Starting a private equity fund

Private equity funds or leveraged buy-out leveraged buyout funds thrive by accurately assessing how much value needs to be injected into the marketplace. This means specifically targeting assets with an appropriate performance level, purchasing those assets, and restructuring internal operations in order to make those assets more attractive when it comes time to sell. Many firms look at both private and public opportunities for investment. Some more savvy managers also use this strategy to bring public firms back into the private sector. For instance, in 2013, Michael Dell teamed up with Silverlake Partners to take Dell off of the stock market to the tune of $24 billion dollars – an example of a massive buy-out deal. As more portfolio firms seek higher returns for their client base, demand in private equity will continue to expand. The size and scope of today’s most prolific funds are examples of what’s possible when financial experts move in the alternative investment space. How can more parties take advantage of these alpha generating strategies and launch their own funds?

Bringing Focus Into The Equation

When considering the business strategy for the start-up fund, ask this crucial question: where is the existing expertise? For example, firms like Fortress Investment Group concentrate on underperforming assets in real estate. Lighter Capital specializes in early stage to mature SaaS companies. As a principal of the fund, be sure to establish operational parameters, including industry type, location, portfolio health, management buy-outs or mergers and acquisitions. Defining the initial strategy is crucial in determining the overall direction and goals.

How The Fund Will Grow Over Time

After determining the creative structure, now is the time to evaluate the specifics of project strategy within the firm of a business plan. A sound plan will first establish a mission through executive summary – explaining expected expenditures and profits over any given frame of time, and which arenas are appropriate from which to raise capital from investors.

Secondly, the plan should outline internal and external team structure. This step should prioritize positional competency with regard to acting consultants, advisors, attorneys, and subsequent authorative delegation. Principal titles, capacities, and management officers should be chosen with careful compliance and due diligence.

Lastly, along with an established name for the firm should come a concentration on customer relationship management, staffing protocols, office management, and other back end, in-house functionalities.