When you have a large business, and you need a substantial amount of funding to move things forward, it’s highly likely that you’ll need the support of a private equity firm. How do you get private equity for your startup? In this article, we’ll explain what private equity is, as well as share the list of the best private equity firms to reach out to.
If you’re looking for a multi-million dollar investment to take your business to the next level, this type of funding is most definitely an option. Be warned though, that private equity firms are only interested in startups with a clear USP, the most innovative tech, and a proven track record.
In our last article, we looked at venture capital and how to increase the odds of a successful investment. Now it’s the turn of private equity. We’ll list some of the world’s most prolific investors and ways you can get noticed when it comes to funding.
Table of contents
- What is private equity for your startup?
- The difference between private equity for your startup and other types of investment
- The list of private equity companies for your MVP: which firms to contact
- Top tips to get private equity for your custom MVP app
- Frequently Asked Questions (FAQ)
What is private equity for your startup?
When you want to expand your business and get money to hire new staff, carry out product research, and move into new markets, you need funding.
There are typically three different types of funding available to you, and private equity is one of them.
Private equity firms specialize in financing mature private companies – by ‘private’ companies, we mean businesses that aren’t ‘public’ on the stock exchange. They invest money in return for equity – a share of your business. This money comes from a collection of wealthy individuals and affluent investors, in a similar way to venture capital. Many large banks specialize in private equity investments.
The difference between private equity for your startup and other types of investment
At this point, you might be thinking that private equity sounds remarkably similar to venture capital and angel investing. However, there are some key differences that set the list of private equity apart from other funding options.
- Private equity firms focus on ‘mature’ companies that are well-established, whilst venture capitalists and angel investors focus on younger and newer startups. This means they have the expertise and contacts needed to maximize the odds of success;
- Private equity firms concentrate on series C and up funding, meaning they are there if you are looking for funding of over $100 million – even billions. Some private equity companies will partner together if there is a multi-billion-dollar deal on the table;
- Private equity firms typically focus on ‘buyouts ‘ – this means they will want 51% ownership or possibly more. This gives them the power to do what they want to drive the company forward to success;
- Depending on where you are in the world, private equity companies are heavily regulated. For example in the UK, private equity firms are regulated by the Financial Conduct Authority. This means they have to be transparent and adhere to the rules; this is vital when there is so much funding up for grabs;
- Private equity firms for custom MVP funding generally are used for three significant purposes. Firstly, if you are looking for a lot of money to significantly expand your business or prepare to launch on the stock market – this is known as an Initial Public Offering or IPO. Secondly, if your business is struggling and you are looking for an investor to help put things right. Finally, if you were bought out by one private equity firm and they are looking to sell to another.
Private equity buyout sample
Here’s an example of a private equity buyout that you might find motivational. In 2013 Dell Computers was a public company on the stock market, but it wasn’t doing very well.
A private equity firm called Silver Lake (more on them later) bought out the business, forcing out most of the company’s board of directors. Silver Lake made significant changes to Dell, including taking them off the stock market and making them a private company again. As a result, the company thrived. Dell might not be around today if it wasn’t for private equity.
According to the BDO, private equity can help grow revenue by 12% and grow the average workforce by 8.5%. So while private equity is not the right solution for every startup, when done right, it can put you at a significant advantage.
The list of private equity companies for your MVP: which firms to contact
So we’ve looked at what a private equity company is, and now we’ll consider how to get private equity for your custom MVP app.
There is a wide range of private equity companies out there, most of them with an international presence. This means you can apply for funding wherever you are in the world and work with people who understand your market and cultural needs.
Many firms in the list of private equity companies also specialize in particular industries, meaning they have the experience you need to drive success. Here are some of the most prolific private equity firms around the world to get you started.
- Bain Capital. An American private equity firm with an international presence, Bain Capital has invested in businesses including Staples, Domino’s, Burger King, and Canada Goose;
- Blackstone Inc. One of the most well-known names on this list, Blackstone specializes in real estate and leisure but is happy to invest in all businesses that have value;
- Clayton, Dubilier & Rice. One of the oldest private equity firms in the world, CD&R specializes in leveraged buyouts, meaning it uses investment in an attempt to acquire other companies;
- Clearlake Capital. Clearlake Capital hit the news in 2022 when the firm became the owner of Chelsea Football Club. Despite this, the company focuses on the technology and industrial sectors;
- CVC Capital Partners. Headquartered in Luxembourg, this company invests in over 100 companies and has offices in 25 locations worldwide;
- EQT Ventures. Swedish-based, this private equity firm has invested in several European businesses over the past 30 years;
- Francisco Partners. A more recently established private equity firm, Francisco Partners specializes in technology startups;
- General Atlantic. An international company headquartered in New York, General Atlantic focuses on five key areas: technology, consumer services, life sciences, healthcare, and financial services;
- Goldman Sachs Capital Partners. Another one of the better-known private equity firms. Goldman Sachs Capital Partners’ biggest success story was when it invested $1.5 billion in Burger King. Four years later, the fast-food business announced plans to go public;
- Hellman & Friedman. Based in San Francisco, this private equity company focuses on startups in financial services, professional services, and the media;
- Hg Capital. This private equity firm focuses on the technology sector and was formerly known as Mercury Private Equity;
- Insight Partners. Previously known as Insight Venture Partners, this firm specializes in software, internet, and technology businesses;
- KKR. Based in the US, Kohlberg Kravis Roberts is often ranked as the largest private equity firm in the world, specializing in a wide range of industries;
- Macquarie Group. Macquarie Group is one of Australia’s largest private equity firms, with a strong focus on infrastructure and financial services;
- Silver Lake. We mentioned Silver Lake earlier on in this article. If your custom MVP app is tech-based, this private equity firm may be a solid choice;
- The Carlyle Group. Operating worldwide, the Carlyle Group is one of the largest private equity firms in the world;
- Thoma Bravo. Over forty years old, this private equity firm specializes in technology and cybersecurity. In 2021 It was announced that Thoma Bravo had taken more multi-billion-dollar companies from public to private than any other investor;
- TPG Inc. Headquartered in Texas, TPG Inc invests in businesses across a wide range of industries;
- Vista Equity Partners. Specializing in software and technology. Vista Equity Partners is well-known in the industry for its due diligence when it comes to human resources and operating procedures;
- Warburg Pincus. With over fifty years of experience, Warburg Pincus works in a wide range of industries including real estate, healthcare, retail, and technology. The firm specializes in growth, meaning it only focuses on businesses that need funding to move to the next level, rather than companies in trouble.
