the fact that the industry is becoming increasingly competitive. What you are required to do is to find out how you fit in this competitive industry and you have to identify the level of this competition. Earning a name and getting famous in the equity industry is a tough task, it will not happen overnight, you will have to give it some time and then work as hard as you can to reach an acceptable place. So make a list of your contenders, and then study their patterns and strategies.
  • Conduct economic analysis: In this equity market, all the fiscal firms get the collection of funds from various investors, however all of these are distinguisable in one way or another. You have to rank them in order of evaluated assets that are being managed. Since the equity industry has expanded in the past few years so has the AUM. In the future the private equity firms will be responsible for generating even more income in the equity industry, so conduct an economic analysis of how different firms in the industry are doing. This might not include just private equity firms but other categories of firms in the industry as well, such as, hedge companies and alternative investment companies.
  • Starting your firm from scrape or purchasing it: You have to build a very strong brand that stands out from the rest. So to be productive, you have to choose what is better for you. Should you start your own new brand, or buy a permit of the business that already has created some brand awareness.
  • Assess Obstacles and Menace of Starting a Private Equity Firm: Since there is a big number of triumphant private equity firms these days, you will face a lot of challenges. So, you have to conduct an analysis and assess what the potential threats to your private equity firm that put you in a tough spot are. These challenges can be anything like defining a good equity firm strategy or establishing what investment vehicle you are going to choose, determining a fee structure, and the biggest thing that can act as a deal breaker if not done properly is raising funds and determining a fee structure for all your potential clients.

3. Taking Care of All The Legal Aspects:

One overlook on the part of legal aspects and you can find yourself in a tough spot. So you have to look at all the legal aspects carefully, and you have to make sure that you don’t miss a single thing that can be used against you later on. Here are the main things to do in this case:

  • Finding the Best Legal Entity: A private equity firm acts as a partner or legally responsible firm for a limited amount of time. You will decide where investments go and where they come from. But the stock holders will have a part in the decision of which businesses that your private equity firm would have provided the funding for the private equity firm business plan .
  • A Unique Name: Your name will set you aside from all the other firms in an aside, and this is how you will be legally enrolled. So think of a name that catches the eye, and that is something that will attract your prospective investors will find good and trustworthy.
  • Choosing The Best Possible Insurance Plan: For a private equity firm, like most other equity companies out there, choosing an insurance plan is important. Discuss with all your partners and choose the insurance plan that suits your equity venture the best. There are tons of kinds such as umbrella insurance, Property insurance, Errors and omissions insurance and General Liability insurance, these help in case of bad economic events, such as bankruptcies, fallout with investors, and problems with personal assets of managers and employees. So this part has to be carefully considered.
  • Trademarking your Brand and Protecting your Intellectual Property: Your intellectual property is a child of your creative juices, so it needs to be protected at all costs. Make sure you get on to protect the property of your private equity firm and file for it right away, Trademark everything right away. Patent your equity enterprise’s logo, your company name, and all other necessary documents.
  • Getting a Professional Certification if needed: If the need arises, you have to get a proper certification in the area of private equity. These certifications make a point that you know what you are doing, and you are certified to do so. Other than that it will also help you comprehend the trade at a deeper level and will help you in various legal aspects. Some of these certifications include private equity expert, CFA etc.
  • Gathering all the legal documents that are needed: Now comes the part where you collect all of the legal documents that are essential in legally starting a private equity firm. This consists of financial documents as well. Examples of these documents are plan, license, an agreement, Capitalization table, corporate minutes, business pitch deck, article of agreement and a few others.

4. Identifying your industry and its occupants:

First of all, you need to figure out exactly what is the exact area in which you want to enter like, and what other categories or group of firms come under it that you will have to deal with. For the private equity firms, the field is composed of finance-related firms and other funded options such as equity firms and others that deal in finances of different businesses. These companies benefit on the basis of all the return they get on their money that was invested. They help businesses and startups in establishing.

The trade does not include all fiscal and funding firms. Some of the companies that the trade excludes are coverage firms, worker benefit firms and real estate franchises.

Now that you have done all your preparation and you have a nice idea on all legal, economic and industry details of the equity venture, you can put them together in the private equity firm business plan. This will be done in a way that shows you have an idea about what you are doing and you are going to do it in the best possible way.

What to consider before STARTING A PRIVATE EQUITY FIRM?

Without a doubt, the first step in starting private equity company is getting done with an equity venture business plan. Not only will it help you in clearing everything up and mapping out guidelines it will also help you in presenting your idea to potential investors so it is a very important task and one that must be taken head on with a lot of research and serious interest.

One thing you have to realize is that just writing a private equity venture business plan is something that will get you immediate success. What gets you success is when you take all the information out of it and take full on advantage of it by implementing everything you mentioned with full force and might.

Now that we have established that when it comes to establishing an equity corporation, how to start a private equity firm, in particular, the first step is making a detailed, proposition covering everything in detail. If you are worried about what exactly constitutes a good business proposition that can wow people, and that can act as a booster for your private equity firm. Then do not worry at all, later on, we are going to describe the levels in composing the perfect proposal of a private equity firm to inspire you to create a great one for your own firm. For that first of all you have to be completely sure of what a private equity firm actually is, look into other equity firms and figure out what they are.

Starting private equity company first requires starting with the equity enterprise proposal. This is what will aid you to formulate the comprehensive proposition for the private equity firm and communicate it in a way that attracts all prospective investors to your firm. This will assist you in actually establishing the private equity firm and to completely apprehend the situation. For this you have to find out the answers to the following questions:

  • Before wondering how to start a private equity firm, consider the target trade of your firm’s service and how exactly they will be targeted?
  • Will there be involvement of some other business or firm in starting your private equity firm?
  • What is different, that will attract the target market to your firm to get investment?
  • How much time will it take in starting a private equity firm?
  • What is the technical and office equipment required and how will it be gathered?
  • What should the main team include to get the most success?

Writing a private equity firm business plan

Now this is a very important part of starting a private equity firm and will tell you how to start a private equity firm, and this is what we are here to guide you for. If you have a solid knowledge about all the things discussed in the previous section and have done all your research in the proper way on all the points discussed before, then writing a proposition for the equity enterprise will be a piece of cake for you. Since it is just putting together complete stuff that you have researched, and you have thought about like your objectives.

The equity enterprise plan will include a brief report of what you private equity firm plans to do, what kind of investments will it offer, how will they be different from others of their kind. It will also include a marketing analysis section. Your promotional strategy which also includes how you conduct advertisement and how will you reach people, it will also contain a brief reporting on your target trade.

Since a proposition also acts as a blueprint for your private equity firm business plan so, sometimes it has to include structural information about the equity business as well, for example, the organizing team of the private equity firm and stuff like how will all your ideas will be implemented and how much cost they will take. This helps put your ideas to work later on.

Another thing you have to take care of while composing your private equity firm business plan proposition is predicting the destiny of the equity company financially and socially. Make calculations like monetary flow, depreciation of things over time and the life of your funds, and how exactly these funds will grow with the passage of time.

It also includes an administrative synopsis which will merge everything together and will put everything in perspective by summarizing it you can say.

To help explain this further here is sample template for an equity venture proposal and which will give you an idea about how it should be written and what will it include.

Sample Template for Private activity firm Business plan

If you want to know how to start a private investment company or how to write a proposition for it the following text will give you an idea:

Write an administrative synopsis

This is the most important part of the plan, some investors form an idea about your entire business based on these two pages. So put a lot of effort into making an administrative synopsis for your private equity firm. Like the name suggests this section will summarize everything about your private equity firm, the potential startups or businesses you will fund, the basic genre of the company, you’re most probable clients and how you are intending to achieve everything you are setting out for in a way that you stay distinctive from others in your industry.

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Write a Company overview

In this section, you should write about the current private equity firm and how you fit into the situation. Briefly explain your entire private equity firm, an interpretation of all the functional facet of your equity company and what services will it provide. Begin with intro of the private equity firm, explain it a little then go ahead and write some basic facts. For example, what is the significance of a private equity firm in this day and age? In which way has the private equity trade increased financially at such a rapid pace over the last ten or more years that it is the perfect time to open a private equity firm of your own? Include how you have planned to gain advantage from the private equity firm and how it will assist you to set apart from all the competitors. Write how you will operate the equity enterprise.

