Anyone in private equity (not funds)

[ExFlyBoy5]

I worked at a PE firm for a while. Not knowing anything about the specific investment, I won't comment on that but I will offer this:

PE funds can make annuity structures look like they were written in crayon by amatuers. Make sure you understand the structure and vehicle you are buying into.

A few thoughts/questions:

What is the "pre-money" valuation of the company?
Is it reasonable? Under what assumptions? (The pre-money valuation of the company is the value without this new round of financing. For example, if you were putting in $10 to get 10% of the company, then the pre-money value is $90.)

MORE QUESTIONS....

Good luck!

Not nearly as many questions to ask/answer when investing in VTI.

 

[Closet_Gamer]

Not nearly as many questions to ask/answer when investing in VTI.

For sure!

Of course, very little chance of a 40x return too!

 

[ExFlyBoy5]

For sure!

Of course, very little chance of a 40x return too!

And I am guessing very little (zero) chance of a 40x return on *any* series B offering.

 

[Closet_Gamer]

And I am guessing very little (zero) chance of a 40x return on *any* series B offering.

True dat!

But in the immortal words of Dumb & Dumber:

"So you're saying there's a chance!"

 

[corn18]

And I am guessing very little (zero) chance of a 40x return on *any* series B offering.

You sound like my wife

True dat!

But in the immortal words of Dumb & Dumber:

"So you're saying there's a chance!"

Rainbows and Unicorns!

 

[livingalmostlarge]

BTDT and that's a low rise up in series a to b funding. You are getting .13% shares. to get a $1m return you need a 10x return going from $75m to $750m which doesn't seem hard. How long to go series A to B?

Personally I would look for more angel investing for a higher rate of return. That isn't enough return for the risk.

Also from experience you want to do companies are that building competitive advantage and the right leadership.

PM me for details.

 

[ExFlyBoy5]

You sound like my wife
Rainbows and Unicorns!

I think your wife is right.

 

[corn18]

BTDT and that's a low rise up in series a to b funding. You are getting .13% shares. to get a $1m return you need a 10x return going from $75m to $750m which doesn't seem hard. How long to go series A to B?

Personally I would look for more angel investing for a higher rate of return. That isn't enough return for the risk.

Also from experience you want to do companies are that building competitive advantage and the right leadership.

PM me for details.

Series A closed 31 Jan 2022. Series B is now closed. This is biotech. Competitive advantage. Last two this firm did sold for $2B+. I will know in 2023 whether I am rich or $100k poorer.

 

[NgineER]

Series A closed 31 Jan 2022. Series B is now closed. This is biotech. Competitive advantage. Last two this firm did sold for $2B+. I will know in 2023 whether I am rich or $100k poorer.

keep us posted

 

[target2019]

Blacktone BX for private equity

I'm hopeful for a piece of the Pink Floyd catalog in the future.

Wish You Were Here

Private equity firm Blackstone (BX) is among potential buyers of Pink Floyd's back-catalog, according to the FT, in a deal that could value the band's music at almost a half billion dollars. The transaction would include master recordings and copyrights to the songs, which include rock classics like "Another Brick in the Wall," "Comfortably Numb" and "Money." KKR (KKR)-backed BMG, Warner Music (WMG), Sony Music (SONY) and Oaktree-funded Primary Wave are also vying for the catalog.

Turning up the volume: Last year, Blackstone took a majority stake in Hipgnosis Song Management, a firm founded by Elton John's former manager Merck Mercuriadis. After the investment in HSM, the private equity firm set up Hipgnosis Songs Capital, which has already bought $341M of back catalogs from Justin Timberlake, Nile Rodgers, Leonard Cohen, Nelly Furtado and Kenny Chesney.

Any agreement would show Blackstone's love for the industry, with the latest Pink Floyd deal worth more than all of those titles combined.

source: https://seekingalpha.com/market-news/wall-street-breakfast

 

[MarieIG]

We'll know Corn18 struck gold when we hear he's shopping for a private plane...

 

[SoloDrifter]

My experience being in the Direct PE world for nearly 10 years including lending to CRE world and other specialty lending.

This has been managed via my brother who has been in this world for 20 years. I'm early retired from IT/telcom world (intentionally never in mgmt), initially built up 401K/IRAs to qualify as accredited investor making it easier to get into Direct PE. Slowly transitioned out of market over years starting with one investment only 5% of portfolio. Now at about two dozen active PE investments/loans and several that have closed. Two may fail but all others are looking healthy. Start small, spread widely over time and be willing to lose some or don't play.

