Good news for funding starved private companies today from Wholesale Investor, which has conducted a survey of its database of more than 5000 investors to get some insight into their appetite for deals.
Right now, the appetite looks pretty good – just over 23% said this is the best time they have ever seen to invest, while more than 43% described this as a “very good” time to part with some cash.
Three forms of investment were particularly attractive to this group – private companies, companies in the pre-IPO phase (perhaps because the investors can see a clear exit path) and property deals (perhaps reflecting the fact that this is an area that still has some bargains).
The majority (over 41%) have up to $500,000 to invest, while 26% have between $1 million and $5 million ready to go.
So where are they going to put this cash? The investors were asked this in two ways: where have you invested in the last 12 months (financial and professional services, property and construction and IT and internet companies were the most popular) and where do you think the growth will come from next (green tech, mining and property dominated).
This should give you a very good idea of the sort of opportunities that private investors are after. If you are in these sectors and are looking to fund expansion, this could be the time to start exploring the networks of private investors who are out there and, apparently, nicely cashed up.
Your traditional advisers (accountants, lawyers, mentors) might be able to introduce you to these investors, or angel investment and venture capital groups can also provide some leads.
But be warned – don’t just expect to rock up and get cash. The Wholesale Investor survey showed that a staggering 64% of investors examine between 10 and 30 proposals before taking the plunge.
The survey also revealed the four big mistakes that private investors see when they hear a company pitch: valuation too optimistic (the hard-nosed investors would say that, wouldn’t they), financial projection too optimistic, lack of management expertise and a lack of a clear exit strategy.
The first three are things that investors will almost always argue about, but the last one – a clear exit strategy – is something that entrepreneurs should always keep front of mind.
James was the editor and publisher of SmartCompany and LeadingCompany for five years. He is now the Australian Financial Review‘s companies & markets editor, and a former BRW editor.
