What makes a company attractive for equity investment?
• Industry – Typical companies that receive equity investment are high-growth companies, with the potential for a high rate of return, in the technology industry. These companies generally have the ability to be a market leader and often to capitalize on the “first mover advantage” – being first in a growing marketplace or industry sector. • Clear Exit Strategy – Angel investors and venture capitalists are attracted to companies that have a clear exit strategy, allowing them to obtain the return on their investment. Often known as a “liquidity event”, this includes an initial public offering; private placement, acquisition or merger with another company or management-led buyout. In general, investors are looking to exit an investment within 3-7 years. • Financial Return – Equity investors are attracted to companies that clearly demonstrate the likelihood of significant financial returns. In general, these investors would like to see profit margins of more than 50%.