Write Vision Statement, Mission Plan and Aim

A vision statement is a must for any booming venture. A strong vision statement not only helps form a vision for your private equity firm but has a strong impact on whoever comes across it. Your vision could be something along the lines of this: “to start a private equity firm that adds value to the financial funding approach in the private investment trade by acting as a pioneer in helping solve the world’s economic challenges.” Your objective should be to attain all your goal so give a short description of that. Your mission statement and vision help drive business strategy in the correct direction so clearly, mention them along with your aims.

private equity firm business plan sample

Write about the business structure

A business structure can make or break the private equity firm business plan . It can be of no use if the structure acts as a catalyst for collapse. So clearly write down all the roles and responsibilities of all the central positions in your private equity firm. You should recruit the perfect team, and new managers looking to make a career stand a better chance of collecting money or equity. If the team has formed out of a successful firm then the investors will want to see that the team includes several individuals that have already worked together in the past and are now speaking on the same strategy now. Write about the team and essential responsibilities of all posts of the equity business. For example, the role of the chief executive will be to recruit and select individuals for jobs, and for searching and picking potential investors and firms to buy in. Specify the previous experience of all your team members as well and mention if they have worked together before.

You can write about the organizational structure of the private equity firm business plan in the form of a flow chart in order of flow of power. You also have to include the organizational budget that can help show the investors briefly how the budget is going to be distributed and if they like it then that shows that you have budget management skills, so budget wisely.

Write the Strategic and Promotional Analysis

This section contains an analysis of the equity market that you are diving into. By analyzing the trade and how it is composed and your scheme of diving into that trade. Include the following things in this section:

  • Fiscal Outlook: This section should contain details of the investment management. It can include the prospective customers and the competitiveness that the private equity firm faces. Currently, the monetary state of the trade in the US, for example, is moderate.
  • Trade Analysis: This includes identification of the trade that a private equity firm is a part of. Once the trade is identified, you have to write about what the trade is like some factual words and numbers about it, like the yearly income for a regular employee of the equity company. What firms and subcategories have a place in this industry and how does everything link together. In this particular case, mention the investment management trade of which a private equity firm is a part of. So you write about the place of the new venture in a particular country and how is it doing.
  • Target Trade: Include the demographics related the equity market that your private equity firm will be targeting. This can be a categorized table with trade areas and categories that will be targeted using your private equity firm business plan or your potential clients. As far as private equity firm is concerned these funds are targeted to only few individuals, but it has a high rate of return.
  • Competitive Analysis: This section is critical. This is where you write about your potential competitors once you enter the industry and how tough of competition will these competitors offer. In the financing industry, the size has grown considerably over the past decade and this is why the competition has also increased. One drawback is that this results in a small barrier to entry into the this trade. The expected expenses to begin the equity venture are, therefore, low.

Write your Marketing Plan

This includes how exactly you will present your equity venture to all your potential customers or your target market. While private equity marketing has been around for a long time, digital marketing has made it easier and has acted as a crucial key to marketing anything. It is easier to track all your targets using it, and it makes all your jobs a lot easier for you. A private equity firm should have extensive marketing done to ensure that it reaches all its targeted clients. Below is an overview of what should be included in this section:

  • Marketing objectives: This includes what you intend to attain using your marketing, for example, a private equity firm should intend to get an online presence by making their site and putting venture’s name along with all essential information on their site. Another thing it should do is to determine relationships with other investment counselling services within their reach.
  • Marketing Strategy: This should briefly tell how exactly the company has programmed to advertise their private equity firm. A private equity firm can do so by hiring a capital introduction firm that helps them in getting introduced to prospective It should also introduce itself to startups who will be interested in their services once they find out about them. Another marketing strategy is the formation of a website that helps form an online presence and helps in reaching all the targeted demographics.
  • Pricing Strategy: In this portion, the pricing that you will charge for your funding services will be written. Do not forget to provide the maximum information you can about your pricing so that it gives anyone reading the plan the elaborate concept about your charges. However, if you are providing quite a few services, shorten your list based on categories. This section in any case should not span more than one page of the document. Keep it short yet full of information.

Write a Financial Plan

As the name suggests this section will help in elaborating the allotted amount and finances of your private equity firm in detail. A sound financial strategy is what exactly will help boost your private equity firm and will assist you in getting maximum return on all your investments, so it should be carefully thought out and clearly put together. Securing funds for the venture is another big issue and a quite tough thing to do, write down who you plan to do that as well, how you think you will be able to attain the required finances to begin your private equity firm. This section should contain the following things about our private equity firm:

  • Theoretical Calculations: The first item to mention is the things you already feel like you know for sure. Like total monetary annual return it will earn on its . Also mention the number of equity funds the owner of the venture will get along with and the yield expansion rate of the firm annually.
  • Source of Funds: In this portion of the proposition, you have to write down where you will be getting all your required funds from. This involves equity contributions such as management of gained finances, equity financing, bank and lenders funds. You can list these sources or write them in the form of a table.
  • General Assumptions: For the coming years, you can make assumptions such as short-term interest rate, long term interest rate, federal tax rate, and personal tax rate and state tax rates in particular year. These assumptions are pretty generic.
  • Profit and Loss Statements: Give the profit and loss statements. You can include comparison charts as well.
  • Cash Flow Analysis: Give the yearly cash flows, charts of cash inflows-outflows and balance.
  • Balance Sheet: Includes the balance sheet and can contain charts as well.

Advertisement Strategy

Advertisement of any new venture is critical, and this is the sole way of telling how the new venture will reach the audience. To captivate the audience to become customers, you have to come up with creative methods to let them know that your firm is the new one in town and why will it be perfect for them. Therefore like any other firm or company a private equity firm also requires a strong advertising strategy, you have to come up with a unique way of approaching customers that they will like. Once you come up with the strategy you have to write about it, so investors know you have that creative side that will help flourish the business. Here are bunch of things you ought to do to come up with an effective advertising strategy:

  • A unique is what stands out in people’s mind even if they have heard of the name rarely. People tend to remember unique names so try to come up with different yet relevant names, but it should not be too difficult.
  • Make unique business cards that you can hand out to all startups, small businesses and investors you are interested in working with. This way they know how to contact you the moment then need to get in touch with a private equity firm.
  • Create relationships with all potential investors and startups you will be investing in. This can be done by going to investment related seminars or by going to networking events.
  • This is the age of social media, all business big or small have to have a good social media presence. The advertisement is done through social media these days, so focus on that, use social media to reach your target market.
  • Think of unique ways to advertise with catchy tag lines and untraditional ways that catch the public eye and have them talking.

Expansion Strategy and Sustainability plan for the Private Equity Firm

Your private equity firm business plan should elaborate the sustainability strategy of your firm. The fate of your firm depends on how you plan to sustain it to have a long term successful life. Other than that you have to focus on not only maintaining the firm but over time you have to expand it as well. So, think of a strategy to expand it as well. This shows your long-term commitment to you private equity firm and how serious you are about it. Your object should be to increase the cash flows without extra investment and profit to expand it and to branch out, to make the firm bigger and better.

Since a private equity firm is a multifaceted investment firm, to expand it and sustain it a strategy that the management can opt for is to expand each segment separately by developing limited partnerships that will help attract additional capital towards the company. Making it secure and helping expand as well.

Here is a brief overview on how to get started and what to write in a private equity firm business plan.

Operational private equity firm business plan

This part of the private equity firm business plan includes the detailed list of tasks that you have to do for the operation of the company and the respective timeline that will be required for each task to carry it out. This helps stick to a schedule and helps plan out the actual establishment of the company and each milestone that comes with it. It is also a great way for investors to know that you do have a road map planned out and you have a serious attitude about diving in the investment management industry.

How can OGS Capital help you with the business plan?

If you have a bright idea, but do not really know how to achieve it then, come to us. We will not only discuss it polish your demands with you but we will work to make a private equity firm business plan for you that helps you in getting a remarkable business establishment for you that helps your venture reach the very top like it deserves it to be. All you have to do is get in touch with us, and the rest is our job.

What sets OGS Capital apart from other private equity firm business plan consultants of its sort is the highly experienced team behind it. Their sole aim to help people. The OGS Capital team consists of a bunch professionals that have the kind of knowledge that makes the sample business plans very informative and that help in getting you the right idea about whatever business plan you seek. Our main focus is helping ambitious individuals establishing their business. We want to take your business idea and help you turn it into the successful venture it deserves to be.

Here is how everything works

All you have to do is place your order with us by giving us all the necessary information. We will get to work, and we will create your project proposal within a matter of 12-24 hours. It is hard to believe, but yes we do provide an elaborate proposal in such a short time. As the project proceeds, we ask the client to fill in a questionnaire which gives us a gist of the project, and the client will get weekly updates from us so that they will be satisfied.

OGS Capital provides customers with a complete draft report, and at this point, if you feel comfortable we ask for feedback which we appreciate a lot. Since our clients are what make us, so we want to hear them out. The final draft is submitted with all issues resolved. Even if you are in a hurry and have an urgent job, you can contact OGS capital because we have the management skills and the experienced professionals that can do your work in a very short time and you can trust us with your work.

Download Sample From Here

OGSCapital’s team has assisted thousands of entrepreneurs with top-rate business plan development, consultancy and analysis. They’ve helped thousands of SME owners secure more than $1.5 billion in funding, and they can do the same for you.