Top tips to get private equity for your custom MVP app
So now that you know which private equity firms to approach, how do you increase the chances of getting that all-important funding? Here’s what we recommend.
Understand what firms are looking for
If you want investment, be aware that private equity firms are looking for something special. There’s a lot of competition when it comes to funding!
Consider the following when it comes to private equity for your startup:
- Your finances. Firms will want to know that you’re in a stable position and have the potential for fast growth
- Your product. Product market fit is important to potential investors. This means that you’ve found the right target audience for your custom MVP app
- Your team. Firms will want to ensure that you’re a good cultural fit and that your values align with theirs
- Your flexibility. It is likely that a private equity firm will want to make significant alterations to how you work in order to bring in a profit. If you’re resistant to change, they may not be willing to work with you
Private equity firms will also want to know how you will fit in and work with their existing portfolio of startups.
Look for the smaller companies
We’ve listed some of the big private equity firms in this article, but there are a lot of sources of private funding out there. It’s estimated that there are over 14,000 private equity firms in the US alone – too many to mention!
In fact, a smaller firm may have the specific experience in your industry you need to help drive your startup forward. Crunchbase has a comprehensive database you can use to find the right firm for your needs from the list of private equity companies.
An excellent way to find private equity firms in your niche is to look on social media. Many partners and traders are on LinkedIn, meaning you can introduce yourself and get a foot in the door. It’s better to pitch to someone you know than to send an email to a generic address on a website.
Private equity is only for the most well-established startups that are willing to do anything to see success. If your business is still in its early stages or you want complete control of your startup, this type of funding might not be the right option for you.
The good news is that there are plenty of alternatives to private equity funding. Angel or seed funding is ideal for startups that are just starting out, while venture capital is best for businesses that are growing. Alternatively, you can bootstrap your startup or arrange a crowdfunding campaign.
Frequently Asked Questions (FAQ)
Private equity for startups involves obtaining funding from private equity firms to expand your business, hire new staff, conduct product research, and enter new markets. These firms invest money in exchange for equity in your company.
Private equity differs from venture capital and angel investing as it primarily targets well-established, mature companies. It focuses on series C and above funding, often involving investments of over $100 million. Private equity firms typically seek majority ownership (51% or more) and are heavily regulated in many regions.
One notable example is the private equity firm Silver Lake’s acquisition of Dell Computers in 2013, which resulted in significant changes and success for the company. Private equity can lead to revenue growth of 12% and workforce expansion by 8.5%, according to BDO.
You can explore a list of private equity firms with international reach and industry specialization. Some renowned firms include Bain Capital, Blackstone Inc., Clayton, Dubilier & Rice, and many others as listed in the article. It’s essential to choose a firm aligned with your startup’s goals and industry.
Understanding what private equity firms look for is crucial. This includes demonstrating financial stability, product-market fit, a compatible team culture, and flexibility for potential changes. It’s also important to consider how your startup fits into the firm’s existing portfolio.
While the article lists prominent firms, there are over 14,000 private equity firms in the US alone. Smaller firms might offer specialized industry expertise that can benefit your startup. Social media platforms like LinkedIn can be useful for networking and approaching potential investors.
Yes, there are alternatives such as angel investors, grants, crowdfunding, and venture capital firms. Angel and seed funding are suitable for early-stage startups, while venture capital is ideal for growing businesses. Bootstrapping and crowdfunding campaigns are also viable options for funding your startup.
Yes, private equity funding can be challenging to secure, as it requires demonstrating exceptional growth potential and worthiness for significant investment. However, if obtained, it can greatly benefit your startup.
We hope this guide has told you everything you need to know about private equity for your custom MVP app. Private equity is one of the hardest types of funding to attain, as you need to be able to show that your startup has exceptional levels of growth and that you’re worth the significant investment.
However, if you can acquire it, it can be one of the best things to happen to your business.