Business

I read a good article in the Boston Business Journal this past week entitled “Private equity and the recession: Eyes on the return”. The article addresses how private equity investments made during recessions have historically delivered the best returns, as investors take advantage of bargain company valuations.

Is this a golden age of investment? It is way too early to determine, but if economic models and history prove correct, equity prices should be at a low – meaning, it is a good time for buyers; not as good of a time for sellers. In fact, in my entrepreneurial law / funding law practice, it has been clear that private equity investors are currently looking for investment opportunities, but they are often looking for discounts in equity valuations.

For early-stage and pre-revenue companies, I think it is best to bootstrap where possible and only raise minimum amounts of capital needed – and to raise these from close sources that won't require value discounts. At this stage, the entrepreneur needs to sell the story – based on relationships of trust and professional experience. Professional investors are looking for discount pricing – because they can – the market is in their favor. So, to the business owner, be creative, be careful, and consider where to raise your capital.

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See also:

Funding Law - Investing in Midwest Technology Companies
Angels are Still Investing
Private Equity VIII – Environment for Buyers and Sellers

Private Equity in 2009 – Don’t Give Up
Private Equity VII – More on Angel Investors

Private Equity VI - Raising Angel Capital
Private Equity V - Raising Capital and Not Telling Lies
Private Equity IV - Angel Investors Get Picky
Private Equity III
Private Equity II
Private Equity I