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BGF explains: what do private equity investors look for in a business?

Our ‘BGF explains’ series is aimed at demystifying the world of business funding by explaining the meaning of key financial terms. We aim to cover everything you might want to know, whether or not it’s a service we offer at BGF. Learn more about our offering here .

Private equity investment is a form of business funding that plays an important role in helping businesses of all kinds to grow. It is a form of equity funding, in which investors provide financial support in return for a share of your business, and it happens away from public markets, in companies that are held privately.

Private equity is usually distinguished from venture capital investment by the growth stage of the target business. Venture capital investors tend to target early-stage companies, while private equity investors tend to target more established businesses. However, the aim in each case is to achieve growth.

Entrepreneurs should seek independent advice before making the significant decision of whether to sell part of their company. In this article, we provide general information about what private equity investors look for in investee businesses, and explore the types of businesses that could benefit.

Which investors are interested in your business?

Private equity investors come in different shapes and sizes. Some specialise in a specific sector, such as healthcare, while others are generalists who invest across all sectors.

Some firms aim to make only large deals, worth more than £100 million, for example, while others target smaller deals. Some firms distinguish themselves by the particular skills they offer – for example they may excel in helping companies expand internationally.

Another point of difference is that some private equity firms will only invest in exchange for a majority stake that gives them control of the business. Others are willing to be minority shareholders or to co-invest alongside other investors.

In short, there are many reasons why a private equity investor may be interested in your business, including your sector , the stage in your business lifecycle , the location of your business, the valuation of your business or the financial position of your business.

A crucial first step in attracting a private equity investor is to understand what qualities of your business may be attractive to which investors.

2. Financials

Do you have sufficient financial information available?

Private equity investors pride themselves on making sound investment decisions based on all the financial information available to them. This is likely to extend beyond the accounting documents you compile annually or quarterly and might include market data, supply chain information, information on customers (existing and potential) and other forms of market analysis.

Intricate financial records, extending over relevant timelines, will be crucial during any negotiations. Keep in mind that private equity firms will likely want to run sophisticated reports and request projections based on a variety of factors, so having a reliable financial function to handle these requests will be helpful.

You will also want to ensure that your accounting practices comply with the relevant reporting standards.

3. Management team

Do you have the right people with the right expertise?

Potential investors will be keen to get to know your management team. They will want to develop a good professional relationship based on trust, so be prepared to have meetings with them before a deal is signed.

However, they will not be looking solely at how your team performs and how skilled they are, but what their responsibilities are, their key measures of success and more.

One crucial person in the transaction will be your finance director or chief financial officer (CFO). It can be helpful to have a CFO who has experience with handling the requests that are common from private equity houses, as this can make the process go more smoothly.

In general, it’s important that your management team is aligned on the main issues. Investors will want to see a clear vision for the future of the business that supports the long-term growth ambitions explained in your business plan.

4. A well-thought-out growth plan

Do you have the right plan to appeal to private equity investors?

It’s important to be able to communicate your growth plans for the business. By investing in you, a private equity investor is joining you on a journey. You want to show them the destination you hope to reach and how you plan to get there.

Equally, you should consider that a private equity investor may have their own ideas about what the growth plan should be. It’s important to be upfront about your ambitions to ensure your interests are aligned with those of your investors.

You should be very clear about the timelines for your plan. Some private equity firms may wish to achieve a return on their investment within a relatively short time period, perhaps one or two years. If you are looking for long-term financial backing, you should make that clear in your business plan.

How does BGF fit in?

BGF provides growth capital to small and mid-sized businesses across the UK and Ireland, investing across sectors and in every region. We are a minority investor that invests in businesses we believe in, without seeking to take control. We invest patient capital , meaning we don’t set hard exit timelines, allowing companies in our portfolio to grow sustainably at the pace that is appropriate for them.

BGF typically makes initial investments of between £1-15 million. The combination of being a minority investor of patient capital that makes investments of this size is distinctive and distinguishes us from most private equity industry. For this reason, BGF’s offering is “different by design”.

BGF is the most active growth investor in the world in terms of number of investments, averaging about one investment a week.

The information contained in this article is for general information and use. It does not constitute any form of advice and is not intended to be relied upon in making any investment decision. Independent advice should always be sought as to whether a particular transaction is suitable having regard to your personal and financial circumstances.

private equity fund business plan

How we can help

As the largest growth investor in the UK and Ireland, BGF has invested in more than 400 small and medium-sized businesses, deploying a total of around £2.5 billion of investment. Our teams are spread across the UK and Ireland in a network of regional offices.

We have broad sector expertise, investing in everything from high-growth online businesses to advanced manufacturing companies and start-ups developing life-saving medicines. If you’re interested in what we have to offer, please contact us today.

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Elaine Warburton

Founder, Angel Investor

private equity fund business plan

Elaine Warburton OBE has over 25 years’ healthcare, biotechnology and entrepreneurial Elaine Warburton OBE, Entrepreneur & Investor

An entrepreneur, innovator, investor and humanitarian, Elaine has co-founded two ground-breaking companies – QuantuMDx Group and ReadyGo Diagnostics. Elaine is passionate about supporting fellow entrepreneurs and women in STEM was awarded an OBE for services to innovation in healthcare.

Elaine Warburton will be hosting Scaleup week sessions:

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Eileen Burbidge

Founding Partner, Passion Capital

private equity fund business plan

Eileen Burbidge MBE is an American venture capitalist and a founding partner at Passion Capital. The London-based VC fund has made 70 tech investments worth $134 million since its launch in 2011.

A Computer Science graduate, Burbidge has worked in roles at companies including Yahoo!, Apple, Sun, and Skype. Burbidge sits as Chair of Tech City UK (the part-Government funded body promoting Britain’s digital economy).

She is also HM Treasury Special Envoy for Fintech and a Tech Ambassador for Mayor of London’s office.

Eileen Burbidge will be hosting Scaleup week sessions:

Claire dorrian.

Head of Sustainable Finance, Capital Markets

private equity fund business plan

Claire is responsible for leading the portfolio of sustainable finance related projects across London Stock Exchange Group’s Capital Markets business which includes equities, fixed income and ETFs. Claire has played an important role in the development of model ESG disclosure and reporting guidance for London Stock Exchange listed companies and initiatives such as an ESG Disclosure Tool, the publication of a guide to green finance and Green Economy Mark for AIM and Main Market companies.

Claire’s background is in the fund management industry and in equity capital markets, working with private and listed companies. Claire is a member of an industry Taskforce on the Scaling of Voluntary Carbon Markets.

Positioned at the heart of global financial markets, LSEG works across the investment and finance chain from issuers to asset owners, and across the financial, banking, trading and advisory ecosystem. As such LSEG is uniquely positioned to support clients in achieving the transition to a sustainable and net-zero economy and was the first exchange group to commit to net zero emissions.

Claire Dorrian will be hosting Scaleup week sessions:

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Paul Thwaite

CEO Commercial Bank. Natwest Group

private equity fund business plan

Paul Thwaite was appointed Chief Executive Officer of the Commercial and Institutional customer franchise in July 2022. He is responsible for the teams within the ring fenced bank that support business customers, ranging from start-ups through to multi-nationals.

Alongside his role as CEO, Paul is also the executive accountable for the Group’s Payments business. Paul has a track record of success in senior business and functional roles across Wholesale, Corporate, International and Retail Banking for the Group, and was most recently responsible for Commercial Banking, which included leading the Group’s response to supporting UK business customers through the Covid pandemic. Prior to this, he held Managing Director and Chief Risk Officer roles in International Banking, based in the UK and the US, working across multiple geographies.

He also takes an active role in equality and inclusion initiatives, and actively drives a number of targeted D&I programmes across the Group.

Outside the bank Paul holds a number of Financial Services advisory and non-executive roles, and is a member of the Whitehall Industry Group and the UK Government’s Business Finance Council.

Paul Thwaite will be hosting Scaleup week sessions:

Scaling sustainably: how scaleups can balance a growing footprint with a growing business

Rodney Appiah

Chairman, Cornerstone Partner

private equity fund business plan

Rodney Appiah is a former investment banker, NED and VC investor with more than 15 years of financial services experience across UK and Europe. He is currently Managing Partner at Cornerstone VC, an early stage fund focused on a ‘people first’ investment strategy, investing at pre-seed and seed stage in UK technology businesses led by diverse founding teams.

An experienced board director, Rodney is a Non Executive Director of the UK Business Angels Association (UKBAA), the UK trade body for angel and early stage investing, and Conduit Connect, a direct investment platform that focuses on connecting global high impact businesses with mission aligned investors. Rodney also holds committee roles at Innovate UK (Innovation Loans Credit Committee), Lloyds Banking Group (Black Business Advisory Committee) and the London Chamber of Commerce (Black Business Association).

