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Anyone in private equity (not funds)
Old 08-01-2022, 08:45 PM   #1
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Anyone in private equity (not funds)

Didn't expect to go this route but an opportunity presented itself and I couldn't pass it up. Invested $100k in a series B investment. Can't give any details due to NDA. Fascinating world. Just curious if anyone else is doing private equity investing.
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Old 08-01-2022, 09:02 PM   #2
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My FIL did it. Lost $100k.
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Old 08-02-2022, 01:03 AM   #3
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Didn't expect to go this route but an opportunity presented itself and I couldn't pass it up. Invested $100k in a series B investment. Can't give any details due to NDA. Fascinating world. Just curious if anyone else is doing private equity investing.
DW used to work in the IB/PE space long time ago and still has some contacts there. We had a couple of opportunities back when we weren't FI and passed (required initial investment was way more than we felt comfortable risking).

Last year I was approached by an old friend to provide some seed $ for his tech start-up. He wanted $x million in exchange for x% of equity and I passed because I didn't think he had a compelling product after sitting thru an 1-hr product demo/presentation.

Question---how did you do your due diligence to determine that you would be comfortable risking $100k?
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Old 08-02-2022, 06:52 AM   #4
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DW used to work in the IB/PE space long time ago and still has some contacts there. We had a couple of opportunities back when we weren't FI and passed (required initial investment was way more than we felt comfortable risking).

Last year I was approached by an old friend to provide some seed $ for his tech start-up. He wanted $x million in exchange for x% of equity and I passed because I didn't think he had a compelling product after sitting thru an 1-hr product demo/presentation.

Question---how did you do your due diligence to determine that you would be comfortable risking $100k?
I got the full B series deck from the VC partner. And the deal came my way via a long time friend and colleague. We did a lot of M&A together.

This is a weird position for me. It feels like the days before I switched to index funds.
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Old 08-02-2022, 08:19 AM   #5
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I think it was member clifp who talked about some "angel investing" that he did (I think that is similar?). He doesn't post much here anymore, but I think he does a search for his name once in a while, as he seems to pop in if his name is mentioned (I think?).

You could also PM him if he doesn't see this.

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Old 08-02-2022, 08:27 AM   #6
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I think it was member clifp who talked about some "angel investing" that he did (I think that is similar?). He doesn't post much here anymore, but I think he does a search for his name once in a while, as he seems to pop in if his name is mentioned (I think?).

You could also PM him if he doesn't see this.

-ERD50
Thanks! Angel investing is private equity. Just an earlier stage.
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Old 08-02-2022, 08:35 AM   #7
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I got suckered into buying some private investments from a broker.

I describe them as "high risk, low reward."

Might never have to pay LTCG taxes again, though.

Here's the latest update on one I got sold back in 2014:

"July 29, 2022

The partnership continues to apply all free cash flow to pay down the <Partnership's name> Note per the terms of the loan...

Management continues to work to sell the partnership’s assets but can make no assurance that a sale will occur, or if a buyer is found, will be sold profitability."

Wonder how much longer I have to wait so I can take a LTC loss on the full amount of my investment.
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Anyone in private equity (not funds)
Old 08-02-2022, 08:42 AM   #8
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Anyone in private equity (not funds)

I havenít done private equity or angel investing but 3% of my portfolio is in a high risk, high reward investment that I canít speak about either. I can afford to lose it all, but donít think I will. If so, Iíll chalk it up to tuition. No big woop. On the other hand, indications are that it might go to 50% of my portfolio or more. In which case, Big Woop!

If you see something compelling and entertaining and are sure you can afford to lose your investment, I donít have a problem with having a bit of high risk capital to complement oneís diversified traditional assets.

Good luck to you. And to me!
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Old 08-02-2022, 08:43 AM   #9
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I got suckered into buying some private investments from a broker.

I describe them as "high risk, low reward."
This one looks to be high risk, high reward. Series A funding was $50M. Series B is $75M. Payout will either be $0 (lose all my money) or 40x+. The last company they brought public was 80x for series B investors. Track record for this VC firm is good. The only reason I even considered it was the recommendation from my friend. I figure I can step out of my comfort zone with 5% of my portfolio. I was surprised my wife was pretty ok with it. She did say I would have to get a job if this impacted her life style.
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Old 08-02-2022, 08:46 AM   #10
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I havenít done private equity or angel investing but 3% of my portfolio is in a high risk, high reward investment that I canít speak about either. I can afford to lose it all, but donít think I will. If so, Iíll chalk it up to tuition. No big woop. On the other hand, indications are that it might go to 50% of my portfolio or more. In which case, Big Woop!

If you see something compelling and entertaining to watch and are sure you can afford to lose your investment, I donít have a problem with having a bit of high risk capital to complement oneís diversified traditional assets.

Good luck to you. And to me!
Yes, good luck! If this plays out like it is supposed to, the return will be 2x my current portfolio, after taxes. That's life changing money. Seems like a good way to invest 5% of my current portfolio.
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Old 08-02-2022, 10:41 AM   #11
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Yep. Been there, done that.
$0 or 40+x.
Unfortunately, I ended up with $0.

