Private equity has become a sought-after avenue for companies seeking investment. Major players in the arena are not shying from acquiring not only already established businesses but also promising start-ups.
Australian entrepreneur and long-time investor Darren Herft says that he developed a penchant for company growth as a university student. Majoring in accounting, the business graduate went on to provide strategic management and financial advice to a range of consulting companies.
“I got more interested in the funding space for companies that were looking to grow,” says Darren Herft.
He thinks that companies looking at aggressive growth over a shorter timespan are ideal for private equity investment and the expertise that comes along with it.
“Companies that are growing or looking to grow quickly need a considerable flow of capital to allow that to happen,” adds Darren Herft.
Darren Herft says that there are some major questions that anyone looking to be an investor, or a consultant need to consider.
“Where do companies need to be to qualify for venture capital or private equity? What are venture capitalists or private equity investors looking for?” says Darren Herft.
It’s not just the financial perspective that matters.
“How involved are they willing to be in the board structures and roles in their acquisition? What position would an investor like, outside of the funding they’re putting in?” he adds.
He is of the opinion that a qualifying candidate should be a company with a business model that makes sense.
“A business model should show how a company can deploy capital to get a strong return, both from a capital as well as a profitability perspective,” says Herft.
Herft has spent a considerable amount of time understanding key issues when it comes to venture capital and private equity. He says that the process of helping companies secure funding has excited him as a student and continues to do so.
He says, “Helping a company is not just about profits. It’s also about providing jobs to the people it will employ and the services and benefits it will provide to the public.”
Whereas banks and other traditional players might be wary of investing in novel ideas, private equity investors are keen on seeking out disruptive technologies that carry the potential of transforming their industry.
“Humanity wouldn’t be where it is in terms of prosperity and growth had it not been for new technology and the ideas accompanying them,” says Herft.
Darren Herft thinks that while such a risk-taking capacity of private equity players is vital and something unique in the financial sphere, a company with great ideas isn’t enough to qualify as an acquisition.
“Investors want to see individuals that are driven, particularly if it’s a Startup. It’s a very difficult game and needs people that are entirely dedicated to the cause.”