Rodney Appiah will be hosting Scaleup week sessions:

Working for everyone: how scaleups can build inclusive workforces

Tessa Clarke

Co-founder, OLIO

private equity fund business plan

A digitally native CEO and now startup founder who thrives in challenging environments, and has a strong track record of driving change. Uses excellent strategic ability to get alignment around a vision, and combines this with a collaborative but firm approach to inspire cross functional teams to (over) deliver. Not afraid to challenge the status quo. Experience includes startups, digital transformation, managing for high growth, global expansion, turnaround, acquisition and integration. Worked in both B2C and B2B across retail, media, events, and financial services, in the UK and globally. Passionate about sustainability, the circular economy and zero waste. A strong proponent of businesses that combine profit with purpose.

Andy Shovel

Founder & Co-CEO, THIS

Andy Shovel, founder and co-CEO of THIS

Andy Shovel is a British entrepreneur and co-founder of THIS – a plant-based, hyper-realistic meat alternative. Since launching in June 2019, THIS is now one of the fastest-growing UK plant-based meat start-ups. The alt-meat brand has recorded a 530% year-on-year growth, representing one of the highest growth rates ever for a British food brand.

Nicolas Moreau

Chief Executive Officer, HSBC Asset Management

private equity fund business plan

Nicolas Moreau joined HSBC Asset Management in September 2019. 

Nicolas has 30 years of experience in the asset management and insurance industries. Before this appointment, Nicolas spent two years at Deutsche Bank as the Management Board member responsible for Deutsche Asset Management. As the Global CEO, Nicolas led the business to be listed on the Frankfurt Stock Exchange in March 2018 and rebranded the business to DWS. Previously, Nicolas spent 25 years with AXA Group. He was Chairman and CEO of AXA France and a member of the AXA Group Management Committee, as well as Vice Chairman of the Group Investment Committee. Nicolas has also been CEO of AXA Investment Managers and CEO of AXA UK & Ireland.

Nicolas Moreau will be hosting Scaleup week sessions:

Erin platts.

Head of EMEA & President of the UK branch at Silicon Valley Bank

private equity fund business plan

Erin Platts is head of EMEA (Europe, the Middle East and Africa) for SVB UK and president of the UK Branch. She is responsible for leading and developing the bank’s business across the EMEA region.

Erin has served SVB UK since 2007. She has a strong background in market and product development, with expertise that includes delivery of bank solutions and debt transactions to technology and life sciences companies and their investors. Before her current role, Erin led the market in Europe as the UK Branch head of relationship banking. She also worked in the Silicon Valley Bank office in Boston before her transition to the UK.

Erin is well-connected and an active champion of global innovation. She has been recognized by Management Today in its 35 Women Under 35 list, as well as highlighted in the Innotribe global index report of Power Women in FinTech.

Erin earned a bachelor’s degree in business management and entrepreneurial studies from Babson College in Wellesley, Massachusetts.

Erin Platts will be hosting Scaleup week sessions:

Anna brailsford.

CEO, Codefirst: Girls

private equity fund business plan

An entrepreneurial leader with a history of exceeding growth targets within the tech industry. Scaled companies to drive growth, maximize revenue and increase performance. Devised strategies to penetrate new markets and develop product portfolios. Created value propositions, services and products to expand revenue streams.

Anna Brailsford will be hosting Scaleup week sessions:

Zahra bahrololoumi.

CEO, Salesforce, UK&I

private equity fund business plan

Zahra is a technology leader and is the Executive Vice President and CEO of Salesforce UK & Ireland. She was appointed in March 2021 to lead the company’s operations across both key growth markets.

Prior to this, Zahra spent 22 years at Accenture and most recently Zahra led Accenture Technology in the UK/I for almost four years and served as an executive board member / director on the board of directors.

As Technology leader she was a transformative force. She was unrelenting in making the service more market-facing and repositioned the business within the ecosystem, notably with the award-winning Kaleidoscope concept. At the same time, she was personally engaged across a range of clients across automotive, legal, government, banking, energy & life sciences where she was instrumental in some of the most significant client relationships and client transformation activities.

During her 22 years, Zahra gained transformation experience across a number of clients and industries including grocery retail, oil and gas, retail banking, healthcare & telecoms. She believes that success comes not only from deep technology expertise, but also an understanding of the value it can bring to customers, employees, partners and anyone involved in its use. Zahra has worked with clients to help define value and achieve it by connecting them to vast ecosystem of technologies, from cloud and ERP platforms to artificial intelligence engines or extended reality.

Zahra has pioneered a number of ‘firsts’ – from convening the UK technology ecosystem at the award-winning Kaleidoscope to patented uses of cloud technology for energy industry divestments.

Zahra is strong advocate for diversity and inclusion and has held a number of D&I leadership roles globally and within the UK/I. She has written on diversity for publications, including Management Today, Forbes and The Telegraph.

She currently sits on the boards of TechUK, Cancer Research UK and Movement to Work.

Zahra has been widely recognised throughout her career as an industry leader, including being named as number thirteen in Computer Weekly’s ‘Most Influential 50 People in UK Tech 2022;’ also in Computer Weekly’s “50 Most Influential People in UK Tech 2021,” and Women in IT’s “Woman of the Year – 2019” finalist.

Zahra lives between London and Northamptonshire with her husband Stephen and enjoys spinning & running.

Zahra Bahrololoumi will be hosting Scaleup week sessions:

Irene graham.

CEO, ScaleUp Institute

private equity fund business plan

Irene is the founding CEO and a board director of the ScaleUp Institute, a private sector, not-for-profit company focused on making the UK the best place in the world to scale up a business.

She is a former senior banker at Standard Chartered where she held both European and global managing director roles.  She set up, ran and scaled several of the bank’s key client and product businesses across its corporate and institutional bank and led several global M&A activities.

During that time at the height of the financial crisis was seconded to work across the banking industry where she lead the Business Finance Taskforce and Better Business Finance which was responsible for, amongst other initiatives, the founding of the Business Growth Fund, SME Finance Monitor, and leading on developments in Open Banking, and the Small Business Act.

She is a Visiting Professor of Entrepreneurship at Strathclyde University and holds a variety of non executive director and advisory roles across the creative, business and finance communities.

Irene Graham will be hosting Scaleup week sessions:

Greg jackson.

CEO, Octopus Energy

private equity fund business plan

Greg Jackson is the founder and CEO of Octopus Energy Group, the energy technology group with 3.5 million customers globally, operations in 14 countries and a £3.4bn portfolio of renewable energy assets.

Launched in 2016, Octopus Energy’s mission is to bring cheaper, greener power to all through technology. Greg’s vision of using technology to disrupt the energy market has attracted over $1.5 billion worth of funding from international energy companies, large pension funds and global investors, and has valued the company at around $5 billion.

Greg is a key thought leader in the UK on issues related to energy transition, energy costs and innovation, especially in energy.

Greg built and sold a number of successful businesses before starting Octopus, including Consultant Connect, a telemedicine provider serving 40% of UK doctors, and e-commerce company C360 which built platforms for many large enterprises. He is an angel investor in a wide range of start-ups, including Xlinks, the company building the world’s largest subsea cable that will bring renewable energy from Morocco to the UK and Zopa, the world’s first peer to peer finance company.

Greg Jackson will be hosting Scaleup week sessions:

Tony danker.

Director General, CBI

private equity fund business plan

Tony joined the CBI as Director-General in November 2020. His career spans a range of roles in business, media and government. Before the CBI, Tony was the first CEO of Be the Business, a business-led movement created to transform UK’s productivity founded by a group of FTSE-100 Chairmen and the former Chancellor of the Exchequer, George Osborne. From 2010-2017 Tony was International Director, then Chief Strategy Officer, at Guardian News & Media. For two years before that, he was a Policy Advisor HM Government (2008-10), joining the Cabinet Office and HM Treasury. Tony’s early career was at McKinsey & Company (1998-2008) in London and Washington DC where he worked for 10 years.

Tony Danker will be hosting Scaleup week sessions:

Stuart tait.

GM & Head of Commercial Banking, HSBC UK

private equity fund business plan

Stuart Tait was appointed Head of Commercial Banking UK in December 2021, and is responsible for HSBC’s relationships with 900,000 large, medium and small business clients.

He is a general manager at HSBC Group, one of the world’s largest banking and financial services organisations with assets of nearly US$3 trillion*.

Prior to his current role, Stuart was Regional Head of Commercial Banking for Asia Pacific, the leading international wholesale bank in the region and one of the Group’s fastest-growing franchises.

Stuart has worked in financial services for over 30 years. He joined HSBC in 1984 as an International Manager and has held various positions in Commercial Banking, Global Banking and Markets, Retail Banking and Wealth Management, Human Resources and Risk. Previous assignments with HSBC have been based in various Asia markets, the Middle East, US, Canada and in the Group’s Head Office.

