While public companies are more popular as the hub for investors, private companies are soon catching up with the pace. However, investing in a private company differs from a publicly traded firm. The major advantage of private investment is that the earnings or profits are directly shared with the owners. Thus, it provides more onus to investors in decision-making than a public firm.
This article discusses how startups and companies can find private companies that offer to fundraise at length.
Why invest in private companies?
Investing in private companies differs compared to public firms. Herein, a private firm is restricted from selling its bonds or stocks in the public market to raise cash. However, with. Private companies may sell limited shares without the need to register with SEBI as per the regulations under Section 42 of the Companies Act 2013.
One of the most significant advantages is that there are multiple options for investing in private companies in the form of debentures, angel investors, equity shares, venture capitalists and much more. In addition, private ventures do not need to answer stockholders or file disclosure statements with the SEBI.
- Investing in private companies assists in diversifying the portfolio by mitigating cyclical and public market risks.
- It raises the potential of increasing overall returns on the portfolio
- It has lower volatility compared to other asset class
How to find private companies that are fundraising?
There are multiple ways of finding private companies that are into fundraising. A few techniques include:
- Individuals can browse through the private company’s website to check if they offer to fundraise
- Websites like Angel.co and Grip offer a list of companies who provide funds along with other relevant information for users to analyse its potential
- There are multiple websites that list out top private firms that are into fundraising
- For example, Pepcorns is a fundraising platform that allows startups to find the best suitable investors through a systematic process which includes:
- Listing all startups in their platform
- Review the startups before onboarding them
- Provide data on each startup for users to analyse and decide if they can invest in the firm.
Points to consider when investing in a private company
Considering various facts, skills and figures involved in building a startup into a successful business are essential. Thus, it is vital to consider the following factors when investing in a private company.
- Are the ideas innovative and unique, answering real-time issues?
- What is the current market condition?
- Can economies of scale be integrated into business operations to boost profits?
- How is the management of the company, its founders and its team?
- Does the company require an extended time frame for investment?
- Do you have a plan of exit?
Conclusion
Funds are essential for startups to kick start their journey of transforming ideas into goals. While it is much easier for an individual to invest in private ventures, investors must still have a good idea about finding a relevant company to generate funds. Herein, they must be familiar with the difference between private and public firms, its advantages and things to take care of.
Are you looking for ideas and a guide to investing in early-stage startups? Pepcorns is a private limited company helping investors invest an initial amount of 1,000 in startups and enjoy higher returns. So do not wait; start investing now!