One CRE loan (first lien paying 10% interest and a cut of sale) closed with 17% IRR after 4 years. Other specialty loans have successfully closed typically in 11-13% range. An equity investment in a fast growing small company had an exit opportunity that I partially took (selling half for 23% IRR after about 5 years), now a midcap as value shot up since then with another exit opportunity close to coming up (potentially 28-35% IRR after 8 years). Other PE in small companies with realistic IPO/acquisition opportunity have potential for 10X+ and are past early stages but one may become diluted some, which I accepted as likely before getting in.

A good chunk of portfolio is monthly income generating well more than double my expenses, all have been fully re-invested over many years as I'm not quite yet withdrawing from this portfolio (in Self-Directed IRAs) but will start in about a year.

I'm entirely pulled out of the public market now, slowly pulled out over years. The PE world has allowed me to retire early with breathing room, not directly impacted by market sentiment/emotions. Investment income double expenses helps but I also manage liquidity issues via a low interest HELOC against my nearly paid off condo for emergencies or big ticket expenses.

That said I don't recommend PE world to anyone who doesn't have someone with long term experience and experienced with vetting opportunities. Frankly I personally don't have the experience, my brother who has been doing this for 20+ years vets opportunities and manages the deals with his entourage also in the PE group (and they allow smallish investments in pooled group as low as $50K sometimes less). But i did balls out take big risks spread across over 20 entities (over several years) and it has worked for me so far. Each year that goes by, the more spread out my risk and I expect one or two to fail every 10 years (none have yet but 2 may at some point). And if doable PE opportunities dry up, I'm positioned well to pursue "safer" 4-6% yields back in the market and still live off divvies.

 

[OnTheBeach]

I have invested in 30+ private equity/private debt/private real estate fund deals over the last 10 years. 3-4 deals a year so the older deal's distributions are covering the current capital calls. All of them are based on recommendations of JPM and Morgan Stanley wealth management groups. I have invested in 1 private equity deal about 8 years ago based on recommendations of a friend that is much smarter than me - and I invested 40% of what he did and it was a .5% portfolio position at the time of the investment. It was just taken out at 17X my original investment - which was a very nice holiday surprise.

 

[SoloDrifter]

^Congrats on last point! I haven't had a return that large yet but tend to get into later stages.

Very similar to my path and similar deals. I've been in about 30 over nearly 10 years (about 2 dozen active at one time lately, several have closed). Starting small is the way to go and would suggest to those considering PE to be willing to lose all of that first one as a test of whoever is vetting/recommending deals. I waited well over a year after first one and when it was progressing well then started into about 2-4 deals/year, typically no more than 5% of portfolio, some less, a couple riskier takes at 10% of portf if a related deal has proven to close successfully. After the first one was looking promising, started to slowly over years convert IRAs to Self-Directed IRAs with checkbook control, allowing to get retirement accounts into private world.

 

[explanade]

Seems this thread is mostly about startups which have the potential to go public with huge returns for early investors?

But I thought PE was also about buying big income-generating assets, like the music catalog of famous artists or maybe buying up some retain chain and liquidating assets, dumping the debt for the acquisition on the entity, and then getting it out.

Used to be called LBOs in the '90s.


Now supposedly another trend is getting PE funds into 401k accounts and apparently, PE doesn't have the same disclosure requirements as mutual funds or ETFs, so there could be high fees and it's not apparent to 401k account holders.

 

[OverThinkMuch]

What I've learned after doing this for a dozen years is that it is a numbers game you really want 100 investments in early stage companies, perhaps 1/3 to 1/2 at the later stage to have a realistic shot of getting a unicorn that will make up for all of your loses. This requires over a $1 million in private equity which is not practical for most FIRE people. VC funds are an option but have their own issues.

I started investing in VC via hedge funds this year. My timing is bad - the IRRs of VC have been 15-20% for years, then shot up above 60% in 2021. I now think 2021 IRRs (internal rate of return) is a fluke, and I should brace for much more normal returns.

I suspect my largest VC investment will hit top quartile returns. I've also invested in a VC secondary fund. What is your take on VC hedge funds?

 

[folivier]

Learned my lesson many years ago. Invested a measly $5000.00 in a good friends "business." He had done his work in getting a product ready for the market and needed a bit of funding. But when presented with a nice opportunity to expand rapidly by taking in more investors he turned it down. Big flop. Lost my money and friendship since he felt so bad that he lost my money he disappeared. Sad, the money didn't mean as much to me as his friendship.