*As of 31 March 2021

Stuart Tait will be hosting Scaleup week sessions:

Dr sally uren.

Forum for the Future

private equity fund business plan

Sally oversees Forum for the Future’s mission to accelerate transformation to a just and regenerative future. This involves working with global businesses such as HSBC and Walgreens Boots Alliance, as well as a wide range of other non-profit, membership and philanthropic organisations. This work takes the form of both one to one partnerships and multi-stakeholder collaborations, all designed to address complex challenges in systems as diverse as from food to apparel. Sally has recently contributed to Forum’s ‘Business Transformation Compass’ – a guide to just and regenerative business, as well as co-authored ‘Driving Co-Benefits for Climate and Health’ , private sector guidance for developing integrated climate and health strategies.  Sally is a regular speaker at international conferences and has had articles published in a wide variety of media outlets. She is an independent advisor on Advisory Boards for several global businesses including Kimberly Clark and Burberry and also Co-Chair of the Independent Advisory Group for Travalyst, the global travel and tourism collaboration led by the Duke of Sussex.

Dr Sally Uren will be hosting Scaleup week sessions:

Rajeeb dey mbe.

CEO, Learnerbly

private equity fund business plan

Founder and CEO of Learnerbly – the workplace learning marketplace. We empower employees through learning stipends to access the very best professional development opportunities based on what they need to lean and how they like to learn (coaching, courses, e-learning, conferences, books, podcasts + more) curated from 250+ of the top L&D providers. We are trusted by some of the world’s most progressive scale-ups and enterprises including King.com, GoCardless, IDEO, Curve, HelloFresh, Bazaarvoice, WeTransfer and many more. With 95%+ employee activation rates and 40-60% monthly engagement (3X+ industry average) across 100+ clients, Learnerbly creates impactful learning cultures for the modern hybrid organization.

Prior to Learnerbly Rajeeb founded Enternships.com, a portal that connects students and graduates to work placements in over 7000 start-ups and SMEs, and which developed innovative corporate talent programmes for clients such as Telefonica, Santander and Havas for which he was named the “02 X Young Entrepreneur of the Year” in 2009 and the youngest recipient of the Queen’s Award for Enterprise Promotion in 2013.

Rajeeb is also the Co-Founder of StartUp Britain, a national entrepreneurship campaign supported by the government; it was launched by UK Prime Minister David Cameron in March 2011. He served as a Trustee of UnLtd, the Foundation for Social Entrepreneurs for over 10 years, and was recognised as one of the 1,000 Most Influential People in London by The Evening Standard. He graduated with First Class Honours in Economics and Management from the University of Oxford in 2008 and was appointed as the world’s youngest Young Global Leader (at 26) by the World Economic Forum in 2012.

Rajeeb is also a contributor for Forbes.com writing on issues such as the leadership, ‘future of work’ (or just work these days!), and entrepreneurship.

Rajeeb Dey MBE will be hosting Scaleup week sessions:

Professor myles allen.

Director, Oxford Net Zero

private equity fund business plan

Myles Allen is Professor of Geosystem Science in the School of Geography and the Environment and Department of Physics at the University of Oxford, and he is Director of the Oxford Net Zero initiative. He is credited by the BBC with first demonstrating, 15 years ago, the need for ‘Net Zero’ carbon dioxide emissions to stop global warming. His research focuses on how human and natural influences on climate contribute to observed climate change and risks of extreme weather and in quantifying their implications for long-range climate forecasts.

He was the Coordinating Lead Author on the Intergovernmental Panel on Climate Change (IPCC)’s Special Report on 1.5 degrees, having served on the IPCC’s 3rd, 4th and 5th Assessments, including the Synthesis Report Core Writing Team in 2014. He proposed the use of Probabilistic Event Attribution to quantify the contribution of human and other external influences on climate to specific individual weather events and leads the www.climateprediction.net/ project, using distributed computing to run the world’s largest ensemble climate modelling experiments.

Professor Myles Allen will be hosting Scaleup week sessions:

Juliet davenport.

Founder and former Chief Executive, Good Energy

private equity fund business plan

Climate scientist, renewable pioneer, businesswoman, environmental entrepreneur. Juliet Davenport has spent more than 20 years not just advocating for solutions to climate change, but actively creating them. Having achieved degrees in physics and economics, Juliet founded the UK’s first 100% renewable electricity supplier in 2000. An innovator whose contribution to climate action over the last two decades in the UK is significant. Her executive role during this period has been to helm of AIM listed Good Energy Group PLC for, having IPO’ed the company in 2012. Good Energy Group PLC is one of the few profitable energy retailers in the UK and has led a charge in renewable energy and new energy technologies for over 20 years.

Juliet Davenport will be hosting Scaleup week sessions:

Katherine morgan.

Head of High Growth & Entrepreneurs, Barclays

private equity fund business plan

Katherine leads a national team of High Growth relationship experts focused on supporting companies from start-up to scale and exit. Katherine brings her significant experience in business leadership, strategy & execution, sales management and culture change to supporting Entrepreneurs and SMEs looking to innovate and grow.

Katherine Morgan will be hosting Scaleup week sessions:

Guy schanschieff.

CEO, Bambino Mio

private equity fund business plan

Co-founder and Managing Director of Bambino Mio.

Guy Schanschieff will be hosting Scaleup week sessions:

Carl schramm.

US Economist

private equity fund business plan

Carl is a globally recognized expert in entrepreneurship, innovation, and economic growth. He has founded and financed multiple startups, and served in executive positions in the insurance industry, both internationally and domestically. As former CEO of the Kauffman Foundation, the world’s most influential organization promoting entrepreneurship, he was referred to as “The evangelist of entrepreneurship” by The Economist. In 2010 he devised the theory of Expeditionary Economics — the US must anticipate restoring economies after invasions — which became part of US war fighting doctrine. Before his business/investing career, Schramm taught at Johns Hopkins for 16 years. He is a member of the Council on Foreign Relations, a trustee of the Templeton World Charities Foundation and a fellow of the Royal Society of Arts. Schramm earned his Ph.D. in economics from the University of Wisconsin, his law degree from Georgetown, and currently serves as University Professor at Syracuse. He is the recipient of the George Eastman prize and five honorary doctorates. His most recent book is Burn the Business Plan; What Successful Entrepreneurs Really Do.

Carl Schramm will be hosting Scaleup week sessions:

Stephen welton.

Executive Chair, BGF

Stephen Welton, non-executive chair of BGF

Stephen Welton is Executive Chair of BGF, a role he has held since July 2020, and is responsible for the strategic direction of the company. Before taking on the role of Executive Chairman, Stephen was the founder CEO of BGF between 2011 and 2020. Under Stephen’s leadership, BGF has grown from 1 to 16 offices across the UK and Ireland, with more than £2.2bn invested and a team of 170, becoming in the process the most active growth capital investor in the UK.

Stephen has extensive experience as an investor. Prior to BGF, he was one of the founding partners of the global private equity firm CCMP Capital (formerly JP Morgan Partners), and before that, Managing Director of Barclays Private Equity and Henderson Ventures, which he also co-founded.

In 2013, Stephen was appointed an advisor to the UK Government regarding the establishment of the British Business Bank and in 2017, served as a member of the Industry Panel advising HM Treasury on the Patient Capital Review and is currently a member of the Prime Minister’s Business Council. In 2018, Stephen was appointed a member of the first Council of Innovate UK, which forms an integral part of UK Research and Innovation. Stephen is also a member of the Diversity Project Advisory Board.

Stephen has served as an independent director on a broad range of companies over many years, both in the UK and internationally, and joined the board of FTSE 250 Intermediate Capital Group plc as a Non-Executive Director in September 2017. Stephen started his career in banking, has a law degree from Durham University and is a qualified Barrister-at-Law.

“BGF is operating at the very heart of the UK & Irish economies. We launched with the ambition to become a champion for British business, the most active provider of long-term capital and the first choice investor for ambitious entrepreneurs. I have no doubt that many of the great British companies of the future are already in our portfolio – and we have only just scratched the surface.”

Stephen Welton will be hosting Scaleup week sessions:

Co-Founder and CEO KNA, Non exec chair Dianomi & Sliide.

private equity fund business plan

Mike Kelly is a digital trailblazer and has spent 30+ years successfully growing digital media, advertising and technology businesses. Mike ran AOL’s media business as President, was CEO and President of the Weather Channel and most recently was an investor and Chairman of BGF-backed video ad platform, Unruly. Mike is also the Chair at two current BGF portfolio companies, Dianomi and Sliide and is a board director at Cars.com and Quantcast.

Founder and CEO of finnCap Group Plc

private equity fund business plan

Sam is founder and CEO of finnCap Group Plc, the leading advisory firm for the business of tomorrow.