Not sure I'll ever go down that road again......
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Old 08-02-2022, 10:50 AM   #12
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Yep. Been there, done that.
$0 or 40+x.
Unfortunately, I ended up with $0.

Not sure I'll ever go down that road again......
Are you willing to share details?
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Old 08-02-2022, 11:36 AM   #13
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Private equity investment. Very keen technology that I was very aware of. Great potential - first products were placed in a very large discount retailer in limited stores. High profile customers endorsed the product (think MLB or NBA teams, though not exactly). All looked great. One of the management team was less than ethical and took the company for most of the cash they had. Ended up Bankrupt. Lawsuits followed that. Maybe some of the larger investors got something back, but I took my lumps and moved on. In my experience it only took one bad apple and a small firm that could not recover from it. But, I took a chance on a moonshot or launchpad explosion. Not sorry I did it, but I'll likely never do it again. In hindsight, my due diligence was lacking and I put too much faith in the members of management that I personally knew without scrutinizing those I did not. All my fault.
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Old 08-02-2022, 02:07 PM   #14
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Private equity investment. Very keen technology that I was very aware of. Great potential - first products were placed in a very large discount retailer in limited stores. High profile customers endorsed the product (think MLB or NBA teams, though not exactly). All looked great. One of the management team was less than ethical and took the company for most of the cash they had. Ended up Bankrupt. Lawsuits followed that. Maybe some of the larger investors got something back, but I took my lumps and moved on. In my experience it only took one bad apple and a small firm that could not recover from it. But, I took a chance on a moonshot or launchpad explosion. Not sorry I did it, but I'll likely never do it again. In hindsight, my due diligence was lacking and I put too much faith in the members of management that I personally knew without scrutinizing those I did not. All my fault.
Thanks for sharing. I'm sure the lawsuits cost more than the cash the company had left over. Were you a shareholder?
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Old 08-02-2022, 03:00 PM   #15
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I've been on the other side - worked at a company that either sold to PE or went through the process with a bunch more that never amounted to anything (not early stage companies - mostly already public companies). I've also been the head of IR for companies majority owned still by PE firms.
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Old 08-02-2022, 06:45 PM   #16
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I got the full B series deck from the VC partner. And the deal came my way via a long time friend and colleague. We did a lot of M&A together.

This is a weird position for me. It feels like the days before I switched to index funds.
On the deal I passed last year, the guy seeking seed money told me that his BIL is a well-known VC guy in SF and that the BIL passed on the deal. That was a red flag for me. Also, the guy arbitrarily came up with a high 8-figure valuation for his product even though he had no customer or revenue (apart from very optimistic projections); it was like pulling a number of thin air.

Sounds like you have a good referral from a trusted friend and colleague. Hope you hit a home run and please keep us updated!
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Old 08-05-2022, 11:33 AM   #17
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Yes it's an interesting space to be in
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Old 08-05-2022, 02:26 PM   #18
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I think it was member clifp who talked about some "angel investing" that he did (I think that is similar?). He doesn't post much here anymore, but I think he does a search for his name once in a while, as he seems to pop in if his name is mentioned (I think?).

You could also PM him if he doesn't see this.

-ERD50
Actually, I don't search for my name, but the topic got my eye.

Most of my investing is earlier typically seed, which is after friends, and families and the founder put in money, but before the venture capitalist put in money.

I've done a number of A rounds investment but no B rounds. Because typical the minimum at the level is $250K although 100K is not uncommon.

Overall Covid has really slowed my Angel investing.
That said it is worth knowing that the Yale endowment has 23.5% of its assets invested in Venture Capital funds vs only 2.25% in domestic equities and 7.5% in domestic bonds.

A couple of comments about the OPs situation.
A 40x return would mean $3 billion valuation which makes the startup a unicorn (market cap > $1 billion). There are lots of acquisitions in the 100 million-$1 billion range, which would mean 2-10x return. Not bad in this market. Although, the mode is probably still zero tax right off.

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 was fortunate that my 3rd investment has paid out high regular dividends, with occasional big bonus distributions. Still, I would have been better putting my Angel money inVTI, although that may not be true depending on how long the bear market goes on.
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Old 08-06-2022, 07:10 AM   #19
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15% of portfolio in 'Alternatives' or 25% including real estate here. I've considered and rejected several PE opportunities. Too much risk with no opportunity for diversification at my portfolio level. Still looking for the right PE or Search fund with $50k minimum where there is less concentrated risk.

The last big opportunity was several years ago with a close relative seeking investment in her startup. Extensive experience in the business for all the principals, great business plan, etc. She and her husband were so confident that they put in their life savings. In their minds, this was a slam dunk opportunity to achieve early retirement. It was difficult to say no.

The pandemic supply chain issues and a couple poor management decisions sunk the company. Hoping they can find a buyer to salvage some of their retirement savings. Definitely not for the risk averse. I won't invest any sum that would be painful to lose.
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Old 08-06-2022, 07:19 AM   #20
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I invest in BX Blackstone and let them worry about the mysterious things like PE.
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