The sector specialist service offering ranges from ECM and IPO, to Plc strategic advisory, debt advisory, M&A, and private growth capital as well as net-zero and sustainability consultancy services through investment in Energise. finnCap Group comprises finnCap Capital Markets, finnCap Cavendish as a market-leading strategic M&A firm and has a global reach through its membership of Oaklins.

Sam actively champions investment for female-led business through the finnCap Ambition Nation: Female leaders series to help create better networks and demystify financial jargon. Sam is also passionate about empowering young people and helping them develop essential life skills.

She is spearheading a campaign for entrepreneurship to be integrated into the school curriculum and works with organisations such as YourGamePlan, icanyoucantoo and Modern Muse to help create a fairer foundation for young people, irrespective of their background.

Sam Smith will be hosting Scaleup week sessions:

Co-founder, Chairman and CEO at Graphcore

private equity fund business plan

Graphcore (graphcore.ai) is a silicon and systems company based in Bristol- UK, that has developed a new type of processor, the Intelligence Processing Unit (IPU), to accelerate machine learning and AI applications. Since its founding in 2016, Nigel has secured over $700m in funding for the company from some of the world’s leading venture capital and financial firms including Atomico, Baillie Gifford, Fidelity, Merian, OTPP, Schroders, and Sequoia Capital, from major corporations including BMW, Bosch, Dell, Microsoft and Samsung and from eminent Artificial Intelligence innovators. At the company’s most recent funding round in December 2020, Graphcore was valued at $2.8Bn.

Nigel has a background as a technology business leader, entrepreneur and engineer having been CEO at two successful VC-backed processor companies XMOS and Picochip (sold to Nasdaq:MSPD, now Intel), a founder of Icera (sold to Nasdaq: NVDA) and VP/GM at Altera (Nasdaq: ALTR, sold to Intel for $17Bn) where he spent over 13 years and was responsible for establishing and building the European business unit that he grew from zero to $500m in annual revenues.

Nigel has an extensive network of connections in the global technology industry spanning USA, China, Asia and Europe. He is often called upon to speak at major industry events and has been recognized with numerous industry awards including, Icon of the Year at the Barclays Entrepreneurs Awards and ranked #1 on Business Insiders, 100 most influential people shaping British technology.

Nigel has served as a Board Member and Chairman at a number of technology businesses including as non-executive director and head of the technical advisory board at Imagination Technologies PLC, a FTSE LSE listed business, until its acquisition in 2017.

Nigel was a founding member of the Princes Trust Technology Leadership group which, with match funding support from the UK Government, was able to raise over £10m for the Princes Trust Charity.

Nigel studied Electrical and Electronic Engineering at Heriot Watt University and is the author on 3 granted patents. Nigel lives in Somerset, UK with his wife and two boys.

Nigel Toon will be hosting Scaleup week sessions:

CEO, Centre for Net Zero

private equity fund business plan

Lucy Yu is CEO at Centre for Net Zero, an impact-driven research unit focused on delivering a fast, fair and affordable energy transition. The Centre was founded by Octopus Energy in 2021.

Lucy has 20 years of experience in technology, policy and regulation. She has led teams in the UK government’s Cabinet Office, Department for Transport, and Centre for Connected and Autonomous Vehicles (CCAV), and at the UN’s International Telecommunication Union. Her work has focused on future mobility and cities; sustainability and renewable energy; and AI, data, and digital technologies. She has written extensively on these topics for the tech press and peer-reviewed journals, and has spoken widely including for Wired and SLUSH.

Outside government she has run operations, public policy, research and strategy functions for some of Europe’s brightest startups including SwiftKey (artificial intelligence); Voi Technology (micromobility); Cucumber (software development); and Five (autonomous vehicles). She has been named a Financial Times Top 100 Most Influential BAME Leader in tech (2019) and a Diversity UK Top 100 Asian Star in UK Tech and Top 5 Star in GreenTech (2021).

Lucy is a Non-Executive Director at the Connected Places Catapult, the UK’s national accelerator for cities, transport and places; and an Associate Fellow of Technology and Public Policy at the Tony Blair Institute for Global Change. She is a trained scientist and holds a degree in chemistry from Imperial College specialising in computational and physical chemistry.

Lucy Yu will be hosting Scaleup week sessions:

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Starting a private equity fund is an attractive prospect for many investors and entrepreneurs. Private equity offers the potential for significant returns through investments in private companies and startups. 

However, launching a successful private equity fund requires extensive planning, fundraising skills, and investment acumen.

This comprehensive guide provides a step-by-step overview of the key steps involved in conceiving, structuring, raising capital for, and launching your own private equity fund .

Defining the Business Strategy

The first step in starting a private equity fund is to define a clear investment strategy and business plan. This involves determining what types of private equity investments the fund will focus on, such as buyouts, growth capital, distressed assets, or venture capital. The fund manager needs to identify sectors or industries they have knowledge of and can add value to potential portfolio companies.

Factors to consider when defining a business strategy include:

  • Targeting specific sectors or deal sizes that are overlooked by larger funds
  • Focusing on a particular geography or region
  • Pursuing niche investment strategies like cleantech, healthcare, or software
  • Leveraging existing relationships and domain knowledge

A focused strategy makes it easier to market the fund to potential investors.

Constructing a Business Plan

After settling on an investment approach, the next step is developing a comprehensive business plan. This is crucial for securing initial funding and attracting investor interest.

Key elements of a private equity fund business plan include:

  • Executive summary: Overview of strategy, fund details, target returns
  • Market analysis: Analysis of trends in the target sectors
  • Investment strategy: Detailed explanation of how the fund will source deals, evaluate opportunities, manage investments, and exit
  • Operations plan: Team biographies, service providers, systems and processes
  • Financial projections: Estimated fund size, projected returns, fee structure
  • Risk factors: Potential risks and mitigation strategies
  • Fundraising strategy: Capital raising timeline and methods to secure investor commitments

The business plan should demonstrate the fund manager’s capabilities, experience, and vision for generating strong returns. It instills confidence in investors considering allocating capital.

Setting Up the Operations

Most private equity funds are structured as limited partnerships or limited liability companies. The general partner establishes a separate legal entity for the fund itself. This involves choosing and registering the appropriate structure.

Key legal and operational considerations include:

  • Hiring experienced lawyers to handle fund formation and drafting of partnership agreements
  • Selecting a qualified fund administrator to handle accounting, reporting, and back-office functions
  • Putting in place IT infrastructure and data management systems
  • Adhering to regulatory requirements and registering as an investment advisor if required
  • Developing compliance policies, controls, and procedures
  • Securing directors and officer liability insurance

Careful structuring and establishment of operations provide a strong foundation for managing the investment vehicle professionally.

Establishing the Investment Vehicle

Before beginning fundraising, the general partner needs to establish the legal entity that will serve as the investment vehicle. The most common options are:

  • Limited Partnership (LP) : This is the predominant structure used by private equity funds. The general partner has unlimited liability, while limited partners have limited liability up to their committed capital.
  • Limited Liability Company (LLC) : Provides limited liability protection to all members but may not be tax efficient for certain investors.

Other key steps in establishing the fund vehicle include:

  • Drafting the private placement memorandum with the help of lawyers
  • Determining the fund’s economic terms such as fees, profit splits, investment period, term length
  • Developing a thorough limited partner agreement
  • Filing required regulatory documentation like Form D with the SEC
  • Setting up escrow accounts to hold capital from investors before closing the fund

Careful preparation of the investment vehicle ensures a smooth process once investor commitments start coming in.

Determining a Fee Structure

Private equity funds charge fees to their limited partners to cover costs and compensate the general partner. The typical fee structure includes:

  • Management Fees : An annual percentage (1-2%) of committed capital to fund operations.
  • Carried Interest : A share (usually 20%) of the fund’s profits paid to the general partner once returns exceed a hurdle rate.

When determining the fee structure, factors to consider include:

  • Industry standards and investor expectations
  • Fund size and strategy that influence operating costs
  • Performance incentives and alignment of interests
  • Tax implications of the fee structure

The fee terms should be clearly explained in the private placement memorandum before seeking investor commitments.

Raising Capital

Raising capital is critical for any new private equity fund manager. This involves securing commitments from limited partners to invest in the fund.

Strategies for attracting investors include:

  • Leveraging existing relationships with high-net-worth individuals or family offices
  • Targeting specific institutional investors focused on the fund’s niche area
  • Utilizing a placement agent to introduce the fund to potential LPs
  • Pitching to pension funds, endowments, and sovereign wealth funds
  • Applying to emerging manager programs run by institutional investors
  • Attending conferences and networking events to meet prospective investors

Once sufficient commitments are received, the fund can hold an official close and start investing the capital. Veteran fund managers are invaluable in helping first-time teams successfully fundraise.

Getting Ready to Start Investing

Before calling capital from limited partners after holding a final close, the fund needs to be ready to deploy the capital. This involves:

  • Having a robust pipeline of potential deals to evaluate
  • Ensuring the investment team is fully staffed with experienced professionals
  • Establishing processes for sourcing deals, conducting due diligence, approval, and execution
  • Selecting service providers needed to support investments like legal advisors
  • Completing the legal agreements with all limited partners

It can take 12-18 months from initially starting the fund until closing on the first investment. Proper planning and preparation ensures the fund is poised for success once capital is in hand.

Contact an RIA Lawyer Today

The attorneys at My RIA Lawyer have extensive experience advising clients on navigating the complex legal and regulatory requirements involved in private fund formation and management. 

Their team of dedicated lawyers can provide trusted guidance at every stage of conceiving, structuring, launching, and operating a private equity fund. 

Contact My RIA Lawyer to discuss your fund plans and how they can support your success.

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What’s Unique About Private Equity?

Complexity, capital calls, and illiquidity are among the challenges investors face to reap potential rewards.

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Private equity involves pooling capital to invest in private companies either in the form of providing venture capital to startups or by taking over and restructuring mature firms via leveraged buyouts. Private equity investors believe that the benefits outweigh the challenges not present in publicly traded assets—such as complexity of structure, capital calls (and the need to hold liquidity to meet them), illiquidity, higher betas than the market , high volatility of returns (the standard deviation of private equity is more than 100% ), extreme skewness in returns (the median return of private equity is much lower than the mean), lack of transparency, and high costs. Other challenges for investors in direct private equity investments include performance data, which suffers from self-report bias and biased net asset values and understates the true variation in the value of private equity investments.

Empirical Research on Private Equity Performance

Unfortunately, the empirical research findings on the performance of private equity, including publicly listed private equity , have not been encouraging. in general, private equity has underperformed similarly risky public equities even before considering their use of leverage and adjusting for their lack of liquidity. But the authors of the 2005 study “ Private Equity Performance: Returns, Persistence, and Capital Flows ” did offer some hope. They concluded that private equity partnerships were learning—older, more experienced funds tended to have better performance—and that there was some performance persistence. Thus, they recommended that investors choose a firm with a long track record of superior performance.

The most common interpretation of persistence has been either skill in distinguishing better investments or the ability to add value after the investment (for example, providing strategic advice to their portfolio companies or helping recruit talented executives). Research by Verdad showed a lack of evidence supporting either hypothesis. But the research does offer another plausible explanation for persistence: Successful firms can charge a premium for their capital.

Reputation and the Cost of Capital

David Hsu, author of the 2004 study “ What Do Entrepreneurs Pay for Venture Capital Affiliation? ,” analyzed the financing offers made by competing venture capital firms, or VCs, at the first professional round of startup funding. He found that offers made by VCs with a high reputation are 3 times more likely to be accepted, and high-reputation VCs acquire startup equity at a 10%-14% discount.

Ramana Nanda, Sampsa Samila, and Olav Sorenson provided confirmation of a reputational discount in their 2020 study, “ The Persistent Effect of Initial Success: Evidence from Venture Capital .” Their findings led them to conclude:

“Our investment-level analyses suggest that initial success matters for the long-run success of VC firms, but that these differences attenuate over time and converge to a long-run average across all VC firms. Although these early differences in performance appear to depend on being in the right place at the right time, they become self-reinforcing as entrepreneurs and others interpret early success as evidence of differences in quality, giving successful VC firms preferential access to and terms in investments. This fact may help to explain why persistence has been documented in private equity but not among mutual funds or hedge funds, as firms investing in public debt and equities need not compete for access to deals. It may also explain why persistence among buyout funds has declined as that niche has become more crowded.”

They added: “The picture that emerges then is one where initial success gives the firms enjoying it preferential access to deals. Both entrepreneurs and other VC firms want to partner with them. Successful VC firms, therefore, get to see more deals, particularly in later stages, when it becomes easier to predict which companies might have successful outcomes.” It is the access advantage that perpetuates differences in initial success over extended periods.

Robert Harris, Tim Jenkinson, Steven Kaplan, and Ruediger Stucke confirmed the prior research findings of persistence of outperformance in their November 2022 study, “ Has Persistence Persisted in Private Equity? Evidence from Buyout and Venture Capital Funds .” However, it was only true for venture capital (not the full spectrum of private equity), as they found that there was no persistence of outperformance in buyout firms.

Latest Research

In their article “ The Dispersion Illusion ,” Brian Chingono and Dan Rasmussen of Verdad pointed out that “advocates for private equity investing often note that the dispersion of performance between top-quartile managers and bottom-quartile managers is significantly wider than the range of performance in liquid asset classes. The implication is that private markets are less efficient, that there’s a larger role for skill, and that investors in private equity can take advantage of this dispersion through manager selection.” However, Harris et al. found that while there was some persistence in venture capital, there was no persistence in buyout firms. Thus, at least for private equity buyout firms, the wide dispersion could not be attributable to high skill.

If skill doesn’t explain the wide dispersion, what does?

Explaining the Wide Dispersion in Performance

Chingono and Rasmussen showed that there is a simple, non-skill-based explanation for the wide dispersion of performance: It reflects the differences in portfolio composition between private equity and public funds. They explained, “Private equity portfolios are quite different from mutual fund portfolios. First, private equity portfolios tend to have about 20 firms, whereas a typical mutual fund holds about 200. Second, private equity portfolios are overwhelmingly comprised of micro-caps, while most mutual funds focus on large and mid-caps. Even the median small-cap mutual fund holds companies with market caps about 10 times the size of a typical [leveraged buyout]. Third, private equity funds hold highly leveraged companies, with the median proportion of debt financing being 49% Net Debt/EV [enterprise value] and the median leverage ratio being 4 times Net Debt/EBITDA [earnings before interest, taxes, depreciation, and amortization].”

To test that hypothesis, they created simulations of public equity portfolios that varied in concentration, company size, and timing of investment. Since private equity doesn’t sample randomly, instead choosing smaller and more profitable businesses, they compared the median returns of private equity against simulated micro-cap portfolios of 20 stocks that were selected from the cheapest 5% (value companies) and the most profitable 5% (quality companies) of companies within each year. Within their micro-cap data, there were typically 30-50 stocks in the top 5% of any given year, and the factor-ranked simulations were randomly selected from this opportunity set when forming the 20-stock micro-cap portfolios over the course of three years (at a pace of six to seven investments per year).

Their simulations started by randomly selecting a vintage year between 1995 and 2017 and then included the two subsequent years to form a three-year investment period. The authors explained, “For example, if 2000 is randomly chosen as a vintage year, the investment period will comprise 2000, 2001, and 2002. Each investment within a portfolio is sold after being held for four years. This iterative process of portfolio formation and realization is repeated 10,000 times in our simulations to create a distribution of return outcomes.” The following is a summary of their findings:

  • Value characteristics appeared to have the biggest impact on micro-cap returns, boosting the median return from 10% in a totally random sample to 18% in a value-ranked sample of 20 stocks.
  • Quality mattered, with an improvement of 4 percentage points in the median return, from 10% in a totally random sample to 14% in a profitability-ranked sample of 20 stocks.
  • The dispersion was about the same, at 20.7% in private equity versus 20.4% in the micro-cap simulation; private equity’s dispersion was in line with the random outcomes from volatile portfolios of leveraged, cheap micro-caps. The most notable difference was that private equity managers underperformed their simulated benchmark by 2 to 4 percentage points per year, which is easily explained by fees.

Their findings led Chingono and Rasmussen to conclude, “The implication of this result is that private equity’s value creation is not sufficient to overcome its fees, in our opinion. While PE may create value through deleveraging and other management decisions, those benefits appear to be fully offset by fees.” They added, “Our results suggest that the dispersion in private equity can be fully replicated in public markets, provided that investors focus on buying cheap, leveraged micro-caps and hold them in a concentrated portfolio, similar to the portfolio construction in PE.”

Investor Takeaways

There are several key takeaways for investors. First, the claims of superior risk-adjusted performance by the private equity industry are exaggerated. Given private equity’s lack of liquidity, opaqueness, and greater use of leverage, it seems logical that investors should demand a roughly 3% internal rate of return premium. Yet there is no evidence that the industry overall has been able to deliver that. Second, the failure to appropriately mark-to-market investments during public market drawdowns leads investors to underestimate the risk of these investments, as the volatility is significantly understated. Third, investors should expect that much of their capital might be outstanding even well beyond a decade—and that should certainly require a risk premium.

Investors desiring exposure to the risk and potential rewards of private equity investing should recognize that the wide dispersion of potential outcomes highlights the importance of diversifying risks. This is best achieved by investing indirectly through a private equity fund rather than through direct investments in individual companies. Because most such funds typically limit their investments to a relatively small number, it is also prudent to diversify by investing in more than one fund. And finally, topnotch funds are often closed to most individual investors. They get all the capital they need from the Yales of the world. Forewarned is forearmed.

The views expressed here are the author’s. Larry Swedroe is head of financial and economic research for Buckingham Wealth Partners, collectively Buckingham Strategic Wealth, LLC and Buckingham Strategic Partners, LLC.

For informational and educational purposes only and should not be construed as specific investment, accounting, legal, or tax advice. Neither the SEC (SEC) nor any other federal or state agency have approved, determined the accuracy of, or confirmed the adequacy of this article. Certain information may be based on third-party data and may become outdated or otherwise superseded without notice. Third-party information is deemed to be reliable, but its accuracy and completeness cannot be guaranteed. By clicking on any of the links above, you acknowledge that they are solely for your convenience and do not necessarily imply any affiliations, sponsorships, endorsements, or representations whatsoever by us regarding third-party websites. Buckingham is not responsible for the content, availability, or privacy policies of these sites and shall not be responsible or liable for any information, opinions, advice, products, or services available on or through them. LSR-23-601

Larry Swedroe is a freelance writer. The opinions expressed here are the author’s. Morningstar values diversity of thought and publishes a broad range of viewpoints.

The author or authors do not own shares in any securities mentioned in this article. Find out about Morningstar’s editorial policies .

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Inside Project Osceola: Florida State sports’ 9-figure private equity plan

  • Matt Baker Times staff

The first known mention of the two-word phrase that could revolutionize Florida State sports sits on the top of the third page of a cash projections spreadsheet from September 2022.

Project Osceola.

The name is a nod to the Seminoles’ spear-planting symbol . The project is a potential nine-figure private equity investment into FSU sports that could accelerate conference realignment and touch everything from the Tampa Bay Lightning to Minor League Baseball.

After the sports business website Sportico first reported FSU’s private equity talks in August , the Tampa Bay Times requested public records from the Seminoles. The Times received more than 2,500 pages last week.

The resulting picture is riddled with redactions and tantalizingly incomplete. Some of the most interesting tidbits are only semi-related — like a potential date for FSU to leave the ACC and a naming sponsor for Doak Campbell Stadium. It’s possible nothing ever materializes beyond due-diligence checklists and presentations labeled “strictly private and confidential.”

But the emails, PDFs and spreadsheets still provide the deepest, albeit preliminary, glimpse of the complex legal theories, detailed financial discussions and groundbreaking possibilities of Project Osceola.

How a private equity investment at FSU might work

The best explanation comes in a September 2022 email from Ken Artin, a public finance attorney at the firm Bryant Miller Olive. State agencies, he wrote, generally can’t become a “joint venture partner, equity partner and anything that looks like that” with a for-profit company. But there’s a workaround, which he called a “super license agreement.”

FSU can move its intellectual property (like logos and names) to a new university entity. That new entity could license the intellectual property to someone else (a private-equity firm). The firm would then try to profit off that licensed material by using it better, more efficiently or in new ways.

Within six months, that proposed non-profit entity had a name: FSU NewCo. The specific intellectual property available from FSU NewCo is redacted.

The companies involved

In August 2022, FSU and J.P. Morgan signed a non-disclosure agreement to work on a deal with outside investors. At least two private-equity firms were interested.

One was Arctos, whose sports portfolio includes a share of the Lightning and Red Sox . The other was Sixth Street, which has a stake in the San Antonio Spurs and the sports entertainment company Legends Hospitality .

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FSU signed an exclusivity deal with Sixth Street over the summer.

Financial terms

They’re almost all redacted, beyond a few peeks.

In November 2022, at least two scenarios had $250 million in private equity.

A second set of figures comes from an “ACC Upside” model in January 2023. It lists a $75 million initial investment plus a $50 million “follow-up equity investment” four years later. By 2032, it projects FSU’s 2032 cash flow to be $197 million — $46 million more than the “No Investment” scenario.

An email from an attorney at Davis Polk & Wardwell outlines FSU’s proposals in June: $25 million upfront, another $125 million under redacted circumstances plus up to $200 million in future debt “without consent and without additional limitations.”

Beyond the cash injection, FSU’s goals (as laid out in an October 2022 presentation) included maximizing revenue opportunities to stay nationally competitive, modernizing management structure, ensuring flexibility in any deal and conducting the process in a way that protects FSU “from negative reaction from important constituents.”

How FSU would use the money

It’s unclear. Arctos and Sixth Street both wanted “a more concrete answer” in March.

As FSU considered $250 million scenarios, athletic director Michael Alford and a school financial administrator, Michael Williams, wanted the money upfront for capital projects. J.P. Morgan’s Todd L. Smith responded that FSU “will ‘owe’ investors a return on that,” so “collecting it all up front if we don’t have immediate need or use will ‘cost’ something.”

Paying off debt would make it easier to divvy up revenue between investors and FSU, according to discussion materials from September 2022. FSU has since approved $265 million in additional debt to renovate Doak Campbell Stadium.

Additional operating expenses were also mentioned, and a June discussion included an initial purchase and “General Basket” of money FSU could use on anything.

Could private equity fund FSU’s ACC exit?

FSU redacted or withheld records as the school and conference litigate the Seminoles’ potential half-billion-dollar exit from the league. But FSU’s ACC future pops out of bars of black; one review featured a “General Basket” and unexplained “Conference Basket.”

One of the “next steps” listed in October 2022: “Determine use of proceeds, especially in a ‘no realignment’ scenario.” By January 2023, there was a “Leave ACC” budget model. Its commentary is partially redacted, but conference payouts spike from $43 million in 2025 to $96.4 million the next year .

Football ticket revenue for home games jumps, too. Its 2026 projections are $18.6 million — $3.2 million more than the “Base Case” — in part because of “post-ACC-exit ticket prices in-line with peers.”

Sixth Street’s due diligence tracker had a March request for conference payout details in the “base case and conference change case.”

Naming rights to Doak

Projections for 2026 include naming rights to FSU’s football home, formally called Bobby Bowden Field at Doak S. Campbell Stadium. FSU’s Year 1 revenue ranges from $1.5 million to $5 million, depending on the document and its assumptions. Sponsorship for the basketball arena, the Donald L. Tucker Civic Center, adds another $800,000-$2.6 million.

USF (Yuengling Center), Florida (Exactech Arena) and UCF (FBC Mortgage Stadium) are among the state teams with corporate names on their buildings. Last season, Georgia Tech tacked on Hyundai Field to the name of its century-old Bobby Dodd Stadium.

Multiple budgets add a concert series at Doak (four shows with 50,000 spectators each, according to an August model). FSU eventually expects these two revenue streams to top $10 million per year.

Minor League Baseball in Tallahassee?

That’s a possibility, according to a 10-year projection the sports consulting firm Navigate presented in 2022. The document lists a $75 million expense for FSU in the 2027 fiscal year for a new baseball stadium; the Seminoles’ Dick Howser Stadium is four decades old. FSU’s baseball revenue nearly doubles to $2.75 million.

A new revenue source also appears in ’27: “Minor League Baseball Team.” It initially adds a combined $4.1 million in tickets, sponsorship/licensing and facilities. The idea is cited in at least one other document but never detailed.

Name, image and likeness

Multiple documents cite $8 million in name, image and likeness (NIL) contributions for the ’24 fiscal year. One scenario ups that figure by 2-3% each year. In another, donations spike to $11.1 million in ‘25 and $13.6 million by ‘32.

These numbers are notable because they’re an official snapshot in a murky marketplace filled with unverifiable, third-party claims. They’re also relevant to Project Osceola; Sixth Street asked about FSU’s NIL partnerships and “plan moving forward” in July.

Sign up for the Sports Today newsletter to get daily updates on the Bucs, Rays, Lightning and college football across Florida.

Never miss out on the latest with your favorite Tampa Bay sports teams. Follow our coverage on Instagram , X and Facebook .

Matt Baker is a sports reporter covering college sports and recruiting. Reach him at [email protected].

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  12. How to Start Your Own Private-Equity Funds

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  13. PDF A Business Plan: The Key to Success for Raising Private Equity ...

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  14. How we did it: Implementing a private-equity strategic vision

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  15. Writing a business plan for private equity

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  17. Ultimate Guide to Private Equity Real Estate

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  18. The Marketing Plan for Private Equity Firms

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  19. PDF Guide on Private Equity and Venture Capital for Entrepreneurs

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  20. Private Equity Firm Business Plan [Edited 2024]

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  21. BGF explains: what do private equity investors look for in a business

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  22. Starting A Private Equity Fund: A Comprehensive Guide

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  23. What's Unique About Private Equity?

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  24. Inside Project Osceola: Florida State sports' 9-figure private equity plan

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  25. PDF Equity Action Plan Summary: U.S. Small Business Administration

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  26. SBA Unveils Updated Equity Action Plan to Advance the Biden-Harris

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  27. Hartford Funds Launches Its First Private-Equity-Focused Fund

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